FORMULATION OF THE 2012 FARM BILL

HEARINGS

BEFORE THE

SUBCOMMITTEES ON: 

RURAL DEVELOPMENT, RESEARCH, 

BIOTECHNOLOGY, AND FOREIGN AGRICULTURE;

CONSERVATION, ENERGY, AND FORESTRY;

LIVESTOCK, DAIRY, AND POULTRY

NUTRITION AND HORTICULTURE;

DEPARTMENT OPERATIONS, OVERSIGHT, AND 

CREDIT;

AND

GENERAL FARM COMMODITIES AND RISK 

MANAGEMENT

OF THE

COMMITTEE ON AGRICULTURE 

HOUSE OF REPRESENTATIVES

ONE HUNDRED TWELFTH CONGRESS

SECOND SESSION

APRIL 25, 26; MAY 8, 10, 16, 17, 18, 2012

Serial No. 112–30

Part 2 (Final)

(

Printed for the use of the Committee on Agriculture 

agriculture.house.gov 

FORMULATION OF THE 2012 FARM BILL

——

PART 2 (FINAL)

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74–372 PDF 2012

FORMULATION OF THE 2012 FARM BILL

HEARINGS

BEFORE THE

SUBCOMMITTEES ON: 

RURAL DEVELOPMENT, RESEARCH, 

BIOTECHNOLOGY, AND FOREIGN AGRICULTURE;

CONSERVATION, ENERGY, AND FORESTRY;

LIVESTOCK, DAIRY, AND POULTRY

NUTRITION AND HORTICULTURE;

DEPARTMENT OPERATIONS, OVERSIGHT, AND 

CREDIT;

AND

GENERAL FARM COMMODITIES AND RISK 

MANAGEMENT

OF THE

COMMITTEE ON AGRICULTURE 

HOUSE OF REPRESENTATIVES

ONE HUNDRED TWELFTH CONGRESS

SECOND SESSION

APRIL 25, 26; MAY 8, 10, 16, 17, 18, 2012

Serial No. 112–30

Part 2 (Final)

(

Printed for the use of the Committee on Agriculture 

agriculture.house.gov 

COMMITTEE ON AGRICULTURE 

FRANK D. LUCAS, Oklahoma, Chairman 

BOB GOODLATTE, Virginia, 

Vice Chairman 

TIMOTHY V. JOHNSON, Illinois 

STEVE KING, Iowa 

RANDY NEUGEBAUER, Texas 

K. MICHAEL CONAWAY, Texas 

JEFF FORTENBERRY, Nebraska 

JEAN SCHMIDT, Ohio 

GLENN THOMPSON, Pennsylvania 

THOMAS J. ROONEY, Florida 

MARLIN A. STUTZMAN, Indiana 

BOB GIBBS, Ohio 

AUSTIN SCOTT, Georgia 

SCOTT R. TIPTON, Colorado 

STEVE SOUTHERLAND II, Florida 

ERIC A. ‘‘RICK’’ CRAWFORD, Arkansas 

MARTHA ROBY, Alabama 

TIM HUELSKAMP, Kansas 

SCOTT DESJARLAIS, Tennessee 

RENEE L. ELLMERS, North Carolina 

CHRISTOPHER P. GIBSON, New York 

RANDY HULTGREN, Illinois 

VICKY HARTZLER, Missouri 

ROBERT T. SCHILLING, Illinois 

REID J. RIBBLE, Wisconsin 

KRISTI L. NOEM, South Dakota 

COLLIN C. PETERSON, Minnesota, Ranking 

Minority Member 

TIM HOLDEN, Pennsylvania 

MIKE MCINTYRE, North Carolina 

LEONARD L. BOSWELL, Iowa 

JOE BACA, California 

DENNIS A. CARDOZA, California 

DAVID SCOTT, Georgia 

HENRY CUELLAR, Texas 

JIM COSTA, California 

TIMOTHY J. WALZ, Minnesota 

KURT SCHRADER, Oregon 

LARRY KISSELL, North Carolina 

WILLIAM L. OWENS, New York 

CHELLIE PINGREE, Maine 

JOE COURTNEY, Connecticut 

PETER WELCH, Vermont 

MARCIA L. FUDGE, Ohio 

GREGORIO KILILI CAMACHO SABLAN, 

Northern Mariana Islands 

TERRI A. SEWELL, Alabama 

JAMES P. MCGOVERN, Massachusetts 

PROFESSIONAL STAFF

NICOLE SCOTT, Staff Director 

KEVIN J. KRAMP, Chief Counsel 

TAMARA HINTON, Communications Director 

ROBERT L. LAREW, Minority Staff Director 

SUBCOMMITTEE ON RURAL DEVELOPMENT, RESEARCH, BIOTECHNOLOGY, AND

FOREIGN AGRICULTURE

TIMOTHY V. JOHNSON, Illinois, Chairman 

GLENN THOMPSON, Pennsylvania 

MARLIN A. STUTZMAN, Indiana 

AUSTIN SCOTT, Georgia 

RANDY HULTGREN, Illinois 

VICKY HARTZLER, Missouri 

ROBERT T. SCHILLING, Illinois 

JIM COSTA, California, Ranking Minority 

Member 

HENRY CUELLAR, Texas 

PETER WELCH, Vermont 

TERRI A. SEWELL, Alabama 

LARRY KISSELL, North Carolina 

MIKE DUNLAP, Subcommittee Staff Director

(II) 

SUBCOMMITTEE ON CONSERVATION, ENERGY, AND FORESTRY

GLENN THOMPSON, Pennsylvania, Chairman

BOB GOODLATTE, Virginia 

MARLIN A. STUTZMAN, Indiana 

BOB GIBBS, Ohio 

SCOTT R. TIPTON, Colorado 

STEVE SOUTHERLAND II, Florida 

MARTHA ROBY, Alabama 

TIM HUELSKAMP, Kansas 

RANDY HULTGREN, Illinois 

REID J. RIBBLE, Wisconsin 

KRISTI L. NOEM, South Dakota 

TIM HOLDEN, Pennsylvania, Ranking 

Minority Member 

KURT SCHRADER, Oregon 

WILLIAM L. OWENS, New York 

MIKE MCINTYRE, North Carolina 

JIM COSTA, California 

TIMOTHY J. WALZ, Minnesota 

CHELLIE PINGREE, Maine 

MARCIA L. FUDGE, Ohio 

GREGORIO KILILI CAMACHO SABLAN, 

Northern Mariana Islands 

BRENT BLEVINS, Subcommittee Staff Director

SUBCOMMITTEE ON LIVESTOCK, DAIRY, AND POULTRY

THOMAS J. ROONEY, Florida, Chairman 

BOB GOODLATTE, Virginia 

STEVE KING, Iowa 

RANDY NEUGEBAUER, Texas 

K. MICHAEL CONAWAY, Texas 

TIM HUELSKAMP, Kansas 

SCOTT DESJARLAIS, Tennessee 

CHRISTOPHER P. GIBSON, New York 

REID J. RIBBLE, Wisconsin 

KRISTI L. NOEM, South Dakota 

DENNIS A. CARDOZA, California, Ranking 

Minority Member 

DAVID SCOTT, Georgia 

JOE COURTNEY, Connecticut 

TIM HOLDEN, Pennsylvania 

LEONARD L. BOSWELL, Iowa 

JOE BACA, California 

KURT SCHRADER, Oregon 

WILLIAM L. OWENS, New York 

MICHELLE WEBER, Subcommittee Staff Director 

SUBCOMMITTEE ON NUTRITION AND HORTICULTURE

JEAN SCHMIDT, Ohio, Chairwoman 

STEVE KING, Iowa 

THOMAS J. ROONEY, Florida 

STEVE SOUTHERLAND II, Florida 

ERIC A. ‘‘RICK’’ CRAWFORD, Arkansas 

JOE BACA, California, Ranking Minority 

Member 

CHELLIE PINGREE, Maine 

GREGORIO KILILI CAMACHO SABLAN, 

Northern Mariana Islands 

MATT PERIN, Subcommittee Staff Director

SUBCOMMITTEE ON DEPARTMENT OPERATIONS, OVERSIGHT, AND CREDIT

JEFF FORTENBERRY, Nebraska, Chairman 

TIMOTHY V. JOHNSON, Illinois 

STEVE KING, Iowa 

ERIC A. ‘‘RICK’’ CRAWFORD, Arkansas 

KRISTI L. NOEM, South Dakota 

MARCIA L. FUDGE, Ohio, Ranking Minority 

Member 

JAMES P. MCGOVERN, Massachusetts 

JOE BACA, California 

BRANDON LIPPS, Subcommittee Staff Director

(III) 

SUBCOMMITTEE ON GENERAL FARM COMMODITIES AND RISK MANAGEMENT

K. MICHAEL CONAWAY, Texas, Chairman 

STEVE KING, Iowa 

RANDY NEUGEBAUER, Texas 

JEAN SCHMIDT, Ohio 

BOB GIBBS, Ohio 

AUSTIN SCOTT, Georgia 

ERIC A. ‘‘RICK’’ CRAWFORD, Arkansas 

MARTHA ROBY, Alabama 

TIM HUELSKAMP, Kansas 

RENEE L. ELLMERS, North Carolina 

CHRISTOPHER P. GIBSON, New York 

RANDY HULTGREN, Illinois 

VICKY HARTZLER, Missouri 

ROBERT T. SCHILLING, Illinois 

LEONARD L. BOSWELL, Iowa, Ranking 

Minority Member 

MIKE MCINTYRE, North Carolina 

TIMOTHY J. WALZ, Minnesota 

LARRY KISSELL, North Carolina 

JAMES P. MCGOVERN, Massachusetts 

DENNIS A. CARDOZA, California 

DAVID SCOTT, Georgia 

JOE COURTNEY, Connecticut 

PETER WELCH, Vermont 

TERRI A. SEWELL, Alabama 

MATT SCHERTZ, Subcommittee Staff Director

(IV) 

(V)

C O N T E N T S 

Page 

Subcommittee on Rural Development, Research, Biotechnology, and 

Foreign Agriculture, April 25, 2012

Costa, Hon. Jim, a Representative in Congress from California, opening statement ...................................................................................................................... 1605

Prepared statement .......................................................................................... 1608

Johnson, Hon. Timothy V., a Representative in Congress from Illinois, opening statement ........................................................................................................ 1603

Prepared statement .......................................................................................... 1604

WITNESSES

Conner, Hon. Charles F., President and Chief Executive Officer, National 

Council of Farmer Cooperatives, Washington, D.C. .......................................... 1610

Prepared statement .......................................................................................... 1612

Submitted material .......................................................................................... 1667

Larson, Hon. Donald, Commissioner, Brookings County, South Dakota; Chairman, Agriculture and Rural Affairs Steering Committee, National Association of Counties, Brookings, SD .......................................................................... 1615

Prepared statement .......................................................................................... 1617

Submitted questions ......................................................................................... 1674

Mazer, Leanne, Executive Director, Tri-County Council for Western Maryland, Frostburg, MD; on behalf of National Association of Development 

Organizations ....................................................................................................... 1622

Prepared statement .......................................................................................... 1624

Submitted questions ......................................................................................... 1675

Dunmire, Frank, Executive Director, Illinois Rural Water Association, 

Taylorville, IL; on behalf of National Rural Water Association ....................... 1635

Prepared statement .......................................................................................... 1636

Submitted questions ......................................................................................... 1675

Stewart, Robert B., Executive Director, Rural Community Assistance Partnership, Washington, D.C. ........................................................................................ 1638

Prepared statement .......................................................................................... 1640

Submitted questions ......................................................................................... 1678

Rozzelle, David G., Executive Vice President, Suddenlink Communications; 

Member, Rural and Small System Operator Committee, National Cable 

Telecommunications Association, St. Louis, MO ............................................... 1644

Prepared statement .......................................................................................... 1645

Submitted questions ......................................................................................... 1681

Bahnson, Mark, Chief Executive Officer and General Manager, Bloomingdale 

Communications, Bloomingdale, MI; on behalf of National Telecommunications Cooperative Association; Organization for the Promotion and Advancement of Small Telecommunications Companies; Western Telecommunications Alliance ..................................................................................... 1651

Prepared statement .......................................................................................... 1653

Submitted questions ......................................................................................... 1683

SUBMITTED MATERIAL

McCormick, Jr., Walter B., President and Chief Executive Officer, United 

States Telecom Association, submitted letter .................................................... 1671

Page

VI

Subcommittee on Conservation, Energy, and Forestry, April 26, 2012

Peterson, Hon. Collin C., a Representative in Congress from Minnesota, opening statement ........................................................................................................ 1690

Prepared statement .......................................................................................... 1692

Roby, Hon. Martha, a Representative in Congress from Alabama, prepared 

statement .............................................................................................................. 1693

Thompson, Hon. Glenn, a Representative in Congress from Pennsylvania, 

opening statement ................................................................................................ 1687

Prepared statement .......................................................................................... 1689

WITNESSES

Schmidt, Gene, President, National Association of Conservation Districts, 

Washington, D.C. ................................................................................................. 1694

Prepared statement .......................................................................................... 1695

Submitted questions ......................................................................................... 1784

Scholl, Jon, President, American Farmland Trust, Washington, D.C. ................ 1697

Prepared statement .......................................................................................... 1698

Submitted questions ......................................................................................... 1787

O’Toole, Patrick, President, Family Farm Alliance, Washington, D.C. .............. 1705

Prepared statement .......................................................................................... 1707

Nomsen, David E., Vice President of Governmental Affairs, Pheasants Forever, Inc., St. Paul, MN ....................................................................................... 1717

Prepared statement .......................................................................................... 1719

Niemeyer, Garry, President, National Corn Growers Association, Auburn, 

IL ........................................................................................................................... 1723

Prepared statement .......................................................................................... 1724

Bell, David K., Executive Director, Wild Blueberry Commission of Maine, 

Orono, ME; on behalf of Specialty Crop Farm Bill Alliance ............................. 1743

Prepared statement .......................................................................................... 1744

Gordon, Randall C., Acting President, National Grain and Feed Association, 

Washington, D.C. ................................................................................................. 1746

Prepared statement .......................................................................................... 1748

Supplementary material .................................................................................. 1792

Homan, Carl V., dairy producer, Homan Family Dairy Farms, Centre Hall, 

PA; on behalf of National Sustainable Agriculture Coalition ........................... 1752

Prepared statement .......................................................................................... 1754

Hopper, Sara, Agricultural Policy Director, Environmental Defense Fund, 

Washington, D.C. ................................................................................................. 1756

Prepared statement .......................................................................................... 1758

Petty, David D., cattle producer, Iowa River Ranch; Member, Environmental 

Working Group, National Cattlemen’s Beef Association, Eldora, IA ............... 1761

Prepared statement .......................................................................................... 1763

Submitted questions ......................................................................................... 1788

SUBMITTED MATERIAL

Hammer, Thomas A., President, National Oilseed Processors Association, submitted statement .................................................................................................. 1775

Sebert, Dan, Executive Director, National Watershed Coalition, submitted 

statement .............................................................................................................. 1779

Shay, Russ, Director of Public Policy; Lynne Sherrod, Western Policy Manager, Land Trust Alliance, submitted letter ...................................................... 1781

United States Department of Agriculture, submitted supplementary material . 1789

Subcommittee on Livestock, Dairy, and Poultry, April 26, 2012

Cardoza, Hon. Dennis A., a Representative in Congress from California, opening statement ........................................................................................................ 1839

Prepared statement .......................................................................................... 1840

Ribble, Hon. Reid J., a Representative in Congress from Wisconsin; statement 

and letter submitted on behalf of: 

Etka, Steve, Coordinator, Midwest Dairy Coalition ...................................... 1933

Fischer, Laurie, Executive Director, Dairy Business Association of Wisconsin ............................................................................................................. 1935

Rooney, Hon. Thomas J., a Representative in Congress from Florida, opening 

statement .............................................................................................................. 1837

Page

VII

Rooney, Hon. Thomas J., a Representative in Congress from Florida, opening 

statement—Continued

Prepared statement .......................................................................................... 1838

WITNESSES

Brown, Ph.D., Scott, Assistant Research Professor, Integrated Policy Group, 

Division of Applied Social Sciences, College of Agriculture, Food and Natural Resources, University of Missouri, Columbia, MO .................................... 1841

Prepared statement .......................................................................................... 1844

Supplementary material .................................................................................. 1921

Wright, Patrick Joseph ‘‘Joe’’, V&W Farms, Inc.; President, Southeast Milk 

Inc., Avon Park, FL .............................................................................................. 1873

Prepared statement .......................................................................................... 1874

Barcellos, Tom, Owner/Operator, T-Bar Dairy; Board President, Western 

United Dairymen, Porterville, CA ...................................................................... 1877

Prepared statement .......................................................................................... 1879

Davis, Jon, Chief Executive Officer, Davisco Foods International, Inc., Le 

Sueur, MN; on behalf of International Dairy Foods Association ..................... 1881

Prepared statement .......................................................................................... 1883

Supplementary material .................................................................................. 1922

Kozak, Jerome J., President and Chief Executive Officer, National Milk Producers Federation, Arlington, VA ....................................................................... 1886

Prepared statement .......................................................................................... 1888

Subcommittee on Nutrition and Horticulture, May 8, 2012

Baca, Hon. Joe, a Representative in Congress from California, prepared statement ...................................................................................................................... 1945

Lucas, Hon. Frank D., a Representative in Congress from Oklahoma, opening 

statement .............................................................................................................. 2021

Prepared statement .......................................................................................... 1944

Pingree, Hon. Chellie, a Representative in Congress from Maine, opening 

statement .............................................................................................................. 1941

Prepared statement .......................................................................................... 1943

Sablan, Hon. Gregorio Kilili Camacho, a Delegate in Congress from Northern 

Mariana Islands, prepared statement ................................................................ 1946

Schmidt, Hon. Jean, a Representative in Congress from Ohio, opening statement ...................................................................................................................... 1937

Prepared statement .......................................................................................... 1940

Southerland II, Hon. Steve, a Representative in Congress from Florida, prepared statement ................................................................................................... 1944

WITNESSES

Lee, Jerry, Environmental Services Manager, Monrovia Growers, Cairo, GA ... 1947

Prepared statement .......................................................................................... 1949

Jarrard, Michael, President and Chief Operating Officer, Mann Packing Company, Salinas, CA ................................................................................................. 1954

Prepared statement .......................................................................................... 1956

Schacht, Lisa L., Owner/Operator, Schacht Family Farm and Market; President, Ohio Produce Growers & Marketers Association, Canal Winchester, 

OH ......................................................................................................................... 1959

Prepared statement .......................................................................................... 1961

Libby, Russell W., Executive Director, Maine Organic Farmers and Gardeners 

Association, Unity, ME ........................................................................................ 1963

Prepared statement .......................................................................................... 1964

Richey, Daniel R., President and Chief Executive Officer, Riverfront Packing 

Company; Member, Board of Directors, Florida Fruit & Vegetable Association, Vero Beach, FL ............................................................................................ 1967

Prepared statement .......................................................................................... 1969

Submitted questions ......................................................................................... 2035

Bivens, Rodney W., Founder and Executive Director, Regional Food Bank 

of Oklahoma, Oklahoma City, OK ...................................................................... 1986

Prepared statement .......................................................................................... 1987

Haskins, Ph.D., Ron, Senior Fellow, Economic Studies Program, Brookings 

Institution; Co-Director, Center on Children and Families, Washington, 

D.C. ........................................................................................................................ 1991

Page

VIII

Haskins, Ph.D., Ron, Senior Fellow, Economic Studies Program, Brookings 

Institution; Co-Director, Center on Children and Families, Washington, 

D.C.—Continued

Prepared statement .......................................................................................... 1993

Dean, Stacy, Vice President for Food Assistance Policy, Center on Budget 

and Policy Priorities, Washington, D.C. ............................................................. 2002

Prepared statement .......................................................................................... 2003

Supplementary material .................................................................................. 2029

Blalock, Philip A., Executive Director, National Association of Farmers Market Nutrition Programs, Alexandria, VA ........................................................... 2014

Prepared statement .......................................................................................... 2016

SUBMITTED MATERIAL

Naasz, Kraig R., President & Chief Executive Officer, American Frozen Food 

Institute, submitted statement ........................................................................... 2029

Share Our Strength, submitted statement ............................................................ 2033

Subcommittee on Department Operations, Oversight, and Credit, May 10, 

2012 

Baca, Hon. Joe, a Representative in Congress from California, prepared statement ...................................................................................................................... 2042

Fortenberry, Hon. Jeff, a Representative in Congress from Nebraska, opening 

statement .............................................................................................................. 2039

Prepared statement .......................................................................................... 2040

Fudge, Hon. Marcia L., a Representative in Congress from Ohio, opening 

statement .............................................................................................................. 2041

Prepared statement .......................................................................................... 2042

WITNESSES

Frazee, Bob, President and Chief Executive Officer, MidAtlantic Farm Credit, 

Westminster, MD; on behalf of Farm Credit Council ....................................... 2043

Prepared statement .......................................................................................... 2045

Gerhart, Jeffrey L., Chairman, Bank of Newman Grove; Chairman, Independent Community Bankers of America, Newman Grove, NE ...................... 2049

Prepared statement .......................................................................................... 2050

Williams, Matthew H., Chairman and President, Gothenburg State Bank; 

Chairman-Elect, American Bankers Association, Gothenburg, NE ................. 2060

Prepared statement .......................................................................................... 2061

Walton, Michael G., urban farmer; Owner, Tunnel Vision Hoops; Co-Founder, 

NEO Restoration Alliance, South Euclid, OH ................................................... 2066

Prepared statement .......................................................................................... 2067

Doerr, Justin D., beginning farmer, Plainview, NE ............................................. 2069

Prepared statement .......................................................................................... 2071

SUBMITTED MATERIAL

Gerber, Michael A., President and Chief Executive Officer, Federal Agricultural Mortgage Corporation (Farmer Mac), submitted statement ................... 2089

Niklas, David W., President, Clackamas Greenhouses Inc.; on Behalf of Society of American Florists, submitted statement ................................................. 2090

Spearman, Kenneth A., Chairman, Farm Credit System Insurance Corporation, submitted letter ........................................................................................... 2094

Subcommittee on General Farm Commodities and Risk Management 

May 16, 2012

Boswell, Hon. Leonard L., a Representative in Congress from Iowa, opening 

statement .............................................................................................................. 2105

Prepared statement .......................................................................................... 2105

Conaway, Hon. K. Michael, a Representative in Congress from Texas, opening 

statement .............................................................................................................. 2097

Prepared statement .......................................................................................... 2099

Page

IX

Costa, Hon. Jim, a Representative in Congress from California; submitted 

statement on behalf of: 

Specialty Crop Insurance League .................................................................... 2339

Lucas, Hon. Frank D., a Representative in Congress from Oklahoma opening 

statement .............................................................................................................. 2103

Prepared statement .......................................................................................... 2104

Peterson, Hon. Collin C., a Representative in Congress from Minnesota, opening statement ........................................................................................................ 2101

Prepared statement .......................................................................................... 2102

WITNESSES

Outlaw, Ph.D., Joe L., Professor and Extension Economist-Farm Management 

& Policy, Department of Agricultural Economics, Texas A&M University; 

Co-Director, Agricultural and Food Policy Center, College Station, TX .......... 2106

Prepared statement .......................................................................................... 2108

Supplementary material .................................................................................. 2305

Schnitkey, Ph.D., Gary D., Full and Associate Professor, Department of Agricultural and Consumer Economics, University of Illinois, Urbana, IL ........... 2115

Prepared statement .......................................................................................... 2116

Submitted questions ......................................................................................... 2347

Collins, Ph.D., Hon. Keith, Economic Advisor, National Crop Insurance Services; Former USDA Chief Economist, Centreville, VA ...................................... 2122

Prepared statement .......................................................................................... 2123

Bowling, Chip, Member, Board of Directors, National Corn Growers Association, Newburg, MD ............................................................................................... 2146

Prepared statement .......................................................................................... 2147

Raun, Linda C., Chairwoman, USA Rice Producers’ Group; Partner, LR 

Farms, El Campo, TX; on behalf of USA Rice Federation; U.S. Rice Producers Association ................................................................................................ 2158

Prepared statement .......................................................................................... 2160

Submitted questions ......................................................................................... 2347

Stallman, Bob, President, American Farm Bureau Federation; rice and cattle 

producer, Columbus, TX ...................................................................................... 2169

Prepared statement .......................................................................................... 2170

Vaughan, Dee, President, Southwest Council of Agribusiness, Dumas, TX ....... 2176

Prepared statement .......................................................................................... 2177

Coley, C.B. ‘‘Chuck’’, Chairman, National Cotton Council; President, Coley 

Gin and Fertilizer Company, Vienna, GA .......................................................... 2185

Prepared statement .......................................................................................... 2186

Brown, Scott W., President, National Barley Growers Association, Soda 

Springs, ID ............................................................................................................ 2193

Prepared statement .......................................................................................... 2195

May 17, 2012

Conaway, Hon. K. Michael, a Representative in Congress from Texas, opening 

statement .............................................................................................................. 2205

WITNESSES

Younggren, Erik, President, National Association of Wheat Growers, Hallock, 

MN ......................................................................................................................... 2206

Prepared statement .......................................................................................... 2207

Morris, Armond, Chairman, Southern Peanut Farmers Federation, Irwinville, 

GA .......................................................................................................................... 2215

Prepared statement .......................................................................................... 2216

Johnson, Roger, President, National Farmers Union, Washington, D.C. ........... 2221

Prepared statement .......................................................................................... 2222

Stewart, J.B., Vice Chairman, National Sorghum Producers, Keyes, OK .......... 2235

Prepared statement .......................................................................................... 2237

Wellman, Steve, President, American Soybean Association, Syracuse, NE ....... 2241

Prepared statement .......................................................................................... 2243

Submitted questions ......................................................................................... 2348

Thompson, Jim, Chairman, USA Dry Pea and Lentil Council, Farmington, 

WA ......................................................................................................................... 2244

Prepared statement .......................................................................................... 2246

Page

X

Gerdes, Ruth, President, The Auburn Agency Crop Insurance, Inc.; Chair, 

Regulatory Affairs Committee, Crop Insurance Professionals Association, 

Auburn, NE .......................................................................................................... 2270

Prepared statement .......................................................................................... 2272

McSherry, CIC, Brian M., President, McSherry Agency, Inc.; Chairman, Crop 

Insurance Task Force, Independent Insurance Agents and Brokers of America, Flanagan, IL .................................................................................................. 2281

Prepared statement .......................................................................................... 2283

Weber, Tim, President, Crop Insurance Division, Great American Insurance 

Company, Cincinnati, OH ................................................................................... 2285

Prepared statement .......................................................................................... 2287

Submitted questions ......................................................................................... 2349

SUBMITTED MATERIAL

Pitts, Hon. Joseph R., Member of Congress; Davis, Hon. Danny K., Member 

of Congress, submitted joint statement .............................................................. 2306

Cowan, Wade; Klint Forbes; David Dickerson, West Texas Guar, Inc., submitted statement .................................................................................................. 2307

Graham, Larry, Chairman, Coalition for Sugar Reform, submitted statement . 2308

Greig, Hon. George D., Secretary, Pennsylvania Department of Agriculture, 

submitted statement ............................................................................................ 2315

Smith, Garrett, President, American Pop Corn Company; on Behalf of Popcorn Institute, submitted statement ................................................................... 2316

American Sugar Alliance, submitted statement ................................................... 2322

United States Conference of Catholic Bishops; Catholic Relief Services; National Catholic Rural Life Conference, submitted joint statement .................. 2341

Subcommittee on Conservation, Energy, and Forestry, May 18, 2012

Costa, Hon. Jim, a Representative in Congress from California, submitted 

statement; on behalf of: 

Wentworth, Rand, President, Land Trust Alliance; Ackelson, Mark, President, Iowa Natural Heritage Foundation; Wayburn, Laurie, President, 

Pacific Forest Trust; Difley, Jane A., President/Forester, Society for 

the Protection of New Hampshire Forests; Livingston, Gil, President, 

Vermont Land Trust ..................................................................................... 2455

Holden, Hon. Tim, a Representative in Congress from Pennsylvania, opening 

statement .............................................................................................................. 2355

Prepared statement .......................................................................................... 2355

Schrader, Hon. Kurt, a Representative in Congress from Oregon, prepared 

statement .............................................................................................................. 2356

Thompson, Hon. Glenn, a Representative in Congress from Pennsylvania, 

opening statement ................................................................................................ 2351

Prepared statement .......................................................................................... 2353

WITNESSES

Greenwood, Hon. James C., President and Chief Executive Officer, Biotechnology Industry Organization, Washington, D.C. ....................................... 2357

Prepared statement .......................................................................................... 2359

Stroschein, J.D., Ryan W., Co-Director, Agriculture Energy Coalition, Washington, D.C. ........................................................................................................... 2378

Prepared statement .......................................................................................... 2380

Reinford, Steve, Owner/Operator, Reinford Farms Inc., Mifflintown, PA .......... 2383

Prepared statement .......................................................................................... 2385

Taylor, Jr., Jerome ‘‘Jerry’’, President and Chief Executive Officer, MFA Oil 

Company; Co-Founder, MFA Oil Biomass LLC, Columbia, MO ...................... 2388

Prepared statement .......................................................................................... 2389

Haer, Gary L., Chairman, National Biodiesel Board; Vice President, Sales 

and Marketing, Renewable Energy Group®, Inc., Washington, D.C. .............. 2397

Prepared statement .......................................................................................... 2399

Burke III, John W., Chairman, Board of Trustees, American Forest Foundation; tree farmer, Woodford, VA .......................................................................... 2418

Prepared statement .......................................................................................... 2420

Dye, C. Randy, Forester, West Virginia Division of Forestry; President, National Association of State Foresters, Charleston, WV ..................................... 2424

Prepared statement .......................................................................................... 2426

Page

XI

Holmes, Charles A., Chairman, Forest Resource Policy Group, National Association of Conservation Districts, Demopolis, AL .............................................. 2429

Prepared statement .......................................................................................... 2430

Schwab, Richard W., Procurement Manager, M.A. Rigoni, Inc., Perry, FL; 

on behalf of American Loggers Council; Southeastern Wood Producers Association .................................................................................................................... 2433

Prepared statement .......................................................................................... 2435

Goergen, Jr., Michael T., Executive Vice President and Chief Executive Officer, Society of American Foresters, Bethesda, MD ........................................... 2437

Prepared statement .......................................................................................... 2439

Supplementary material .................................................................................. 2461

SUBMITTED MATERIAL

Julia, Tom, President, Composite Panel Association, submitted statement ....... 2461

Rigdon, Philip, President, Intertribal Timber Council, submitted letter ............ 2463

Waslaski, Kevin, Chairman, U.S. Canola Association, submitted statement ..... 2466

Wellman, Steve, President, American Soybean Association, submitted statement ...................................................................................................................... 2467

Wood Fiber Coalition, submitted statement .......................................................... 2468

(1603)

FORMULATION OF THE 2012 FARM BILL 

(RURAL DEVELOPMENT PROGRAMS) 

WEDNESDAY, APRIL 25, 2012

HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON RURAL DEVELOPMENT, RESEARCH, 

BIOTECHNOLOGY, AND FOREIGN AGRICULTURE, 

COMMITTEE ON AGRICULTURE, 

Washington, D.C. 

The Subcommittee met, pursuant to call, at 2:33 p.m., in Room 

1300 of the Longworth House Office Building, Hon. Timothy V. 

Johnson [Chairman of the Subcommittee] presiding. 

Members present: Representatives Johnson, Thompson, 

Stutzman, Scott, Hultgren, Hartzler, Schilling, Costa, Cuellar, and 

Sewell. 

Staff present: Mike Dunlap, Tamara Hinton, DaNita Murray, 

Lauren Sturgeon, Suzanne Watson, Andy Baker, Liz Friedlander, 

John Konya, Jamie Mitchell, and Caleb Crosswhite. 

OPENING STATEMENT OF HON. TIMOTHY V. JOHNSON, A 

REPRESENTATIVE IN CONGRESS FROM ILLINOIS 

The CHAIRMAN. This hearing of the Subcommittee on Rural Development, Research, Biotechnology, and Foreign Agriculture to assess rural development programs in advance of the 2012 Farm Bill 

will come to order. I have a brief opening statement—not as brief 

as I would like but be what it is—to read before we start, and I 

ask the Ranking Member, Mr. Costa, to do likewise. 

Good afternoon and welcome to this hearing to review the rural 

development programs in advance of the 2012 Farm Bill. This is 

the first of eight hearings which will be held by the various Subcommittees to review Federal farm policy before we begin drafting 

the reauthorization of ag programs. These Subcommittee hearings 

are a continuation of the Committee’s work to gather information 

on farm policy. We have also conducted 11 audits of farm programs—three of which were held by this Subcommittee—and four 

field hearings to gather input directly from producers across America. 

Today, we are focusing on how the Federal Government makes 

investments in rural communities. While the infrastructure needs 

such as water, wastewater, and broadband access are similar 

throughout every town and city in America, small, rural towns that 

make up a good part of our districts face unique challenges. Each 

farm bill seeks to address long-standing challenges and adapt to 

new ones in the rural development title. 

1604

Without a doubt, access to water, energy, and broadband infrastructure plays a critical role in each community’s ability to create 

a competitive business environment. Even with the right infrastructure in place, limited access to credit and business training 

could impede the community’s ability to develop and start new enterprises. 

And I might say parenthetically that at least three or four of us 

were at a Subcommittee hearing in Springfield, Illinois, where we 

specifically dealt and focused on the broadband issue, it was very 

instructive and very helpful. Our staffs did a great job and I hope 

we will be able to integrate some of the input received and add that 

into a final product. 

Today’s discussion will take us across a wide range of issues as 

we look at the range of programs offered by the USDA. It is in part 

the sheer number of programs which makes it difficult to gauge the 

effectiveness of current policy. Just a few weeks ago, we heard testimony from GAO regarding the extent of duplication and fragmentation among Federal agencies. As the Committee considers 

how to reauthorize current programs, it seems prudent to also seek 

ways to weed out activities and authorities that are either redundant or ineffective and in doing so, these programs would be made 

more accessible to applicants, reduce USDA’s administrative burden, and focus program resources on core responsibilities. As Congress looks at ways to address the deficit, scarce funds must be 

stretched to accomplish more than ever. 

Before us today are two panels comprised of organizations that 

assist rural America in a variety of ways, but are universally focused on developing the livelihoods and economies of virtually 

every rural town and county. As partners and implementers of 

USDA programs, our witnesses will be able to provide an in-depth 

discussion of the farm bill and ways to strengthen our approach to 

rural economic development. 

Our first panel includes representatives of co-ops, counties, and 

development organizations whose members are found in every corner of the country. Among the issues we hope to address with our 

first panel is the fragmentation of programs, challenges of regional 

coordination, and ways to improve program applications. 

Our second panel will focus on infrastructure programs and how 

our water, wastewater, and telecommunications programs are functioning. Particularly in light of budget constraints, we hope to receive additional feedback on how the programs can be adjusted to 

reach more communities with the given resources. 

We appreciate the time that each of the witnesses have given us 

to prepare their testimony. The testimony received today will be 

significant as we begin the process to reauthorize the farm bill. 

[The prepared statement of Mr. Johnson follows:]

PREPARED STATEMENT OF HON. TIMOTHY V. JOHNSON, A REPRESENTATIVE IN

CONGRESS FROM ILLINOIS

Good morning and welcome to this hearing to review rural development programs 

in advance of the 2012 Farm Bill. This is the first of eight hearings which will be 

held by the various Subcommittees to review Federal farm policy before we begin 

drafting the reauthorization of agricultural programs. These Subcommittee hearings 

are a continuation of the Committee’s work to gather information on farm policy. 

We’ve also conducted 11 audits of farm programs—three of which were held by this 

1605

Subcommittee—and four field hearings to gather input directly from producers 

across America. 

Today we are focusing on how the Federal Government makes investments in 

rural communities. While the infrastructure needs such as water, wastewater, and 

broadband access are similar throughout every town and city in America, the small, 

rural towns that make up a good part of our districts face unique challenges. Each 

farm bill seeks to address long-standing challenges and adapt to new ones in the 

rural development title. 

Without a doubt, access to water, energy, and broadband infrastructure plays a 

critical role in each community’s ability to create a competitive business environment. Even with the right infrastructure in place, limited access to credit and business training can impede a community’s ability to develop and start new enterprises. 

Today’s discussion will take us across a wide range of issues as we look at the 

range of programs offered by USDA. It is, in part, the sheer number of programs 

which makes it difficult to gauge the effectiveness of current policy. Just a few 

weeks ago, on March 21st, we heard testimony from the Government Accountability 

Office (GAO) regarding the extent of duplication and fragmentation among Federal 

agencies. 

As the Committee considers how to reauthorize current programs, it seems prudent to also seek ways to weed out activities and authorities that are either redundant or ineffective. In doing so, these programs would be made more accessible to 

applicants, reduce USDA’s administrative burden, and focus program resources on 

core responsibilities. As Congress seeks ways to address the deficit, scarce funds 

must be stretched to accomplish more than ever. 

Before us today are two panels comprised of organizations that assist rural America in a variety of ways, but are universally focused on developing the livelihoods 

and economies of virtually every rural town and county. As partners and implementers of USDA programs, our witnesses will be able to provide an in-depth discussion 

on the farm bill and ways to strengthen our approach to rural economic development. 

Our first panel includes representatives of cooperatives, counties, and development organizations whose members are found in every corner of the country. Among 

the issues we hope to address with our first panel is the fragmentation of programs, 

challenges to regional coordination, and ways to improve program applications. 

Our second panel will focus on infrastructure programs, and how our water, 

wastewater, and telecommunications programs are functioning. Particularly in light 

of budget constraints, we hope to glean additional feedback on how the programs 

can be adjusted to reach more communities with the given resources. 

We appreciate the time that each of our witnesses took to prepare their testimony 

and travel to be here today. The testimony we receive today will be invaluable as 

we begin the process to reauthorize the farm bill.

The CHAIRMAN. With that, I would like to turn to my friend and 

colleague from California, the Ranking Member, Mr. Costa, for a 

statement as well. 

OPENING STATEMENT OF HON. JIM COSTA, A 

REPRESENTATIVE IN CONGRESS FROM CALIFORNIA 

Mr. COSTA. Thank you very much, Mr. Chairman, for your leadership and your comments. And let me take this opportunity since 

this is the first Subcommittee hearing that we have held since your 

announcement regretfully to make this your last term in serving 

the people of Illinois as a distinguished Member of the House; we 

appreciate all of the good work that you have done over the years 

and the hard work that you have done on behalf of your constituents, as well as a terrific Member of the House Agriculture Committee. Your focus and your care are well known and the sacrifices 

you and your family have made so you could serve the people of 

our United States is truly appreciated. So let me thank you again 

on behalf of all the Members of the Subcommittee and our colleagues for a job well done and we will look forward to continuing 

to work with you before the end of this year is out. 

1606

The CHAIRMAN. Let me just say a very sincere thanks to you for 

not only the comments but for the wonderful partnership that we 

have created on this Subcommittee and the input and role that you 

play, which is overwhelmingly appreciated and your friendship is 

as well. So those comments are especially important to me and 

thank you so much. 

Mr. COSTA. Well, thank you again, Mr. Chairman. 

This hearing is important, as all the hearings that this Subcommittee has held, as it relates to the rural development title of 

the farm bill and the organizations that are going to testify in 

terms of your input and as it relates to the United States Department of Agriculture’s rural development programs, which I think, 

and Members of the Subcommittee believe, are critical as we reauthorize the 2012 Farm Bill. 

Rural America, as we all know, comprises 3⁄4 of the nation’s land 

and is home to more than 50 million people. The rural development 

programs in this title help their interests and the prosperity of 

those communities that we represent. These programs authorized 

by the rural development title of the farm bill support an array of 

public facilities and services. In addition, rural development programs have allowed communities to apply for loans, loan guarantees, and grants, which are critical throughout rural America. 

Over the course of nearly 80 years, since the Great Depression, 

the landscape of rural America has changed greatly. Our nation’s 

policy related to rural America has also changed. And even as manufacturing and service sectors have replaced some agricultural production as dominant economic forces in some of rural America, we 

know that there are a lot of commonalities that rural America 

share together, including the bountiful harvest of American agriculture. 

As we look at the reauthorization of the farm bill, it is my belief 

that this Subcommittee and the full Committee should look closely 

at what it means to be rural in the 21st century and how increasingly limited Federal resources can be leveraged to assist our rural 

communities. 

In February 2011, we held a hearing of this Subcommittee examining the definition of rural as it applies to the USDA programs. 

However, to date, sadly, we still have not received the report promised by the United States Department of Agriculture clarifying that 

definition. Please, Secretary Vilsack, if you are hearing this anywhere, members of the USDA, if you are hearing this anywhere, 

we would like to get the report. 

In fact, my Congressional district is one of the most productive 

agriculture regions in the country and many of our communities 

not only are rural but many of my communities are poor and disadvantaged. Despite the clear need, my district struggles with eligibility requirements under the rural development programs, as, for 

example, whether or not rural housing help or essential community 

facilities can be included largely because of the criteria used to define what rural means. Establishing a nationwide definition of 

rural presents challenges, I understand, regionally from the South 

to the Northeast the Midwest to the West. However, it seems to me 

that we ought to be able to work through this. 

1607

We have a very able state director with USDA who is here in the 

audience today, Dr. Glenda Humiston, who I work with on a regular basis. She just told me that in looking at the 2011 Census 

data, as an example, 98 communities in California will no longer 

be deemed as falling under the definition of rural, which more tragically or unsatisfying for many of my colleagues represent 80 percent of their loan portfolio. So with the new definition, because of 

population increases that are taking place, 98 communities in California will no longer be considered rural and that impacts 80 percent of the loan portfolio as the state director just informed me. 

And by the way, I want to thank Dr. Glenda Humiston for doing 

the terrific job that she does. 

I think everyone here, our witnesses included, would be hardpressed to come up with a singular definition. I know that is 

tough—that accurately portrays what it means to be rural in every 

state. There isn’t a one-size-fits-all I do not believe. Recent farm 

bills have updated the definition of rural, so I look forward to hearing the witnesses’ view on how we might address this issue. If 

more of our rural communities can be better served with a different 

set of criteria or a different regionally based approach, then let’s 

hear about it before we reauthorize the 2012 Farm Bill. 

That said, Mr. Chairman, I am particularly interested in hearing 

from representatives of the telecommunications organizations responsible for delivering broadband services to consumers in rural 

communities connecting rural America to what we know is a global 

economy. Whether it is in my home State of California or anywhere 

between, Federal programs and private service providers have 

made great strides in deploying broadband. The hearing that you 

mentioned in Illinois that the Subcommittee held last year brought 

that out in terms of the access to broadband, and you had some 

very good witnesses that testified. 

I want to highlight a few California figures that illustrate why 

the issue of rural broadband is so important not just in my district 

but in states and communities all across rural America. When you 

think of California—and I know that people have a lot of different 

thoughts when they think of California—but oftentimes it is Silicon 

Valley, its high-tech sector are probably many things that come to 

mind. According to a 2008 report, California Broadband Task 

Force, we are a leading state in broadband penetration. However, 

that figure is misleading. The same report found that 1.4 million 

rural Californians lacked access to broadband and barely 1⁄2 the 

state’s residents have broadband access at home. For these households with annual incomes of $25,000 or less, many in my district, 

the situation is even bleaker with less than 1⁄4 of the households 

subscribing to broadband. 

What this shows me is despite relative success in putting wires 

in the ground, the Federal Government and private sector 

broadband providers, public institutions still have a lot of work to 

do in bridging the divide between the haves and the have-nots. And 

let me tell you why I think this is so important, especially in rural 

America—because we are closely reaching our ability to have access or capacity on broadband. American agriculture is at the cutting edge around the world in this broadband technology as it relates to irrigation technologies, as it relates to tillage technologies. 

1608

Broadband is being used to make our farmers more efficient and 

more effective. Yet when you limit their capacity or the broadband 

capacity for American farmers, dairymen, and ranchers, it has an 

economic impact in this global economy that they have to compete 

in. 

Finally, Mr. Chairman, research is an important task of the Subcommittee and the separate title of the farm bill and I just want 

to take a moment to speak on that. Research has been at the core 

of the United States Department of Agriculture for nearly 150 

years since the Department of Agriculture was created. Particularly, through our land-grant institutions—and many of us represent land-grant institutions—research driven by the United 

States Department of Agriculture has helped ensure safe, abundant, and affordable food supply and fiber that has not only made 

American farmers and farm households thrive but be among the 

very best in the entire world. 

Equally important to these efforts is the research conducted by 

even many of our non-land-grant agricultural schools such as my 

alma mater, Fresno State—go Bulldogs—which is one of the premier ag schools in the West. I am sure it comes as no surprise to 

many of my colleagues that of particular interest is the research 

being conducted in Specialty Crops Research Initiative that many 

of us fought very hard for in the 2008 Farm Bill. It was created 

there for the purpose of continuing to expand that. It expires this 

year. Specialty crops represent approximately 1⁄2—1⁄2—of the 

United States agricultural exports without support in the farm bill. 

So it is an assistance through technical programs such as market 

access, such as Specialty Crops Research Initiative, such as efforts 

for pest detection and eradication—I can get it out I know I can—

that help us thrive when we deal with infestations. 

So I look forward to the reauthorization and working together on 

a bipartisan basis in the farm bill. It is critically important that 

competitive research dollars remain available to our institutions 

throughout the United States to support American agriculture. I 

look forward to hearing from the witnesses who participate in the 

rural development programs and their views and their proposals 

about how we can maintain and strengthen the United States Department of Agriculture’s largely successful rural development programs in a cost-saving environment that we know that we are in 

as we reauthorize the 2012 Farm Bill. 

Mr. Chairman, thank you. I spoke longer than I should have but 

I had a lot to say this afternoon. Thank you. 

[The prepared statement of Mr. Costa follows:]

PREPARED STATEMENT OF HON. JIM COSTA, A REPRESENTATIVE IN CONGRESS FROM

CALIFORNIA

Thank you, Chairman Johnson, for calling today’s hearing, to discuss the rural 

development title in the farm bill and hear from organizations that participate in 

the USDA rural development programs in advance of the 2012 Farm Bill. 

Rural America comprises 3⁄4 of the nation’s land area and is home to more than 

50 million people. The rural development programs under this title help advance the 

interests and prosperity of these communities. 

The programs authorized through the rural development title of the farm bill support an array of public facilities and services. In addition, rural development programs allow communities to apply for loans, loan guarantees, and grants, which provide much needed assistance to help advance their farm or community. 

1609

In one form or another, the Federal Government has assisted rural families and 

communities since the Great Depression. 

Over the course of the nearly 80 years since that time, the landscape of rural 

America has changed greatly, and our nation’s policies related to rural America 

have changed with it. 

Even as the manufacturing and service sectors have replaced agriculture production as the dominant economic force in much of rural America, the common needs 

of our rural communities remain. 

As we look to reauthorize the farm bill, it is my belief that this Subcommittee 

and the full Committee must look closely at what it means to be a rural community 

in the 21st century and how increasingly limited Federal resources can be leveraged 

to position rural areas to better compete in a global economy. 

In February 2011, we held a hearing in this Subcommittee examining the definition of rural as it applies to USDA programs. However, to date, we have still not 

received the report promised to us by USDA clarifying the definition. 

The fact is, my Congressional district is one of the most productive agricultural 

regions in the country and many of our communities are not only rural, but also 

largely poor and disadvantaged. 

Despite the clear need, my district struggles with eligibility for rural development 

programs, whether it is rural housing, health, or essential community facilities, 

largely because of the criteria used to define rural communities. 

Establishing a nationwide definition of rural presents challenges for communities 

in all corners of the country. 

I think everyone here, our witnesses included, would be hard-pressed to come up 

with a singular definition that accurately portrays what it means to be rural in each 

and every state. 

Recent farm bills have updated the definition of rural, so I look forward to hearing our witnesses’ thoughts on whether further reforms should be considered in the 

next farm bill to more effectively and efficiently operate rural development programs. 

If more rural communities can be better served with a different set of criteria or 

a different regionally-based approach to development, then that is something this 

Committee should consider in this farm bill. 

That said Mr. Chairman, I am particularly interested in hearing from the representatives from the telecommunications organizations responsible to delivering 

broadband services to consumers in rural communities and connecting rural America to the global economy. 

Whether it’s in my home State of California or anywhere in between, Federal programs and private service providers have made great strides in deploying 

broadband. 

I want to highlight a few California figures that illustrate why the issue of rural 

broadband is so important for my district, my state and communities all across rural 

America. 

When you think of California, Silicon Valley and our high-tech sector are probably 

among the first things that come to mind. And according to a 2008 report by the 

California Broadband Task Force, California does lead the nation in broadband penetration, with 96 percent of Californians having access to the technology. 

But this figure is also misleading. The same report found that 1.4 million rural 

Californians lack access to broadband and barely 1⁄2 of the state’s residents have 

broadband access at home. 

For those households with an annual income of less than $25,000—many of which 

are in my district—the situation is even bleaker, with less than 1⁄4 of households 

subscribing to broadband. 

What this shows me is that despite relative success in putting wires in the ground 

the Federal Government, broadband providers and public institutions still have a 

lot of work to do in bridging the divide between the haves and have-nots when it 

comes to broadband, particularly in rural America. 

Finally Mr. Chairman, research is another important task of this Subcommittee 

and a separate title of the farm bill, and I want to take just a moment to speak 

on that. 

Research has been a core mission of USDA for the nearly 150 years since the Department was created. 

Particularly through our land-grant institutions, the research driven by USDA 

has helped ensure a safe, abundant and affordable supply of food and fiber that has 

helped American farmers thrive. 

Equally important to these efforts is the research conducted by our non-land-grant 

agriculture schools, such as Fresno State University in my district. 

1610

I’m sure it comes as no surprise by now to my colleagues that of particular interest to me is the research being conducted through the Specialty Crops Research Initiative, which was created in the 2008 Farm Bill. 

The mandatory funding for this program expires after Fiscal Year 2012. 

Specialty crops represent approximately 1⁄2 of the value of U.S. agriculture without support from title I of the farm bill, so assistance through technical programs 

such as the Market Access Program and research programs like the Specialty Crops 

Research Initiative are particularly important to help this vital sector thrive. 

As we look toward reauthorization of the farm bill it is critically important that 

competitive research dollars remain available to these institutions to continue their 

good work on behalf of American agriculture. 

I look forward to hearing from our witnesses who participate in USDA rural development programs and their views and proposals about how we can maintain and 

strengthen USDA’s largely successful rural development programs in a cost-saving 

environment in the 2012 Farm Bill. 

Thank you again, Mr. Chairman, for calling this hearing. I yield back my time.

The CHAIRMAN. Thank you, Mr. Costa. And no, you didn’t speak 

too long. In fact, your comments are right on point and I really appreciate them. 

Our first panel today is comprised of three individuals, all of 

whom are highly regarded in their area. Mr. Chuck Conner, my 

friend and President and CEO of the National Council of Farmer 

Co-Ops; former Secretary of Agriculture, Mr. Don Larson, Commissioner, Brookings County, South Dakota, on behalf of the National 

Association of Counties; and Leanne Mazer, I believe, the Executive Director of the Tri-County Council for Western Maryland, 

Frostburg, Maryland, speaking on behalf of the National Association of Development Organizations. 

So with that, Mr. Conner, the floor is yours. 

STATEMENT OF HON. CHARLES F. CONNER, PRESIDENT AND 

PRESIDENT AND CHIEF EXECUTIVE OFFICER, NATIONAL 

COUNCIL OF FARMER COOPERATIVES, WASHINGTON, D.C. 

Mr. CONNER. Chairman Johnson, Ranking Member Costa, and 

Members of the Subcommittee, on behalf of the nearly 3,000 farmer-owned cooperatives and their producer members, we appreciate 

the opportunity to testify today. 

Rural development programs are intended to bolster rural communities and position them to better compete in a global environment. As such, it is important that USDA rural development programs focus on agriculture and farmer co-ops as the foundation for 

helping encourage and support rural economies. 

There are more than 88 programs administered by 16 different 

Federal agencies specifically targeted at rural economic development. With a significant decrease in funding for farm bill programs, coupled with declining USDA resources to administer those 

very programs, it just makes sense to us to consolidate the programs that all have the same objective. It takes the same amount 

of staff time, Mr. Chairman, to administer a million-dollar program 

as it takes to administer a $100 million program. 

At the same time, the requirements for applying for grants have 

become overly complicated and too burdensome and have spawned 

a cottage industry for consultants. Some feedback I have received 

from my members is that while they are interested in applying for 

a rural development grant, they don’t have the resources to navigate the process and the time and energy required to apply isn’t 

worth the amount of funds they would be eligible for in the end. 

1611

Simplifying the application process would lead to more applications 

resulting in better projects. 

That said, Mr. Chairman, the Value-Added Producer Grants Program has been successfully utilized by farmer co-ops. I have specific examples provided by several NCFC members that I would 

ask at this point be submitted for the record. The program has 

been instrumental in helping co-ops overcome many barriers faced 

when developing new products for the marketplace, one of which 

is working capital. This is particularly acute for advanced planning 

that requires substantial capital investment or commitment of resources up front. 

The program has helped producers launch new agricultural products through their co-ops both domestically and internationally. 

Having access to Value-Added Producer Grants allows co-ops to 

capitalize on new business opportunities that would otherwise simply go unexplored. These successful products have resulted in more 

stable income from the marketplace for producers. The program is 

administered on a matching-fund basis, thereby doubling the impact of such grants and helping encourage investment and ventures 

that ultimately benefit all of rural America. 

Co-ops bring many producers, Mr. Chairman, together who individually do not have the size, expertise, or resources to take advantage of the value chain beyond their own farm gate and gives them 

the opportunity to profit from those downstream activities. NCFC 

strongly believes that co-ops, by spreading the benefits of ValueAdded Producer Grants among a large number of producers can 

give the American taxpayers the greatest bang for their buck. 

In 2011, USDA made significant improvements to the program 

rules that recognize those very benefits that I describe. NCFC supports those changes and ask that they carry through in this farm 

bill reauthorization process. 

Another area of interest to many of my members is the Cooperative Services Program. Over time, that program area has lost many 

of its experienced professional staff. At one time, the program 

housed well over 100 employees, but today, that number is less 

than ten. We are not advocating for additional staff but we do want 

to see the resources that exist better spent. 

For example, there are many research needs that Cooperative 

Services could provide that would be specifically beneficial to 

NCFC and our member cooperatives, but currently, much of that 

research is simply not being done. We often hear from NCFC members that are searching for timely and complete statistics on farmer 

co-ops. There is an evident lack of complete and timely research on 

the impact of farmer co-ops on rural economies and those lacking 

items include number of farmer co-ops and their location, number 

of employees, aggregate payroll amounts, farmer co-op market 

share of various commodities, and of course, the patroness dividends that we return to our farmer owners. 

In addition, we encourage Cooperative Services to revisit and update the very useful legal and tax publications that have been a 

cornerstone of cooperatives in the past. NCFC does seek inclusion 

of report language better directing the focus of USDA’s Cooperative 

Services and looks forward to working with this Committee in this 

regard. 

1612

So I thank you, Mr. Chairman, for the opportunity to testify before your Subcommittee today and look forward to answering questions at the appropriate time. 

[The prepared statement of Mr. Conner follows:]

PREPARED STATEMENT OF HON. CHARLES F. CONNER, PRESIDENT AND CHIEF

EXECUTIVE OFFICER, NATIONAL COUNCIL OF FARMER COOPERATIVES, WASHINGTON, D.C. 

Chairman Johnson, Ranking Member Costa, and Members of the Subcommittee, 

thank you for the invitation to testify today on how the 2012 Farm Bill can best 

help rural America meet current and new challenges, and specifically address issues 

as you look to write the rural development title. 

I am Chuck Conner, President and Chief Executive Officer of the National Council 

of Farmer Cooperatives (NCFC). NCFC represents the interests of America’s farmer 

cooperatives. There are nearly 3,000 farmer cooperatives across the United States 

whose members include a majority of our nation’s more than two million farmers. 

These farmer cooperatives allow individual farmers the ability to own and lead organizations that are essential for the vitality of the agriculture sector and rural communities. Earnings derived by farmer-owned cooperatives are returned to their 

farmer-members on a patronage basis thereby enhancing their overall farm income 

that directly supports and keeps capital in the rural economy. 

According to the U.S. Department of Agriculture (USDA), rural America comprises 3⁄4 of the nation’s land area and is home to more than 50 million people. 

USDA rural development programs play a vital role in helping to ensure continued 

prosperity in these communities. We appreciate the opportunity to highlight some 

of these programs, and their impact on cooperatives and their farmer-owners. 

These programs serve a variety of purposes including strengthening farm income, 

fostering the incubation of business in areas that are capital and financially challenged, and help rural America stay abreast of changing technologies. Rural development programs are intended to bolster rural communities and position them to 

better compete in a global environment. As such, it is important that USDA rural 

development programs continue to focus on agriculture and farmer cooperatives as 

a foundation for helping encourage and support rural economies. 

Inasmuch as rural development programs have offered many benefits to American 

farmers and rural economies, some are often criticized for being unfocused and 

under-funded. It is worth noting that there are more than 88 programs administered by 16 different Federal agencies specifically targeted at rural economic development. USDA administers most of the existing rural development programs and 

has the highest average of program funds going directly to rural counties, approximately 50 percent. 

With a significant decrease in funding for farm bill programs, coupled with declining USDA resources to administer those programs, consolidation of programs, where 

feasible, is warranted. It takes the same amount of staff time to write rules, review 

applications, and administer a $1 million program as it does a $100 million program. It is not an efficient use of limited staff resources to be administering many 

programs that have differing application and administrative requirements where 

the overall program objectives are generally similar. 

Conversely, the various requirements for applying for grants have become complicated and difficult to figure out and thus spawned a cottage industry for consultants to assist applicants through the process. It would be beneficial to have a system to evaluate the merits of a proposal aside from the professionally written content, and where it is encouraged that participants write their own grant applications. Samples of past grant applications together with work plans may be very useful to applicants. While the level of assistance varies from one state Rural Development office to the next, NCFC members have found their local offices to be extremely helpful resources and USDA staff willing to assist when questions arise. 

NCFC supports streamlining the number of programs as well as the application 

process—the result will be a more efficient, effective agency, while providing for a 

more understandable, easier-to-navigate application process for all entities. 

Value-Added Producer Grants (VAPG) 

A barrier that cooperatives often face is the capital necessary to innovate and 

process new consumer products. This is particularly acute for advance planning by 

cooperatives that requires substantial capital investment or commitment of resources, such as planning for operating and expansion expenses. Since its establishment, USDA’s Value-Added Producer Grants (VAPG) program has been a tremenVerDate 0ct 09 2002 12:54 Dec 11, 2012 Jkt 041481 PO 00000 Frm 00024 Fmt 6633 Sfmt 6621 I:\DOCS\112-30\74372.TXT BRIAN
1613

dous success in helping cooperatives overcome those constraints. The program has 

helped producers launch new agricultural products through their cooperatives, both 

domestically and internationally. These value-added products benefit both producers 

and consumers. 

With VAPG funds, cooperatives are empowered to capitalize on new value-added 

business opportunities that would otherwise go unexplored. VAPG helps cooperatives differentiate and expand production, in turn helping them improve the value 

of their products through processing and marketing. The objective is to increase 

sales not by displacing other products, but rather build and sustain a market where 

one previously did not exist. Their successful, self-sustaining products have translated into greater and more stable income for producers from the marketplace. It 

also has served to promote economic development and create jobs. 

The program is administered on a matching-fund basis, thereby doubling the impact of such grants and helping encourage investment in ventures that ultimately 

benefit rural America. As a cost-share program, it is as an excellent example of an 

effective public-private partnership bringing a number of self-sustaining products to 

market. 

Of the 298 recipients of Value-Added Producer Grants for 2012, 26 are farmerowned cooperatives. NCFC strongly believes that cooperatives efficiently spread the 

benefits of the VAPG among a larger number of producers in the aggregate. Cooperatives by their nature bring many producers together who individually do not 

have the size, expertise and resources to take advantage of the value chain beyond 

the farm gate and gives them the opportunity to profit from those down-stream activities. Therefore, funds invested by USDA and the benefits of projects generated 

by cooperatives through the VAPG are distributed to a wide number of producers. 

Likewise, by investing in initiatives of cooperatives, USDA lowers the overall costs 

to the government in program administration per individual farmer that benefits. 

In 2011, USDA made significant improvements to the program rules that recognize those benefits. I urge you to also recognize those principles and treat cooperatives as a priority in any direction you may give USDA in administering the VAPG. 

Loan Guarantee Programs 

Rural Development loan guarantees are a cost-effective way to leverage limited 

resources and funding. For example, communities in rural America need access to 

capital to upgrade our nation’s water infrastructure. The water and water disposal 

guarantee loan programs administrated by the Rural Utilities Service of USDA increases ability to leverage all resources—public and private—to provide the financing necessary for our nation’s water systems. This program is a cost-effective way 

to promote public-private partnerships that boost the rural economy and enhance 

the quality of life in rural communities. 

Energy 

Cooperatives play a significant role in the development and marketing of renewable energy. In addition to ethanol and biodiesel, many cooperatives also are investigating opportunities for creating renewable energy from biomass such as dairy cow 

manure through anaerobic digestion. USDA programs also are being used more and 

more by cooperatives to improve energy efficiency in their facilities. We strongly 

support reauthorization of these important grant, loan and related programs which 

research and promote the development and advancement of biofuels and opportunities for biomass, as well as such programs that assist in reaching energy efficiency 

goals. 

USDA Cooperative Services Program 

Over time, the Cooperative Services Program has lost many of its experienced professional staff. This office was once the premier source of information on cooperatives’ role in various commodity sectors, and on cooperative legal foundations, taxation, finance, member education/information, governance, and board/management 

relations. There are many areas in addition to these in which research by Cooperative Services could provide especially beneficial information. We often hear from 

NCFC member cooperatives that are searching for timely and complete statistics on 

farmer cooperatives. There is an evident lack of comprehensive and updated research on the impact of farmer cooperatives on rural economies. 

In addition to research on the economic impacts of farmer cooperatives, Cooperative Services should re-visit very useful legal and tax publications it has published 

in the past. These publications are used frequently by farmer cooperatives. Materials and/or training sessions for boards of directors would also be greatly beneficial. 

Subjects such as financial decision-making, ethics, board make-up and representation, and executive succession are all important to the success of a cooperative. 

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NCFC seeks inclusion of report language better directing the focus of USDA’s Cooperative Services, and looks forward to working with the Committee in that regard. 

In closing, maintaining a strong agriculture economy is essential to the health of 

rural America. Some of the challenges faced by the agricultural industry include 

dealing with immense regulatory pressure and struggling to have access to a legal, 

stable workforce. While, those issues clearly fall out of the jurisdiction of the 

USDA’s rural development programs, they are vital to a strong agricultural economy. In addition, there are programs contained throughout the farm bill that enhance opportunities for rural communities—from maintaining a meaningful safety 

net for producers, to supporting agricultural exports. 

Thank you again for the opportunity to testify today before the Subcommittee. We 

look forward to working with you to strengthen USDA’s Cooperatives Services, keep 

the VAPG Program viable and available to farmer co-ops, and streamline other 

rural development programs and applications. I am happy to answer any questions 

you may have. 

About the National Council of Farmer Cooperatives 

Since 1929, NCFC has been the voice of America’s farmer cooperatives. NCFC values farmer ownership and control in the production and distribution chain; the economic viability of farmers and the businesses they own; and vibrant rural communities. With an extremely diverse membership, NCFC members span the country, 

supply nearly every agricultural input imaginable, provide credit and related financial services (including export financing), and market a wide range of commodities 

and value-added products. 

American agriculture is a modern-day success story. America’s farmers produce 

the world’s safest, most abundant food supply for consumers at prices far lower than 

the world average. Farmer cooperatives are an important part of the success of 

American agriculture. Cooperatives differ from other businesses because they are 

member-owned and are operated for the shared benefit of their members. 

ATTACHMENT

Value-Added Producer Grants 

The purpose of the Value-Added Producer Grant program is to help agricultural 

producers improve the value of their products through processing and/or marketing. 

Grants can be used for feasibility studies, developing business plans, working capital and for farm-based renewable energy products. Planning grants are available 

for up to $100,000; working capital grants for up to $300,000. The grants are limited 

to 50 percent of project costs. Eligible applicants include independent producers, agricultural cooperatives, producer groups and majority-controlled producer-based 

business ventures. 

Farmer-Owned Cooperatives: A Few Examples of VAPG Activities 

Blue Diamond: In 2003, Blue Diamond developed a line of three highly seasoned 

added value almond products. The goal was to attract new users to improve the 

grower’s return long-term by creating a sustainable and meaningful source of revenue. The goals of the VAPG were exceeded by an eightfold increase in sales projections and a successful new line of almond products for consumers was launched that 

continues to fuel additional demand for a crop that has tripled in the last 10 years. 

Blue Diamond ‘‘Bold’’ sales were over $40.2 million in 2011, growing more than 18 

percent compounded annually. ‘‘Bold’’ flavors have increased fourfold to 12 flavors 

in 2011. 

In addition, the new line now accounts for almost 17 percent of total Blue Diamond snack almond sales; Blue Diamond total snack almond household penetration 

is now over 11 percent, up from 2.3 percent in 2003; the ‘‘Bold’’ line is distributed 

in over 35,000 of the nation’s largest retail stores. 

Blue Diamond Growers is a farmer-owned cooperative headquartered in Sacramento, CA. The co-op created a commercial California almond industry when it 

organized in 1910. Today, it represents over half of U.S. almond growers and is the 

leading global manufacturer of almonds. Blue Diamond almond growers are small 

family farmers, averaging about 55 acres each. 

Pacific Coast Producers: Beginning in April of 2003, Pacific Coast Producers 

(PCP) has earned four separate Value-Added Grants. These grants have assisted 

PCP Retail Sales, Operations, R&D and Marketing groups in launching dozens of 

new items into the retail grocery trade including, but not limited to a line of shelf 

stable, private brand plastic fruit bowls, canned extra light syrup fruits, organic 

canned tomatoes, fire roasted canned tomatoes and fortified canned fruits. A new 

grant awarded in February 2012 will serve as a major enabler to rebrand canned 

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and shelf stable fruit and tomato products, making canned food products more relevant in the future and increasingly desired by new consumers. 

With the assistance of the USDA Value-Added Grants since 2003, Pacific Coast 

Producers was able to build our plastic fruit bowl program into a 7,500,000 case per 

year industry juggernaut, added approximately 240,000 cases per year to our 

canned fruit program in the Extra Light Syrup sub-category, built an organic tomato program from nonexistent to almost 450,000 cases per year and a fire roasted 

tomato program of 440,000 cases per year, encompassing annual sales of approximately $78 million dollars and growing. These sales do not displace products from 

other manufacturers, but rather built and sustained where no interest existed prior 

to the initial launch with the assistance of the VAPG program. PCP expects each 

of the aforementioned newly created sub-categories of shelf stable food to continue 

their rapid growth and for the rebranding of canned items through its Fresh as 

Fresh Can Be campaign, to permanently lift the sustainability of its California Cooperative Farmers. 

Sunsweet: In an effort to stimulate demand for its farmers’ production, Sunsweet 

has used the VAPG program to assist in launching innovative products. ‘‘Sunsweet 

Ones’’ recast prunes as a ‘‘candy nutrient’’ by individually wrapping moist prunes 

in cellophane, making them a ‘‘snack-on-the-go.’’ In 2007, Sunsweet began marketing a light, low-calorie version of its PlumSmart juice products which is made 

from fresh prune plums which normally are less visually appealing than the varieties grown for fresh markets. Because the PlumSmart line represents prune-plums 

as snacks, nutrition-on-the-go, or food with specific nutritional claims, it requires 

advertising to engage consumer interest. 

In addition, the VAPG assisted in launching other Sunsweet products addressing 

consumers’ preferences and expanding demand for their farmers production. The 

ability for new product development and making a market has been greatly enhanced due to USDA’s VAPG. 

Founded in 1917 as the California Prune and Apricot Growers Association, the cooperative served as a marketing agent to offer the crops of its members—under the 

brand name ‘‘Sunsweet’’—to consumers at better prices than were offered by individual growers. Today, Sunsweet processes and markets the dried fruit production 

of more than 300 grower-members.

The CHAIRMAN. Thank you, Mr. Conner. 

Mr. Larson? 

STATEMENT OF HON. DONALD LARSON, COMMISSIONER, 

BROOKINGS COUNTY, SOUTH DAKOTA; CHAIRMAN,

AGRICULTURE AND RURAL AFFAIRS STEERING COMMITTEE, 

NATIONAL ASSOCIATION OF COUNTIES, BROOKINGS, SD 

Mr. LARSON. Thank you, Chairman Johnson, Ranking Member 

Costa, and Members of the Subcommittee, for our opportunity to 

speak to you today. I am Don Larson. I am a County Commissioner 

from Brookings County, South Dakota, and I serve as chair of the 

National Association of Counties Agriculture and Rural Affairs 

Steering Committee and I am honored to bring the collective perspective of our nation’s counties as I represent NACo today. 

A vast majority of our nation’s 3,068 counties are rural; therefore, our new farm bill with emphasis on rural development is critical to our American counties. Today, we are talking about America’s food, fiber, and renewable energy fuels producers and their 

local economies. Before I get into the details of the testimony, I 

want to thank the leadership and the membership of the House Agriculture Committee for your commitment to passing the farm bill 

this year. 

In my testimony, Mr. Chairman, I want to make three points, 

which I lay out in more detail in the written comments provided. 

First, the lack of sufficient and coordinated infrastructure development and capital are two critical obstacles to economic development 

and competitiveness in small town and rural America. USDA’s 

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broad range of rural development programs should be made a priority in the farm bill because they are a critical source of grant and 

loan funding that is leveraged by rural business, rural communities, and rural people to overcome these challenges and create 

jobs. 

The programs that assist communities with financing of water 

infrastructure, community facilities, electric utilities, and 

broadband deployment are the basic building blocks all communities need to compete. Water and community facilities programs 

are consistently ranked as the most critical. Rural business programs all increase capital availability and help counties play their 

important role as intermediaries and technical assistant providers. 

Most importantly, the rural development title helps rural communities improve economic opportunity and quality of life. The bipartisan Beginning Farmer and Rancher Opportunity Act, H.R. 

3236, provides a model that NACo supports for the kind of initiatives necessary to invest in the next generation of American producers. The rural development title also provides critical support to 

new and beginning farmers through its ability to finance the infrastructure necessary for local and regional food systems. This growing sector will be enhanced by the NACo-supported Local Farms, 

Food, and Jobs Act, H.R. 3286. NACo supports maintaining the 

$150 million in mandatory funding provided in the 2008 Farm Bill. 

The second key point is that rural people, businesses, and communities are increasingly operating in dynamic regional economies 

and USDA rural development programs must be reshaped to a 

more locally driven strategic regional approach. The importance of 

Federal investments in regional planning and project implementation is clear in eastern South Dakota. My county, partnered with 

the City of Brookings, the County of Brookings, South Dakota State 

University, our state created the South Dakota State University Innovation Campus, the first one in South Dakota. Our Innovation 

Campus provides a place where people and ideas are coming together to enhance the economic vitality of our region. 

We use the ability of our First District Association of Local Governments to develop a business plan and regional strategy with 

Federal EDA funding. These planning investments provided vital 

gap funding that helped make our regional vision a reality. EDA 

got this project off the ground. 

USDA, the main Federal partner in rural America, is not structured to make this kind of success story happen. Currently, USDA 

rural development programs all too often are structured to serve 

individual communities rather than a larger county and multi-jurisdictional facility and regional strategies and goals. Funding decisions are based on the best-written application as determined by 

Federal officials, not state and local actors. We suggest the next 

farm bill direct the Secretary of Agriculture to give priority to 

projects that demonstrate collaboration and cooperation at the local 

and regional level. Our towns, cities, and counties can no longer afford to compete in a race to the bottom; rather, we are learning 

that cooperation and collaboration best utilize limited resources. 

Incentivizing projects that involve collaboration across jurisdictions 

is smart policy and supported by rural America. 

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Our last point is the Campaign for a Renewed Rural Development is a collaboration of 35 national organizations with a sincere 

interest in rural America’s future that is united in six key priorities for the next rural development title. Those are mentioned in 

my previous report to you. 

Ladies and gentlemen, we are here as your partner and we want 

to work with you to recreate some of these things. And we know 

if we keep doing what we are doing, we are going to get what we 

got. Thank you, Mr. Chairman. 

[The prepared statement of Mr. Larson follows:]

PREPARED STATEMENT OF HON. DONALD LARSON, COMMISSIONER, BROOKINGS

COUNTY, SOUTH DAKOTA; CHAIRMAN, AGRICULTURE AND RURAL AFFAIRS STEERING

COMMITTEE, NATIONAL ASSOCIATION OF COUNTIES, BROOKINGS, SD 

Thank you Chairman Johnson, Ranking Member Costa and Members of 

the Subcommittee for the opportunity to testify today regarding an assessment of rural development programs in advance of the 2012 Farm Bill.

My name is Don Larson. I am a County Commissioner in Brookings County, 

South Dakota and I serve as chair of the National Association of Counties’ (NACo) 

Agriculture and Rural Affairs Steering Committee. Brookings County is located in 

the eastern corner of South Dakota and has a population of around 32,000 people. 

Before I get into the details of my testimony I want to start by commending the leadership and membership of the House Agriculture Committee for your commitment to passing a farm bill this year. NACo supports 

you in that effort in partnership with a broad coalition of groups that urged passage 

this year. NACo supports all titles in the 2012 reauthorization of the farm bill which 

is critical to all of our nation’s counties due to the important programs and policies 

that are enacted for rural development, agriculture, nutrition, conservation, research, forestry, energy and a host of other provisions. NACo calls on Congress to 

place a particular emphasis on crafting a bill that provides a robust and improved 

Rural Development title and is appreciative of the focus on this topic in today’s 

hearing. 

My goal today in covering this important topic is to give you some concrete examples from my county and region and I’m honored to also bring the collective perspective of our nation’s rural counties as I represent NACo. NACo looks forward to 

working with as you consider ways to improve USDA’s Rural Development portfolio 

during the farm bill reauthorization process. We share your deep commitment to 

rural America and believe that through our working partnership, rural individuals, 

communities, farmers, ranchers and all other rural businesses will be given more 

flexibility to expand their economic potential and compete in the global economy. 

About the National Association of Counties 

The National Association of Counties (NACo) is the only national organization that represents county governments in the United States. Founded in 

1935, NACo provides essential services to the nation’s 3,068 counties. NACo advances issues with a unified voice before the Federal Government, improves the 

public’s understanding of county government, assists counties in finding and sharing 

innovative solutions through education and research, and provides value-added services to save counties and taxpayers money. For more information about NACo, visit 

www.naco.org.

Overview 

In my testimony, Mr. Chairman, I want to make three main points.

• The lack of sufficient and coordinated infrastructure development and 

capital are two critical obstacles to economic development and competitiveness in small town and rural America. USDA’s broad range of 

Rural Development programs should be made a priority in the next 

farm bill because they are a critical source of grant and loan funding 

that is leveraged by rural businesses, rural communities and rural people to overcome these challenges in order to create jobs.

• Rural people, businesses and communities are increasingly operating 

in dynamic regional economies and USDA Rural Development programs must be reshaped to promote and give greater flexibility to these 

successful regional approaches and local collaborations.

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• Rural Stakeholders are united in their support for Rural Development 

programs and have provided a comprehensive list of recommendations 

to improve these programs. 

Making Rural Development a Priority 

Our agricultural sector needs more investments in our rural community infrastructure to remain competitive, both from a quality of life perspective as well as 

the production, transport and safety of agricultural food and energy crops. Rural Development in the farm bill context shouldn’t be viewed as a competitor, but as a 

complementary component that should be robustly funded with mandatory and discretionary dollars. The agricultural sector is a primary beneficiary of just about 

every investment made by USDA Rural Development, whether related to improved 

water and wastewater treatment facilities, improved housing options for workers, 

more affordable access to business financing, assistance for value-added production 

marketing or cheaper and reliable services from rural electric, telephone and 

broadband cooperatives. 

Most importantly, the rural development title helps rural communities improve 

economic opportunity and quality of life so that the next generation of farmers is 

able to step forward. The percentage of farmers who rely on off-farm income to survive is continuing to accelerate and the average age of farmers and ranchers continues to increase. New and beginning farmers depend on vibrant rural communities 

to make their operations viable. NACo supports policies that ensure all programs 

recognize that youth play a vital role in sustaining American agriculture and rural 

communities. New programs and updates to ongoing programs are needed so that 

it is possible for young and beginning farmers to survive and thrive in the modern 

agricultural economy. The bipartisan Beginning Farmer and Rancher Opportunity 

Act, H.R. 3236, provides a model that NACo supports for the kind of initiatives necessary to invest in the next generation of American producers. It is a comprehensive 

marker bill with sound ideas for each title and includes rural development programs 

such as the Value-Added Producer Grants and assistance to entrepreneurial farm 

enterprises. 

The Rural Development title also provides critical support to new and beginning 

farmers through its ability to finance the infrastructure necessary for local and regional food systems. Growing up we called them truck farms, but today my fellow 

elected officials and I from across the country are seeing more and more young people get their start in agriculture through small farm to local market operations. 

NACo supports investments in infrastructure, entrepreneurial programs and facilities that process, distribute, and develop value-added products using locally-grown 

commodities purchased from local farmers to meet the demand for local, healthy 

food. The community facilities program and business programs provide important 

sources of capital to help these markets grow. These programs directly benefit new 

and beginning farmers, local and regional food systems and the urban and suburban 

consumers who are gaining access to fresh products. It is also critical to point out 

that regional and local food systems are bolstering urban—rural economic linkages 

and providing new economic development opportunities in both. 

This growing sector will be enhanced by the NACo supported Local Farms, Food 

and Jobs Act, H.R. 3286. The bill provides important policy suggestions for the farm 

bill that are intended to help farmers and ranchers engaged in local and regional 

agriculture by addressing production, aggregation, processing, marketing, and distribution needs and will also assist consumers by improving access to healthy food 

and direct retail markets. Local and regional agriculture is a major economic driver 

in the farm economy. There are now more than 7,000 farmers markets throughout 

the United States—a 150 percent increase since 2000, direct to consumer sales have 

accounted for more than $1.2 billion in annual revenues. 

NACo and its municipal counterpart the National League of Cities believe that 

this growing sector exemplifies the success of regional collaborations as communities 

build upon partnerships to improve access to healthy, local foods. Access to healthy 

food is increased when local and regional food production, processing, distribution, 

and retail enterprises work together to build stronger markets for healthy foods. 

The regional food effort provides an important source of employment in our communities, as it strengthens the viability of small and mid-scale farms and other small 

businesses along the food chain. 

USDA Rural Development also offers capital and infrastructure financing that is 

critical to all sectors of the rural economy. The programs that assist communities 

with financing for water infrastructure, community facilities, electric utilities and 

broadband deployment are the basic building blocks all communities need to compete. The water and community facilities programs are especially important to rural 

counties. For nearly 40 years, Rural Development has successfully partnered with 

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technical assistance (TA) providers to help rural communities develop this vital infrastructure through various programs, like water and wastewater, solid waste, and 

mutual self-help housing. By partnering with TA providers, Rural Development is 

able to maximize the return on every Federal dollar invested in these programs and 

ensure that they are accessible to all rural communities. We support the reauthorization of these programs due to their success in leveraging outside resources, minimizing the risk of default on Rural Development loans, and developing the capacity 

of local leaders to manage large projects. 

In addition, we urge you to authorize a technical assistance set-aside for the Essential Community Facilities program to enable small communities to provide vital 

services like public safety, health care, business incubators and other vital services. 

We also urge you to bolster Rural Development staff and TA providers’ capacity to 

assist rural communities and regions with comprehensive economic development 

planning. Otherwise, USDA risks funding parallel initiatives that are not coordinated with the current economic development plans of rural communities and regions. 

The Intermediary Relending Program (IRP), Rural Business Enterprise Grant 

Program (RBEG), Rural Business Opportunity Grant Program (RBOG), Business 

and Industry Loan Program and Rural Microentrepreneur Assistance Program 

(RMAP) all increase capital availability to rural businesses. Counties play an important role as intermediaries for relending programs and as technical assistance providers through IRP, RBEG and RBOG, but are ineligible to serve as the microenterprise development organizations that assist microenterprises through RMAP. Local 

governments should be made eligible for RMAP as they are often the sole provider 

of economic development services in many communities. 

Infrastructure development and access to capital remain the most significant 

roadblocks to economic development and competitiveness in small town and rural 

America. USDA Rural Development is effective at helping communities overcome 

these roadblocks, but needs to receive mandatory funding, maintain discretionary 

funding and be directed to be more strategic with funding in the coming fiscal years 

in order to overcome these obstacles. 

Shifting USDA to a More Locally Driven, Strategic Regional Approach 

The next farm bill offers a unique opportunity for Federal policymakers to start 

pursuing new Federal policies for rural development that ensure the Federal dollar 

gets stretched farther and that rural localities and regions, not Washington, drive 

the funding decisions. 

At the local level I’m proud of our collaboration with the City of Brookings on 

multiple joint projects, which are intended to create more opportunities for our residents. NACo and the National League of Cities are also united in many of our priorities at that national level. NACo and NLC both support Federal policies that advance regional and multi-jurisdictional approaches to planning and development. 

Many communities—rural, urban, small and large—are partnering with various levels of government, as well as public, private and nonprofit organizations to pursue 

regional development opportunities that grow the local economy. While county and 

city officials work to find innovative solutions to revitalize our communities, current 

rural development policy makes it difficult for local leaders to use the available resources most efficiently. 

Local jurisdictions pursue regional cooperation for many reasons, including as a 

means to overcome limitations in accessing traditional financing mechanisms that 

have grown overburdened or expensive as a result of the current fiscal climate. We 

think Congress should work to promote regional collaboration in rural development. 

First, rural development programs can be oriented to give weight to applicants demonstrating local and regional partnerships. Second, the definition of regional partners should be broad enough to recognize a variety of entities active in the life of 

a community, including nonprofit and for-profit corporations, service providers and 

other governmental groups, which help local governments achieve success. Third, 

programs should incent and reward applicants that demonstrate cost savings and 

avoid duplication of efforts. 

Currently, USDA Rural Development programs all too often are structured to 

serve individual communities rather than larger county and multi-county regional 

strategies and goals. Funding decisions are based on the best written application 

and not the level of collaboration and cooperation that a project demonstrates. In 

today’s economy, our rural places are not served well by stove piped programming, 

but rather need Federal investments to prioritize strategic multi-jurisdictional plans 

that capitalize on the unique economic assets and unique vision of people, businesses and organizations in rural regions. 

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Rural people and places do not fit nicely into a box. I encourage you to avoid getting bogged down in the regional fights that erupt when definitions are considered. 

Instead, I encourage you to focus on providing enhanced flexibility for USDA Rural 

Development’s state offices to provide assistance that fits the uniquely rural nature 

of their states, by focusing on serving rural regions, both multi-town and multicounty. USDA Rural Development funding should be directed towards the 

prioritized assets and needs of rural communities and regions and not well written 

applications written by a consultant in some far off urban area. 

The fiscal situation facing all levels of government—Federal, state and local—is 

dire. Therefore, our investments must be based upon the best economic research 

available. Historically, policymakers have thought it was impossible for municipalities and unincorporated rural areas to work together as one county or for multiple 

counties to work together. The prevailing notion was that our interactions in economics and football were the same. We met regularly, but only in competition 

against each other. 

I’m happy to report that this old notion is becoming less and less prevalent. Our 

towns, cities and counties can no longer afford to compete in a race to the bottom 

against each other in search of the next big manufacturing plant. No, instead we 

are being forced to consider new ways of governing in an era of limited government 

resources. We are working together more efficiently and are streamlining services. 

NACo pledges to work with you to improve USDA’s portfolio of rural development 

programs in order to assist with this changing dynamic. 

Incentivizing projects that involve collaboration across jurisdictions and sectors of 

the rural economy does not have to disadvantage remote rural communities or lead 

to more funding going to larger rural cities and towns. Funding will still only flow 

to those communities eligible under population criteria standards, but a new priority for projects that demonstrate collaboration would allow the broader regional 

strategies formulated jointly by urban, suburban and rural areas to be factored into 

funding decisions as long as resources are only going to eligible rural jurisdictions. 

A model for incentivizing multi-jurisdictional and multi-sector collaboration without leaving behind those communities that do not want to or cannot collaborate is 

a funding bonus. An example is the U.S. Economic Development Administration’s 

(EDA) very small but effective economic development district (EDD) planning program, which is the only national program that requires rural communities to think 

and plan regionally. The agency rewards local governments and grantees with a ten 

percent Federal bonus within its public works and economic adjustment assistance 

programs if they engage in multi-county planning and development. Those that do 

not engage in this process are still funded, but do not receive the bonus. USDA 

could be encouraged or forced to do something similar in terms of providing a more 

attractive grant/loan package to coordinated strategic projects. This model could also 

be adapted to USDA Rural Development’s clientele by providing incentives for both 

multi-county planning and integrated planning among municipalities and unincorporated areas within a single county. 

In my County of Brookings, South Dakota, through regional planning and innovative partnerships we created the South Dakota State University Innovation Campus, the first research park developed in the state of South Dakota. Sited on 125 

acres, the Innovation Campus is located next door to South Dakota State University 

(SDSU). 

The SDSU Innovation Campus provides a place where people and ideas come together in our region to combine the experience of university, business, industry and 

government in an environment that uses innovation and critical thinking to generate new ideas, promote research, entrepreneurialism and business mentoring—

providing opportunities to keep our best and brightest in South Dakota. 

The SDSU Innovation Campus is the product of the SDSU Growth Partnership, 

a 501(c)(3) nonprofit corporation whose partners include Brookings County, the City 

of Brookings, Brookings Economic Development Corporation, South Dakota State 

University, the South Dakota State Foundation and a State Representative. The 

county and city put up-front money, and the First District Association of Local Governments helped develop a business plan and grant application for EDA funding. 

These planning investments provided vital gap funding that helped make our regional vision a reality. The First District serves 11 counties and 75 communities 

within the counties of Brookings, Clark, Codington, Deuel, Grant, Hamlin, 

Kingsbury, Lake, Miner, Moody, and Roberts. 

The site includes retail and support services. Local private developers have developed a 120 unit housing complex, the Innovation Village, on property adjacent to 

the park. The campus has walking, jogging and biking trails, and open green spaces, 

and is also accessible via public transportation. All of the private development on 

the innovation campus becomes a part of our local tax base. 

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The economic success story in Brookings County and our region, along with our 

innovation campus, clearly demonstrate that rural communities and institutions can 

make substantial progress by working regionally to achieve economies of scale, technical expertise, workforce pool and infrastructure financing to compete nationally 

and globally. The project has helped Brookings County and our region prosper. In 

fact, we enjoy one of the lowest unemployment rates in the country at around four 

percent. Most importantly, we are seeing spin off businesses from this innovation 

campus in the surrounding counties that are even more rural than Brookings County. 

However, rural unemployment in the nation has remained high overall, despite 

the strong performance of the agricultural sector. Other rural communities would 

like to start planning and implementing regional strategies but do not have the 

funding to get started. Reorienting USDA towards a regional approach would provide needed resources to assist rural communities with seed money for planning, or 

as in our case, additional funds to expand our regional development efforts. In our 

region, we could expand the principles of the innovation campus project to additional parts of our region. Our county could also link to other efforts such as our 

regional farmers’ market initiative, our Seed Technology Laboratory, and our youth 

learning center. 

This new approach will save time and money for rural counties who have trouble 

navigating the array of stove piped programs at USDA. The vast majority of counties and municipalities in our nation lack the financial, human and technical resources individually that are required to compete with urban centers. These same 

rural communities lack the expertise needed to navigate and apply for the alphabet 

soup of excellent programs offered by USDA. These communities are not asking for 

a free lunch. However, they do need a jump start. Federal investments that encourage regional planning activities and provide seed funding for implementation can 

help provide rural business and community leaders with the leverage they need to 

begin something that creates wealth and jobs. 

Rural Stakeholders Are United in Support of Rural Development and Ideas 

for Improvement of This Critical Agency 

The Campaign for a Renewed Rural Development is a collaboration of 35 national 

organizations with a strong interest in the future of small town and rural America. 

NACo chairs this campaign which works collectively to support rural development 

programs and strategies that promote rural prosperity. The members of the campaign represent a diverse cross-section of rural and small town America. The campaign is focused on advocating for a comprehensive rural development title, in which 

Rural America will gain increased access to important seed capital, infrastructure 

financing, professional expertise and support services. A majority of the campaign 

came together to recommend six key priorities that will strengthen USDA Rural Development investments. I have summarized these points below. 

Clarify Mission of USDA Rural Development—In addition to its traditional and 

vital role as a lender of last resort helping rural individuals and communities, the 

agency going forward should be viewed as a crucial partner in forging new economic 

opportunities that help rural people and places thrive. 

Provide Flexibility and Incentives for Regional Collaboration—Rural Development 

must be reoriented, through statutory language, to give its programs greater flexibility to encourage the local and regional partnerships that are currently encouraging innovation in rural regions across the country. 

Maintain Rural Development Investments—We recognize the extreme fiscal challenges under which the farm bill will be written and the pressure to cut mandatory 

funding. We urge Congress and the Administration to work to ensure that rural investments, such as USDA Rural Development, do not receive disproportionate cuts. 

Rather we urge you to maintain mandatory funding for Rural Development in the 

2012 Farm Bill. 

Maintain and Improve Technical Assistance—We support the reauthorization of 

technical assistance programs due to their success in leveraging outside resources, 

minimizing the risk of default on Rural Development loans, and developing the capacity of local leaders to manage large projects. In addition, we urge you to authorize a technical assistance set-aside for the Essential Community Facilities program. 

We also urge you to bolster Rural Development staff and TA providers’ capacity to 

assist rural communities and regions with comprehensive economic development 

planning. 

Improve Metrics and Accountability—We urge Congress to require USDA to increase its use of outcome-based evaluation metrics and to evaluate the community 

and system wide impacts of its programs on the economy of rural communities and 

regions. 

1622

Streamline Application and Reporting Processes—We urge Congress to provide authorizing language that demands a culture of continuous evaluation of current best 

practices that streamline application and reporting processes. These processes 

should be adjusted to meet the staffing and capacity challenges of all rural communities and businesses, especially the most rural communities and businesses. 

I’m excited to see this level of unity in rural America. We need it if we are to 

overcome the economic challenges that face us. All the panelists today represent 

stakeholders in rural America that are critical to rural counties. I’ve already mentioned our multi-county collaboration through the First District Association of Local 

Governments, which is a regional development organization. I also am proud of our 

work in eastern South Dakota to collaborate with our business community, our 

farmer and ranchers, our cooperatives, our nonprofits and churches, our colleges and 

universities and our foundations, among many others. 

In conclusion, it is clear that rural people and places are increasingly operating 

in dynamic regional economies and USDA Rural Development programs must be reshaped to promote and give greater flexibility to these successful regional approaches and local collaborations. Second, Congress and the Administration should 

work together in a bipartisan manner to make rural development programs a priority within farm bill reauthorization. NACo seeks to be your partner in this endeavor. We promise to work with you to streamline and improve existing programs 

so that investments in rural America pay even bigger dividends in the future. 

Thank you again, Chairman Johnson, Ranking Member Costa and Members of 

the Subcommittee for the opportunity to testify this afternoon on behalf of NACo 

on these critical rural development issues. I appreciate your time and interest. I 

look forward to answering any questions.

The CHAIRMAN. Thank you, Mr. Larson. 

Ms. Mazer? 

STATEMENT OF LEANNE MAZER, EXECUTIVE DIRECTOR, TRICOUNTY COUNCIL FOR WESTERN MARYLAND, FROSTBURG, 

MD; ON BEHALF OF NATIONAL ASSOCIATION OF

DEVELOPMENT ORGANIZATIONS 

Ms. MAZER. Thank you, Chairman Johnson, Ranking Member 

Costa, and Members of the Subcommittee, for the opportunity to be 

here today. My name is Leanne Mazer, and I am the Executive Director of Tri-County Council for Western Maryland, located in 

Frostburg, Maryland. I would respectfully like to make three 

points. 

First, Mr. Chairman, the mission area of USDA Rural Development is critical to our nation’s rural and most distressed areas as 

they work to develop the fundamental building blocks necessary to 

be economically viable and competitive. During challenging fiscal 

times, it is often easy to forget the real impact of these programs 

like USDA Rural Development. I would like to briefly tell you 

about a couple examples of the work we have accomplished with 

these programs in my region. 

With the financing package that included a USDA loan, one of 

our counties was able to construct a new water line that opened up 

a new business park for advanced manufacturing. Very soon thereafter, cabinet manufacturer American Woodmark moved in immediately creating 120 new quality manufacturing jobs. The company 

has continued to grow and now employs about 330 people. 

In 2005, our agency assumed the management of an IRP fund 

from another organization within our region. This offered us one 

other financing tool to provide access to capital for our business 

community. Recognizing that our region had a need for professional 

hands-on business counseling and technical assistance for our local 

entrepreneurs and businesses, we were also successful in securing 

two USDA Rural Business Enterprise Grants in the following 2 

1623

years. During the period of IRP investments, our Council assisted 

196 businesses and resulted in $12.7 million in projects developed. 

Tri-County Council’s business counselor assisted one of those 

companies in developing a business plan with financial projections 

to support a much-needed manufacturing facility expansion. The 

company’s growth was limited by their existing plant size. We 

helped that company successfully put together a financing package 

that included $400,000 in gap financing from our agency with a 

total project cost of just over $2 million. The company continues to 

grow today and has been able to increase their annual sales substantially. 

Second, Mr. Chairman, our nation’s rural communities are facing 

enormous pressure from global competitors. Therefore, it is imperative that USDA Rural Development has the policies, program tools, 

and flexibility to assist rural communities and regions. We believe 

that this can be achieved by USDA facilitating regional collaboration and strategic investments through existing regionally focused, 

locally driven frameworks like the U.S. Economic Development Administration’s Comprehensive Economic Development Strategy, or 

CEDS, process. 

Just last week, our region was pleased to see the completion of 

a major project that could demonstrate how we use our CEDS locally. The City of Frostburg utilized a USDA water and waste disposal loan, along with other Federal, state, and local programs and 

partners to complete a major water distribution project that provides reliable clean water to over 5,300 homes and businesses. The 

project also included a hydroelectric plant that now generates electric savings for the city. 

Because our region made this project a priority many years ago 

during our CEDS and planning processes, all three of our counties 

and all 24 municipalities were committed to its success. Therefore, 

I would urge a greater recognition and support of existing regional 

development strategies, including the EDA CEDS that could assist 

the Rural Development in making sound decisions with their investments. 

Finally, Mr. Chairman, USDA rural development applications, 

policies, and reporting requirements should be streamlined to reflect the scale of the rural investments, emerging needs, and opportunities in rural regions. Western Maryland is much like other 

rural regions across America. Communities and small businesses in 

our region often lack the staff capacity to apply for and manage 

USDA rural development programs. This is unfortunate since programs like USDA rural development were established specifically 

for these communities. 

Rural Development should consider a process to identify the current concerns felt by their customers and enter into a program of 

continuous evaluation and improvement for the purposes of maximizing program impact. Rural Development should also consider 

establishing stronger connections to entities like regional development organizations and counties to provide technical assistance to 

rural communities, small businesses and entrepreneurs. 

In closing, I urge your continued support of the USDA rural development programs and funding in the 2012 Farm Bill. Thank you 

1624

again for the opportunity to be here today and I would welcome 

any questions. 

[The prepared statement of Ms. Mazer follows:]

PREPARED STATEMENT OF LEANNE MAZER, EXECUTIVE DIRECTOR, TRI- COUNTY COUNCIL FOR WESTERN MARYLAND, FROSTBURG, MD; ON BEHALF OF

NATIONAL ASSOCIATION OF DEVELOPMENT ORGANIZATIONS

Thank you, Chairman Johnson, Ranking Member Costa, and Members of 

the Subcommittee, for the opportunity to testify today on the 2012 Farm 

Bill’s rural development title. Let me start by thanking you and the Members 

of the Subcommittee for your leadership and interest in the rural development mission area as part of the 2012 Farm Bill reauthorization process. The broad portfolio 

of USDA Rural Development programs for business development, infrastructure, 

housing, value-added agriculture production and marketing, regional strategic planning, and broadband deployment are essential to the long-term economic competitiveness and quality of our nation’s rural communities. 

My name is Leanne Mazer. I am the Executive Director of the Tri-County Council 

for Western Maryland, headquartered in Cumberland, and a Past President and 

Board Member of the National Association of Development Organizations (NADO). 

My background includes nearly 2 decades in regional and local economic development, including more than twelve years in my current position. 

The National Association of Development Organizations (NADO) represents the national network of 540 regional development organizations. As publicbased organizations governed primarily by local elected officials and other community leaders, the members of NADO focus on improving the economic conditions and 

quality of life across America’s local communities through regional strategies, partnerships and solutions. In addition, NADO is a member of the Campaign for Renewed Rural Development, a broad-based coalition led by our partners at the National Association of Counties. 

The Tri-County Council for Western Maryland is a regional economic development agency serving Allegany, Garrett, and Washington counties. We provide a 

variety of programs and services within our region, and serve as a regional planning 

and development organization under the guidelines of both the Appalachian Regional Commission (ARC) and the U.S. Economic Development Administration 

(EDA). In addition to our professional and technical assistance programs for local 

governments, businesses, and nonprofit entities, our organization operates several 

small business development loan funds, serves as the state data center affiliate for 

Western Maryland, and offers Geographic Information System (GIS) services for our 

local communities and partners.

Mr. Chairman, I will focus my remarks today on three key areas related 

to USDA Rural Development and the future of our rural regions and communities:

1. The mission area of USDA Rural Development is critical to our nation’s rural and most distressed areas as they work to develop the fundamental building blocks necessary to be economically viable and competitive. This includes basic yet essential investments for infrastructure and 

utilities, housing and community facilities, and access to capital and technical 

expertise for our businesses and entrepreneurs.

2. With rural regions now facing intense global competition, we need to 

ensure USDA Rural Development has the policies, program tools, and 

flexibility to assist rural communities with cutting-edge, asset-based regional development strategies and investments. This will take a new level 

of sophistication and capacity within our rural regions and at USDA Rural Development. Specifically, we need to foster stronger public-private-nonprofit partnerships, prepare our rural workforce with new skills, and develop modern infrastructure and community facilities, which can be achieved more efficiently 

and cost effectively by leveraging and investing in existing regional development strategy processes such as the U.S. Economic Development Administration’s Comprehensive Economic Development Strategy (CEDS) framework.

3. USDA Rural Development applications, policies, and reporting requirements should be streamlined and broadened to reflect the scale of 

rural investments, emerging needs and opportunities of rural regions, 

and capacity of local organizations. While retaining necessary financial and 

performance accountability standards, Congress should ensure USDA Rural Development has a modern set of policies, programs, and incentives to help rural 

1625

communities pursue regionally-based, locally-driven community and economic 

development strategies.

First, Mr. Chairman, the mission area of USDA Rural Development is critical to our nation’s rural and most distressed areas as they work to develop 

the fundamental building blocks necessary to be economically viable and 

competitive. With USDA’s assistance over the decades, rural communities across 

the nation are now better positioned to pursue regional asset-based and innovationfocused development strategies that are resulting in new job and local wealth retention opportunities. 

However, continued gains are increasingly at-risk due to Rural Development funding cuts in recent years. Since FY 2010, the Budget Authority for the USDA Rural 

Development mission area has been cut by nearly $733 million, including reductions 

of $102.46 million in the Rural Utilities Service, $333.93 million in the Rural Housing Service and $75.52 million in the Rural Business-Cooperative Service. Over the 

past 2 years, water and waste water grants have been cut $41.61 million, community facility grants are down 44 percent, and support for rural microenterprise lending and technical assistance was eliminated for the current fiscal year. 

While some of these cuts have been masked by massive increases in USDA’s direct loan and loan guarantee program levels (especially due to the historically low 

subsidy level for the community facilities program), the reality remains that the 

most distressed rural communities will struggle to make the improvements necessary to remain economically viable. In addition, the programs hit hardest by recent budget cuts include the agency’s smaller, more flexible business and community 

assistance programs, such as Rural Business Enterprise Grants (RBEG), Rural 

Business Opportunity Grants (RBOG), and the Rural Community Development Initiative (RCDI). Combined, these three community and economic development programs have been cut more than $17 million, or 37 percent, over the past 2 years. 

The program level for the Intermediary Relending Program (IRP), an important access to capital resource for rural businesses and entrepreneurs, is also down 48 percent over the same period. 

Other key Federal economic development programs that specifically help small 

towns and rural communities are also facing substantial cuts. Compared to FY 2001 

levels, project funding for the U.S. Economic Development Administration is down 

$181 million (42 percent reduction) and HUD’s Community Development Block 

Grant (CDBG) program is down $1.46 billion (44 percent cut). This translates into 

nearly $620 million in reduced grant investments for vital community and economic 

development infrastructure each year since half of EDA’s investments are typically 

in rural areas and 30 percent of HUD’s CDBG money is targeted, by law, to small 

cities and rural areas. 

In the current budget climate, we understand that most of these core programs 

for basic yet essential investments for infrastructure and utilities, housing and community facilities, and access to capital for rural communities are unlikely to be restored to their peak levels. This makes USDA Rural Development programs and 

policies even more essential. While we recognize this Committee is not directly responsible for the annual appropriations for USDA Rural Development, the Committee can ensure the remaining programs and resources are used in a more strategic and performance-driven manner. 

During challenging fiscal times, it is often easy to get caught up in the numbers 

and forget the real impact Federal programs like USDA Rural Development have 

on the communities and people across America. In one of my counties, we recently 

completed a significant project of regional importance that would have been impossible without assistance from USDA Rural Development. With a USDA loan, Allegany County, working with state and local partners, was able to construct a new 

water line to the new Barton Business Park for Advanced Manufacturing, which 

was developed to create manufacturing and technology jobs in an area where the 

unemployment rates are consistently higher and the per capita incomes are consistently lower than the national and state averages. 

This project was essential to ready the facility for tenants and soon thereafter, 

cabinet manufacturer American Woodmark moved in. The company, readily positioned to expand its operations to address rising product demand in the U.S. Northeast and Mid-Atlantic regions, immediately created 120 new quality manufacturing 

jobs. They continue to grow and now employ approximately 332 employees. 

In 2005, our agency assumed the management of an IRP fund from another organization within our region. While we are still working with USDA and our clients 

to clean up and close out previous loans, we are making progress in awarding newer 

loans and investments. Recognizing that a pressing need in our region was more 

professional, hands-on business counseling and technical assistance for our local enVerDate 0ct 09 2002 12:54 Dec 11, 2012 Jkt 041481 PO 00000 Frm 00037 Fmt 6633 Sfmt 6621 I:\DOCS\112-30\74372.TXT BRIAN
1626

trepreneurs and businesses, we also secured two USDA Rural Business Enterprise 

Grants (RBEG) to assist our small business community, particularly those that were 

potential or existing loan clients. During the 2 year period with our RBEG investments, we assisted 196 businesses with business counseling and other technical assistance. Among the results, we invested more than $1.8 million in gap financing 

to help our partners secure approximately $12.7 million in new lending and investments. It is worth noting that we provided more than a 50 percent local match for 

both these USDA awards. 

One of the businesses that the Tri-County Council helped during this time period 

was M&W Ventures, LLC, a Washington County small business engaged in electric 

motor sales, repair, and installation, whose growth was limited by the size of their 

existing plant. Our organization assisted the company with a business plan to support the expansion of the plant facility that was needed for overall growth and increased sales. Our organization was able to provide $400,000 in gap financing to 

support a total package of $2.1 million. The company continues to grow, expanding 

their annual sales to $3.9 million.

Second, Mr. Chairman, our nation’s rural communities are facing enormous pressure from our global competitors. At the same time, our rural regions have the assets and drive to compete and take advantage of new opportunities. Therefore, it is imperative that USDA Rural Development has 

the policies, program tools, and flexibility to assist rural communities and 

regions with cutting-edge, asset-based regional innovation strategies and 

investments.

To be successful in the modern economy, rural entrepreneurs and communities 

must be connected to global and domestic markets—digitally, institutionally, and 

physically. This will take a new level of sophistication and capacity within our rural 

regions and at USDA Rural Development. It will also mean improving Federal interagency collaboration, fostering stronger public-private-nonprofit partnerships, preparing our rural workforce for new challenges, and developing more modern infrastructure and community facilities. We believe this can be achieved more efficiently 

and cost effectively by facilitating regional collaboration and strategic investments 

through existing regionally focused, locally driven planning frameworks such as the 

U.S. Economic Development Administration’s Comprehensive Economic Development Strategy (CEDS) process. 

One of the many specific ways the Tri-County Council supports regional development is through our long partnership with the U.S. Economic Development Administration (EDA) and the Appalachian Regional Commission. The EDA, through its 

national network of 380 economic development districts, provides vital seed capital 

and matching funds for local communities to craft and implement regional economic 

development strategies. As such, the vast majority of rural America is supported by 

a Comprehensive Economic Development Strategy (CEDS). 

The CEDS is an invaluable framework for identifying the economic conditions, 

shared development goals, and the regionally impactful investments that will enhance the competitiveness of rural America. Because they are regionally based, locally owned strategies, the CEDS would provide USDA with an established system 

to help make more strategic investments. In addition, USDA should be given additional resources and authority to assist rural counties and regions with more robust 

support for developing and implementing in-depth rural asset mapping, key industry analysis, and regional innovation readiness assessments that build upon the 

groundwork of the CEDS process. 

In Maryland, we have been embarking on several regional projects that demonstrate the importance and power of connecting often disparate issue areas for the 

purposes of regional development. Last week, we were pleased to see the completion 

of a major project that demonstrates how we used our CEDS to examine existing 

assets, identify and prioritize local needs, and successfully finish a project of regional significance. The City of Frostburg, in partnership with other Federal, state, 

and local partners, used a USDA Water and Waste Disposal loan (combined with 

funding from the Appalachian Regional Commission) to complete a major water distribution project that provides reliable, clean and abundant water to over 5,300 

homes and businesses. 

The USDA loan was used for the replacement of raw water transmission mains, 

which enabled the City to pump enough water to meet the needs of the existing 

water service area. This allowed the hydroelectric plant, which generates electricity 

to offset energy used, to pump raw water from the Piney Dam source under the 

terms of a net metering agreement with Potomac Edison. The hydroelectric plant, 

which began production in December 2011, produces between 55 and 70 kW with 

a current estimated annual value of $29,000. The new and larger raw water transVerDate 0ct 09 2002 12:54 Dec 11, 2012 Jkt 041481 PO 00000 Frm 00038 Fmt 6633 Sfmt 6621 I:\DOCS\112-30\74372.TXT BRIAN
1627

mission mains now provide the City with the capability to efficiently pump more 

water and generate additional electrical savings. 

This one water project was 30 years in the making and required extensive relationship building and consensus across a spectrum of often divergent stakeholders. 

Yet, because our region made this project a priority many years ago through our 

CEDS process, all three counties and 24 municipalities were committed to its success. Our hydroelectric plant is now a key part of our region’s economic development 

infrastructure. 

Our organization is also involved in a major initiative to bring broadband to rural 

and under-served portions of the state through the Maryland Broadband Cooperative. We assisted in creating the first regional community foundation in our part of 

the state. In addition, we helped facilitate improved communications and coordination among various educational institutions within our region, with a major emphasis on preparing our youth and students for today’s economy. 

With fewer Federal resources, including grant dollars and staffing, it is becoming 

more essential for USDA Rural Development to make more strategic and performance-based investments that are tied to regional and local plans and priorities. Instead of public, private and nonprofit sector leaders working together on our assetbased opportunities and needs, we are often forced to fit our community and economic development initiatives into USDA’s program stovepipes and funding priorities. I would urge a greater recognition and support of existing regional development strategies, including the EDA CEDS, that could assist Rural Development in 

making sound decisions regarding their investments. This would also require making USDA’s rural development programs more flexible and geared toward addressing regional and local priorities. 

Finally, Mr. Chairman, USDA Rural Development applications, policies, 

and reporting requirements should be streamlined and broadened to reflect the scale of the rural investments, emerging needs and opportunities 

of rural regions, and capacity of local organizations. While retaining necessary financial and performance accountability standards, Congress should ensure 

USDA Rural Development has a modern set of policies, programs, and incentives 

to help small towns and rural areas pursue community and economic development 

growth. 

Western Maryland is much like other rural regions across America. Communities 

and small businesses in this region often lack the staff capacity to apply for, and 

manage, USDA Rural Development programs. This is unfortunate since programs 

like USDA Rural Development were established specifically for the purpose of assisting rural communities, especially those with severe distress and poverty. 

Every Federal program should be adjusted to meet not only the needs, but the 

capacity of all rural communities and businesses. In order to maximize access to the 

services and programs that rural regions need to create conditions for job growth, 

Rural Development should strongly consider a process to identify the current concerns felt by their customers and enter into a program of continuous evaluation and 

improvement for the purposes of maximizing program impact. Rural Development 

should also strongly consider establishing stronger connections to entities, such as 

regional development organizations and counties, to provide technical assistance to 

rural communities, small businesses and entrepreneurs. 

In closing, I urge your continued support of USDA rural development programs 

and funding in the 2012 Farm Bill, especially those built around regional, assetbased development strategies and investments that create conditions for quality job 

growth. USDA Rural Development is an essential partner and funding source for 

rural people and places. It is also a vital tool for regional development organizations, such as the Tri-County Council, and our local government and community 

partners as we strive to position our communities for the future. 

Thank you again, Chairman Johnson, Ranking Member Costa, and Members of 

the Subcommittee, for the opportunity to testify today. I would welcome any questions.

The CHAIRMAN. There will be questions. I call on the Ranking 

Member, Mr. Costa. 

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

Former-Secretary Conner, thank you for your service to our country. And you talked about the Value-Added Producer Grant. As I 

understand we have mandatory funding up until the Fiscal Year 

2017 if I am correct. I think it has been successful not only in helping cooperatives overcome constraints on necessary capital to innoVerDate 0ct 09 2002 12:54 Dec 11, 2012 Jkt 041481 PO 00000 Frm 00039 Fmt 6633 Sfmt 6601 I:\DOCS\112-30\74372.TXT BRIAN
1628

vate and process new commodities and product packaging that we 

use to export around the world, but initially you mentioned that cooperatives are in the best position to efficiently spread the benefits 

to a larger number of producers. However, I was looking at some 

of the numbers since the 2008 Farm Bill and after 298 recipients 

of the Value-Added Producer Grants, only 26 of them went to cooperatives. Why did so few go to them if, according to your testimony, you are in the best position to do them? 

Mr. CONNER. It is a great question, Mr. Costa, and let me just 

say I think your numbers are accurate and I would further add 

that I believe there was a period of time where 80 percent of the 

Value-Added Producer Grants were being used by cooperatives. So 

there is a substantial decline that has occurred there over time. 

And as I said in my oral testimony, I shared with you a firsthand 

experience we had where, when the program funds were available, 

we notified our membership of that process. And again, as I stated——

Mr. COSTA. I know but I am just trying to get a sense of why 

there has been the decline and what might be done because I am 

a big supporter of cooperatives. 

Mr. CONNER. Yes. 

Mr. COSTA. I have a number of cooperatives, dairy and food cooperatives that have been long—not only in California but throughout the country. And I think value-added is very important. That 

is why I would want to support the grants. I am just trying to figure out what is going on. 

Mr. CONNER. Well, let me get right to the point, then. The response from many when these funds became available was that the 

application process required too many resources on their part for 

a relatively small benefit——

Mr. COSTA. All right——

Mr. CONNER.—and it was not worth it for them——

Mr. COSTA.—let me segue to the other comments I made in my 

opening statement, and that is for all three of you, my concerns 

about rural definitions. I wonder whether or not any of the three 

of you would speak to ideas that you could suggest to the USDA 

on how Congress could better define rural and provide the agency 

flexibility it needs to address needs throughout the nation in terms 

of rural communities because, as I said, I don’t think one-size-fitsall. 

And in some areas, for example, again we all know our own situation best but in California we have tried to encourage smarter 

growth in our cities in part to protect our agricultural lands. We 

have asked cities not to spread on some of our prime ag land. And 

as a result of that, it has created population densities under the 

definition of rural that now then comes back and penalizes us. This 

has been something that is not new, wresting with the definition 

of rural. Does the gentleman from NACo and the other gentlelady 

have any comments that you would like to make as it relates to 

a rural definition? 

Mr. LARSON. Well, Ranking Member, I think we share the same 

dilemma that you share. And we don’t have at this moment a better idea for the definition of rural, albeit we understand and we appreciate fully the experience you have in your home county and 

1629

that you are not the only situation like that across the country 

where you see some growth but rural areas are attached. But the 

best I can say is that I share the dilemma at this moment and I 

don’t have the perfect answer because as we approach the regionalization of our efforts to better expend the Federal dollars that are 

available to us——

Mr. COSTA. Okay. 

Mr. LARSON.—we take in more people——

Mr. COSTA. Ms. Mazer, do you a comment, suggestion? 

Ms. MAZER. Ranking Member Costa, NADO is a broad-based organization, too, so I really can’t comment as far as I am not in a 

position to represent a definition, a population number to define 

rural but I can talk about my——

Mr. COSTA. I am just looking for ideas. 

Ms. MAZER. I can talk about my region for a little bit. We have 

three counties I mentioned, 24 municipalities and a total population of about 250,000. Our smallest community is about 80 citizens and we have two cities that one is right at the threshold at 

21,000 for Community Facilities Grants, and our other largest city 

is 37,000 in population. While we see the struggles of our small 

towns, we also see the struggles in our largest city. They are different struggles. And we use regional planning and the process of 

continuous regional planning where we bring our region’s leaders 

together on a voluntary basis several times a year every year on 

a continuous basis to try to see how we can address those issues 

that they are all facing, those struggles they are all facing from 

both ends of the population spectrum. 

I will tell you that being said, when we put those leaders in the 

room, our elected officials, our chambers of commerce, our business 

people, our education leaders, they will come to consensus and they 

do look at how we can make the best progress and the most 

progress for the region. 

Mr. COSTA. Yes, and I think your example is not unusual compared to all the districts we represent. Thanks. My time has expired but just for the Members’ information, Fresno County is the 

largest agricultural county in the nation, over $6 billion a year. But 

the City of Fresno now has over half a million people in it, so we 

are the fifth-largest city in the state, and because of that fact, even 

though we are the number one agricultural county in the nation in 

terms of farm gate receipts, we are obviously very much handicapped by the 15 cities that surround different parts of Fresno 

County and the small hamlets that are not incorporated. Anyway, 

that is part of the dilemma we are dealing with. 

The CHAIRMAN. Thank you, Mr. Costa. 

The gentleman from Georgia, Mr. Scott. 

Mr. SCOTT. Thank you, Mr. Chairman. And Commissioner 

Larson, I listened to what you said and, if we keep doing what we 

are doing, we are going to get what we got. I guess my fear is—

and Members of Congress—if we keep doing what we are doing, we 

might lose what we have in America. And I have just a simple 

question. You are a county commissioner so you are out there 

where the rubber meets the road with the American citizen. Do you 

have to balance the budget in your county on an annual basis? 

Mr. LARSON. Yes, we do. 

1630

Mr. SCOTT. What would happen if you didn’t balance it on an annual basis? 

Mr. LARSON. Well, obviously the answer would be that over a 

continued time frame the ultimate route would be bankruptcy. 

Mr. SCOTT. Yes, sir. I tell you, I have found that local people like 

yourself do a much better job with managing tax dollars than we 

do up here in Washington, so I want to thank you for coming up 

here and testifying. And I do hope that, Mr. Chairman, we are able 

to get more of these decisions made at the local level where the 

rubber meets the road. Thank you for what you are doing. 

The CHAIRMAN. I thank you sincerely. Thank you. 

Mr. SCOTT. I yield back the remainder of my time. 

The CHAIRMAN. Thank you. The gentlelady from Alabama, Ms. 

Sewell. 

Ms. SEWELL. Thank you, Mr. Chairman, Ranking Member Costa, 

and Members of the Committee. I thank you witnesses for your testimony. 

The idea of promoting a regional approach to rural development 

has been promoted by the USDA and encouraged by Secretary 

Vilsack in his Regional Innovation Initiative which sets aside significant funds across the rural development programs for regional 

projects. I have the pleasure of representing my home district, 

which includes a lot of rural areas of Alabama and we are a big 

benefactor of the Delta Regional Authority. I am very supportive of 

the regional approach to better leveraging limited resources to better impact both our rural communities directly as well as infrastructure development that really helps the whole communities as 

a whole. 

However, one concern that is shared by some is how a more regional approach will adversely impact those rural communities that 

are not a part of, or cannot, or do not have the ability to be a part 

of regional planning because of the dispersed nature of those communities. Please elaborate on some of the benefits and challenges 

associated with a more regional focus on rural development. And 

how would you work to overcome any of these identified challenges 

to a regional approach for communities that are more spread out? 

And I open that up to all three witnesses. 

Mr. LARSON. Well, ma’am, I approach it in our discussions that 

the regional concept is a good way to go to involve communities. 

And regions are about as difficult to define as rural probably, but 

for a specific project you could have a large region, another project 

is a smaller region meaning a group of communities or citizens 

have to work together to create the project, that the project is designed to create a better quality of life for beyond just one small 

community always understanding that in rural America we have 

remote areas. And this type of cooperation and collaboration is 

probably impossible. And those people should then have the same 

opportunity to apply as a regional and be given the same type of 

preference. 

Ms. SEWELL. Yes, sir. Any other comments? 

Ms. MAZER. No, I would agree with that. 

Ms. SEWELL. When we are talking about limited resources, rural 

development—and I know it is spearheaded by Doug O’Brien for 

Secretary Vilsack and he does a remarkable job of being attentive 

1631

to rural communities. But I would be interested in hearing your 

perspective as to what rural development programs have proven 

the most effective and which programs have proven least effective. 

In this kind of economic environment, it is always important to listen to those people who are directly impacted and actually try to 

use those programs directly. So I would be interested in knowing 

which rural development programs have been the most beneficial. 

Mr. CONNER. Congresswoman, in the material that I submitted 

for the record I gave examples of three different co-ops that have 

used the Value-Added Producer Grant Program, which is a matching public-private program to bring about good things for their 

farmer-owners. Probably the best example that we put forward is 

one of Blue Diamond Almonds——

Ms. SEWELL. Yes. 

Mr. CONNER.—where literally these funds are being used for 

market development and this is an enormous growth industry in 

the State of California. In a state where other industries are not 

necessarily growing, this is a remarkable growth story. A big part 

of it can be attributed to these value-added grants. 

Ms. SEWELL. Any suggestions as to programs that have been less 

effective? And I would obviously love to hear from our commissioner since you are on the frontlines of programs that have been 

effective for rural development. 

Mr. LARSON. Well, ma’am, the programs that are most effective 

and most needed in rural America—I speak nationwide—are always references to water, wastewater, broadband——

Ms. SEWELL. Infrastructure——

Mr. LARSON.—and, yes, infrastructure and then rural facilities 

and specifically those to accommodate healthcare. In rural areas we 

need a place that we can treat someone until the emergency facilities are there whether it be helicopter, ambulance, whatever——

Ms. SEWELL. Absolutely——

Mr. LARSON.—to—critical care. 

Ms. SEWELL. Yes. 

Mr. LARSON. And the broadband is going to have the impact on 

rural America just like electricity did. 

Ms. SEWELL. Great. Well, thank you all. I yield back the rest of 

my time. 

The CHAIRMAN. Thank you. I might mention to the Members of 

the Subcommittee it is my hope, goal, to make sure we get both 

panels in and the Subcommittee hearing concluded before we go to 

the Floor so we don’t have to truncate the process. I am not trying 

to speed anybody up. It is a lot more instructive I think when we 

can go straight through. 

With that, I call on the gentlelady from Missouri, Mrs. Hartzler. 

Mrs. HARTZLER. Thank you, Mr. Chairman. And I would add my 

comments to the Ranking Member thanking you for your service 

and wishing you well and saying it has been an honor. It is an 

honor to serve with you here. 

I would like to start with Mr. Conner. Your testimony was very 

interesting how you pointed out that there are 88 programs administered by 16 different Federal agencies specifically targeted at 

rural development and that consolidation is warranted. I was just 

wondering do you have some examples of some specific agencies or 

1632

departments or programs that you think would be a good thing to 

consolidate? 

Mr. CONNER. Well, Congresswoman Hartzler, let me just answer 

your question this way. Obviously, we believe that the U.S. Department of Agriculture Rural Development is the right place and they 

are the people they have, if you will, boots on the ground out in 

the field to actually successfully administer these programs. And so 

in that process we would certainly strongly encourage a continued 

relationship with that agency that has the people out there who 

are in the rural communities, know the projects, know who is behind them, know the quality of those projects. And I am not sure 

that exists with all of the agencies that I mentioned but we would 

certainly encourage continued use of the people with boots on the 

ground. 

Mrs. HARTZLER. Can you give me an example of a program that 

is in a different agency that is also in USDA that you think we 

could pull back totally under USDA’s jurisdiction? 

Mr. CONNER. Well, pulling back totally probably is farther than 

what I am prepared——

Mrs. HARTZLER. Consolidating. 

Mr. CONNER.—to give some good advice for you, but, this Committee can explore a number of different opportunities in the housing programs that I have mentioned with the Value-Added Producer Grants. These are things that are occurring elsewhere as 

well and we have found these programs again, we have offered 

criticisms but yet, we want to continue to see them operated and 

funded through USDA Rural Development. 

Mrs. HARTZLER. Great. Thank you very much. 

Mr. Larson, several of you have mentioned the importance of infrastructure grants and the loans to the rural communities. And 

certainly as I travel around my district that is something that is 

very important and is needed with wastewater and water treatment facilities, especially as it relates to the EPA’s changing rules 

and specifications, older infrastructure, whether it be sewer lines 

or water lines in these small towns, and they rely on these loans. 

I was just wondering do you have an idea of the amount of need 

that is out there, dollar-wise, for this type of infrastructure versus

how much money is available currently for these programs? 

Mr. LARSON. No, ma’am, I do not have a dollar estimate for you 

but I can sympathize and agree with your comment, the fact that 

there is a great need out there in rural America and there is going 

to be a continuing need if we hope to grow and expand the rural 

economy with value-added projects and so forth because we need 

these other types of important infrastructure to facilitate those 

communities that are fortunate enough to have this type of economic development happen. 

Mrs. HARTZLER. Yes. These small towns just don’t have the 

money that it takes to upgrade their sewer plants or to do what 

needs to be done according to the regulations. It is putting them 

in a very difficult position. And so I was just wondering if you had 

any thoughts on that. So I will withhold further comments due to 

time, but thank you, Mr. Chairman. Thank you. 

1633

The CHAIRMAN. Looking at the panel here, I always wonder what 

one-party rule would be like. Did you ever see the Woody Allen 

movie? 

I would then recognize the gentleman from Pennsylvania, Mr. 

Thompson. 

Mr. THOMPSON. Thank you, Mr. Chairman. And I join my colleagues on also saying thanks for your leadership. 

Ms. Mazer, you mentioned the importance of preparing our workforce with new skills in your testimony. What specific farm bill programs do you support and believe help with this? 

Ms. MAZER. I am not sure of a specific answer to that as far as 

workforce skills from actual Community Facilities. We have used 

Community Facilities loans and grants in building one of the first 

new high schools in our county in 50 years. We could talk about 

it from the bricks-and-mortar and infrastructure type of perspective but we could also talk about the impact of regional planning 

and truly looking regionally. 

And one of the examples that I can share from my region is, 

again, we are a regional entity made up—our board is made up of 

county commissioners, educators, chambers of commerce, business 

leaders. Our educational institutions had for a long time professional staff an association. There are 3 K–12 schools. There are 

three community colleges, a state university, and then a University 

System of Maryland, and they approached us because we were the 

regional platform. They were struggling with maintaining staff so 

we took over the management of the consortium. We now have a 

virtual educational consortium where we can bring those leaders 

together to talk about the educational needs. They can work together, they can pursue joint opportunities, and it is also a direct 

link, then, between economic development and education. 

Mr. THOMPSON. So what is the tie then within your model between—obviously it sounds like you are blessed with, for a rural region you are blessed with different educational entities——

Ms. MAZER. Yes. 

Mr. THOMPSON. Is there a good solid tie back to the rural employers so that their workforce needs are clearly understood, constantly monitored, and that is kind of that need is what drives 

what you do with that area? 

Ms. MAZER. Yes, absolutely. There is a very close connection. We 

work together very closely. We also have an organization made up 

of private sector CEOs and in Allegheny County in the center of 

our region it is called the Greater Cumberland Committee. We 

have the Greater Hagerstown Committee in Washington County. 

The Greater Cumberland Committee actually has a program where 

they bring businesses and our educational community together as 

well. 

Mr. THOMPSON. All right. Thank you. 

Now, Mr. Conner, can you discuss the success of the farm cooperatives and what kind of benefits that they tend to provide 

rural communities and American agriculture, how they differ from 

other businesses? And with those cooperatives, I am assuming 

these are strongly member-driven, and how do we make sure 

that—I have heard a lot of discussion especially on the dairy side 

of member concerns that are member-driven but they feel like they 

1634

don’t have a lot of input. So how does that work in terms of how 

can we assure that our farm cooperatives are strongly memberdriven? 

Mr. CONNER. Well, Congressman Thompson, let me just answer 

the question this way if I could. I do believe our farmer-owned cooperatives are member-driven because obviously those co-ops are 

managed by a board of directors that for the most part is elected 

by those farmer members of that cooperative. In my case I have 

never observed a circumstance where those farmer leaders were 

shy about making their views known if they thought the direction 

of the co-op was headed different than what they preferred. You 

know, things change pretty rapidly again because the people that 

own the co-op, the people that vote on the leadership, on the management of that co-op are indeed the very farmer members who 

make up that co-op and that creates a system that is very, very responsive to those farmer members. 

Mr. THOMPSON. Okay, thank you. 

Mr. Larson, which rural development program do you think in 

your opinion has the best return on investment in terms of putting 

Federal dollars through the farm bill into rural economic development program? Which one do you think has the best return on investment coming back for the taxpayers? 

Mr. LARSON. Well, I am glad that you review them as investments because that is what they are. 

Mr. THOMPSON. Sure. 

Mr. LARSON. They are an investment, not an expense. And I 

would have to say that in my opinion that good water and wastewater treatment facilities are very important to rural America. And 

I don’t mean just small towns but our rural water systems that 

serve the rural areas. 

Mr. THOMPSON. Thank you, sir. 

Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you. And thanks for your comments here 

on the panel. I really appreciated that. 

With that, I don’t believe there is any second round of questions. 

I appreciate your being here, ladies and gentleman, and look forward to seeing you again. 

Mr. LARSON. Thank you. 

Ms. MAZER. Thank you. 

The CHAIRMAN. Calling the second panel to come on forward, and 

while they are doing that, I want to indicate that along with the 

testimony that we are about to receive from the second panel, I 

have a letter submitted by the U.S. Telecom Association. Unless 

there is objection, I would ask that it be made part of the record. 

So ordered. 

[The information referred to is located on p. 1671.] 

The CHAIRMAN. And so the second panel, as they are assembling, 

is comprised of Frank Dunmire who is actually from my part of the 

state, was actually in Taylorville a week ago Saturday at the VFW. 

Mr. Dunmire is the Executive Director of the Illinois Rural Water 

Association on behalf of the National Rural Water Association; Mr. 

Robert Stewart, Executive Director of Rural Community Assistance 

Partnership; Mr. David Rozzelle, Executive Vice President of the 

Suddenlink Communications St. Louis on behalf of the National 

1635

Cable Telecommunications Association; and Mark Bahnson, CEO 

and General Manager of Bloomingdale Communications, 

Bloomingdale, Michigan, on behalf of the National Telecommunications Cooperative Association. 

With that, then, we ask that the panelists speak in the order I 

recognized them. First, Mr. Dunmire. 

STATEMENT OF FRANK DUNMIRE, EXECUTIVE DIRECTOR,

ILLINOIS RURAL WATER ASSOCIATION, TAYLORVILLE, IL; 

ON BEHALF OF NATIONAL RURAL WATER ASSOCIATION 

Mr. DUNMIRE. Thank you. Chairman Johnson, Ranking Member 

Costa, and Members of the Subcommittee, thank you for holding 

today’s hearing. Like Mr. Chairman said, I am Frank Dunmire, the 

Executive Director of Illinois Rural Water Association and in the 

interest of time I will summarize my written statement. But before 

I get too far along into my testimony, I would like to thank Chairman Johnson for his service to Illinois. Since the Chairman began 

his career in the public service in 1971, he has been a champion 

of the farmers and the rural communities in our state and we wish 

him well as he leaves the House of Representatives and returns 

home to his family in Illinois. Thank you, Tim. 

The Illinois Rural Water Association is a member of the National 

Rural Water Association on whose behalf I am testifying this afternoon. NRWA represents over 28,000 small rural water systems 

with which 1,100 of those are located in Illinois. Every day, rural 

water helps communities properly operate, maintain, and manage 

their water and wastewater systems, ensure compliance with the 

Safe Drinking Water Act, and when necessary, respond to natural 

disasters. 

Last year, rural water provided over 155,000 hours of onsite assistance to rural water and wastewater systems throughout the 

country. Everyone realizes the importance of water. It is not until 

you turn on the tap and nothing comes out that you begin to understand how complicated life becomes without easy access to water. 

Water quality and affordability are important factors for businesses 

wanting to locate or remain in a rural community. Many times, job 

creation is directly tied to the availability of a good supply of potable water. 

An excellent example of this is located in southwestern Illinois 

at the Prairie State Energy campus. This project created over 3,000 

construction jobs and it will create 500 permanent onsite jobs and 

800 support sector jobs. But what most people don’t know is that 

all of the potable water supply needs for this facility are being met 

by Washington County Water Company, a water cooperative funded through Rural Development. 

As a lender of last resort, USDA provides critical financing for 

water systems that are unable to secure commercial credit. In Fiscal Year 2011, USDA obligated over $1.3 billion in loans and grants 

to 695 water and wastewater projects. Eighty-two percent of those 

funds were used for projects in communities with populations of 

5,000 or fewer. And even though over the last 72 years USDA has 

made over $30 billion in water infrastructure loans to communities 

that others would not, the lifetime default rate for this program is 

a meager 1.02 percent. 

1636

In addition to infrastructure financing, USDA’s water programs 

also provides funding for technical assistance to rural communities. 

This onsite assistance provided by circuit riders and wastewater 

technicians is critical to ensuring that the rural communities have 

sustainable water and wastewater systems. We strongly encourage 

the Committee to reauthorize the Circuit Rider Program. 

We believe the farm bill should maintain the water programs 

current policies, funding should be limited to rural communities 

who are unable to find affordable credit elsewhere. Funding should 

be targeted to rural communities with the greatest economic need 

and environmental public health challenges. And grants should be 

awarded based in proportion to a community’s economic need. 

We are aware of discussions to expand USDA loan and grant eligibility to more populous communities. We believe the water programs current focus on communities with populations of 10,000 or 

less is working. Currently, 82 percent of USDA’s water infrastructure funding goes to communities with populations of a few thousand or fewer. Even though funding has been awarded to smaller 

and poorer communities, the current backlog is still over $3 billion. 

We do not believe anything is to be gained by increasing the pool 

of eligible communities for water infrastructure loans and grants. 

In fact, we are concerned this could result in few loans and grants 

for truly needy rural communities and that the increase in applications could place a substantial burden on a shrinking Rural Development field staff, thereby delaying all loan and grant approvals. 

Mr. Chairman and Ranking Member Costa, this concludes my 

testimony and I will be happy to answer any questions at the appropriate time. 

[The prepared statement of Mr. Dunmire follows:]

PREPARED STATEMENT OF FRANK DUNMIRE, EXECUTIVE DIRECTOR, ILLINOIS RURAL

WATER ASSOCIATION, TAYLORVILLE, IL; ON BEHALF OF NATIONAL RURAL WATER

ASSOCIATION

Chairman Johnson, Ranking Member Costa and Members of the Subcommittee, 

thank you for holding today’s hearing. I am Frank Dunmire, the Executive Director 

of the Illinois Rural Water Association. Before I get too far along in my testimony, 

I would like to thank Chairman Johnson for his service to Illinois. As many of you 

know the Chairman, while still in law school, began his career in public service by 

winning a seat on the Urbana City Council in 1971. In 1976 he was elected to the 

Illinois state legislature and served there until he was elected in 2000 to represent 

the 15th district here in Washington. He has been a champion of the farmers and 

rural communities in our state during his time in Congress and we wish him well 

as he leaves the House of Representatives and returns home to his family in Illinois. 

The Illinois Rural Water Association is a member of the National Rural Water 

Association (NRWA), on whose behalf I am testifying this afternoon. NRWA represents over 28,000 small rural water systems in all 50 states through its 49 rural 

water association members. Of those 28,000 member systems 1,100 are located in 

Illinois. Every day state rural water associations are helping rural communities 

throughout the country learn how to properly operate, maintain, and manage their 

water and wastewater systems; how to best ensure compliance with the Safe Drinking Water Act; how to protect their ground and surface water sources; and when 

necessary responding to natural disasters. Rural Water prides itself as being an organization that helps build capacity in rural America. When a community has a 

problem with its water and/or wastewater system, Rural Water assists the system 

operators in the identification and repair of the problem. We do not do the work 

for the community, but we help train their operators and teach them how to do it. 

Last year Rural Water provided over 155,000 hours (or the equivalent of over 17 

years) of onsite assistance to rural water and wastewater systems. Rural Water also 

1637

provided 3,500 hours of wastewater technician classroom training to nearly 15,000 

individuals. 

The rural development title of the farm bill historically has not received as much 

focus as other policy matters such as: direct payments, crop insurance, conservation, 

or nutrition. However, the rural development programs authorized by this Subcommittee in the farm bill will meaningfully impact the lives of millions of people—

take water for example. USDA’s water infrastructure and technical assistance programs are authorized in the farm bill. Everyone realizes the importance of water, 

but it is very easy to take for granted. It is not until you turn on the tap and nothing comes out, or your community is under a boil order, that you begin to understand how complicated life becomes without easy access to water. But the importance of access to safe, affordable, and plentiful drinking water is not only important 

in rural homes but also to rural businesses. Water quality and affordability are important factors for businesses wanting to locate or remain in a rural community. 

Many of the businesses related to agriculture that are located in rural communities 

(think food processing, meat packing, biofuel production, farm services facilities) 

need high quality and affordable water supplies. Rural water is important to the 

rural economy. Many times job creation is directly tied to the availability of a good 

supply of potable water. An excellent example of this is located in Southwestern Illinois at the Prairie State Energy Campus. Chairman Johnson and possibly other 

Committee Members are aware that this project alone created in excess of 3000 construction jobs and will create approximately 500 permanent on-site jobs. High paying jobs I might add. In addition to those 500 jobs it is estimated that an additional 

800 support sector jobs will be created as well. BUT, what most people don’t know 

is that all of the potable water supply needs for this facility are being met by Washington County Water Company, a not-for-profit water cooperative funded through 

Rural Development. 

Perhaps as a representative of NRWA I am a little biased, but I believe that 

USDA’s water programs are the most important for rural communities that this 

Subcommittee will address in the farm bill. As a lender of last resort, USDA provides critical financing for water systems that are unable to secure commercial credit. In FY2011, USDA obligated $1.379 billion in loans and grants to 695 water and 

wastewater projects. Eighty-two percent of these funds were used for projects in 

communities with populations of 5,000 or fewer. And even though over the last 72 

years USDA has made over $30 billion in water infrastructure loans to communities 

that others would not, the lifetime default rate for this program is 1.02%. The 

metrics for this program are impressive, as are the demands for its funds. According 

to USDA at the end of FY 2011 there were 415 completed applications for which 

no funding was then available. It would have required an additional $1.5 billion in 

loans and grants to fund these projects. There were also an additional $3.3 billion 

in preliminary applications from rural communities. Many of the completed applications will be funded with FY 2012 funding, but the fact remains that the backlog 

for loan and grant funds currently exceeds $3 billion. 

In addition to infrastructure financing, the USDA’s water program also provides 

funding for technical assistance to rural communities that meet the eligibility requirements to be a borrower from Rural Development. As I mentioned previously, 

as one of USDA’s technical assistance providers Rural Water provided over 155,000 

hours of onsite assistance to rural communities last year. This onsite assistance, 

provided by circuit riders and wastewater technicians (and authorized in Section 

306(a)(22) and 306 (a)(14) of the Consolidated Farm and Rural Development Act, respectively) is critical to ensuring that rural communities have safe, affordable, 

healthy drinking water and wastewater systems. The authority for the circuit rider 

program expires at the end of the fiscal year. We strongly encourage the reauthorization of the circuit rider program.

As the Committee considers whether changes to the authorizations for the rural 

water programs are warranted, the NRWA would urge caution. We believe the farm 

bill should maintain the water program’s current policies: funding should be limited 

to rural communities who are unable to find credit elsewhere; funding should be targeted to rural communities with the greatest economic need and environmental/public health challenges; and grants should be awarded based in proportion to a community’s economic need. 

We are aware of discussions to expand USDA loan and grant eligibility to more 

populous communities. While there may be other issues within the Rural Development mission area, we believe the water program’s current focus on communities 

with populations of 10,000 or less is working. Currently, 82% of USDA’s water infrastructure funding goes to communities with populations of 5,000 or fewer, 64% goes 

to communities with populations of 2,500 or fewer, 51% goes to communities with 

populations of 1,500 or fewer, and 42% goes to communities with populations of 

1638

1,000 or fewer. Even though funding has been awarded to the smaller and poorer 

communities, as I mentioned earlier, there still is $3 billion backlog. We do not believe anything is to be gained by increasing the pool of eligible communities for 

water infrastructure loans and grants. In fact, we are concerned this could result 

in fewer loans and grants for truly needy rural communities and that the increase 

in applications could place a substantial burden on a shrinking Rural Development 

field office staff, thereby delaying all loan and grant approvals. 

We are also aware of proposals that would expand water infrastructure grant eligibility for more affluent communities. Again, we support the policies underlying the 

water program and believe the current grant limitations are working. 

Mr. Chairman, and Ranking Member Costa, this concludes my testimony. I appreciate the opportunity to appear before you this afternoon. I wish you luck in the 

days and weeks ahead as the Committee develops a new farm bill. I would be happy 

to answer any questions you may have. Thank you.

The CHAIRMAN. Thank you, Mr. Dunmire. 

Mr. Stewart? 

STATEMENT OF ROBERT B. STEWART, EXECUTIVE DIRECTOR, 

RURAL COMMUNITY ASSISTANCE PARTNERSHIP,

WASHINGTON, D.C. 

Mr. STEWART. Thank you, Chairman Johnson, Ranking Member 

Costa, and Members of the Subcommittee, for allowing me the opportunity today to discuss the importance of rural development programs and the upcoming farm bill reauthorization. My name is 

Robert Stewart and I am representing the Rural Community Assistance Partnership, a national nonprofit network of regional service providers that for over 40 years have provided onsite technical 

assistance and training services to rural communities in every 

state regarding water and wastewater facilities, waste disposal, affordable housing, and community economic development. 

The importance of RD infrastructure programs to current rural 

economies and for future economic development cannot be overstated. In particular, rural water and wastewater utilities are the 

critical foundation upon which rural communities and families depend for their health, their livelihoods and their prosperity. Virtually all economic activity in rural America, whether it is farming, 

ranching, value-added commodity processing, oil and gas production, mineral activities, alternative energy pursuits, or tourism depend on sustainable rural communities and utilities. It has been 

RD programs that have provided rural America with vital infrastructure, business development opportunities, and a range of technical assistance programs that promote productive and sustainable 

economies. 

RCAP works directly with RD staff in helping rural communities 

funding application requirements, implement proper management 

practices to ensure financial accountability and provide operational 

assistance. Due to a limited customer base and typically lower median income, many small rural communities are unable to finance 

major infrastructure improvements without some Federal assistance. Unlike larger communities that can access the municipal 

bond market or other private financing options, these small rural 

communities have turned to RD as a lender of last resort. 

RD has responded by providing over 18,000 active water and 

sewer loans serving more than 19 million rural residents as previously mentioned with basically a nonexistent default rate. Although challenged by reductions in every state, RD staff continue 

1639

to provide services that respond to local needs. Whatever the situation, rural community leaders benefit from being able to turn to a 

local RD staffer, an RCAP technical assistance provider, or a Rural 

Water Association circuit rider that they know and trust who is familiar with their system. 

To build on these successes, the farm bill should reauthorize the 

Water and Wastewater Loan and Grant Programs, the Technical 

Assistance and Training Grant Program, the Essential Community 

Facilities Program, and the Water Infrastructure Revolving Loan 

Program at or near the levels in the current farm bill. 

Despite RD’s many successes, a substantial number of small communities, towns, and counties have difficulty fully accessing and 

complying with RD regulations. The application process and eligibility requirements for each program are slightly different and each 

poses unique challenges. Local leaders, most often volunteers, find 

that meeting RD loan requirements can be a complex and time-consuming process. However, with help from an experienced technical 

assistance provider, even communities with no paid staff and limited planning resources can develop the local capacity to apply for 

and manage needed infrastructure projects. 

While there are many calls for reducing the requirements for accessing loans, RCAP’s experience is that these requirements are for 

the most part necessary to ensure that the Federal Government is 

making financial support available only to the neediest communities while ensuring the security of the Federal investment. The 

extremely low default rate on these loans is a testament to the efficacy of existing requirements. 

One area for improvement might be to have common environmental review requirements among all Federally financed infrastructure programs. Oftentimes, projects have multiple funding 

sources with varying environmental review and assessment requirements. The existing Technical Assistance and Training Grant 

Program has been so successful that many state RD offices and 

local community officials have repeatedly asked RCAP to assist 

with other non-water-related RD-funded projects, in particular, the 

Essential Community Facilities Program. Community facilities constitute and important foundation for rural community growth and 

job creation. A CF Technical Assistance and Training Program can 

ensure that these facilities are planned for, constructed, operated, 

and managed in an efficient manner that benefits the entire community and promotes economic development opportunities. 

There has been an increasing emphasis on regionalization, as we 

have already heard today, which RCAP supports and we would propose that borrowers demonstrate to RD—this is particularly on the 

water and the wastewater side—their efforts towards regionalized 

service provision as part of the application process. In addition, 

higher priorities should be given to regional applications, especially 

those resulting in consolidations or collaborative service delivery. 

RCAP’s experience, however, has been that regionalization is 

most often successful when a technical assistance provider is able 

to spend time with all the entities involved to offer alternative approaches, assist in the evaluation of costs and benefits, identify 

funding sources, prepare necessary documentation, and promote 

public education and outreach. 

1640

There are some proposals being discussed, as we have heard 

today, to standardize the definition of rural in all RD programs. 

While this might seem reasonable, any effort to increase the size 

of eligible borrowers under the water and environment programs 

above a 10,000 population would severely jeopardize what is basically the only source of Federal funding for small community infrastructure needs. If the definition is expanded, many of our nation’s 

smallest communities will be unable to compete for RD water infrastructure funds with much larger towns placing them at a competitive disadvantage for the one program that was designed especially 

for their unique needs. 

I will end my remarks here and hope that you will review my 

written statement for additional information and ideas on the RD 

title and the farm bill. And I appreciate the opportunity to be here 

and would be happy to answer any questions. 

[The prepared statement of Mr. Stewart follows:]

PREPARED STATEMENT OF ROBERT B. STEWART, EXECUTIVE DIRECTOR, RURAL

COMMUNITY ASSISTANCE PARTNERSHIP, WASHINGTON, D.C. 

Thank you, Chairman Johnson, Ranking Member Costa, and Members of the Subcommittee, for this opportunity to address the importance of USDA Rural Development (RD) programs to rural America. In my over 25 years of work in the rural 

utility field, first in my home state of Texas, and now managing a nation-wide rural 

community development organization, I have experienced firsthand the vital role 

that RD’s water and sewer and community facilities programs play in improving the 

quality of life in the rural communities that form the backbone of our heartland. 

My name is Robert Stewart, and I am the Executive Director of the Rural Community Assistance Partnership (RCAP). RCAP is a nonprofit national network of regional service providers that for nearly 40 years has helped small, low-income, rural 

communities address water, wastewater, and other community development needs 

in all 50 states, Puerto Rico, and the Virgin Islands. Our staff of assistance providers delivers onsite training and technical assistance to small water and wastewater systems to help them meet regulatory requirements, finance and manage capital improvement projects and to develop and sustain technical, managerial, and financial capacities. 

For many years, the RCAP network has partnered with USDA to bridge the gap 

between RD and the communities they serve. RCAP assists rural communities with 

funding applications and every phase of the project planning and development process, as well as providing training and technical assistance after construction is complete, helping communities understand how to properly manage and operate their 

system in a fiscally sustainable manner. We work to ensure that RD borrowers are 

able to meet the terms of their Letters of Condition and that they are able to repay 

their loans on time. Every year, the RCAP network helps roughly 2,000 rural communities address their water and wastewater needs. 

Providing these basic services is a challenge for many rural communities. Rural 

residents are three times more likely than their urban counterparts to lack water 

and sanitation; they also typically pay nearly three times the amount for water and 

sewer services. Due to their limited customer base, small utilities lack the economies of scale that reduce the costs of infrastructure construction, operation, and 

maintenance to levels that are affordable to low-income residents. Few rural communities can access the municipal bond market or find banks that are willing to 

invest in such long-term, low-yield transactions. So, many turn to RD as their lender of last resort. 

USDA–RD Water and Wastewater Programs Have Been Enormously Successful 

RD’s water and wastewater programs are a key component of economic development in rural America. Every water and wastewater construction dollar generates 

nearly $15 of private investment and adds $14 to the local property tax base. Without the basic infrastructure funded by RD—clean drinking water for household 

needs, sufficient quantities of water to support local industry, and sanitary sewers 

to remove sewage and industrial byproducts to protect public health—local employers will relocate or close factories and small businesses will decline and eventually 

1641

1 United States. Dept. of Agriculture. Rural Development. Water and Environmental Programs 

Annual Activity Report, Fiscal Year 2011. Washington, D.C.: USDA, 2012. 

disappear. The entrepreneurs and small business owners who are the engines of our 

economy won’t open new businesses, shops or restaurants on Main Street without 

basic services. Infrastructure is the foundation of economic development, and to promote economic growth in rural America, you need to ensure that businesses’ and 

residents’ basic needs—like water and sewer services—are met. Opportunities for 

continued economic growth in rural communities are substantial. Agricultural production, oil and gas development, mining operations, alternative energy pursuits, 

and tourism are all vibrant economic sectors that depend on sustainable rural communities. RD programs play a part in making available to rural communities water 

and wastewater utilities, essential community facilities, affordable housing, and 

broadband. 

The Water and Environment Programs at RD have enjoyed tremendous success 

over the past few decades. The agency boasts a portfolio of more than 18,000 active 

water/sewer loans, more than 19 million rural residents served, and a delinquency 

rate of just 0.18%.1 This success is partly attributable to the field presence RD has 

historically maintained in rural areas. With staff in field offices throughout the 

country, RD is uniquely positioned to evaluate the credit-worthiness of small utilities and can distribute Federal funds quickly and efficiently to areas of need. In 

drought years, or after natural disasters, community leaders benefit from being able 

to turn to a local RD staffer whom they know and trust and who is familiar with 

their system and its needs, though recent staff reductions in RD offices nationally 

have started to hinder the ability of RD to serve rural communities with these critical services. To build on the past successes of the Water and Environment Programs, the farm bill should reauthorize the water and wastewater loan and grant 

programs, the technical assistance and training grant program, and the water infrastructure revolving loan fund program at or near the levels in the previous farm 

bill. 

Technical Assistance is Key to Ensuring RD’s and Rural Communities’ Suc- cess 

Despite RD’s many successes, a substantial number of small, low-income towns 

and counties have difficulty accessing RD programs. The application process and eligibility requirements for each program are slightly different, and each poses unique 

challenges. Local leaders are most often volunteers who lack professional staff and 

the resources to find out what funding sources are available or the requirements for 

funding eligibility. Their first look at the Letter of Conditions on an RD loan can 

make the process seem overwhelming and discourage worthy applications. With help 

from an experienced technical assistance provider, however, even communities with 

no staff and limited planning resources can develop the local leadership capacity to 

manage needed infrastructure projects. Technical assistance plays a vital role in ensuring that the programs serve the communities they were designed to benefit in 

a cost-effective manner. 

While there are many calls for reducing the requirements associated with obtaining water and wastewater financing from RD, RCAP’s opinion is that these requirements are for the most part necessary to ensure that the Federal Government is 

making financial support available to the neediest communities while ensuring the 

security of the Federal investment. The extremely low default rate on these loans 

is a testament to the efficacy of existing requirements. Common environmental review requirements among all Federal and state infrastructure programs would be 

one area for improvement. Oftentimes projects have multiple funding sources with 

varying environmental review/assessment requirements, and standardizing them 

across Federal programs would reduce the burden on applicants to conduct multiple 

separate reviews. 

Overall, the water and wastewater Technical Assistance and Training Grant Program has been so successful that many state RD offices and local community officials have asked the RCAP network to assist with other, non-water-related RD-funded projects. While we try to work with as many communities as we can by relying 

on non-Federal resources, Congress can help by authorizing changes to existing 

farm bill programs, specifically Rural Housing Service’s Essential Community Facilities (CF) Program, to allow for set-asides to fund technical assistance. State RD 

Offices have repeatedly asked RCAP for assistance with borrowers under the CF 

program. A CF technical assistance and training program can provide much-needed 

support for the CF program as has been the case with the water and wastewater 

programs. Under current and projected economic environments, essential community facilities constitute an important foundation for rural community growth. HavVerDate 0ct 09 2002 12:54 Dec 11, 2012 Jkt 041481 PO 00000 Frm 00053 Fmt 6633 Sfmt 6621 I:\DOCS\112-30\74372.TXT BRIAN
1642

ing a dedicated technical assistance program in this area will ensure that these facilities are planned for, constructed, operated and managed in an efficient manner 

that benefits the entire community and promotes economic development opportunities. 

As the success of the water and wastewater programs has shown, technical assistance benefits both rural communities and the agency by improving access to the 

programs and ensuring a positive return on Federal investments. By expanding 

technical assistance to other programs at RD, taxpayer dollars can go further while 

still providing necessary services to rural communities. In addition, a broader technical assistance program would help ensure a more coordinated approach to economic development in rural communities. Experienced planners who are familiar 

with the application processes for Federal and state programs could help communities better coordinate the timing of their development projects. This would help 

prevent communities from tearing up Main Street 1 year to replace sewer pipes, 

then tearing it up again the following year to install fiber optic cables, simply because that’s when the funding was available. A comprehensive Federal approach to 

technical assistance among all RD programs would allow local leaders to better plan 

and coordinate their construction activities and eliminate such inefficiencies. 

Regionalization Issues 

Another way Congress can improve existing RD programs is to encourage applicants to look for opportunities to regionalize. In order to maximize limited resources, 

communities need to realistically examine whether operating their own facilities is 

cost effective. With respect to water and sewer infrastructure, at times clusters of 

small towns can better and more affordably be served by having one large treatment 

plant with pipes running to each town than by having a separate treatment facility 

in each town. In areas where communities are too far apart to run pipes, utilities 

could benefit from shared management, operations, purchasing and other similar 

joint service provisions. Regionalization may not be feasible in all cases, especially 

in areas with long distances between communities. However, RCAP recommends 

that potential borrowers demonstrate to RD their efforts to employ regionalized 

service provision as part of the application process. 

Most states now require that new or expanding utilities provide documentation 

regarding their efforts to regionalize prior to being granted a license or certificate 

to serve an area. Priority should be given to applications for regional service provision, especially in cases where smaller or non-compliant systems are being consolidated to more efficiently serve their customers. By giving a small priority to projects 

in which the applicants can demonstrate that they have weighed the costs and benefits of regionalization, RD can encourage regional projects where appropriate without disqualifying communities that are geographically isolated. Furthermore, 

RCAP’s experience has been that regionalization is most often successful when a 

technical assistance provider is able to spend time with all entities involved to offer 

alternative approaches, assist in the evaluation of costs and benefits, identify funding sources, prepare necessary documentation, and assist with public education and 

outreach. 

Some consideration should also be paid to the current language contained in 7 

U.S.C. § 1926(b) ‘‘Curtailment or limitation of service prohibited’’ that allows water 

districts that are USDA borrowers to veto any activity that impacts service provision in their area. The need to protect the Federal investment is necessary and was 

the basis for this provision. However, should Congress decide that regionalized approaches to service delivery are appropriate in some cases, then a re-examination 

of this provision is necessary to allow for a more comprehensive and planned approach to regional development. As this currently stands, the Federal protection afforded under 1926(b) can prevent state and local governments from making their 

own decisions on how best to provide utility services in local areas. 

Reauthorize Revolving Funds for Financing Water and Wastewater 

Projects 

7 U.S.C. § 1926(a)(2)(B) authorizes a program for nonprofit entities to capitalize 

revolving loan funds for the purposes of financing eligible borrowers with pre-development or other short-term capital costs (such as site acquisition or engineering 

costs or for equipment replacement, small service extensions or emergency repairs). 

RCAP would recommend that this program be maintained at currently authorized 

levels and the maximum for eligible loans to small-system borrowers be increased 

from $100,000 to $150,000, as costs for even the smallest repairs have increased significantly. Both RCAP and the National Rural Water Association have utilized this 

program to capitalize revolving loan fund programs that have assisted small communities to extend services, meet regulatory requirements, make emergency repairs 

1643

and fund pre-development costs associated with major capital construction projects. 

These types of loans are typically not available from RD or the State Revolving 

Funds, nor do small communities have much hope of securing these loans from private sources. Demand for these loans far surpasses amounts authorized and appropriated for this purpose. 

Changing the Definition of ‘‘Rural’’

There are some proposals being discussed to standardize the definition of ‘‘rural’’ 

in all RD programs. While it might seem reasonable to have a single definition of 

rural that encompasses the utility, community facilities and business programs, any 

effort to increase the size of eligible borrowers under the Water and Environmental 

Programs above 10,000 would severely jeopardize what is basically the only source 

of Federal funding for small, rural community infrastructure needs. If the definition 

is expanded to, say, 50,000 and under, many of our nation’s smallest communities 

will be unable to compete for RD water and sewer infrastructure funds with much 

larger towns that have departments of full-time staff, engineers and grant writers. 

The sheer number of community water systems serving populations under 10,000—

over 90% of the 53,000 community water systems in this country—requires that limited RD funded be targeted to those communities with the greatest need, and the 

greatest need is in these smaller, rural communities. 

Larger communities—even those in the 10,000–50,000 population range—have access to the bond market, other state-funded programs and/or bank financing at reasonable rates and terms. Larger communities also benefit from greater numbers of 

customers over which to apportion debt service costs. This allows larger systems to 

afford treatment and service options, and to keep costs to customers reasonable, 

while accessing non-Federal financing sources. If allowed access to RD funding, 

many of these larger communities will instead turn to lower-interest RD loans, 

which will leave the small communities that have no other options out of the mix. 

Smaller rural communities should not be placed at a competitive disadvantage for 

the one program that was designed specifically to meet their unique needs. Many 

smaller, economically distressed communities require the kind of grant/loan packages provided by RD in order to make customer costs reasonable, even if these costs 

are still typically much higher than what is found in their larger or more urbanized 

neighboring communities. 

Household Water Well Program: 7 U.S.C. § 1926(E) 

This section allows RD to make grants to nonprofit organizations to loan money 

to individuals to finance the construction, refurbishing and servicing of individually 

owned household water well systems in rural areas. While this program, combined 

at times with state housing programs, has benefited low-income families in isolated 

rural areas that would otherwise be unable to obtain water except through a household well, the farm bill should require that none of these loans go to residences in 

areas where RD has funded or is considering funding a community water system. 

Funding individual homeowner loans can adversely impact small customer bases 

within areas funded by RD’s community water loans by reducing the potential number of customers who are ultimately responsible for servicing the Federal debt. Furthermore, encouraging multiple wells into potentially sensitive and increasingly depleted aquifers can negatively impact other users from both a water quality and 

water quantity perspective. 

Conclusion 

Solving the challenges facing rural communities requires a multi-pronged approach that includes adequate funding, along with steps to ensure that funding is 

available to all communities that truly need it, and a comprehensive approach to 

technical assistance to maximize the efficiency and effectiveness of RD’s programs. 

It also includes an emphasis on regional economic development and cost-effective investments in infrastructure that provide maximum return on scarce Federal, state, 

and local resources. The farm bill reauthorization is an opportunity to replicate the 

success of the water/wastewater technical assistance program and modify existing 

programs, such as Essential Community Facilities, to encourage a regional approach 

to rural development, while protecting taxpayer investment in our nation’s water 

and sewer infrastructure. 

Thank you for considering my testimony on the importance of rural development 

as you prepare for your farm bill deliberations. I welcome any questions you may 

have at this time.

The CHAIRMAN. Mr. Rozzelle? 

1644

STATEMENT OF DAVID G. ROZZELLE, EXECUTIVE VICE

PRESIDENT, SUDDENLINK COMMUNICATIONS; MEMBER, 

RURAL AND SMALL SYSTEM OPERATOR COMMITTEE,

NATIONAL CABLE TELECOMMUNICATIONS ASSOCIATION, 

ST. LOUIS, MO 

Mr. ROZZELLE. Chairman Johnson, Ranking Member Costa, and 

Members of the Subcommittee, thank you for inviting me to testify 

today. My name is Dave Rozzelle, and I am an Executive Vice 

President with Suddenlink Communications. Suddenlink is a leading provider of cable video services, high-speed Internet access, 

wireless home networking, wireline phone, online video, home security services for hundreds of communities, approximately 1.4 million households and thousands of commercial customers across 11 

states. Suddenlink primarily serves second-tier communities such 

as Lubbock, Texas; Charleston, West Virginia; Jonesboro, Arkansas; Lake Charles, Louisiana; and Greenville, North Carolina. 

However, we also serve dozens of small rural communities, some 

with populations below 500 people. Since 2009, we have invested $350 million above and beyond our 

normal capital spending levels to ensure that our customers can 

enjoy cutting-edge services, including high-speed Internet service, 

which we offer to substantially all of our customers. Moreover, our 

investment in industry-leading DOCSIS 3.0 technology has enabled 

us to provide data transmission speeds up to 107 megabits to a 

growing number of our residential customers, some in small rural 

communities like Pomeroy, Ohio, and Ripley, West Virginia. 

I am also here today as a member of the Rural and Small System 

Operator Committee of the National Cable and Telecommunications Association. NCTA is the principal trade association of the 

cable industry in the United States. Since 1996, the cable industry 

has invested over $185 billion to upgrade and expand its networks 

to provide broadband access and now offers high-speed Internet 

service to more than 93 percent of U.S. households. 

Suddenlink and NCTA strongly support the primary goals of 

rural broadband funding. Broadband is a crucial driver of economic 

recovery and global competitiveness and quality broadband services 

should be available to all regions of the country, including the least 

densely populated areas of the country. Unfortunately, over the 

past 10 years, the implementation of the rural broadband programs 

by the Rural Utilities Service has not maintained that focus. The 

USDA Inspector General issued critical reports in 2005 and 2009 

which found that ‘‘the overwhelming majority of communities, 77 

percent, receiving service through the Broadband Program already 

have access to the technology without the RUS Loan Program.’’ 

Misdirecting scarce government funds to areas that are already 

being served means less support for areas without any broadband. 

It also puts existing private providers in the untenable position of 

having to compete against a government-subsidized competitor. 

Though the 2008 Farm Bill made some reforms, the RUS’s new 

March 2011 rules still allow the RUS to approve applications that 

are complete overbuilds without reaching any new households 

which lack broadband service. 

We respectfully submit that the new farm bill should take strong 

steps to direct taxpayer dollars where they are most needed. SpeVerDate 0ct 09 2002 12:54 Dec 11, 2012 Jkt 041481 PO 00000 Frm 00056 Fmt 6633 Sfmt 6601 I:\DOCS\112-30\74372.TXT BRIAN
1645

cifically, as this Subcommittee considers reauthorization of the legislation, we urge you to consider the following four proposals: 

First, limit funding to substantially unserved areas. To ensure 

available funds are used effectively, the RUS Broadband Support 

Loans, Loan Guarantees, or Grants should be limited to areas 

where at least 75 percent of residential households lack access to 

broadband service. 

Second, seek additional information. To ensure compliance with 

this proposed eligibility standards, the Secretary of Agriculture 

should be required to give existing providers an opportunity to voluntarily submit information about their service areas that may 

overlap areas proposed to be served by the applicant. This was 

done in the stimulus program. 

Third, prioritize support to areas most in need of it. The Secretary should continue to give priority to the RUS Broadband 

Loans or Grants that will extend broadband service to areas with 

the greatest proportion of unserved households. 

Finally, increase accountability. Each entity receiving RUS 

broadband support should be required to report quarterly on its use 

of the funds and its progress and those reports should be available 

online. That was done by the Department of Commerce in the stimulus program. 

Suddenlink and NCTA share your goal of bringing broadband to 

every rural household. A well administered Broadband Loan Program is an important part of reaching that goal. Including our four 

proposals will help ensure that the program stays focused and on 

track to do so. 

Thank you for the opportunity to speak here today and I appreciate your willingness to consider ways to ensure broadband funds 

are spent in the most effective way possible for all Americans. I 

look forward to taking your questions at the appropriate time. 

[The prepared statement of Mr. Rozzelle follows:]

PREPARED STATEMENT OF DAVID G. ROZZELLE, EXECUTIVE VICE PRESIDENT, SUDDENLINK COMMUNICATIONS; MEMBER, RURAL AND SMALL SYSTEM OPERATOR

COMMITTEE, NATIONAL CABLE TELECOMMUNICATIONS ASSOCIATION, ST. LOUIS, MO 

Good morning, and thank you for inviting me to testify today. My name is Dave 

Rozzelle, and I am an Executive Vice President with Suddenlink Communications. 

Suddenlink is a leading provider of cable video services, high-speed Internet access 

(also known as broadband access), wireless home networking, wireline phone, online 

video, and home security services for communities primarily located in Texas, West 

Virginia, Louisiana, Arkansas, North Carolina, Oklahoma, Missouri and Arizona. 

Suddenlink provides service to hundreds of communities and approximately 1.4 

million households. Suddenlink primarily serves second tier markets, such as Lubbock, TX; Charleston, WV; Jonesboro, AR; Lake Charles, LA; and Greenville, NC. 

However, we also serve dozens of small, rural communities, some with populations 

below 500 people. Since 2009, we have invested over $350 million—above and beyond our normal 

capital spending levels—to ensure that our customers can enjoy cutting-edge services, including high-speed Internet service, which we offer to substantially all of our 

subscribers. Moreover, our investment in industry-leading DOCSIS 3.0 technology 

has enabled us to provide data transmission speeds up to 107 Mbps to a growing 

number of our residential customers, some in small communities like Pomeroy, 

Ohio, and Ripley, West Virginia. 

I am also here today as a member of the Rural and Small System Operator Committee of the National Cable & Telecommunications Association (‘‘NCTA’’). NCTA is 

the principal trade association of the cable industry in the United States. NCTA 

represents cable operators serving more than 90 percent of the nation’s cable television households and more than 200 cable program networks, as well as equipment 

1646

1 U.S. DEP’T. OF AGRICULTURE, ECONOMIC RESEARCH SERVICE, Rural Broadband at a Glance,

at 1 (Feb. 2009), available at http://www.ers.usda.gov/Publications/EIB47/

EIB47lSinglePages.pdf. 2 Id. at 4

suppliers and providers of other services to the cable industry. The cable industry 

has long been at the forefront of the growth and deployment of broadband service. 

Since 1996, the cable industry has invested over $185 billion to upgrade and expand 

its networks to provide broadband access. The result of this investment is that cable 

operators today offer high-speed Internet service to more than 93 percent of U.S. 

households. 

Suddenlink and NCTA strongly support the primary goals of rural broadband 

funding. Quality broadband services should be available to all regions of the country, including the least densely populated areas of the country. Broadband is a crucial driver of economic recovery and global competitiveness. Broadband links rural 

America to the rest of the country and the world, creates jobs, improves educational 

opportunities, and delivers health care more efficiently. While Suddenlink has invested an incremental $350 million in recent years to bring the most advanced services to its customers, we recognize that there are still some rural consumers who 

lack access to broadband. Rural broadband funding programs should focus on bringing broadband to those rural consumers. 

Unfortunately, over the past 10 years the implementation of the rural broadband 

programs by the Rural Utilities Service (‘‘RUS’’) has not maintained that focus. 

Time and again, the USDA’s Inspector General has found that taxpayer dollars were 

used to underwrite broadband services in areas that already have broadband from 

providers that are funded wholly by risk capital. Likewise, a study by Navigant Economics concluded that RUS grants and loans were awarded to areas already served 

by multiple broadband providers—at the cost of tens of thousands of dollars or more 

for each unserved household. Misdirecting funds to areas that are already being 

served means less support for areas without any broadband—and it also puts existing providers in the untenable position of having to compete against a governmentsubsidized competitor. 

Unlike water or electricity, the broadband market is highly competitive in many 

areas, including in many rural areas of the country. In the broadband context, 

misallocated funds not only waste tax dollars, they undermine the goal of fair competition. Particularly in the current budget situation, neither of these outcomes is 

acceptable. As you consider whether and how to reauthorize the rural broadband 

program, it is essential that you include clear direction to the RUS to ensure that 

taxpayer dollars are put to work to extend broadband to unserved areas rather than 

subsidize competition in communities where service is already available, and that 

you include mechanisms to ensure transparency and accountability with respect to 

any projects that the RUS may fund. 

My testimony today will address these points in a little more detail, including 

some specific proposals for targeting rural broadband funds. 

Rural Broadband Support Programs Should Focus on Unserved Areas 

Bringing service to unserved areas is an important and appropriate objective for 

rural broadband programs. It is widely acknowledged that broadband is a crucial 

driver of economic recovery and global competitiveness. By facilitating economic development, broadband will add jobs to the economy. Broadband is also central to improving educational opportunities and delivering health care more efficiently, important benefits that also contribute to economic growth. 

As the Department of Agriculture has noted, ‘‘broadband Internet access is becoming essential for both businesses and households’’ and ‘‘many compare its evolution 

to other technologies now considered common necessities . . .’’ 1 Broadband Internet 

access would benefit businesses as well as provide ‘‘rural residents access to goods 

and services that may not otherwise be available locally or via dial-up Internet.’’ 2

Unfortunately, these considerable benefits are still unavailable to some rural and 

remote areas of our nation where market forces have proved insufficient to encourage investment in broadband networks and service. These are the areas that should 

be the focus of the rural broadband loan program. 

In recognition of this priority, Congress has tried to focus rural broadband programs on unserved areas. For instance, in response to findings that the broadband 

loan program enacted in the 2002 Farm Bill included funding for suburban areas, 

Congress enacted reforms to the program in 2008. The 2008 Farm Bill prioritized 

funds for unserved areas and directed the Secretary of Agriculture to ‘‘give the highest priority to applicants that offer to provide broadband service to the greatest proVerDate 0ct 09 2002 12:54 Dec 11, 2012 Jkt 041481 PO 00000 Frm 00058 Fmt 6633 Sfmt 6621 I:\DOCS\112-30\74372.TXT BRIAN
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3Food, Conservation, and Energy Act of 2008, Pub. L. No. 110–246, § 601(c)(2) (2008) (‘‘2008 

Farm Bill’’); see also CONF. REP. NO. 110–627, at 832 (2008). And the House Report indicated 

that eligibility requirements were tightened for the broadband loan program in order ‘‘to refocus 

on both rural and unserved areas of the country and provide[] additional criteria to USDA to 

prevent entities from receiving loans to serve only markets already sufficiently served with highspeed and affordable broadband service.’’ See HOUSE REP. NO. 110–256, at 232 (2008). 4 2008 Farm Bill, §§ 601(d)(2)(A)(i)–(ii). 5 Id. § 601(d)(5). 6 American Recovery and Reinvestment Act of 2009, Pub. L. No. 111–5, 123 Stat. 115, 118 

(2009). 7OIG AUDIT REPORT 09601–4–Te, RURAL UTILITIES SERVICE BROADBAND GRANT AND LOAN

PROGRAMS, U.S. DEPARTMENT OF AGRICULTURE, OFFICE OF INSPECTOR GENERAL, SOUTHWEST

REGION, at ii (Sept. 2005) (‘‘OIG 2005 Report’’). 8 Id.

9OIG AUDIT REPORT NO. 09601–8–TE, RURAL UTILITIES SERVICE BROADBAND LOAN AND LOAN

GUARANTEE PROGRAM, AUDIT REPORT, U.S. DEPARTMENT OF AGRICULTURE, OFFICE OF INSPECTOR GENERAL, at 9 (Mar. 2009) (‘‘OIG 2009 Report’’). 10 Id. at 2. 11 Id. at 5 (emphasis added). 

portion of households that, prior to the provision of the broadband service, had no 

incumbent service provider.’’ 3

The 2008 Farm Bill also established revised project eligibility standards, requiring, with certain exceptions, that at least 25% of the households in the proposed 

service territory be unserved or served by only one broadband provider, and that 

no portion of the proposed service territory be served by three or more providers in 

order for a project to be eligible for funding.4 The law also improved the transparency of the loan process by directing the Secretary of Agriculture to publish a 

notice for each loan or loan guarantee application describing the content of the application, including the identity of the applicant; each area proposed to be served 

by the applicant; and the estimated number of households without terrestrial-based 

broadband service in those areas.5

Likewise, the American Recovery and Reinvestment Act (the ‘‘Recovery Act’’)—

which included $7.2 billion to subsidize broadband deployment, the largest Federal 

subsidies ever provided for broadband construction in the U.S.-targeted funding to 

areas ‘‘without sufficient access to high speed broadband service to facilitate rural 

economic development’’ and gave priority to projects that provide service to the highest proportion of rural residents that do not have access to broadband service.6

RUS Has Consistently Failed To Keep Its Focus on Unserved Areas 

Despite some successes and prior efforts at reform, however, RUS’s implementation of rural broadband programs has consistently fallen short. In two separate reports, the USDA’s Office of Inspector General (‘‘OIG’’) criticized the RUS for failing 

to focus on unserved areas. In 2005, the OIG found that the rural broadband program enacted as part of the 2002 Farm Bill had ‘‘not maintained its focus on rural 

communities without preexisting service’’ and was instead subsidizing competition 

in suburban areas and in communities already served by one or more existing 

broadband providers.7

OIG ‘‘question[ed] whether the government should be providing loans to competing rural providers when many small communities might be hard pressed to support even a single company. In these circumstances, the RUS may be setting its own 

loans up to fail by encouraging competitive service; it may also be creating an uneven playing field for preexisting providers operating without government assistance.’’ 8

In March 2009, OIG released a second report evaluating implementation of the 

2002 Farm Bill, concluding that ‘‘the key problems identified in our 2005 report—

loans being issued to suburban and exurban communities and loans being issued 

where other providers already provide access—have not been resolved.’’ 9 It found 

that despite OIG’s 2005 initial findings, ‘‘RUS continued to make loans to providers 

in areas with preexisting service, sometimes in close proximity to urban areas.’’ 10

Of ‘‘37 applications approved by RUS since September 2005, 34 were granted to applicants in areas where one or more private broadband providers already offered 

service.’’ 11

Although the 2008 Farm Bill did not explicitly prohibit granting loans to preexisting service areas, OIG expressed its concern that ‘‘the overwhelming majority 

of communities (77 percent) receiving service through the broadband program already have access to the technology, without the RUS’s loan program. Moreover, the 

1648

12 Id. at 6. 13 Id. at 2. 14 Id. at 10. 15See Statement of the Honorable Phyllis K. Fong, Inspector General, before the Subcommittee on Communications and Technology, Committee on Energy and Commerce, U.S. 

House of Representatives, at 2–3 (Feb. 10, 2011), available at http://democrats.energycommerce.house.gov/sites/default/ files/imageluploads/FonglTestimony.pdf.

legal ramifications of subsidizing some providers in a given area, but not others, 

have proved problematic.’’ 12

The Inspector General also voiced concerns about the RUS’s ability to disburse 

Recovery Act funds going forward:

We remain concerned with RUS’ current direction of the Broadband program, 

particularly as they receive greater funding under the [Recovery Act], including 

its provisions for transparency and accountability. As structured, RUS’ 

Broadband program may not meet the Recovery Act’s objective of awarding 

funds to projects that provide service to the most rural residents that do not 

have access to broadband service.13

OIG concluded that ‘‘[w]e remain concerned that the majority of RUS’ program 

funds have not been utilized in expanding broadband service to rural areas where 

no prior service exists.’’ 14

At a February 2011 House Energy and Commerce Communications Subcommittee 

hearing, the Inspector General reiterated her concerns about the RUS Broadband 

Loan Program. In particular, she noted that:

• The RUS had a history of ‘‘not maintain[ing] its focus on rural communities 

lacking preexisting service;’’

• The RUS had devoted ‘‘significant portions of its resources to funding competitive service in areas with preexisting broadband access rather than expanding 

service to communities without existing access;’’ and

• ‘‘RUS’ decision to fund certain providers in rural communities, but not

others . . . could create an unlevel playing field for providers already operating 

without government subsidies.’’ 15

The RUS’s New ‘‘Interim Final’’ Rules Perpetuate the Problems Identified 

by OIG 

Despite the RUS’s persistent failure to focus on unserved areas, confirmed by 

OIG, we were hopeful that the RUS would address these problems through the 

adoption of rules to implement the reforms of the 2008 Farm Bill. Unfortunately, 

the RUS’s new ‘‘interim final’’ rules for the Broadband Loan Program, despite being 

3 years in the making, perpetuate the problems that have plagued the program from 

the outset. 

The new rules still allow the agency to fund complete overbuilds without reaching 

any households with no broadband service. They also allow loans to be made in an 

area where two existing private providers are already offering competing service, as 

long as 25% of the households in the proposed service area are unserved or underserved (defined to mean an area where service is offered by zero or one incumbent 

providers). This means that a valid proposed service area could already have two 

competing private providers offering service to 75% of the households and one provider offering service to 25% of the households and still get a loan. An award could 

be made even though the loan recipient would not be reaching a single household that lacked broadband service.

In addition, the new rules allow the RUS to fund upgrades in areas that are 

served, without regard to the number of households that do not have service and 

without regard to whether the service area is already served by any number of providers. (Loans for upgrades are restricted in areas with multiple providers only if 

an applicant is eligible to receive funding through another Rural Electrification Act 

funding program.) This results in bringing new service to no new households

and, again, has the government subsidizing a competitor and picking winners and 

losers in the market. 

The Failure to Prioritize Unserved Areas Imposes Substantial Costs on the 

Economy and Deters Private Investment 

The impact of funding duplicative broadband networks has resulted in an extremely high cost to reach a small number of unserved households, all at taxpayer 

expense. According to an economic analysis and three case studies of funding under 

the Recovery Act’s Broadband Initiatives Program, commissioned by NCTA and preVerDate 0ct 09 2002 12:54 Dec 11, 2012 Jkt 041481 PO 00000 Frm 00060 Fmt 6633 Sfmt 6621 I:\DOCS\112-30\74372.TXT BRIAN
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16 Jeffrey A. Eisenach and Kevin W. Caves, ‘‘Evaluating The Cost-Effectiveness of RUS 

Broadband Subsidies: Three Case Studies’’ (Apr. 13, 2011), available at http://www.ncta.com/

DocumentBinary.aspx?id=966. 17 Id. at 4. 18 Id. at 16. 19 Id. at 23–32. 20LCFN’s proposal asserts a substantially greater number of households passed, which appears to stem from its inclusion of unoccupied housing units within the total. Id. at 33–34 n. 

72. 

pared by Jeffrey A. Eisenach and Kevin W. Caves of Navigant Economics,16 that 

cost, if imposed nationwide, would nearly triple the price of extending broadband 

to every U.S. home. 

Among the key findings in the study are the following:

• Of the three projects analyzed, more than 85 percent of households were already passed by existing broadband providers, and in one project area, more 

than 98 percent of households were already passed by at least one provider.17

• Based on the cost of the direct grants and subsidizing the loans, the study estimated that the cost per unserved household passed would be $30,104 if existing 

coverage by mobile broadband providers is ignored, and $349,234 if mobile 

broadband coverage is taken into account.

• The RUS approach of funding duplicative coverage is directly at odds with the 

National Broadband Plan’s recommendations and would massively increase the 

cost of extending broadband to all unserved homes. The FCC’s Omnibus 

Broadband Initiative estimated that the cost of extending broadband to every 

unserved household in the U.S. is approximately $23.5 billion, so long as duplicative service is not funded. But funding duplicative service—as the RUS did 

under BIP—increased the cost of a nationwide build-out by $63.7 billion, to 

$87.2 billion.18

The Navigant study examined three large BIP subsidy awards which totaled 

$231.7 million, or about seven percent of the total BIP $3.5 billion combined loan 

and grant program:

• $101.2 million in northwestern Kansas;

• $66.4 million for Lake and St. Louis counties in northeastern Minnesota;

• $64.1 million to cover a portion of Gallatin County in southwest Montana.

In northwestern Kansas, the Rural Telephone Service Company (‘‘RTS’’) and its 

wholly-owned subsidiary NexTech were awarded $101.2 million in loans and grants 

to deploy and upgrade broadband services. Although the project area covered 4,247 

square miles and contained 14,588 households, the majority of those households 

were in one city—Hays, Kansas—which covers less than 8 square miles. Hays, however, was already served by RTS, AT&T and Eagle Communications. Only 2,442 

households in the entire project area were unserved using the RUS’s definition—

and if 3G wireless broadband service was taken into account, all but 25 households—0.2%—were already served. Indeed, the majority of the unserved area was 

also uninhabited.

On average, across all the principal counties that comprise the proposed service 

area, 95 percent of the households already had high-speed broadband service. The 

taxpayer cost per unserved household for this project—for which the RUS benchmark is $10,000 and the FCC benchmark is $6,350—was $30,329 based on the 

RUS’s definition. If wireless 3G broadband was taken into account, the cost rose to 

$2,954,920 per unserved household.19

In northeastern Minnesota, the Lake County Fiber Network (‘‘LCFN’’) was awarded $66.4 million in loans and grants to develop last mile FTTP infrastructure in an 

area comprising Lake County and portions of eastern St. Louis County. The proposed service area covered 2,675 square miles and included 11,637 households.20 Of 

those households, only 2,669—about 23%—were unserved using the RUS’s definition, and only 421 households were unserved by any terrestrial broadband provider—meaning that only 3.6 percent of households were unserved when mobile 

broadband service is taken into account. 

As in Kansas, much of the area that was unserved was also uninhabited. In the 

served areas, there were at least eight facilities-based broadband providers, and the 

majority of households in the proposed service area had a choice among multiple 

providers and 68% of those households were served by three or more providers. The 

taxpayer cost per unserved household for this project—against the RUS’s benchmark of $10,000 and the FCC benchmark of $6,250—was $13,746 based on the 

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21 Id. at 33–39. 22 Id. at 17–23. 23 Id. at 6. 24See also id. at 16–17. 

RUS’s definition. If wireless 3G broadband was taken into account, the cost rose to 

$87,231 per unserved household.21

In southwest Montana, Montana Opticom, LLC received $64.1 million to deploy 

last mile FTTP infrastructure in Gallatin County, Montana. The proposed service 

area covered 154 square miles and included 9,035 households—and was considered 

one of the most densely populated, rapidly growing and prosperous counties in Montana, with more extensive broadband coverage than most other areas of the state. 

Of the 9,035 households covered by the project, only 136—1.5%—were unserved 

using the RUS’s definition. Only 7 households—0.1%—were unserved when mobile 

broadband service is taken into account. 

As with the other two areas, much of the area that was unserved was also 

uninhabited. In fact, none of the census blocks in the areas the RUS claims were 

‘‘unserved’’ contained more than a single occupied housing unit. In the served areas, 

there were at least nine facilities-based broadband providers, and 93% of those 

households already were served by five or more broadband providers. Ninety-eight 

percent of households had a choice among four or more broadband providers. The 

taxpayer cost per unserved household for this project was $346,032 based on the 

RUS’s definition. If wireless 3G broadband was taken into account, the cost rose to 

$7,112,422 per unserved household.22

Navigant concluded that ‘‘[w]hile it may be too early for a comprehensive assessment of the [Recovery Act]’s broadband programs, it is not too early to conclude 

that, at least in some cases, millions of dollars in grants and loans have been made 

in areas where a significant majority of households already have broadband coverage, and the costs per incremental home passed are therefore far higher than existing evidence suggests should be necessary.’’ 23

This type of waste has a tremendous impact on broadband deployment throughout 

our nation. Facing a government-subsidized competitor creates tremendous difficulties for rural and smaller market companies, and creates a disincentive for companies like ours to invest. As I noted earlier, Suddenlink has invested over $350 million in private capital in the last 3 years alone to bring cutting-edge broadband to 

our communities. A robust broadband strategy inevitably depends on this continued 

private investment—government subsidies cannot fund all the broadband deployment needed for the country to become truly broadband-accessible. But using scarce 

Federal resources to skew the playing field will discourage and undermine this investment. It threatens the jobs of employees of the private enterprises who live in 

the very communities the awards are intended to benefit, offsetting new jobs created 

by the project, and undermining one or more broadband providers in the area to 

benefit another.24 Moreover, devoting funds to already-served areas creates a greater risk that loans may not be repaid because borrowers will face pre-existing competition. 

Rural and smaller market operators like Suddenlink are ready and willing to face 

competition from other providers. We have competed with large corporations like 

DISH Network, AT&T, Verizon, and DIRECTV for many years. That type of competition, however, differs from government-backed investment in particular companies. Companies that have taken the financial risk of serving a rural market, and 

serving it well, without government assistance cannot realistically be expected to 

continue to do so if they must face a government-subsidized competitor. Moreover, 

wasting valuable dollars to overbuild well-served communities at the expense of 

unserved residents does not make sense, particularly in the current economic environment. 

RUS Must Be Given Clear and Unambiguous Direction to Ensure That 

Broadband Loan Dollars Are Appropriately Directed to Unserved Areas 

The new farm bill should take strong steps to direct taxpayer dollars where they 

are most needed. Specifically, as this Subcommittee considers reauthorization of the 

legislation, we respectfully urge you to consider the following four proposals. 

First, limit funding to substantially unserved areas. To ensure available funds are 

used effectively, the RUS broadband support loans, loan guarantees, or grants 

should be limited to areas where at least 75% of residential households lack access 

to broadband service of at least 4 Mbps downstream and 1 Mbps upstream—the target basic access speed defined in the Federal Communications Commission’s National Broadband Plan. 

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Second, seek additional information. To ensure compliance with this proposed eligibility requirement for the RUS broadband support loan, loan guarantees, or grant 

programs, the Secretary of Agriculture should be required to give existing providers 

an opportunity to voluntarily submit information about their service areas that may 

overlap areas proposed to be served by the applicant, for subsequent due diligence 

review by the RUS. Similar requirements were adopted by USDA and the Department of Commerce in connection with BIP and the Broadband Technology Opportunities Program (‘‘BTOP’’). 

Third, prioritize support to areas most in need of it. To ensure funds are used 

where they are most needed, the Secretary should continue to give priority to the 

RUS broadband loans, loan guarantees, or grants that will extend broadband service 

to areas with the greatest proportion of households that do not currently have 

broadband at basic access speeds available from any provider. This would simply 

extend a provision in current law. 

Finally, increase accountability. To ensure transparency and accountability, each 

entity receiving RUS broadband support loans, loan guarantees, or grants should be 

required to report quarterly on its use of the funds and its progress in fulfilling the 

objectives for which the funding was provided. The reports should be made available 

to the public on the RUS website, along with a database of information about each 

award made by an RUS broadband program. Congress adopted similar requirements 

when it established the BTOP program under the Recovery Act. 

* * * * *

Suddenlink and NCTA share your goal of bringing broadband to every rural 

household. A well-administered broadband loan program is an important part of 

reaching that goal. Including our four proposals will help ensure that the program 

stays focused and on track to do so. Thank you for the opportunity to speak here 

today, and I appreciate your willingness to consider ways to ensure that broadband 

funds are spent in the most effective way possible for all Americans.

The CHAIRMAN. Thank you. 

Mr. Bahnson? 

STATEMENT OF MARK BAHNSON, CHIEF EXECUTIVE OFFICER 

AND GENERAL MANAGER, BLOOMINGDALE

COMMUNICATIONS, BLOOMINGDALE, MI; ON BEHALF OF

NATIONAL TELECOMMUNICATIONS COOPERATIVE

ASSOCIATION; ORGANIZATION FOR THE PROMOTION AND 

ADVANCEMENT OF SMALL TELECOMMUNICATIONS

COMPANIES; WESTERN TELECOMMUNICATIONS ALLIANCE 

Mr. BAHNSON. Thank you, Chairman Johnson, Ranking Member 

Costa, and the rest of the Committee. I appreciate the invitation 

to participate in today’s discussion. 

For the past 4 years, I have served as CEO/General Manager of 

the Bloomingdale Telephone Company headquartered in 

Bloomingdale, Michigan. My remarks today are on behalf of 

Bloomingdale, as well as NTCA, OPASTCO, and WTA and their 

small community-based members who have provided a variety of 

communication services throughout the rural far reaches of the nation. 

America’s 1,100 rural telecom providers serve only five percent of 

the U.S. population located in approximately 40 percent of the nation’s geographic landmass. Bloomingdale employs 25 people and 

our 2011 annual operating revenue was about $5.9 million. We 

offer 1.5 megabit broadband to 100 percent of our area with much 

faster speeds available to the majority of our customers, currently 

up to 20 megabits. 

Rural providers are community-focused. Bloomingdale’s partnership with RUS has produced countless opportunities whether it is 

the fiber that we laid in Paw Paw, Michigan, an exchange that can 

deliver 100 megabit Internet service to the local schools and the 

1652

county courthouse or the customer who no longer has to travel over 

8 hours a week to the University of Michigan Hospital in Ann 

Arbor for his heart condition. He can now have the tests over fiber 

done in his home. 

Ever since Bloomingdale began this operation in 1904, we have 

been proud to serve as the only provider to some of the most rural 

areas of Michigan while the larger carriers chose to serve only the 

most profitable and densely populated towns. The American economy runs on broadband. In an area moving from no broadband providers to three broadband providers during the years 1999 through 

2006, they realized a 6.4 percent employment growth on average, 

yet only about 1⁄2 of rural Americans currently subscribe to 

broadband at home and half of the small businesses are dissatisfied 

with their Internet speed. 

USDA’s Economic Research Service reports that over the past 

decade, the rural population has grown at less than 1⁄2 the rate of 

metropolitan population. RUS rural development programs, coupled with ongoing support, are essential to delivering the 

broadband that will empower rural America to reverse this trend. 

Our U.S. telecommunication programs have been a success story 

by providing reliable access to capital that helps carriers deliver affordable voice and broadband service to millions of Americans 

where it would not otherwise be available. Unfortunately, the momentum and economic development achieved in recent years with 

the help of RUS lending is being put at risk as a direct result of 

the regulatory uncertainty created by the FCC’s ongoing Universal 

Service Fund and intercarrier compensation reform proposals. RUS 

financing works hand-in-hand with ongoing RUS support to meet 

the national statutory mandate of quality, reliable telecom service 

in high-cost rural areas where low customer density, vast distances, and rugged terrain deter even the most optimistic business 

cases. Removing or weakening one piece of that puzzle threatens 

the provision of telecom service area in rural America and puts 

millions of RUS loans at risk of default. 

For example, Bloomingdale completed a $4.4 million RUS 

broadband loan project in 2010. That project will net RUS nearly 

$2.5 million in interest when we have completed the repayment. 

RUS lending remains essential to broadband deployment. Indeed, 

14 million Americans still do not have 4 megabits broadband available. Only 79.2 percent of rural Americans have access to speeds 

greater than 6 megabit and 70.8 percent are fortunate to have 

speeds greater than 10 megabits; 10 megabits would be what is 

commonly considered necessary for rural areas to compete in a 

modern broadband world. 

NTCA and its partners representing the rural telecom industry 

welcome discussion about ways to improve RUS telecom programs. 

In short, we are concerned about making further changes to a 

broadband program that has been at a virtual standstill for 4 

years, especially if reforms are designed to cut out lending to areas 

that still lack broadband. Further, technology and neutrality dictates that the same data transmission requirements must apply to 

wire and wireless networks. Priority should be given to applicants 

proposing scalable projects, meaning those that can be easily and 

relatively inexpensively upgraded over time to reflect the increased 

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consumer demand for more bandwidth. We can’t accomplish our 

broadband goals without granting some discretion to the Secretary 

who can then adjust based on the endless variety of circumstances 

presented by applicants. 

Serving every American is not a simple undertaking and RUS 

lending should be the focus on ensuring that everyone has access 

to robust, reliable broadband over the long term. Regardless of 

whether consumers are focused on voice, video, or data, they will 

require the underlying infrastructure to ensure that their communications get to its destination. The rural industry has long been 

a leader in deploying advanced telecommunication services to 

America’s rural areas and that success is built upon a foundation 

of public-private partnership and that has worked for decades. 

Rural providers and their rural associations are eager to continue to work with you to make broadband universally available as 

envisioned by many and mandated by statute. Thank you for your 

attention to this matter. 

[The prepared statement of Mr. Bahnson follows:]

PREPARED STATEMENT OF MARK BAHNSON, CHIEF EXECUTIVE OFFICER AND GENERAL

MANAGER, BLOOMINGDALE COMMUNICATIONS, BLOOMINGDALE, MI; ON BEHALF OF

NATIONAL TELECOMMUNICATIONS COOPERATIVE ASSOCIATION; ORGANIZATION FOR

THE PROMOTION AND ADVANCEMENT OF SMALL TELECOMMUNICATIONS COMPANIES; 

WESTERN TELECOMMUNICATIONS ALLIANCE

I. Introduction 

Thank you for the invitation to participate in today’s discussion on the successes 

of Federal investments in rural broadband and the challenges that lie ahead. 

Broadband has quickly become an essential service that plays a key role in creating 

and keeping jobs in rural America. For the past 4 years I have served as CEO/General Manager of Bloomingdale Telephone Company, which is headquartered in 

Bloomingdale, MI. Prior to my current position, I served for 10 years as Office Manager for Alliance Communications in Garretson, SD. I regularly work with the National Telecommunications Cooperative Association (NTCA), which represents small, 

community-based telecommunications cooperatives and other small telecom providers in Washington, D.C. My remarks today are on behalf of Bloomingdale Telephone Company, as well as NTCA, the Organization for the Promotion and Advancement of Small Telecommunication Companies (OPASTCO), and the Western 

Telecommunications Alliance (WTA) and their collective several hundred small community-based members that provide a variety of communications services throughout the rural far reaches of the nation. 

We believe our industry is uniquely qualified to participate in today’s discussion 

because we are consumer-centric small businesses leading the way in deploying 

high-speed, sustainable broadband to rural America. Bloomingdale, similar to about 

half of the nation’s small, community-based rural providers, is a commercial company—privately held by 264 stockholders. Family or commercially-owned rural providers are consumer-centric because they are locally owned and operated. Likewise, 

in the cooperative structure that makes up the other half of small rural providers, 

the consumers are also the owners, so every choice is viewed from both an owner 

and a consumer perspective—the two are truly one and the same. 

Bloomingdale’s top priority has always been to provide every one of our consumers 

with the very best communications and customer service possible at affordable rates 

that stimulate adoption. Bloomingdale has several lines of business, including ILEC, 

CLEC, ISP and Cable TV. Make no mistake—while our headquarters are in 

Bloomingdale, we in fact serve over 2,500 customer lines across our 125 square mile 

rural service area that is spread across the southwest corner of the State of Michigan. This constitutes about 20 customers per square mile. We employ a total of 25 

people and in 2011 our annual operating revenue was about $5.9 million. Our service area is rural and sparsely populated, requiring great effort to get advanced services to our customers. In our industry’s parlance, as a small rural provider of this 

size, Bloomingdale is a Tier 3 carrier. 

Let me give you a quick snapshot of how Bloomingdale compares with several 

other industry entities. Verizon, AT&T, and CenturyLink are classified as large, or 

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1 Connect America Fund, A National Broadband Plan for Our Future, Establishing Just and 

Reasonable Rates for Local Exchange Carriers, High-Cost Universal Service Support, Developing 

a Unified Intercarrier Compensation Regime, Federal-State Joint Board on Universal Service, 

Lifeline and Link-Up: Notice of Proposed Rulemaking and Further Notice of Proposed Rulemaking, WC Docket No. 10–90, GN Docket No. 09–51, WC Docket No. 07–135, WC Docket No. 

05–337, CC Docket No. 01–92, CC Docket No. 96–45, WC Docket No. 03–109, FCC 11–13, at 

para. 3 (2011) (NPRM).

Tier I carriers, and also operate in multiple states. Verizon has a workforce of nearly 194,000 and annual revenues of $110 billion. AT&T has a workforce of 256,420 

and annual revenues of more than $126 billion. CenturyLink has a workforce of 

47,500 and operates in 37 states. Clearly with operations of this size, the priorities, 

objectives, and sources of capital are generally far different from Bloomingdale’s 

community-based limited-scale approach to doing business. 

The entrepreneurial spirit of Bloomingdale is representative of our approximately 

1,100 small rural counterparts in the industry, who together serve 5% percent of 

the U.S. population across approximately 40% of the nation’s geographic land mass. 

Like the vast majority of our rural colleagues, Bloomingdale has been an early 

adopter of new technologies and services. In 2005, Bloomingdale upgraded its network to ADSL2+ (Fiber-to-the-node). Bloomingdale currently has 1.5 Megabit 

broadband service available to 100% of our ILEC service area, 3 Megabit broadband 

available to 95% of our service area, and up to 15 Megabit broadband available to 

50% of our service area. We have many residential customers with 20 Megabit service. The CLEC exchanges are Fiber-to-the-Home. This fiber connection allows for 

nearly limitless amounts of bandwidth. We know our customers will require more 

and more bandwidth and have built a network that will supply it. 

Time would fail me to tell of every opportunity created thanks to our long partnership with RUS—whether it’s the fiber we laid in the Paw Paw, MI exchange that 

delivers 100 Megabit Internet service to the local schools and county courthouse or 

the customer who no longer has to travel over 8 hours a week to the hospital for 

his heart condition because he can have his test done over the Internet via his fiber 

connection. One 10 year old young man from Paw Paw began chemotherapy last 

fall. To avoid falling behind in school he uses his new fiber connection to Skype into 

his classroom and communicate with peers by voice, video, and instant messaging. 

If only we could’ve completed a recent RUS project faster. One family was planning 

to relocate from New York to open a home-based business. At closing they discovered that there was no broadband available and cancelled the purchase. 

Bloomingdale is a carrier-of-last-resort and has always operated under the 

premise that if someone wants service in our service area, then we do whatever it 

takes to provide the would-be customer with that service. Ever since Bloomingdale 

began operating in 1904 we’ve been proud to serve as the only provider to some of 

the most rural areas of Michigan while larger carriers avoided investments in such 

areas and chose to serve only the most profitable and densely populated towns. Because of such commitment, and with the aid of key rural development programs and 

universal service support, rural Americans throughout Bloomingdale’s service area, 

and indeed throughout the markets of NTCA, OPASTCO, and WTA members, are 

enjoying universal voice service, access to mobile, video, and broadband Internet 

services, and enhanced emergency preparedness. 

II. The Benefits of Rural Carrier Investments and Operations Flow to the 

Entire Economy 

The American economy runs on broadband. As the Federal Communications Commission (FCC) stated in its February 2011 Notice of Proposed Rulemaking for Universal Service Fund (USF) and intercarrier compensation (ICC) reform:

Ubiquitous broadband infrastructure has become crucial to our nation’s economic development and civic life. Businesses need broadband to start and grow; 

adults need broadband to find jobs; children need broadband to learn. 

Broadband enables people with disabilities to participate more fully in society 

and provides opportunity to Americans of all income levels. Broadband also 

helps lower the costs and improve the quality of health care. As important as 

these benefits are in America’s cities—where more than 2⁄3 of residents have 

come to rely on broadband—the distance—conquering benefits of broadband can 

be even more important in America’s more remote small towns, rural and insular areas, and Tribal lands. Furthermore, the benefits of broadband grow when 

all areas of the country are connected. More users online means more information flowing, larger markets for goods and services, and more rapid innovation.1

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2 (n.d.). Retrieved from website: http://www.esa.doc.gov/sites/default/files/reports/documents/report.pdf. 3 (n.d.). Retrieved from website: http://usda01.library.cornell.edu/usda/current/FarmComp/

FarmComp-08-12-2011lnewlformat.pdf. 4 (n.d.). Retrieved from website: http://www.brookings.edu/∼/media/Files/rc/papers/2007/

06laborlcrandall/06laborlcrandall.pdf. 5 (n.d.). Retrieved from website: http://www.ppic.org/content/pubs/report/Rl110JKR.pdf. 6Kuttner, H. Hudson Institute, (2011). The economic impact of universal telecommunications: 

The greater gains.

The National Telecommunications and Information Administration’s November 

2010 report titled ‘‘Exploring the Digital Nation: Home Broadband Adoption in the 

United States’’ stated that home broadband usage went from 51% in 2007 to 64% 

in 2009.2 Sixty-six percent of urban (metropolitan) Americans subscribe to 

broadband at home, as compared with 51% of rural (non-metropolitan) Americans. 

The numbers demonstrate that broadband is being deployed to rural America. 

USDA’s National Agricultural Statistics Service’s August 2011 report on Farm Computer Usage and Ownership revealed that 62% of U.S. farms now have Internet access.3 Broadband DSL is now utilized on 38% of U.S. farms. Small, rural providers 

have made basic levels of broadband service available to over 90% of rural consumers in their sparsely populated service areas. 

At the same time, USDA’s Economic Research Service reports that over the course 

of the past decade the rural population has grown at less than half the rate of the 

metropolitan population. And as Chairman Johnson has stated in the past, many 

rural communities are experiencing ‘‘more deaths than births.’’ Broadband deployment and adoption in rural America must increase at a faster rate in order to reverse the trend of rural flight. As more and more commerce, government services, 

and education moves over broadband, it will only become more important to provide 

this service to rural areas to bolster economic activity that will be necessary to attract and retain more Americans. 

The job-creating benefits of broadband have been reported far and wide. Recent 

studies conclude that every one percentage point increase in broadband penetration 

in a state increases overall employment by 0.2% to 0.3% a year.4 Further, an area 

moving from no broadband providers to one to three providers during the years 1999 

through 2006 realized 6.4% employment growth on average.5

Small, rural community-based telecommunications providers alone contributed $14.5 billion to the economies of the states in which they operated in 2009.6 The 

rural telecommunications sector supported 70,700 jobs in 2009, both through its own 

employment and the employment that its purchases of goods and services generated. 

So, we know that a robust broadband infrastructure is critical to economic development. We know from a technological standpoint that all broadband networks, 

whether wireless or wired, ultimately rely upon the wired network. And we know 

that wired networks provide the capacity to support the type of applications that 

this nation critically needs: telehealth, distance learning, civic participation, and 

interstate and global commerce. But delivering such capabilities in rural areas is 

not an easy task—the vast distance and sparse populations make the costs of building broadband-capable networks in rural areas quite high. 

This is why rural development programs, such as those administered by the RUS, 

are essential to promote broadband deployment. But even if such programs help promote the deployment of rural networks, those networks are of no use if they cannot 

be maintained and upgraded, or if the services offered over them are unaffordable 

to consumers because the underlying costs of operating in rural areas as so high. 

This is why it is so important to recognize the key role that other programs, such 

as the statutorily-mandated USF, play in allowing rural consumers to have access 

to reasonably comparable services at reasonably comparable prices. In short, it 

takes an ongoing and sustainable public-private partnership—one that recognizes 

the costs of both building and maintaining networks—to enable access to affordable, 

high-quality access in hard-to-serve corners of rural America. 

III. The Rural Utilities Service (RUS) Programs 

RUS telecommunication programs have been a great success story and have 

helped provide voice and broadband service to millions of Americans where it would 

not otherwise be available. These programs, which have been lending for broadband 

capable plant since the early 1990s, have helped advance state-of-the-art networks 

to rural Americans left behind by providers unable or unwilling to serve low population density markets. Reliable access to capital helps rural carriers meet the 

broadband needs of rural consumers at affordable rates. RUS financing is often the 

only source of capital for our rural carriers now that marketplace uncertainty has 

forced lenders to drastically tighten their lending. 

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7See Connect America Fund, WC Docket No. 10–90, A National Broadband Plan for Our Future, GN Docket No. 09–51, Establishing Just and Reasonable Rates for Local Exchange Carriers, WC Docket No. 07–135, High-Cost Universal Service Support, WC Docket No. 05–337, Developing an Unified Intercarrier Compensation Regime, CC Docket No. 01–92, Federal-State 

Joint Board on Universal Service, CC Docket No. 96–45, Lifeline and Link-Up, WC Docket No. 

03–109, Universal Service—Mobility Fund, WT Docket No. 10–208, Report and Order and Further Notice of Proposed Rulemaking, FCC 11–161, at para. 108 (rel. Nov. 18, 2011) (Final Order) 

(establishing a benchmark of 6 Mbps downstream and 1.5 Mbps upstream for broadband deployments in later years of CAF Phase II). 

Unfortunately, the success, momentum, and economic development achieved in recent years with the help of RUS telecommunication programs have been put at risk 

as a direct result of the regulatory uncertainty created by the FCC’s ongoing USF 

and ICC reform proposals. RUS lending, USF support, and ICC are inextricably 

linked (99.2% of RUS Telecommunications Infrastructure borrowers receive high 

cost USF support) and unwise changes to USF could put billions of RUS loans at 

risk of default and in fact have already resulted in a dramatic reduction in program 

applications and rural investment. 

According to the FCC’s National Broadband Plan, 14 million people in seven million housing units do not have access to terrestrial broadband capable of download 

speeds of 4 Mbps, and that such housing units are more common in rural areas. 

Using the National Broadband Map’s Broadband Statistics Report, it has been 

pointed out that 98% of rural Americans (100% urban) have access to ‘‘broadband’’ 

download speeds greater than 786 kbps, and some claim the loan programs are 

therefore no longer needed. However, the same report shows that only 79.2% of 

rural Americans (99% urban) have access to speeds greater than 6 Mbps and only 

70.8% rural (97.6% urban) have access to speeds greater than 10 Mbps, which are 

minimum download speeds more commonly considered necessary for rural areas to 

compete in the modern broadband world.7

There can be no question regarding the essential nature of the RUS Broadband 

Loan Program and the need to avoid reforms that might create unintended consequences. However, NTCA and its partners representing the rural telecom industry 

welcome discussion about ways to further improve the RUS Broadband Loan Program and offer several suggestions and observations below.

• Interim rules, which were required by programmatic changes to the Broadband 

Loan Program in the 2008 Farm Bill to better target resources, were not put 

in place until March 2011 (during which time no new loans were approved). 

Since that time, the FCC’s adoption and ongoing consideration of changes to 

USF have created regulatory uncertainty, dramatically reducing both the number of new Broadband Loan Program applications and RUS’s ability to finalize 

rules and evaluate and approve new loans. As a result, the Broadband Loan 

Program has been at almost a complete standstill since 2008. With virtually no 

new loan projects available to assess the results of the 2008 Farm Bill’s reforms, 

is now the time to place new restrictions on the Broadband Loan Program? 

Though some providers that don’t typically serve rural areas want to dramatically restrict the program, it was inoperable for its first 3 years and has been 

frozen by regulatory uncertainty for the past year.

• Minimizing subsidized ‘‘overbuilds’’ in areas where broadband already exists 

should remain a top goal for RUS. However, the impact of certain reform proposals to further restrict the Broadband Loan Program must be carefully evaluated. One such proposal would encourage RUS to not provide a loan for any 

area where more than 25% of households already have access to broadband. 

Under such a scenario, a provider wishing to receive a loan to serve a rural area 

where 74 out of 100 people do not have access to broadband would not qualify 

for a loan. It should also be noted that in rural areas, such a population could 

be spread over miles and miles. Is eliminating the Broadband Loan Program 

as an option to help provide service in such a situation the right answer for 

households and businesses that remain unserved year after year and have no 

prospect for broadband service in sight? The concerns expressed around this 

issue have been loudly heard, and the Secretary of Agriculture’s discretion is 

an appropriate barometer for such decision-making.

• We support an efficient method by which existing providers can be notified of 

submitted applications that may affect the area(s) they serve without being required to check a website periodically. One method may be to encourage existing providers to register for an email alert system whereby they would receive 

an electronic notice whenever an applicant seeks a loan in the state or states 

that they serve.

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• We oppose a lesser speed standard for would-be borrowers who seek to deploy 

wireless networks. In the interim rules, RUS established the minimum rate of 

data transmission as 3 Mbps for mobile broadband and 5 Mbps for fixed 

broadband. Attaching a value and setting a lower data transmission requirement to mobile service is contrary to the technology neutrality statutory directive.

• Priority should be given to applicants who are proposing projects that feature 

scalability—meaning those that can be easily and relatively inexpensively upgraded over time to reflect increased consumer demand for more bandwidth, 

and thus ensure optimal use of the network asset over the life of the applicable 

broadband loan.

RUS programs are not duplicative of other Federal programs such as USF. RUS 

telecommunication programs provide up-front capital to build out to new customers 

and to upgrade networks. USF, by design, provides for cost recovery for the ongoing 

operation of the network and maintenance, and is at bottom intended to make sure 

that the prices consumers pay for service in rural areas are affordable—that is, 

‘‘reasonably comparable’’ to those in urban areas. Put another way, USF helps make 

sure that consumers can afford to ‘‘adopt’’ service and make continuing use of the 

network over time. Finally, it is worth noting that RUS telecommunication loan program projects are paid back with interest—creating a win/win situation for rural 

broadband consumers and for taxpayers. 

Some opponents of the RUS telecommunication programs and USF point to their 

ability to provide broadband service without RUS loans or USF cost recovery. However, it’s important to note that these providers often fail to provide service to the 

most high-cost ‘‘last mile’’ households and businesses, focusing instead on the concentrated areas of a community or service area. On the other hand, rural telecom 

providers often have carrier-of-last-resort obligations that require them to serve all 

customers in their service territory—not just the more densely populated, profitable 

towns and cities. 

Without carriers-of-last-resort such as Bloomingdale reaching out into the ‘‘country’’ outside the towns with the help of this public-private partnership, we would 

have even more unserved consumers in rural America—and the challenge of achieving universal broadband would be greater than it already is. And if this public-private partnership is undermined, then small rural telcos may have no choice but to 

likewise abandon the ‘‘countryside’’ and retreat to serving just within the ‘‘in-town’’ 

boundaries too. Last year, during debate on the FY 2012 Agriculture Appropriations 

Bill, the House of Representatives recognized the value and continued importance 

of RUS funding to the delivery of affordable communications throughout rural areas 

and voted in favor of a floor amendment to continue funding the RUS Broadband 

Loan Program. 

IV. The USF & ICC Mechanisms Are Essential to Broadband Availability, 

Service Quality, and Adoption in Rural Areas 

USF and ICC have long played a role in connecting all of America by supporting 

telecommunication services in rural areas. As Congress recognized in the Telecommunications Act of 1996, these areas need predictable, sufficient and specific 

support to ensure the availability of affordable, high-quality services for all consumers. High-cost USF is a program that enables providers to deploy and operate 

advanced networks in places where low customer density, vast distances and rugged 

terrain deter even the most optimistic business cases. 

Without USF support to supplement customer revenues, rural carriers, who serve 

an average of ten customers per square mile, would be forced to drastically reduce 

service, exit the outlying parts of rural markets, or charge retail prices that no consumer could realistically afford. Such outcomes would be inconsistent with longstanding national statutory policy. These networks connect rural communities and 

outlying farms and ranches with the rest of America and the world. Even if a wireless carrier were to operate in some portion of a rural area, it could not deliver highquality broadband without the robust underlying capacity of the networks provided 

by these small entrepreneurial community-based carriers. 

With the help of USF and ICC, rural carriers provide near-universal voice service 

to all Americans and have increased broadband penetration to 92% of their consumers with only 3% growth per year in USF support over the past several years. 

But in the majority of cases, the broadband is only DSL speed and does not reach 

the speed—4 Mbps downstream/1 Mbps upstream—that the FCC has now identified 

as a target level of ‘‘universal service.’’ The time has come to update these important 

network support mechanisms to ensure that everyone can participate in the economy made possible by a nationwide integrated advanced communications network. 

1658

8See Final Order. 9See Letter from Walter B. McCormick, Jr., United States Telecom Association, et al., to 

Chairman Genachowski, FCC, WC Docket No. 10–90, et al. (filed July 29, 2011). 10 (n.d.). Retrieved from website: http://www.gao.gov/new.items/d09494.pdf. 

The FCC released its USF/ICC reform order on November 18, 2011, with the aim 

of transitioning the program to explicitly support broadband service in rural America.8 At the urging of the FCC, the rural carriers and larger providers reached 

agreement on a Consensus Framework for reform last summer that would have kept 

the fund at its current level while supporting faster broadband to more Americans.9

The parties to the Consensus Framework made many difficult compromises to reach 

an agreement in the hope of achieving universal broadband service and gaining 

some regulatory certainty. However, the FCC’s order: (1) failed to adopt any provisions specifically promoting broadband service in rural carriers’ service areas, (2) cut 

existing cost recovery mechanisms for rural carriers retroactively, and (3) proposed 

a further notice of rulemaking with the potential for more cuts. 

In sum, rural providers will be expected to do more in terms of broadband deployment and service offering with less opportunity for cost recovery, and we do not get 

regulatory certainty because the additional cuts proposed within the further notice 

hinder lending and investment. This ‘‘regulatory overhang’’ is undermining job creation, network investment and the sustainable quality of broadband services in wide 

swaths of rural America. By the FCC’s own admission, three out of ten carriers will 

lose more than 10% of their existing USF support under the order, and more than 

half will lose some level of support. And this is only in Year 1—the picture does 

not improve as the cuts phase in and become deeper over time. 

We believed that with all of the facts before them, the FCC would have taken advantage of the opportunity to make bold recommendations, including a call for a national commitment to invest in and maintain state-of-the-art communications technologies throughout all of America. Unfortunately, the agency’s narrow focus on delivering broadband to completely unserved areas fails to acknowledge that America’s 

most rural areas can only continue to be served with the help of ongoing high cost 

support. 

Rural providers sincerely hope that the FCC will respond to the recent calls of 

more than 60 Members of Congress to expressly decline to act on several aspects 

of its further notice and instead signal to service providers, lenders, investors, and 

consumers that it will allow adequate time for adjustment to the changes already 

made in its order. Moreover, since carriers cannot ‘‘undo’’ loan commitments or ‘‘tear 

out’’ existing networks, the FCC should make clear that any caps or other limitations on cost recovery already adopted in its order will be applied prospectively. As 

it has done for consumers in other areas, the FCC should adopt a Connect America 

Fund that will provide additional funding for broadband-capable deployment in 

areas served by rural providers. Reforming USF and ICC properly is essential to 

achieving our national goal of universal broadband access and to the livelihood of 

thousands of job-creating small businesses that need broadband to compete in a 

global economy. 

V. Broadband Gains 

We can all be proud of our nation’s broadband progress over the past decade and 

the opportunities that broadband creates for rural America to compete and thrive. 

This success has only been possible due to the unique cooperation that has existed 

between the industry, the American people, and policymakers. Together, through a 

spirit of entrepreneurship, a can-do attitude, and a deep national confidence, the appropriate mix of programs and policies have been cultivated and maintained to ensure widespread broadband deployment and adoption. 

This commitment and partnership will be essential to America’s quest to secure 

and maintain a level of global broadband pre-eminence. To underscore this assessment I draw the Committee’s attention to a May 2009 U.S. Government Accountability Office (GAO) report that, among other things, considers the Federal Government’s approach to broadband deployment.10 In the study’s opening remarks it notes 

that according to government officials, ‘‘the Federal approach to broadband deployment is focused on advancing universal access.’’

The GAO report goes on to state that historically the role of the government in 

carrying out a market-driven policy has been to create market incentives and remove barriers to competition, while the role of the private sector has been to fund 

broadband deployment. It continues that under this policy, broadband infrastructure 

has been deployed extensively, yet doing so in rural areas is more difficult and in 

some instances gaps remain, primarily due to the limited profit potential associated 

with such initiatives. Industry stakeholders credit RUS and USF with helping to inVerDate 0ct 09 2002 12:54 Dec 11, 2012 Jkt 041481 PO 00000 Frm 00070 Fmt 6633 Sfmt 6621 I:\DOCS\112-30\74372.TXT BRIAN
1659

crease broadband deployment and adoption, and that to achieve universal access, 

support of this nature will be essential in the future. 

Despite the long history of success associated with these programs, a small but 

vocal minority of voices exists that refuse to accept this reality. Throughout this debate over the government’s role in broadband deployment, the rural sector of the 

industry has routinely been directed to ‘‘think outside the box’’ in a search for more 

economical solutions to communications infrastructure deployment. If I do nothing 

else here today, it is my overarching desire to ensure that everyone participating 

and listening to this discussion ultimately leaves with the recognition and understanding that rural carriers always have and always will ‘‘think outside the box.’’ 

Truly, they have no other choice. 

What segment of the industry was the first to completely convert to digital 

switched systems? What segment of the industry was a pioneer in providing wireless options to their hardest to reach customers? What segment of the industry produced the first company to deploy an all-fiber system? What segment of the industry 

was the first to offer distance learning and telehealth applications? What segment 

of the industry was an early leader in providing cable-based video, then satellite 

video, and now IP video to their markets? What segment of the industry quickly 

moved into Internet service provision in the early stages of the Internet’s public evolution? And what segment of the industry continues to lead in the deployment of 

high-speed broadband capable infrastructure? 

In every instance the answer to those questions is the small rural segment of the 

communications industry. Rural carriers are small businesses dedicated to providing 

opportunities to other small businesses and individuals that might otherwise have 

to compete on an unlevel playing field. This is possible because cooperative and commercially-structured systems are owned and operated by members of the local community. Clearly, these are entrepreneurs who care about their communities and 

their nation and are continually ‘‘thinking outside the box.’’

VI. Conclusion 

Regardless of whether consumers are focused on voice, video or data in tomorrow’s 

world of communications, they will require the underlying infrastructure to ensure 

their communication gets to its destination. America stands at a crossroads between 

a narrowband and broadband world. The choice is clear. The rural industry has long 

been the leader in deploying advanced telecommunications services to America’s 

rural areas, and that success is built upon a foundation of public-private partnership that has worked for decades. To make sure this progress is updated and remains relevant in a new era of communications, rural providers and the rural associations are eager to continue working with you to move forward aggressively to fulfill the national objective of making broadband universally available as is envisioned 

by so many and indeed mandated by statute. Thank you for your attention to this 

matter.

The CHAIRMAN. Thank you. I am going to go out of order and 

allow the Ranking Member, who has other legislative commitments, to ask a couple questions and then we will take the rest in 

order. Mr. Costa? 

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

Mr. Bahnson, I think you confirmed what I said in my opening 

statement about the challenges of capacity for broadband and the 

availability of broadband in our rural communities. I have members here that said 95 percent of households, it is available, but 

their take rate is only 60 percent. And instead of subsidizing competitors—because I appreciate the public-private partnership that 

you spoke of in your closing statement—in areas where broadband 

is already available, shouldn’t the money be better focused on providing under-served areas, going forward, to provide access? And 

could you also talk about bandwidth and access for agriculture for 

blue technologies? 

Mr. BAHNSON. Well, the area I serve is very agricultural, a lot 

of blueberry farmers, cherry farmers, peach farmers, apple farmers, 

and they use our technology everywhere now. We are talking about 

doing specific builds to packing plants for just those purposes. So 

1660

I would absolutely agree with you that it is crucial for those areas. 

Getting that service to those areas is extremely expensive, and 

without help from outside sources, it is very difficult for us to do 

that. You just can’t build a business case to take facility to a place 

where there just aren’t a lot of people there to buy that service 

from you. 

Mr. COSTA. Dave Rozzelle do you want to comment on this or 

not? You don’t have to. 

Mr. ROZZELLE. In that case I will pass given the time constraints. 

Mr. COSTA. Okay. I appreciate that. Finally, my last question, 

Mr. Dunmire with NRWA, you talked about the importance—and 

the previous witness did—of safe drinking water and whether these 

grants and loans have provided a positive role. And I have a number of communities like that but I have a different question. And 

some of the communities in terms of compliance with Federal regulations or regulatory regimes under the Environmental Protection 

Agency not just with this Administration but with previous Administrations—I mean this has been a bipartisan problem—when you 

have naturally occurring contaminants like arsenic or benzene. 

Thirty years ago we could trace parts per million but now we developed an ability to trace parts per billion and now parts per trillion, 

it just seems to me that the amount of water you have to consume 

to be impacted by parts per trillion is rather unimaginable that it 

would impact your health. 

And instead of zero risk—and there is no zero risk in terms of 

protecting health and safety—I mean I have had communities that 

have had to drill new wells at a million and a half dollars—for a 

small community, that is a big price tag—when the water has been 

that way for millions of years. I mean in some cases we have contamination that we created with the likes of DDT and other kinds 

of things with past practices. But it just seems to be change in the 

regulatory regime would be more helpful than trying to create 

some sort of a zero tolerance. 

Mr. DUNMIRE. Ranking Member Costa, you are preaching to the 

choir. That has been our argument with primacy agency in Illinois, 

which is IEPA. For years and years and years, they approached it 

with a common-sense view and a number of years ago they went 

through an audit from U.S. EPA. It was not a pleasant audit. Our 

friends in Springfield at IEPA now are forced to enforce the U.S. 

EPA regulations without any waivers, no common sense to it. Like 

you have pointed out, there have been countless systems, predominantly in north central Illinois to northern Illinois that had the 

radon problems, arsenic problems that have been forced to put in 

added treatment, very, very expensive added treatment essentially 

doubling and tripling the water rates of their customers. 

Mr. COSTA. Let me just close. And we, on a bipartisan basis, need 

to figure out how to work this. Common sense tells you that in any 

sort of risk assessment and risk management regime that you have 

to assess the management of the risk versus the assessment of how 

big of a risk that it is. And on a cost-comparative basis—and this 

is the common sense that gets lost—we never take into an evaluation the criteria on how do we get the best bang for our buck 

whether it be Federal, state, or local dollars on limiting the risk to 

1661

our communities where we have a responsibility to minimize the 

risk. 

But certainly, we never look at it in a vacuum. When a person 

gets in a car and backs out of their driveway, they are much more 

likely to have a higher risk of an accident, God forbid, that would 

result in injury. And we accept that risk versus how much water 

you have to consume daily for 80 years on tracing parts per billion 

of naturally occurring arsenic that has been in the water forever. 

So I will get off my soapbox but it is a challenge that we have 

to address in some fashion. 

The CHAIRMAN. Thank you, Mr. Costa. I will defer my questions 

to the end. 

Mr. Scott? 

Mr. SCOTT. Thank you, Mr. Chairman. 

And Mr. Rozzelle, I live in a small community that is very close 

to a larger community, and you have been fairly critical of the RUS 

loan program and one of the words you continue to use is unserved.

Would you give me the definition of unserved? And specifically 

what I am getting at here is unserved versus under-served. 

Mr. ROZZELLE. Congressman Scott, the National Broadband Plan 

defined broadband as 4 megabits down, 1 megabit up. 

Mr. SCOTT. Okay. 

Mr. ROZZELLE. If a household doesn’t have that available to it, 

passing it, then it would not have broadband under the National 

Broadband plan definition. 

Mr. SCOTT. Okay. Would you agree that there is much more competition in metropolitan areas than there is in rural areas? 

Mr. ROZZELLE. I would agree that generally in larger communities there are more carriers providing broadband service than 

there are in rural communities, yes, sir. I would agree with that. 

Mr. SCOTT. And would you agree that in those competitive markets that, because of the competition, the consumer pays less for 

the same service than they do in the more under-served areas of 

the state? 

Mr. ROZZELLE. Congressman Scott, I would say this in relation 

to Suddenlink, with which I am obviously very familiar, and that 

is that we spent a great deal of money to bring very high-speed 

broadband as deeply as we could into our footprint in terms of densities——

Mr. SCOTT. Yes. 

Mr. ROZZELLE.—and in our smaller communities which have 

broadband some of those communities pay more on an equivalent 

service basis than our larger communities and some pay less. 

Mr. SCOTT. And I certainly believe you to be telling the truth, but 

my experience has been that in the rural parts, I paid significantly 

more than I paid at my business, for example, which was actually 

in a competitive market and my home was in the rural market. I 

did not have a choice in providers at my home but I had a choice 

at the business. I paid significantly less for the service. 

Mr. ROZZELLE. In most of our markets on the broadband side we 

are competitive with the incumbent telephone company generally 

and in a number of them we are also competing with other providers who are present. And so with all due respect, it really depends on the community as to the level of competition that we face. 

1662

Mr. SCOTT. Where I am from I have seen a very serious reluctance of major corporations to move into the more rural parts. It 

seems to me that they, if you will, cherry pick the more profitable 

areas and that may be part of their business strategy where your 

local rural telephone company, which is traditionally familyowned——

Mr. ROZZELLE. Yes. 

Mr. SCOTT.—is willing to serve in more community-oriented——

Mr. ROZZELLE. Suddenlink began life as a company that served 

entirely rural communities and grew to be the company that we 

are today. So I certainly understand what you are saying. And I 

represent here a group of operators at NCTA, some of which serve 

extremely small communities, and they are also family-owned. 

Mr. SCOTT. Thank you very much. 

Mr. Bahnson, would you like to comment on the loan program 

and the value it adds to bringing competition to the rural markets 

or to the rural consumer? 

Mr. BAHNSON. To go back to your earlier question, I would just 

say yes, it is cheaper when there is competition. There is no doubt 

about it. 

We couldn’t do the things that we have done in my company if 

we wouldn’t have had RUS as a partner. It just wouldn’t be possible. You just can’t make the money work. I need that kind of help 

to serve the people we are trying to serve. And the area I am in 

is extremely small. I mean the towns that those others have talked 

about would be considered pretty good-sized towns to the town I 

serve in. 

Mr. SCOTT. Thank you, sir. 

Mr. Chairman, I don’t have any time remaining but I will yield 

back to you. 

The CHAIRMAN. Thank you. 

Mrs. Hartzler? 

Mrs. HARTZLER. Thank you, Mr. Chairman. 

I believe you were here with the first panel and heard my questions about the needs for rural infrastructure, the challenges we 

have there. In your testimony, Mr. Dunmire, I see that you outline 

a little bit some of the demand and the amount of money that was 

allocated for rural infrastructure projects and as well outlined that 

at the end of 2011 and 415 completed applications—which no funding was available—to address the backlog you think we need $3 

billion. Is that correct? 

Mr. DUNMIRE. Yes, ma’am. That is the applications that were in 

process total up to that $3 billion. 

Mrs. HARTZLER. Of those applications, could you give me a rough 

estimate, kind of break down the causes for the need for it? Some 

is just the aging of the infrastructure. The water lines, the sewer 

lines were put in place in the 1950s and 1960s. Wouldn’t you say 

part of it is just aging? I would really want to know how much you 

think is due to the EPA’s ever-changing standards that are putting 

a new burden on our rural communities and forcing them to have 

to upgrade their sewer systems and their water systems. Could you 

give me some sort of a breakdown in the costs for the needs of 

these projects? 

1663

Mr. DUNMIRE. I wish I could give you an answer here today, but 

unfortunately, I cannot. But I will promise you this: we will check 

into that and we will get the information to you as soon as possible. 

But it is a combination of all of the factors that you have just mentioned. 

Mrs. HARTZLER. Yes. Certainly, we can’t do anything about the 

aging but the projects in my district, the ones that frustrate the 

most is when you have a system that is working—and Ranking 

Member Costa alluded to it—it is safe, it is working, and then here 

the government comes in and says you need to upgrade your sewer 

plan or you need to do this or you need to do that, which costs millions of dollars which these small towns don’t have and then is 

forcing a burden on us as the Federal Government to have to have 

the resources to help supply that. And so if you could help provide 

us with some of that information that gives us the tools we need 

to be able to fight that here and try to push for commonsense regulations that will ensure safety but yet also use our tax dollars wisely. So I really appreciate that. I appreciate what all of you are 

doing for rural America. As a farm girl from Archie, Missouri, I appreciate all of what we can do for rural America. Thank you. 

Mr. DUNMIRE. Okay. If you would allow just 1 second——

Mrs. HARTZLER. Well, sure. 

Mr. DUNMIRE.—to respond, the water operators and wastewater 

operators that I represent, there is nobody out there that would 

want to step up to the plate and make sure the water is more safe 

to drink——

Mrs. HARTZLER. Sure. 

Mr. DUNMIRE.—and the effluent of their wastewater plants is not 

damaging the environment than the operators that I represent. 

However, when it comes to the—and I use this term not lightly—

frivolous——

Mrs. HARTZLER. Yes. 

Mr. DUNMIRE.—regulations that seem to be coming our way, it 

just gets to be too hard of a job for the small municipalities out 

there. 

Mrs. HARTZLER. Absolutely. Thank you for your——

Mr. DUNMIRE. Now I will get off my soapbox. 

The CHAIRMAN. Thank you, Mrs. Hartzler. 

Mrs. HARTZLER. Thank you. 

The CHAIRMAN. And my friend from Illinois, Mr. Schilling. 

Mr. SCHILLING. Thank you, Mr. Chairman. And I also want to 

thank you for your great service not only to our state but also to 

our country and you have been a great leader on the Agriculture 

Committee. 

So I would first like to address Mr. Dunmire. First, it is great 

to see you again, sir, just want to thank you for the great work you 

do for our rural communities. And I know that we serve over 1,700 

total is the amount throughout the state. So thank you for that. 

I think everyone in the room is aware of our fiscal situation. We 

have cut our own budgets here in the House by 12 percent. I think 

the Agriculture Committee has really stepped up to the plate when 

it comes to spending and saving debates. So it is great. 

But with that in mind, with the limited resources we have, how 

would water applications fit into the regional concept discussed 

1664

today, particularly in the light of what we have talked about is the 

$3 billion backlog? 

Mr. DUNMIRE. Was that directed towards me? 

Mr. SCHILLING. Yes, sir. 

Mr. DUNMIRE. Okay. Well, I believe a little bit of a Band-Aid approach has already been put in place. Back in August of last year, 

USDA and EPA—U.S. EPA I should say—signed a Memorandum 

of Agreement on improving sustainability of rural water and wastewater systems. And a key component of that is the promotion of 

system partnerships. As Mr. Costa pointed out earlier, this isn’t a 

one-size-fits-all. And there are instances in the State of Illinois 

where we don’t really call it regionalization, more as a consolidation. 

And sometimes it is more economically feasible to look at your 

neighbors. If they are experiencing the same problems, going to 

have to build a water treatment facility or a wastewater treatment 

plant, it makes all the sense in the world to build one a little bit 

bigger, more cost-effective. Not always do they see eye to eye. And 

this is where Mr. Stewart was alluding earlier that sometimes it 

takes somebody to take them by the hand, lead them from cradle 

to grave, get them in the same room together, get them talking. 

This isn’t you against me, this is a common goal that is going to 

ultimately save both of our municipalities and our customers—if 

you will—money. 

Mr. SCHILLING. Very good. Thank you for that. 

Mr. Bahnson and Mr. Rozzelle, we have several cable and telephone cooperatives in our district, including McDonough Telephone 

Cooperative and then Mid-Century Telephone Cooperative that 

serve thousands of miles of rural area in western Illinois. I meet 

with them quite regularly and it seems every time I do, they constantly have a new rule or regulation coming from the FCC that 

could potentially prevent broadband expansion. This doesn’t provide them for much certainty to invest in new technology or to expand their broadband access. How much of the reluctance for investment inferred by the studies you mentioned in your testimony 

is actually due to the FCC reforms? 

Mr. BAHNSON. I think probably the best example I can give you 

is I was recently at a managers’ meeting with small telephone companies. There was probably 100+ managers there. As we talked 

about what is going on, I think probably the common thread is we 

don’t know what is going on right now. We just can’t make investments. It is not a good idea for our company. And that is pretty 

scary because we were talking earlier about 4 megs/1 megs in 

terms of those speeds. My consultants tell me by 2015 consumers 

are going to want 100 megs at their house. I don’t know if that is 

true or not, but if it is, we have a huge challenge in front of us 

and we are afraid to make the investments to get there. 

Mr. SCHILLING. Very good. With that, I yield back my time. 

The CHAIRMAN. We thank you. I want to conclude I guess by 

thanking this panel and the other panel for their testimony. I 

would ask are there any members of the first panel still here? I 

don’t believe there are. Okay. All right. You can even feel free, even 

though it is not in order, to respond to my concluding question if 

you desire. 

1665

As I listen to the testimony today, first of all, I was impressed 

by your breadth of understanding, your commitment to the values 

that frankly most of the Members of this Subcommittee on both 

sides share, and I am grateful for your being here. What occurred 

to me is that we are here to talk about the formulation of the 2012 

Farm Bill rural development programs, excellent testimony and I 

appreciate it, but we all recognize—I do, you do, and every Member 

of this Subcommittee does—that this Subcommittee and the other 

five Subcommittees of the Agriculture Committee, as well as every 

committee in the U.S. House and Senate is going to have to engage 

in what we individually call shared sacrifice. We are not going to 

balance the budget, we are not going to deal with the deficit and 

the debt unless we all recognize that every single component of 

what the Federal Government does has got to be reexamined. 

And so my question for you is, as articulate as you have been on 

advocating for programs that still cost money, if you were in my 

position or in the position of anybody in Congress or the President, 

where would you make cuts and save money to engage in this 

whole process of shared sacrifice that is going to be necessary in 

order for us to dig ourselves out of the $16.5 trillion hole? Any 

thoughts? Yes, sir. 

Mr. LARSON. Well, Mr. Chairman, I am Mr. Larson of the National Association of Counties and our association has no specific 

policy on that so I speak personally to you as I think your question 

probably was. But I think that the issues that we have talked 

about today are so critical for the future of rural America, particularly the broadband, the water and the wastewater are the keys to 

our future success. And if we have to do without, in all due respect, 

sir, we now have profitability in American agriculture with commodity prices as they have been for the last couple years and for 

probably the near foreseeable future. I think we can take some of 

the funding that have been used in that portion of the farm subsidies and anything in those areas of the farm bill and redirect 

them into the rural development portfolio and probably have a 

much better impact and longer impact on rural America than a 

one-time check to an individual farmer. Thank you. 

The CHAIRMAN. Thank you for your thoughts. Anything else? 

Mr. DUNMIRE. Thank you, Mr. Chairman. 

Each of the individual panelists that presented up here, on their 

programs they were always asked how do you justify who gets 

money and who does not get money? You know, how do you weigh 

the need that is out there? I submit that maybe Congress should 

go back and look at what really is working and what does not work 

and to add to the agricultural that Mr. Larson has discussed, defense is another huge elephant in the room that could probably be 

cut as the wars wind down. 

Mr. BAHNSON. I guess one thing I would just like to point out is 

that my company fully intends to pay those loans back and I am 

using your money right now but you are going to get it back and 

on the one loan I talked about earlier, you are going to get $2.5 

million back. And to me that seems like a total win-win situation. 

The people who live in my rural area getting the services they need 

now and the government is going to get their money back plus interest. That just seems like a win-win to me. 

1666

The CHAIRMAN. Okay. Well, I appreciate it. I appreciate the 

input. We have a tough task ahead of us. I think the Chairman of 

the Committee has an obligation to remain judiciously neutral in 

terms of what we are doing. I would only say, speaking on behalf 

of this Subcommittee I believe and the whole U.S. House, we are 

going to have to make some cuts, we are going to have to make 

some savings, none of which are going to be painless. We all need 

to engage in that process or we are never going to deal with the 

issue that we have. 

So with that I would thank the witnesses for their testimony, excellent testimony today. I appreciate the great job, as always, that 

our Majority staff—as well as the Minority staff—do. And I don’t 

have any concluding statement to make. Mr. Costa is going into 

other let’s say business and so I would simply say that under the 

rules of the Committee the record of today’s hearing will remain 

open for 10 calendar days to receive additional material and supplementary responses from the witnesses to any question posed by 

a Member. 

This hearing of the Rural Development, Research, Biotechnology, 

and Foreign Agriculture Subcommittee is adjourned. 

[Whereupon, at 4:15 p.m., the Subcommittee was adjourned.] 

[Material submitted for inclusion in the record follows:] 

1667

SUPPLEMENTARY MATERIAL SUBMITTED BY HON. CHARLES F. CONNER, PRESIDENT

AND CHIEF EXECUTIVE OFFICER, NATIONAL COUNCIL OF FARMER COOPERATIVES

Applicant Name State 

Grant Type

(Planning or

Working Capital) 

Applicant Type Grant 

Amount 

Thompson Farm & Trucking AL Working Capital $40,050

Ozan Vineyard and Cellars AL Working Capital $49,698

Cody Hopkins AR Planning $98,500

Caballos y Companaros, Inc AZ Working Capital $39,500

Curds & Whey Dairy CA Working Capital $48,000

Pacific Coast Producers CA Working Capital Farmer or Rancher Cooperative $300,000

Farm Fresh Solutions CA Working Capital $21,192

Delta Blue Blueberries CA Working Capital $49,000

Rosa Brothers Milk Company CA Working Capital $300,000

Blue Diamond Growers CA Working Capital Farmer or Rancher Cooperative $300,000

Ingel Haven Ranch CA Planning $44,000

California Dairy Campaign CA Planning $100,000

Sonoma County Vintners CA Working Capital $300,000

Hog Wild for Organic Pork CA Planning Capital $67,500

Bohemian Creamery CA Working Capital $100,000

Top O’ the Morn Farms CA Working Capital $300,000

Arburua Enterprises, Inc CA Working Capital $35,000

Nishimori Family Farms, LLC CA Working Capital $226,284

Sunsweet Growers CA Working Capital Farmer or Rancher Cooperative $300,000

Livermore Valley Wine Country CA Working Capital $208,504

Community Alliance with Family Farmers CA Working Capital $45,475

Sweetgrass Cooperative CO Working Capital Farmer or Rancher Cooperative $226,000

Table Mountain Farms, LLC CO Planning Grant $41,550

Aaron Christopher Rice CO Working Capital $26,890

Paradise Farms Organic FL Working Capital $49,500

White Oak Pastures, Inc. GA Working Capital $300,000

Lil Mog. LLC d/b/a MSM Meats and 

Country Store 

GA Working Capital $295,231

Laurie-Jo’s Southern Style Canning, LLC GA Working Capital $300,000

Lane Packing, LLC GA Working Capital $300,000

Hillside Orchard Farms, Inc. GA Working Capital $300,000

Flint River Farmers Cooperative GA Working Capital Farmer or Rancher Cooperative $300,000

Georgia Buffalo, Inc. GA Working Capital $117,500

Jubilee Organic Creamery, Inc. GA Working Capital $200,000

Cartecay Vineyards—Lawrence E. Lykins, 

owner 

GA Working Capital $46,500

Marie-Laure Ankaoua HI Working Capital $48,000

Hawaii Cattle Producers Cooperative Association HI Working Capital Farmer or Rancher Cooperative $58,180

Kimberly Ino HI Working Capital $27,750

Kalapana Organics, LLC HI Working Capital $12,000

MV Farms Inc. dba Naked Cow Dairy HI Working Capital $140,000

Country View Dairy, LLC IA Working Capital $86,826

Grass Run Farms IA Working Capital $49,847

Unruh Greenhouses LLC IA Working Capital $49,990

Iowa Hops Company IA Planning $35,340

Farmer’s All Natural Creamery IA Working Capital $280,000

Mark Hulsebus IA Working Capital $13,000

Joseph Schafer IA Working Capital $300,000

Hafner, Inc. IA Planning $30,225

Two Saints Winery IA Working Capital $26,680

Iowa Choice Harvest, LLC IA Working Capital $255,284

Joker’s Wild Value Added Beef IA Working Capital $49,120

Colter’s Creek Winery ID Working Capital $25,000

Moss Produce ID Working Capital $300,000

3 Horse Ranch Vineyards, LLC ID Planning $30,000

Clover Leaf Creamery ID Working Capital $300,000

Idaho’s Bounty ID Working Capital Farmer or Rancher Cooperative $55,180

Fish Processors Inc. ID Working Capital $300,000

Lime Rock Brown Swiss Cheese, LLC IL Working Capital $49,990

Justin Kilgus IL Planning $10,595

Living Water Farms, Inc. IL Working Capital $300,000

Marcoot Jersey Farm, Inc. IL Working Capital $217,866

Russell and Elizabeth Kelsay IN Planning $10,000

1668

Applicant Name State 

Grant Type

(Planning or

Working Capital) 

Applicant Type Grant 

Amount 

The Feel Good Farm, LLC IN Planning $11,295

Indiana Farmstead Cheese (Steckler) IN Planning $38,000

Schmidt Farms, Inc. KS Working Capital $49,714

McCarty Family Farms, LLC KS Working Capital $300,000

Thayer Feed, LLC KS Working Capital $46,945

Jerry Brown, Brown Honey Farms, Inc. KS Working Capital $300,000

Johannes Farm KS Working Capital $9,400

Stone Cross Farm & Cloverdale Creamery KY Working Capital $55,114

KY Sheep and Goat Development Office KY Working Capital $36,400

Horsehoe Bend Vineyards KY Working Capital $297,675

Evans Orchard KY Working Capital $70,000

Kenny’s Farmhouse Cheese, Inc. KY Working Capital $246,818

Kendal Clark Farms KY Working Capital $49,950

Ky Hydro Farms, LLC KY Working Capital $49,999

Kentucky Freshwater Fish Inc. KY Working Capital $300,000

Meat Hook Butcher Shop Steering Committee c/o Woodland Farm KY Planning $67,397

Cajun Central, LLC LA Working Capital $298,054

Island Bee Company MA Working Capital $13,000

The Vineyards at Dodon, LLC MD Working Capital $299,974

Crow Vineyard and Winery, LLC MD Working Capital $48,600

Chapel’s Country Creamery MD Working Capital $187,000

Boordy Vineyards MD Working Capital $239,200

Chesapeake Bay Dairy MD Working Capital $286,398

Nancy S. and Kevin D Brandt MD Planning $40,455

Carole Morison, Sole Proprietor MD Planning $15,756

Knob Hall Winery MD Working Capital $40,000

Basignani Winery Ltd MD Planning $50,000

David Lewis Herbst MD Working Capital $49,950

SuriPaco, LLC ME Planning $27,450

Angela Mary MI Working Capital $293,842

Sandy Acres, LLC MI Planning $20,125

Berglund Farms MI Working Capital $269,278

Michigan Sugar Company MI Working Capital Farmer or Rancher Cooperative $300,000

Uncle John’s Cider Mill MI Working Capital $42,024

VanDenBerg Farms MI Working Capital $298,788

Royal Farms Inc. MI Working Capital $45,094

American Ag Energy MN Planning $100,000

Cedar Summit Dairy, LLC MN Working Capital $300,000

Clearbrook Elevator Association MN Working Capital Farmer or Rancher Cooperative $300,000

Duluth Farmers Market MN Planning $18,986

Pastures A Plenty Company MN Working Capital $300,000

Smude Enterprises LLC MN Working Capital $298,500

TFC Poultry MN Working Capital $300,000

1Soy, Inc MO Planning Farmer or Rancher Cooperative $100,000

American Soy Asia, LLC MO Working Capital $300,000

Boeckmann Family Farm MO Working Capital $281,670

Janet Smith MO Planning $28,000

Grove Dairy Products, LLC MO Planning $50,000

Hampton Alternative Energy Products, 

LLC 

MO Working Capital $210,000

Jowler Creek Winery, Inc. MO Working Capital $18,363

Becky & Tim Lavy MO Planning $38,000

McKaskle Farms MO Planning $40,000

MOF2, LLC MO Planning $100,000

Nature Friendly Conservation Branded 

Beef 

MO Planning $34,000

Ortiz Farms MO Planning $78,795

Show Me Energy Cooperative, LLC MO Planning Farmer or Rancher Cooperative $100,000

Soy Labs, LLC MO Planning $100,000

Tuscolo Hill Vineyards MO Planning $16,000

Brinson Farms, LLC MO Planning $49,000

Wildwood Gin Inc. MS Working Capital $300,000

Forest Free Range, LLC MS Working Capital $87,326

Indian Springs Farmers Association AAL MS Planning Farmer or Rancher Cooperative $24,999

We Three Bees Apiary MS Working Capital $21,500

William & Marilyn Hedstrom dba 

Hedstrom Dairy 

MT Working Capital $48,530

Leonard Bernard Desmul MT Planning $55,000

1669

Applicant Name State 

Grant Type

(Planning or

Working Capital) 

Applicant Type Grant 

Amount 

Little Red Hills, LLC; Cooper Burchenal MT Working Capital $150,000

Sunburst Trout Company LLC NC Working Capital $283,884

Chaple Hill Creamery, LLC NC Working Capital $180,000

Nooherooka Natural, LLC NC Working Capital $130,000

Honey Mountain Farm LLC—Chuck 

Moore 

NC Working Capital $120,000

Marketing Specialty Beef from Farm NC Working Capital $140,000

Cottle Strawberry Nursery NC Working Capital $300,000

Sleepy Goat Cheese LLC NC Planning $22,500

Smoky Mountain Native Plant Association, Inc. NC Planning $20,000

Yamco LLC NC Planning $100,000

Sullivan Estate Vineyard & Winery, 

L.L.C. 

NC Working Capital $37,148

Dakota Pride Cooperative ND Working Capital Farmer or Rancher Cooperative $49,000

Bowdon Meat Processing ND Working Capital Farmer or Rancher Cooperative $49,500

Nebraska Waters, LLC NE Working Capital $300,000

Robinette Farms, LLC NE Working Capital $24,944

Feather River Vineyards NE Working Capital $49,998

Hollenbeck Farms NE Working Capital $258,250

Knotted Wood Distillery NE Working Capital $49,950

Winery Ridge Orchard NH Working Capital $41,350

Springdale Farms, Landaff Creamery NH Working Capital $105,750

Miles Smith Farm, Carole Soule and 

Bruce Dawson 

NH Working Capital $293,599

Salem Oak Vineyards LLC NJ Working Capital $20,000

Landisville Produce Cooperative Association NJ Working Capital Farmer or Rancher Cooperative $49,975

Garden State Goat Farm NJ Working Capital $36,500

Outer Coastal Plain Vineyard Association NJ Planning $33,332

First Field, LLC NJ Working Capital $32,000

Peppadew Gold Peppers NJ Working Capital $259,625

Red Mesa Meats NM Planning $12,500

Preferred Produce, Inc. NM Working Capital $49,500

Tracey Hamilton NM Working Capital $49,500

B.W. Cox (Owner) & Carl Livingston 

(Manager) 

NM Working Capital $49,999

Edgwick Farm NY Working Capital $120,000

Catskill Dudukju LLC NY Working Capital $49,000

New York Beef Farmer’s Cooperative NY Planning Farmer or Rancher Cooperative $36,500

King Brothers Dairy NY Working Capital $49,500

Farmer Ground Flour, LLC NY Working Capital $75,000

North Country Farms NY Working Capital $180,638

Old Chautauqua Vineyards, LLC NY Working Capital $299,999

Kilcoyne Farms NY Working Capital $261,077

NYAG, LLC NY Working Capital $170,000

CELK Distilling, LLC NY Working Capital $150,000

Keuka Lake Vineyards, LTD NY Working Capital $37,301

Red Jacket Orchards NY Working Capital $49,500

Dagele Brothers Produce; Christopher 

Dagele 

NY Planning $79,425

North Country Landscape & Nursery, Inc. 

DBA Tug Hill Vineyards 

NY Working Capital $59,950

Food Gems, LTD NY Working Capital $35,004

Hosmer, Inc. NY Working Capital $49,990

Guppy’s Berry Farm NY Working Capital $3,650

Martin Sidor Farms, Inc. NY Working Capital $49,990

Spring Lake Winery NY Working Capital $49,500

Maple Shade Farm NY Working Capital $49,750

Growers Cooperative Grape Juice Co., Inc. NY Working Capital Farmer or Rancher Cooperative $45,000

Egg Tech Ltd. OH Working Capital $300,000

Van Strohm Fiber Processing Mill OH Working Capital $60,500

Auburn Twin Oaks, LLC OH Working Capital $125,000

Commercialization Roadmap for Alternative Aviation Fuel OH Planning $71,551

Mercer Landmark—Louis McIntire OH Planning Farmer or Rancher Cooperative $39,800

Tea Hills Gourmet Chicken Products OH Working Capital $178,062

Holder Brothers Beef OK Working Capital $300,000

Walnut Creek Farms OK Working Capital $40,850

1670

Applicant Name State 

Grant Type

(Planning or

Working Capital) 

Applicant Type Grant 

Amount 

Bogdan Caceu OR Planning $12,125

Wrigley Family Ventures OR Working Capital $49,999

Fairview Farm LLC OR Working Capital $49,264

Seely Family Farm OR Working Capital $163,013

Zena Forest, LLC OR Working Capital $130,750

Deadlus Cellars Co. OR Working Capital $49,005

Sokol Blosser, Ltd. OR Working Capital $49,999

Carman Ranch OR Planning $18,050

Scott H. McKenzie, et al.; Seaview Cranberries, Inc. OR Working Capital $49,999

Deck Family Farm OR Working Capital $300,000

Coleman Vineyard LLC OR Working Capital $49,824

Cherry Country OR Working Capital $49,999

Goldin Artisan Cheese, LLC OR Working Capital $10,410

Michael Steven Mega OR Working Capital $49,992

Oregon Coastal Flowers OR Working Capital $100,000

Champoeg Creek Farm OR Working Capital $49,990

Morale Orchards, LLC OR Planning $39,909

Stoller Vineyards, Inc. OR Working Capital $49,792

Tad Buford & Karen Finley, Queen Bee 

Honey Company 

OR Working Capital $30,824

Southern Oregon Winery Association 

(SOWA) 

OR Planning Grant $22,550

Wild Wines, LLC OR Working Capital $93,572

Rainshadow Organics OR Working Capital $49,999

Wayne Hutchings OR Working Capital $24,400

Brenda Carter PA Working Capital $3,000

North Mountain Pastures PA Working Capital $26,860

Wholesome Dairy Veterinary PA Working Capital $49,990

Willow Brook Farms, LLC PA Working Capital $3,730

Glenn R. Cauffman PA Working Capital $80,000

Keystone Beef Marketing Network PA Planning $35,150

Endless Mountains Farm Fresh Cooperative PA Planning Farmer or Rancher Cooperative $37,450

Christian Klay Winery PA Working Capital $24,888

Fertile Grounds PA Working Capital $300,000

Shade Mountain Winery (SMW) PA Working Capital $49,999

Roberto Atienza DBA Hacienda San Pedro PR Working Capital $300,000

Carlos Gonzalez dba Finca Gonzalez PR Working Capital $150,000

Apiarios Caraballo, Corp. PR Working Capital $100,000

JJJ Ranch, Inc. PR Working Capital $300,000

Bananera Hermanos Marrero, Inc PR Working Capital $250,000

Esmerelda Sandoval; Del Valle Fresh, Inc. SC Planning $100,000

Jimmy Forrest Farm Inc. SC Working Capital $299,852

Hickory Bluff LLC SC Working Capital $42,907

Jackson Winery and Vineyards, LLC SD Working Capital $300,000

Wild Idea Buffalo Company SD Planning $17,500

Sarah Bellos TN Planning Capital $39,600

Cumberland Farmer’s Market (CFM) TN Working Capital $43,276

The Fullen Brothers Farm TN Planning $95,000

Johnson Backyard Garden TX Working Capital $49,950

San Angelo Bioenergy Facility TX Planning $95,000

Rangeland Restoration TX Working Capital $300,000

James Clinton Hodges DBA Sterling 

Lamb 

TX Working Capital $120,900

Texas Daily Harvest TX Working Capital $200,000

Panhandle Agricultural Producers LLC TX Planning $62,630

Herber Valley Artisan Cheese UT Working Capital $300,000

Scott G. Smith UT Working Capital $22,319

Utah Pork Producers Association UT Working Capital $300,000

Cornaby’s LLC UT Working Capital $239,412

Riley’s Farm Fresh LLC UT Working Capital $22,328

The Homeplace Vineyard, Inc. VA Working Capital $208,571

Virginia Wineries Association Cooperative VA Planning Farmer or Rancher Cooperative $100,000

Rosemont of Virginia, LLC VA Working Capital $300,000

Virginia Wineworks VA Working Capital $149,125

Messick’s Farm Market VA Planning $60,000

Dairy Energy Inc. VA Planning $100,000

Springview Farm LLC VA Working Capital $37,250

Baker, Inc. VA Working Capital $110,000

AgriBerry, LLC VA Working Capital $300,000

Grayson Natural Foods VA Working Capital $280,735

Virginia Aqua-farmers Network, LLC VA Working Capital Farmer or Rancher Cooperative $300,000

1671

Applicant Name State 

Grant Type

(Planning or

Working Capital) 

Applicant Type Grant 

Amount 

Kingdom Creamery VT Working Capital $300,000

Green Mountain Organic Creamery, LLC VT Working Capital $300,000

The Success Factor VT Planning $15,480

Paul Lisai VT Working Capital $47,869

Tamarack Tunis VT Working Capital $49,999

Louisa Conrad VT Working Capital $49,057

Hall Home Place, LLC VT Working Capital $24,389

Boston Post Dairy VT Working Capital $38,201

Margorie and Brett Urie VT Working Capital $32,547

Gateway Milling WA Planning $99,425

Little Farms, LLC WA Working Capital $49,726

BellWood Acres Distilling Project WA Working Capital $150,000

Northwest Agriculture Business Center WA Working Capital $300,000

Tachira, LLC WA Working Capital $300,000

Melissa Moeller WA Working Capital $38,367

Skagit Fresh Natural Beverage Company WA Working Capital $49,900

Knutzen Farms, LP WA Planning $48,000

Sheperd Song Farms LLC WI Working Capital $300,000

Lost Lake Bound, LLC WI Working Capital $34,700

Kelley Country Creamery WI Working Capital $300,000

Richard L. Walders WI Working Capital $49,999

Wisconsin Sheep Dairy Cooperative WI Planning Farmer or Rancher Cooperative $17,865

Harmony Specialty Dairy Foods, LLC WI Working Capital $300,000

LaClare Farms Specialties, LLC WI Working Capital $300,000

Four Elements Organic Herbals LLC WI Working Capital $283,948

Weber’s Farm Store, Inc. WI Working Capital $300,000

JFBHayLLC WI Working Capital $300,000

Tony Koyen Farming Inc. WI Working Capital $300,000

Wisconsin Cranberry Cooperative WI Working Capital Farmer or Rancher Cooperative $300,000

Jolivette Family Farms Inc. WI Working Capital $300,000

Gingerbread Jersey LLC WI Working Capital $300,000

Community Farmers’ Co-Op (AKA CFC) WI Working Capital Farmer or Rancher Cooperative $200,000

Ellsworth Cooperative Creamery WI Working Capital Farmer or Rancher Cooperative $300,000

Marieke Penterman, Holland’s Family 

Cheese LLC 

WI Working Capital $300,000

Lakeshore Forest Products, Inc. WI Working Capital $300,000

George R. Crave; Crave Brothers 

Farmstead Cheese, LLC 

WI Working Capital $300,000

Gensing and Herb Co-op WI Working Capital $300,000

Johnson Timber Corporation WI Working Capital $300,000

Westby Cooperative Cooperative WI Working Capital Farmer or Rancher Cooperative $300,000

African-Style Dried Fish WI Working Capital $300,000

Millet Supply, LLC WI Working Capital $300,000

MacFarlane Pheasants, Inc. WI Working Capital $300,000

Krueger Lumber Company WI Working Capital $300,000

Hsu’s Ginseng Enterprises, Inc. WI Working Capital $300,000

Bloomery Plantation Distillery, LLC WV Working Capital $49,000

SUBMITTED LETTER BY WALTER B. MCCORMICK, JR., PRESIDENT AND CHIEF

EXECUTIVE OFFICER, UNITED STATES TELECOM ASSOCIATION

April 24, 2012

Hon. TIMOTHY V. JOHNSON, Hon. JIM COSTA, 

Chairman, Ranking Minority Member, 

Subcommittee on Rural Development, 

Research, Biotechnology, and Foreign 

Agriculture, 

Subcommittee on Rural Development, 

Research, Biotechnology, and Foreign 

Agriculture, 

House Committee on Agriculture, House Committee on Agriculture, 

Washington, D.C.; Washington, D.C. 

Dear Chairman Johnson and Ranking Member Costa:

Thank you for the opportunity to provide the views of the United States Telecom 

Association (USTelecom) in advance of the Subcommittee’s upcoming hearing on the 

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telecom and broadband loan programs administered by the Rural Utilities Service 

(RUS). As the Subcommittee begins to craft the rural development component of the 

upcoming reauthorization of farm programs, this is a particularly important and 

timely hearing that allows supporters of RUS loan programs to explain their continuing value to rural America and to dispel certain myths disseminated by detractors of these programs. 

USTelecom represents innovative broadband companies ranging from some of the 

smallest rural telecoms in the nation to some of the largest companies in the U.S. 

economy. Our members offer a wide range of advanced broadband services, including voice, Internet access, video, and data, on both a fixed and mobile basis. The 

vast majority of our member companies are rural providers. Many are small businesses serving small communities. They are proud members of these communities 

and deeply committed to their future development. What unites our diverse membership is our shared determination to deliver broadband services to all Americans—regardless of their location. 

USTelecom members appreciate the strong support the Agriculture Committee 

has provided for RUS telecommunications programs since their inception in 1949. 

RUS endures because it is a brilliantly conceived public-private partnership in 

which the borrowers are the conduits for the Federal benefits that flow to rural 

telecom customers—the true program beneficiaries. The targeted assistance offered 

by the RUS broadband and telecommunications loan programs remains essential to 

a healthy and growing rural economy and contributes to the provision of universal 

communications services comparable to those found in urban areas. In fact, the perfect repayment record of borrowers from the telecommunications loan program 

means these loans actually make money for the government and contribute to deficit 

reduction. 

RUS Broadband Loan Program 

Attention has focused in recent years on the implementation of the RUS 

Broadband Loan program. The program was created in the 2002 Farm Bill to provide loans specifically for broadband deployment in unserved areas. In May 2007, 

USTelecom appeared before this Subcommittee and raised concerns with the implementation of the original program, particularly about broadband loans being provided in urban areas and in areas with multiple existing broadband providers. 

USTelecom worked closely with this Subcommittee during development of the 

2008 Farm Bill, and as a result, Congress improved the targeting of RUS 

Broadband Loan program funds by narrowing the definition of ‘‘rural’’ so that suburbs and subdivisions near cities no longer qualify for loans, and by prioritizing 

lending to areas with little or no existing broadband service. This means that top 

priority is given to loan applicants who offer to provide broadband service to the 

greatest proportion of households without service. 

Since passage of the last farm bill in May 2008, USTelecom, like many others, 

was distressed by the agency’s delay in issuing the regulations required to implement the changes in the program. RUS did not release the interim-final rules implementing Congressional reforms to the program until March 2011. Shortly after the 

release of those interim-final rules it became clear that disbursements from the 

FCC’s High-Cost Universal Service program were going to be dramatically reformed. 

As a result, RUS is now in the process of updating its financial models to account 

for these coming changes, and rural carriers are being asked to withhold applications until these financial models are updated. Others that have already submitted 

applications, but have not yet had their applications approved, are being asked by 

RUS to resubmit their applications in light of the current and pending changes in 

High-Cost Universal Service support. While we are certainly frustrated by these 

delays, there remains a continuing need for the Broadband Loan program, as we 

will explain in further detail below. 

Unjustified Criticisms 

We believe it is important for us to address head-on the distortions being propagated by the program’s detractors—many of whom, we would hasten to add, typically have no desire to provide broadband service beyond the denser populations 

found in rural town centers. 

First, some detractors point to a 2009 Department of Agriculture Inspector General (IG) review of the program as justification for its termination. A closer reading 

of that report, though, shows it is a review of the broadband loan program as it existed before the program changes required by Congress in the 2008 Farm Bill. In 

fact, the IG report acknowledges that Congressional reforms contained in the 2008 

Farm Bill would have resulted in $862 million in loans issued by RUS between the 

1673

IG’s initial 2005 report on the program and the passage of the 2008 Farm Bill being 

ruled partially or completely ineligible for funding. 

Second, some critics have deliberately conflated entirely separate programs to 

make their assertions. They often point to examples of over-building of existing 

broadband networks funded from the $2.5 billion Broadband Initiatives Program 

(BIP), administered by RUS, and created by the 2009 American Recovery and Reinvestment Act. A separate program, BIP was not required to follow the program 

modifications to the Broadband Loan program required by Congress in the 2008 

Farm Bill. To be clear about this point, in the period between passage of the 2008 

Farm Bill and the release in March 2011 of the program’s interim-final rules, no 

loans were issued under the Broadband Loan program. 

Third, certain detractors also suggest Congress failed in 2008 to limit providers 

from receiving support for building out broadband in areas where it is already available. To address this issue, they propose to prohibit loans to build out broadband 

or upgrade facilities in areas where it is already available at certain speeds to more 

than 25 percent of existing residential households. Actually, Congress did address 

this issue and there is no evidence that the Congressional policy changes are insufficient. In fact, such a proposal discriminates against the hardest-to-serve households 

in rural areas and could prevent consumers and businesses located in areas outside 

of a town center from ever receiving broadband service. 

Finally, some have suggested the RUS Broadband Loan program and the HighCost Universal Service program are duplicative. In fact, the two programs are complementary—each an important element in deploying cutting edge communications 

services to rural America. While the RUS Broadband Loan program supports only 

one-time capital investments to provide broadband in hard-to-serve rural areas, the 

Universal Service program provides support to ensure that affordable and reasonably comparable communications services are available to consumers and businesses 

in high-cost rural areas. 

Going Forward 

As this Subcommittee is well aware, there are areas of our nation that still lack 

access to broadband service. The recession that began subsequent to the passage of 

the last farm bill has made it increasingly difficult for small companies to obtain 

infrastructure improvement loans through the private sector. 

In addition, it would be premature to further amend the Broadband Loan program 

at this time. RUS only issued the interim-final regulations in March 2011 to account 

for the program changes required by Congress in the 2008 Farm Bill, before the program was suspended again due to pending changes in the FCC’s High-Cost Universal Service regulations. A reasonable period of time is required to reconcile the 

changes brought about by both these developments. 

The investment in the most modern and sophisticated equipment available at the 

premises of businesses, schools, or clinics is wasted if the local communications provider cannot afford to build the facilities that quickly transport the large amounts 

of voice, video, and data these entities generate. Further, the government’s contribution through these loan programs is leveraged by the equity, technical expertise, 

and dedication of local telecom companies, as well as the additional tax revenues 

generated by the jobs and economic development resulting from the provision and 

upgrading of broadband infrastructure via loans. 

Again, thank you for the opportunity to provide our views on these important programs. RUS telecom and broadband program participants take seriously their obligations to their government, their nation, and their subscribers. They will continue 

to invest in our rural communities, use government loan funds carefully and judiciously, and do their best to assure the continued affordability of advanced communications services in rural America. 

Sincerely,

WALTER B. MCCORMICK, JR.


112301115.eps
1674

* There was no response from the witness by the time this hearing went to press. 

SUBMITTED QUESTIONS

Response from Hon. Donald Larson, Commissioner, Brookings County, 

South Dakota; Chairman, National Association of Counties, Agriculture 

and Rural Affairs Steering Committee * 

Questions Submitted By Hon. Timothy V. Johnson, a Representative in Congress 

from Illinois 

Question 1. You have requested that we give priority to applications which are 

submitted through a regional plan. Why should Congress authorize a regional plan 

to move ahead of an application from an individual community which is just as 

much in need, but for a variety of reasons may not be able to participate in a regional collaboration?

Question 2. In your testimony you highlighted the local and regional food programs. You also suggested that programs across the farm bill should be on equal 

footing. In your view, why should there be a specific program to devote funds to a 

narrow purpose, as opposed to ensuring it is a qualified activity under the general 

business grant and loan programs?

Question 3. Many programs were designed in the past when funding was more 

available and the resources could be narrowly devoted to certain activities. In this 

current budget environment, which programs would you suggest should be cut or 

eliminated so the programs which provide the true core economic development assistance can be focused on?

Question 4. Your testimony discusses a great need for access to healthy foods. But 

in the U.S. supply chains are among the strongest in the world and food is the most 

available and affordable in the world. Exactly what market failure are you suggesting needs to be addressed with local and regional food chains as it relates to 

healthy food access?

Question 5. You mentioned technical assistance and its importance to ensuring 

the viability of projects over the life of the loan. Do you believe every program needs 

to devote scarce resources to technical assistance? What non-Federal resources could 

fill this need?

Question 6. You called for expanded authority in the Community Facilities program to allow grants for technical assistance. How would those funds be used, and 

why should it come out of funds that would otherwise be available to fund additional critical community facilities such as first-responder equipment? Which eligible 

activity would you suggest be removed from the program to offset this new eligible 

purpose?

Question 7. You call for a more locally-driven process at USDA. Is USDA adequately staffed for such a shift? How would the programs be overseen?

Question 8. You mentioned that you want local governments included as eligible 

entities in the relending programs. How would conflicts of interest be managed 

when governments are both the lender and regulator? Are the same structures in 

place in every entity which would be made eligible under this proposal? How would 

internal controls be verified by USDA to prevent abuse?

Question 9. Your testimony listed a number of organizations you feel should be 

eligible regional partners. Could you please clarify which partners MUST be included, and which SHOULD be included if they exist in the region?

Question 10. Your third suggestion for regional cooperation mentions an additional priority for communities which demonstrate cost savings and reduced duplication. How would you envision these savings be demonstrated for USDA to evaluate?

Question 11. What prevents USDA from working with their state partners each 

funding year to approve projects which fill in the gaps of regional plans?

Question 12. How do you guarantee the strong urban and suburban voices in regional discussions do not drown out the needs of rural communities when regional 

plans are formed?

Question 13. You mentioned that technical assistance providers’ capacity needs to 

be strengthened; however, one of the qualifications should already be that those providers have the capacity to justify receiving Federal funds in the first place. Are you 

suggesting that USDA should train people so that they then are eligible to receive 

Federal funds? 

1675

Response from Leanne Mazer, Executive Director, Tri-County Council for 

Western Maryland; on Behalf of National Association of Development 

Organizations 

Questions Submitted By Hon. Timothy V. Johnson, a Representative in Congress 

from Illinois 

Question 1. Regional plans are put in place for up to 5 years, yet sometimes adjustments must be made. What recourse do small communities have to adjust their 

priorities in a regional plan when leadership changes or other factors justify such 

a revision? 

Answer. As resources at the state and local level continue to diminish, local communities across rural America like ours are joining together to create comprehensive 

regional plans that examine their region’s existing assets and needs across multiple 

sectors including comprehensive economic development, workforce, transportation, 

healthcare, and pre-disaster mitigation. 

These strategies are essential because they help rural regions to prioritize their 

needs, ensure that locals coordinate and are vested in the process and projects, and 

help leverage every possible asset and dollar to improve economic conditions in their 

communities. These regional strategies also encourage multiple rural communities 

to think more strategically and creatively about how they use Federal, state, and 

local dollars. Partnering regionally helps us to avoid duplication of effort 

and we are able to better share our resources and determine which 

projects will increase our communities’ economic viability.

This type of coordination does not happen overnight and can be a complex and 

arduous process to achieve agreement across multiple jurisdictions. But during a 

time of increase scrutiny on Federal investments, this type of vetting and coordinating process by local public, private and nonprofit sector leaders should be encouraged by USDA and across the Federal Government. 

Although some of the existing planning frameworks like the U.S. Economic Development Administration’s Comprehensive Economic Development Strategies (CEDS) 

are 5 year plans, they can be updated annually based on changing needs and conditions. These strategies are not meant to be restrictive or static plans, but are intended to be living documents that help guide communities as they strive for 

growth. Just as the U.S. military prepares strategic plans and U.S. private companies create business plans, the regional economic development plans can serve as 

a roadmap for communities like ours to achieve shared goals. Routine plan updates 

can ensure that communities’ priorities are addressed and allow for course corrections as strategic plans are implemented. 

If a community determines to shift their priorities in a regional plan, or if a community is not covered by a regional planning framework, they should still be able 

to submit proposed projects for consideration by USDA. 

Under current law, there is no incentive for rural communities to coordinate on 

USDA rural development projects. USDA should encourage communities to work together to best use Federal dollars.

Question 2. If communities decide they would rather op-out of the regional plan 

where they would otherwise be included, how would their application be treated 

under what NADO has considered for regional priorities if they decide to change 

their local priorities? 

Answer. If a community decides to op-out of the regional plan, or is not covered 

by a regional plan, they should be allowed to submit their application for USDA consideration under the normal system. USDA already makes decisions on where and 

how to invest public dollars. Whether a community is part of a regional plan or not, 

they will still have to compete against other projects. Communities that opt-out of 

a regional plan or strategy should not be penalized, but at a time where Federal 

dollars are increasingly scarce, USDA should encourage communities to work together to determine how they can leverage existing assets with Federal dollars. 

E-Mail Submitted by Fitzhugh Elder, National Rural Water Association 

May 17, 2012

MIKE DUNLAP, Staff Director,

Subcommittee on Rural Development, Research, Biotechnology, and Foreign Agriculture, 

House Committee on Agriculture.

Mike,

I hope all is well. Frank’s responses to the QFR’s are attached. Please let me 

know if you need anything else. 

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As you draft the farm bill, in addition to the circuit rider language we have discussed, I would like to also request that you keep 7 U.S.C. § 1926(b) as it is currently written. The purpose of 7 U.S.C. § 1926(b) is to protect the integrity of the 

Federal Government’s outstanding loans by preventing any portion of a water system to be forcibly annexed or cherry picked by another system or municipality. Such 

annexation would result in the remaining customers being solely responsible for repayment of the loan, with fewer customers to share the burden—resulting in a higher cost per customer and greater risk of default. This dilemma is of special concern 

because USDA loans are only made available to low and moderate-income rural 

communities based on household per capita income that cannot obtain commercial 

credit. It is also important to remember that USDA provides both loan and grant 

to systems based on their financial situation and proposed rate structure at the time 

the application is processed. Any loss of projected revenue caused by loss of territory 

jeopardizes this carefully constructed financial arrangement. The 7 U.S.C. § 1926(b) 

provision is an essential stabilizing element and is one of the reasons that the program works so well. 

Please let me know if you have any questions or concerns. Thank you.

FITZHUGH ELDER,

National Rural Water Association. 

Attached Response from Frank Dunmire, Executive Director, Illinois Rural 

Water Association; on Behalf of the National Rural Water Association 

Questions Submitted By Hon. Timothy V. Johnson, a Representative in Congress 

from Illinois 

Question 1. Mr. Dunmire and Mr. Stewart, you both talked about the repayment 

rates of water loans, using the lifetime default rate of 1.02% and a delinquency rate 

of 0.18% respectively. Just so we are comparing the same numbers, could you both 

clarify whether you mean to refer to the same rates, or if there is a reason you have 

described two different aspects of the programs? 

Answer. I believe Mr. Stewart and I were using two different measurements of 

the water and waste loan programs to make a similar point. The default rate is a 

measure of the nominal lifetime defaults as a percentage of disbursements, while 

the delinquency rate is a measure of the number of late payments as a percentage 

of the number of loans. I believe that both numbers are demonstrative of a very 

well-managed loan program. This is particularly true when considering that USDA 

is a lender of last resort.

Question 2. If the current program limits require USDA focus on towns of less 

than 10,000, and in reality the program focuses on towns of less than 5,000; would 

there be any value in opening up the eligibility definitions to larger cities? 

Answer. No. In fact, I feel that it would have an adverse effect on the smaller systems. The current trend that shows funding ‘‘focusing’’ on towns of less than 5,000 

should be considered as an example of how well the current limits are working. As 

a general rule of thumb larger municipalities have larger project needs and consequently require larger amounts of funding. To include larger municipalities in this 

program, in my opinion, would only serve to dilute the RD funding pool.

Question 3. What are some of the current regulatory issues faced by small towns 

as they work to provide clean water? 

Answer. Below are a few examples of the regulatory requirements small towns 

struggle with. Please note that this is not a comprehensive list.

a. Reporting: For example, Consumer Confidence Reports—each year suppliers 

are to supply their customers with a consumer confidence report (CCR) that 

contains information about their drinking water. Currently there are several 

ways to meet this regulation (i.e., direct mail, publish in newspaper, or in the 

case of really small systems less than 500—notify them of its availability). What 

is not an acceptable means is posting on a website. There is discussions within 

USEPA and legislation introduced (H.R. 1340 & S. 1578) to repeal the mailing 

requirement of the CCR rule.

b. Costly standards without flexible implementation for small communities: For 

example, Arsenic—This is one of the many ‘‘contaminants’’ that Ranking Member Costa referred to in his opening remarks. Here is a naturally occurring element that can be found in water supplies throughout the country. When 

USEPA lowered the allowable concentrations to 10 parts per billion it put many 

systems into a state of non-compliance and they were forced to put in treatment. The treatment that most opted for—reverse osmosis—was not only expensive to install but is expensive to run as well.

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c. Complexity of Federal Regulations: For example, the Lead and Copper rule—

although the water system delivers lead/copper free water to the end-user they 

are still being asked (or forced) to take responsibility for what happens to the 

water once it leaves the systems pipes.

Question 4. Can you offer any insight into the application process, and how USDA 

might be able to coordinate with the EPA to streamline applications and timing of 

engineering requirements in the process? 

Answer. The answer is quite simple—communication. In Illinois the predominant 

funding entities (Rural Development, IEPA, Department of Commerce and Economic 

Opportunity, and the Illinois Finance Authority) will meet on a quarterly basis. Also 

attending these meetings are Illinois Rural Water Association and RCAP. The sole 

purpose of these meetings is to coordinate project funding among the different agencies and identify those systems that might benefit from technical assistance visits.

Question 5. With the limited funds available, how would water applications fit 

into the regional concept discussed at the hearing, particularly in light of the over 

$3 billion backlog? 

Answer. Obviously regionalization is a very good tool in lowering overall costs of 

supplying water to an area or treating wastewater generated in a region. However, 

getting municipalities or systems with their own separate identities to ‘‘buy into’’ 

a regionalized concept is very difficult. Illinois has met with some success in what 

we prefer to call consolidation. In recent years several water treatment plants have 

been constructed to serve a number of municipalities. In other words they are 

wholesalers of water and the individual municipalities, co-ops, etc. retain control 

over their distribution systems. 

We support consolidation and regionalization. It has been one of our core missions 

in expanding public drinking water systems to rural communities. This has been a 

great benefit to rural households and small communities. However the key principle 

in any successful consolidation, is local support for the consolidation—and local control on when and how they choose to consolidation. Rural Water has led or assisted 

in more communities consolidating their water supplies than any program, policy 

or organization. Again, when communities believe consolidation will benefit them, 

they eagerly agree. However, if communities are coerced to consolidate, one can almost guarantee future controversy. 

Question Submitted By Hon. Vicky Hartzler, a Representative in Congress from Missouri 

Question 1. With respect to the grant and loan applications for water and wastewater systems, what are the primary needs for communities which apply? 

Answer. I can only speak to what I see here in Illinois but the three top needs 

in Illinois are:

a. There are still large areas of rural Illinois that experience either an inadequate supply of water or water of questionable quality. Residents in these 

areas are forced to conserve as much water as possible so the amount they have 

to haul from town is kept to a minimum. A picture is worth a thousand words 

and I would like to include this I downloaded from the Internet that as a true 

example of how some rural Americans get their drinking water—load it in a 

tank in the back of a pickup truck and haul it home. You will find these municipal fill stations, as they are called, are the busiest just before holidays and any 

major forecasted storm. No one wants to run out of water at those times.

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b. As more regulations are passed by regulatory agencies, systems that were 

once in compliance find they are no longer so and are forced to determine the 

most cost effective way of satisfying the new regulations. Some examples of this 

can be found above.

c. Replacing outdated system components. This can be anything from a new 

water or wastewater treatment facility to any of the many subcategories. Again, 

in Illinois, I have seen many systems request funding that will replace water 

towers, water mains in problem areas, treatment facility equipment, lift stations, pump stations and the list goes on. Right now there seems to be quite 

a need for new water towers as the ones built back in the 1930’s begin to fail.

Question 2. What percentage of applications are addressing outdated systems that 

are beyond their useful life? 

Answer. According to USDA approximately 25% of applications currently in the 

backlog are for renovation and replacement of water systems.

Question 3. To what extent do new EPA regulations force communities to upgrade 

their systems? 

Answer. It has been my experience, that shortly after (and at times even before) 

a new regulation is put in place communities will make substantial requests for 

funding. Over the next few years that funding ‘‘need’’ is somewhat satisfied and 

then a whole new set of regulations come along—resetting the cycle.

Question 4. Are new environmental challenges a factor? 

Answer. New environmental challenges are a factor. For example, current implementation of EPA nutrient reduction initiatives under the Clean Water Act are requiring many communities to install costly new treatment technologies.

Question 5. To what degree is need driven by growth of the communities? 

Answer. Certainly there are some projects that are being driven by growth but 

for, the most part, they are the last to be funded through RD. 

Response from Robert B. Stewart, Executive Director, Rural Community 

Assistance Partnership 

Questions Submitted By Hon. Timothy V. Johnson, a Representative in Congress 

from Illinois 

Question 1. Your testimony seems to indicate that a small town very much in 

need of a water system would not be disadvantaged if a priority is given to a regional application. Could you please clarify how a priority can be given to a project, 

but that in doing so another project would not be disadvantaged? 

Answer. The priority point system used by Rural Development ensures that varying considerations are given weight when considering the merit of a project application. Funding decisions are decided by a combination of factors, any one of which 

can only influence the funding decision to a small extent. RCAP proposes that the 

agency give a small number of priority points for projects that can demonstrate that 

they have analyzed options for regionalization. Regionalization is not feasible for all 

water systems, so a system that awards points for projects that can demonstrate 

that they have weighed the costs and benefits of regionalization—even if they ultimately decide that a regional project is not feasible—will encourage small towns to 


112301163.eps
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consider all available options, including regionalization. The extent to which this 

would impact other applicants is limited because it is only one of many factors considered by the agency. Systems facing public health risks or in need of emergency 

repairs would still be getting priority points under the existing criteria and would 

therefore continue to offer competitive applications. Those that would score high 

under the existing criteria and consider regionalization as a solution, however, 

would be given higher priority than those that would score high under the existing 

criteria and do not consider regionalization as a potential solution.

Question 2. USDA Rural Development has a strong track record regarding its effectiveness at providing rural areas with electricity, water, sewer, and community 

facilities. Would the Federal Government be equally as effective providing economic 

planning and development as versus infrastructure? 

Answer. RCAP does not view infrastructure and economic development as mutually exclusive. In order to support small businesses and industry, towns need to 

meet their basic infrastructure needs. Those infrastructure components form the 

foundation on which local economies are built, and are an integral part of rural economic development. As mentioned, Rural Development’s programs have a strong 

track record in those fields, which has helped to foster economic growth by providing 

the foundational infrastructure necessary to support industry and entrepreneurs. 

USDA Rural Development currently operates a variety of economic development 

programs such the Business and Industry Guaranteed Loan (B&I) Program; the 

Intermediary Relending Program (IRP); the Rural Business Enterprise Grant 

(RBEG) Program; and the Rural Economic Development Loan and Grant (REDLG) 

to name just a few. These programs allow local, rural communities, nonprofit and 

for-profit organizations to obtain financial assistance (mainly loans along with very 

modest grant programs) to support development activities created by and for these 

local communities. RD business programs are not directive in regards to the initiatives selected by the local communities and businesses and have operated successfully for many years.

Question 3. Your testimony suggested that a town of 10,000 or more could seek 

funding in the bond market. What rates would a town of that size expect to find 

in the bond market? 

Answer. The likely bond rate for any municipality depends on a variety of factors: 

population, property values, industrial customer base, indebtedness of the town, and 

credit history, among others. As such, the rates faced by towns from 10,000 to 

50,000 in population would vary depending on the characteristics and history of the 

communities involved. Typically for these size communities that already have some 

infrastructure developed and are looking to make improvements or expansions to 

their services, the rates would be 41⁄2% or less in the open market for communities 

without a current bond rating. Smaller communities and those without any current 

water and wastewater infrastructure have no real options other than financing 

through RD or SRFs. Also of note is the increased willingness of many local banks 

to finance infrastructure projects for these mid-sized communities at terms of up to 

15 years with comparatively low rates and much reduced processes costs.

Question 4. You mentioned the economic activity generated by each dollar of Federal investment. Could you elaborate on how that is calculated, and how the tax 

base is expanded after these investments? 

Answer. The figures cited in my testimony—that every water and wastewater construction dollar generates nearly $15 of private investment and adds $14 to the local 

property tax base—come in part from a study by Fagir S. Bagi, an economist from 

the Economic Research Service at USDA that was published in the Winter 2002 

issue of ‘‘Rural America’’ (Vol. 17, Issue 4). Recent studies have reached similar conclusions, including a report by the Cadmus Group for the U.S. Conference of Mayors 

in 2008 that estimates that every $1 we invest in water/sewer infrastructure increases GDP by $6.35 in the long term and that every water utility construction dollar generates nearly $15 of private investment and adds $14 to the local property 

tax base. I am happy to provide copies of these reports at your request.

Question 5. You suggested that the Community Facilities program should be 

opened up to planning grants. When budgets are already being strained and the 

funds available to the program for critical community investments are even more 

limited, how does it make sense to instead use the money for planning and writing 

grants? 

Answer. In my testimony, I suggested that the Community Facilities (CF) program be opened to Technical Assistance grants, not planning grants. Technical assistance (TA) involves helping both with the nuts and bolts of facility construction 

and operation, and also in developing local leadership capacity to handle the financial and managerial side of project development. Allowing TA for the CF program 

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would enable nonprofit TA providers to work directly with communities receiving 

RD loans and grants to get their finances in order and ensure that the taxpayers’ 

investment is repaid. Part of the technical assistance provided may include planning, but the funding would be available for a much broader slate of assistance, 

rather than simply planning. 

It makes sense to use a small portion of the limited funds for TA because it expands the pool of available resources for communities and ensures that taxpayer 

dollars that are loaned to communities are repaid. Over the nearly 40 years that 

RCAP has provided TA in the water/wastewater field, we have leveraged small 

amounts of Federal dollars into millions of dollars of investment directly into rural 

communities. Over the past 4 years (FY08–FY11), RCAP has helped Rural Development water/wastewater project communities obtain over $360 million in project financing, a return of more than $15 for every dollar we receive from the agency. By 

replicating the success of the water/wastewater program, a CF TA program can 

stretch Federal dollars by attracting resources and investment directly to CF 

projects and developing the financial and managerial capacity of local officials to ensure that both Federal and non-Federal loans are repaid in full.

Question 6. You talk about expanding technical assistance in several parts of your 

testimony. Can you offer any empirical evidence to substantiate your claim that diverting funds away from programs and into technical assistance makes scare resources go even farther? 

Answer. As mentioned in the answer to the previous question, over the past 4 

years, RCAP has leveraged over $15 of investment directly in community projects 

for every dollar of funding we receive from Rural Development. We acknowledge 

that it is easier to attract investment to water infrastructure, because there are 

ratepayers, and thus a guaranteed revenue stream, but even if TA providers are 

able to help CF project communities attract only 1⁄2 as much financing for every 

Federal dollar ($7.50:1), the increased resources will help stretch scarce Federal 

funds while providing critical community facilities that support economic development and job creation in rural areas. TA providers are able to foster relationships 

among small communities, private lenders, state and local governments, and Federal agencies to maximize the resources available to communities and attract nonFederal capital to these projects that help expand the reach of Federal programs.

Question 7. Could you describe in greater detail the comprehensive Federal approach to Technical Assistance you mention in your testimony? What is the difference between what you are suggesting and simply ensuring USDA is doing their 

job? 

Answer. By comprehensive technical assistance, I mean using the success of the 

water/wastewater TA program as a model for TA programs for the rural development programs that don’t currently have one, such as for Essential Community Facilities or the Broadband Initiatives Program. For rural communities across America, simply making financing programs available, whether its loans, loan guarantees 

or grants, is not sufficient to implement meaningful development programs that improve the quality of life and economic opportunities for rural Americans. Nonprofit 

technical assistance organizations such as RCAP have the on-the-ground experience 

and expertise to guide rural communities towards those development programs that 

most closely respond to their unique needs while ensuring that all Federal funding 

is used in areas of greatest need and to affect the greatest economic benefit for those 

communities.

Question 8. You mentioned that you have used pre-development loans to assist 

communities. Of the over $3 billion in projects stuck in the backlog at USDA, how 

many of those pending applications were put together with pre-development loans? 

Answer. Absent a detailed review of each state’s applications it would be difficult 

to accurately characterize the number of pending applications that used pre-development loans. Notably RD applications require a significant amount of work to be accomplished prior to a commitment of funds by RD. The communities and their engineers are therefore burdened with finding the funds for requirements such as the 

preliminary engineering report, environmental assessment or site acquisition. While 

some engineering firms can carry these costs (sometimes for a year or longer) until 

the project is funded, many or most cannot. For the smaller communities and for 

those that are planning for first-time water or wastewater systems, this places a 

major financial burden on the systems and can result in delays for critical projects 

or an outright inability to proceed with the application. For instance, in Texas the 

majority of current applications were made possible by accessing pre-development 

loans while in Mississippi the incidence of these loans is much smaller. The Revolving Loan Fund authorized by the farm bill assists with meeting this need, but only 

for a small percentage of applicants. Similar to the response earlier on the question 

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regarding bond financing, communities without existing systems are unable to obtain pre-development loans from traditional financial institutions and few of these 

communities have the assets to pay for these costs up-front.

Question 9. Mr. Dunmire and Mr. Stewart, you both talked about the repayment 

rates of water loans, using the lifetime default rate of 1.02% and a delinquency rate 

of 0.18% respectively. Just so we are comparing the same numbers, could you both 

clarify whether you mean to refer to the same rates, or if there is a reason you have 

described two different aspects of the programs? 

Answer. The delinquency rate I referenced is the figure reported by USDA–RD 

Water and Environmental Programs at the release of their annual activity report 

for fiscal year 2011. In the Annual Activity Report itself, the agency writes that it 

‘‘[m]aintained a less than one percent delinquency rate on the portfolio of more than 

18,000 loans.’’ In other words, of WEP’s current portfolio, the agency reported that 

only 0.18% of borrowers are delinquent. The lifetime default rate, as cited by Mr. 

Dunmire, is a different statistic, though both show that the program has been enormously successful and provide an example of the efficacy of technical assistance programs. 

Response from David G. Rozzelle, Executive Vice President, Suddenlink 

Communications; Member, National Cable Telecommunications Association, Rural and Small System Operator Committee 

Questions Submitted By Hon. Timothy V. Johnson, a Representative in Congress 

from Illinois 

Question 1. Could you describe how many of your members have accepted the responsibility of being the carrier of last resort to ensure every American has access 

to phone service which is now shifting into access to broadband service? How many 

of your members participate in the RUS broadband loan program? 

Answer. State-imposed carrier of last resort obligations originated decades ago to 

ensure that telephone companies in rural areas would continue to offer basic voice 

connections to residents in those areas. Carrier of last resort generally is not an option that companies are free to accept or reject. Rather, it is a set of rights and obligations imposed by states. Most states imposed these obligations on telephone companies because they were monopoly providers and therefore were expected to serve 

all customers, in some cases with the aid of Federal subsidies. Conversely, most 

states have not imposed these obligations on new entrants, including cable companies. In addition, because cable operators generally do not receive Federal or state 

subsidies, there may be some extremely high cost areas that telephone companies 

alone are able to serve as a result of government subsidies. 

Cable broadband connections also enable consumers to access online voice-overIP (VoIP) providers like Vonage—so consumers in areas served by cable also have 

voice connectivity in this way. It is worth noting that while many large and small 

cable operators have extended voice and broadband service to many rural areas 

without the help of government subsidies, the new FCC rules do not allow any opportunity for competitive providers to obtain USF support in areas served by rural 

telcos. 

To my knowledge, only one of NCTA’s members participates in the RUS farm bill 

broadband loan program.

Question 2. In your testimony you suggested that USDA should establish a speed 

threshold similar to that of the FCC. Do all your members meet the 4 mega-bits 

per second threshold you mention in your testimony at all times, even during times 

of peak usage, for all of your customers? 

Answer. On a customer specific basis, no provider, regardless of technology, can 

meet a specified speed threshold at ‘‘all times’’—the shared nature of mass market 

broadband services, and the Internet itself does not allow such precision. In a recent 

report, however, the FCC found that, on average, cable operators delivered 93 percent of advertised download speeds and 108 percent of advertised upload speeds 

during peak hours. Suddenlink monitors the performance of its network closely to 

make certain we provide our customers with the experience we have promised them. 

While I can’t vouch for each and every NCTA member, my understanding is that 

NCTA’s members as a group endorse the definition of broadband contained in the 

FCC’s National Broadband Plan, which is 4 Mbps downstream.

Question 3. Is there a need for rural broadband investments? How are your members reaching the last, unserved portion of rural households? 

Answer. Suddenlink and NCTA strongly support the availability of broadband 

funding for unserved rural areas. Quality broadband services should be available to 

all regions of the country, including the least densely populated areas of the country. Broadband is a crucial driver of economic recovery and global competitiveness. 

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Broadband links rural America to the rest of the country and the world, creates 

jobs, improves educational opportunities, and delivers health care more efficiently. 

Rural broadband funding programs should focus on bringing broadband to those 

rural consumers in areas where it is uneconomic to serve. 

Cable operators and other providers are investing millions of dollars to bring the 

most advanced services to rural customers, and to reach those unserved areas if 

they can with private investment dollars. As I said in my direct testimony, in the 

past 3 years, Suddenlink has invested $350 million above our normal capital spending levels to improve our network and our services. As a result, we provide speeds 

up to 107 Mbps to many of our customers, including customers in Ripley, WV (2010 

population 3,252) and Pomeroy, OH (2010 population 1,852). Another cable operator, 

Sjoberg’s Inc., has connected the schools in the Thief River Falls, MN area (pop. 

8400) with fiber links operated at 100 Mbps, as well as a 1 gb fiber-based network 

for the City of Warroad, MN (pop. 1300) that ties together the City Hall, Fire Department, Police Department and the Utility Department. Sjoberg’s, in fact, is building out to many low density areas within its footprint (less than five homes per mile 

of plant) with fiber-to-the-home technology and is providing 5, 8 and 11 Mbps 

speeds. 

As noted above, we acknowledge that there are areas which remain unserved, and 

where Federal and state subsidies may be needed to help provide broadband service.

Question 4. Were the three studies referenced in your testimony conducted by an 

independent group, or were they commissioned? How much of the reluctance for investment in broadband inferred by those studies is actually due to the uncertainties 

surrounding the FCC reform orders? 

Answer. As noted in my testimony, the studies were commissioned by NCTA but 

were conducted independently by Navigant Economics. The case studies demonstrate that millions of dollars in grants and loans have been directed to areas 

where a significant majority of households already have broadband coverage. According to the Navigant report, this has resulted in an exceedingly high cost of 

$30,104 per each incremental home passed in the studies 

The reluctance to serve remote areas is a function of economics, not regulatory 

policy. Unserved areas nearly always have a sparse population that is insufficient 

to support the costs of building and operating broadband facilities. Targeted and efficient government support is the most appropriate means of extending broadband 

to those areas. For example, the FCC is currently working on the Connect America 

Fund which targets USF support to help bring broadband to unserved households. 

USF reform and extending broadband service to unserved areas are fully compatible 

goals.

Question 5. Your testimony focuses on the issue of ‘overbuilding.’ Yet you do not 

distinguish whether the alleged existing service is directly comparable across examples, to the competing project, or even sufficient to meet the needs of the community. Could you please list for us each of the projects you feel were simply installing 

the exact type and speed of service on top of the same speed and area of service? 

What percentage would these be of all the broadband projects funded through RUS? 

Answer. By ‘‘overbuilding,’’ we mean government funding of an area where a 

wireline or terrestrial wireless provider already offers broadband service that meets 

or exceeds the FCC’s definition. Scarce taxpayer dollars should be put to work to 

extend broadband to areas that lack broadband service at those speeds, rather than 

subsidizing the construction or upgrade of an additional provider in an area that 

is already served. 

Additionally, because of the lack of transparency in the RUS Broadband Loan Program, we have a hard time determining the exact details of any of the overbuild 

projects and, thus, cannot determine what percentage of the RUS broadband 

projects primarily serve areas already served. It should be noted, however, that the 

2009 report by the Department of Agriculture Inspector General found that 34 of 

37 applications granted (95%) were for ‘‘areas where one or more private broadband 

providers already offered service.’’

Question 6. This Committee also expressed reservations with the way that the 

ARRA was implemented, though we hoped that rural America would benefit in spite 

of the rushed process. In your testimony, do you mean to compare the BIP projects 

funded under the ARRA directly to the loan program authorized in the farm bill? 

Answer. While BIP funding is separate from the loan program authorized under 

the farm bill, they are both implemented by RUS. RUS’s stewardship of BIP, like 

its implementation of the farm bill program, demonstrated a failure to target funding to unserved areas despite explicit direction to do so. Under both programs, many 

millions of dollars in grants and loans have been made in areas where a significant 

majority of households already have broadband coverage from one or more 

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broadband providers. This ongoing failure across multiple programs is why we believe that RUS must be given clear and unambiguous direction to ensure that 

broadband loan dollars are appropriately directed to areas that lack broadband service.

Question 7. You suggested that RUS borrowers post quarterly reports online. 

What information are you seeking through this concept? 

Answer. We believe that it is important to hold recipients of government support 

accountable for meeting the goals for which support was provided. There should be 

transparency after the RUS awards money to an applicant. Quarterly progress reports should detail the use of the funds (e.g., is the money actually being used to 

extend plant to unserved areas, or is it being directed at areas that already have 

a broadband provider; is the money being spent in the manner that was approved 

in the application?); status of the project; next steps; and timeframe of completion. 

If an entity accepts public funding, it should reasonably expect to have to provide 

full information about how those funds are being spent, even if such data would be 

considered proprietary by a privately-funded provider. Moreover, if support is targeted to unserved areas—as it should be—there should be few, if any, competitive 

concerns with respect to such disclosure. 

Response from Mark Bahnson, Chief Executive Officer and General Manager, Bloomingdale Communications; on Behalf of National Telecommunications Cooperative Association; Organization for the Promotion and Advancement of Small Telecommunications Companies; 

Western Telecommunications Alliance 

Questions Submitted By Hon. Timothy V. Johnson, a Representative in Congress 

from Illinois 

Question 1. You highlighted the fact that not all providers have the same focus, 

and in fact some cherry-pick the concentrated, easier to serve, and more lucrative 

areas. Does this approach fit into the model of ensuring broadband service is provided universally? 

Answer. No. Some opponents of the RUS telecommunication programs and USF 

point to their ability to provide broadband service without RUS loans or USF cost 

recovery. However, it’s important to note that these providers often fail to provide 

service to the most high-cost ‘‘last mile’’ households and businesses, focusing instead 

on the concentrated areas of a community or service area. This method of service 

fails to provide broadband ‘‘universally.’’ On the other hand, rural telecom providers 

often have carrier-of-last-resort obligations that require them to serve all customers 

in their service territory—not just the more densely populated, profitable towns and 

cities. 

Without carriers-of-last-resort reaching outside the towns with the help of this 

public-private partnership, there would be even more unserved consumers in rural 

America—and the challenge of achieving universal broadband would be greater than 

it already is. And if this public-private partnership is undermined, then small rural 

telcos may have no choice but to likewise abandon the ‘‘countryside’’ and retreat to 

serving just within the ‘‘in-town’’ boundaries too.

Question 2. There are several programs operated by USDA which can be used to 

deploy broadband and build community facilities to provide public access to the 

Internet. These include the Community Facilities Program and the Distance Learning and Telemedicine Program. Do you think that there is an opportunity in these 

programs to consolidate the authorities so that rural towns do not have to spend 

a great deal of time trying to sort through a maze of different programs? Are there 

other programs which could also be consolidated to reduce the confusion on where 

to apply? 

Answer. The presence of multiple USDA telecommunication programs—each offering unique features—ensures flexibility that might not otherwise be available under 

a more ‘‘one-size-fits-all’’ approach. For example, a remote, high-cost community 

with no broadband service might be best served with a Community Connect Program grant that makes available a community center with computer access points. 

However, another community without direct access to medical care may better benefit from Distance Learning and Telemedicine Program development funds to enhance their emergency service capabilities through telecommunications technology. 

For example, rural educational opportunities in Bloomingdale’s service territory 

have been greatly expanded because of a RUS Distance Learning grant, a RUS loan 

that supported high-speed Internet deployment to the school, and the USF E-Rate 

program, which helps schools ensure students have access to the Internet.

Question 3. Some of the testimony others presented seems to indicate that insufficient changes were made in the 2008 Farm Bill, although those assertions rely on 

1684

older OIG reports from the previous, 2002 Farm Bill. Given that the farm bill loan 

program has been stalled, do you believe there is sufficient information to make 

such a claim? 

Answer. No. Interim rules, which were required by programmatic changes to the 

Broadband Loan Program in the 2008 Farm Bill to better target resources, were not 

put in place until March 2011 (during which time no new loans were approved). 

Since that time, the FCC’s adoption and ongoing consideration of changes to USF 

have created regulatory uncertainty, dramatically reducing both the number of new 

Broadband Loan Program applications and RUS’s ability to finalize rules and evaluate and approve new loans. As a result, the Broadband Loan Program has been at 

almost a complete standstill since 2008. With virtually no new loan projects available to assess the results of the 2008 Farm Bill’s reforms, now is not the time to 

place new restrictions on the Broadband Loan Program. Though some providers that 

don’t typically serve rural areas want to dramatically restrict the program, it was 

inoperable for 3 years after the 2008 Farm Bill and has been frozen by regulatory 

uncertainty for the past year. Restoring regulatory certainty will enable this program to return to the successful track record it had as a public-private partnership.

Question 4. Just to clarify one of the points in your testimony, is it your view that 

putting a 75% threshold for unserved households would completely eliminate RUS’ 

ability to deploy broadband in our small, rural communities? 

Answer. Minimizing subsidized ‘‘overbuilds’’ in areas where broadband already exists should remain a top goal for RUS. However, the proposal to prevent RUS from 

loaning in any area where more than 25% of households already have access to 

broadband would likely dramatically reduce demand for the program and eliminate 

significant portions of the country from eligibility. Under such a scenario, a provider 

wishing to receive a loan to serve a rural area where 74 out of 100 people do not 

have access to broadband would not qualify for a loan. It should also be noted that 

in rural areas, such a population could be spread over miles and miles. Put another 

way, such a system could leave three rural residents ‘‘unserved’’ in near-perpetuity 

simply because one resident located miles away happens to be fortunate enough to 

receive some level of broadband. 

Eliminating the Broadband Loan Program, which provides loans that must be 

paid back to the Federal Government with interest, as an option to help provide 

service in such a situation is not the answer for households and businesses that remain unserved year after year and have no prospect for broadband service in sight. 

The concerns expressed around this issue have been loudly heard, and the Secretary 

of Agriculture’s discretion is an appropriate barometer for such decision making.

Question 5. Some of the testimony presented suggested that USDA adopt the FCC 

targets of 4 Mbps down and 1 Mbps up for broadband service speed. In your view, 

how would such a universal requirement affect USDA’s ability to deploy broadband 

in rural America? 

Answer. According to the FCC’s National Broadband Plan, 14 million people in 

seven million housing units do not have access to terrestrial broadband capable of 

download speeds of 4 Mbps, and that such housing units are more common in rural 

areas. Using the National Broadband Map’s Broadband Statistics Report, it has 

been pointed out that 98% of rural Americans (100% urban) have access to 

‘‘broadband’’ download speeds greater than 786 kbps, and some claim the loan programs are therefore no longer needed. However, the same report shows that only 

79.2% of rural Americans (99% urban) have access to speeds greater than 6 Mbps 

and only 70.8% rural (97.6% urban) have access to speeds greater than 10 Mbps, 

which are minimum download speeds more commonly considered necessary for rural 

areas to compete in the modern broadband world. Indeed, the FCC established a 

benchmark of 6 Mbps downstream and 1.5 Mbps upstream for broadband deployments in later years of CAF Phase II in the Final Order for USF reform released 

Nov. 18, 2011. 

RUS telecommunication programs provide up-front capital to build out to new customers and to upgrade networks. USF, by design, provides for cost recovery for the 

ongoing operation of the network and maintenance, and is at bottom intended to 

make sure that the prices consumers pay for service in rural areas are affordable—

that is, ‘‘reasonably comparable’’ to those in urban areas. RUS programs are also 

aimed at the efficient practice of ‘‘building it right the first time.’’ Rather than dispatching construction crews multiple times over many years at higher costs to handle repeated upgrades, the RUS programs encourage an approach to minimize the 

need for repeat construction efforts. Instead, these programs aim at ensuring that 

each network deployed (which is collateral for the loans provided) will retain the 

maximum value over its useable life. 

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USDA will play a crucial role in delivering faster broadband to more rural Americans, but the job will not be completed unless USF is targeted to provide the cost 

recovery essential to maintaining service. As of now, it does not appear that USF 

reform will result in the kind of support to small, rural providers that will be essential to delivering faster speeds. The FCC has decided to direct incremental support 

for broadband to the larger carriers that traditionally have not delivered broadband 

to their rural service areas. If the agency proceeds on this course and the gamble 

does not work, USDA lending alone will be insufficient for addressing the resultant 

gaps in service.

Question 6. You mentioned the maintenance and upgrading of systems. To what 

extent do investments in upgrades allow you to expand your coverage and service 

to unserved areas? 

Answer. If broadband is worth deploying to high cost rural areas then it is worth 

investing in upgrades to ensure that recipients are able to fully utilize the Internet 

and participate in modern global economy. Smart broadband deployments can help 

keep the cost of upgrades down. 

In order to provide broadband at a reasonable cost, the networks deployed today 

must be easily scalable to meet the broadband needs of tomorrow without significant 

additional investment. Much of the infrastructure of a wireline broadband network 

is in buried or aerial cable plant that has a twenty-year life, or longer. If a service 

provider were to construct a network that fails to meet the customer’s needs after 

only a few years, the cost to provide broadband would be considerably greater because a second network would have to be designed and built before the first network 

had reached the end of its economic life. In these instances, the network that appears to be the least expensive initially may be more expensive in the end because 

of upgrades or network replacements that must occur. 

Deploying broadband networks in areas of low customer density presents its own 

challenges, because the infrastructure cost per customer can be up to ten times 

greater than in urban areas. In rural areas it is especially important that the infrastructure deployed be easily scalable to meet the customer’s future broadband needs 

because the replacement cost is so high. 

Michael Copps (when he was the Acting FCC Chairman) recognized this when he 

said, ‘‘Bandwidth-intensive applications could very quickly become the norm in the 

U.S.—even in rural areas. Technologies that cannot be upgraded easily could make 

Internet applications less than 5 years from now look like the dial-up downloads of 

today.’’ (Federal Communications Commission, Bringing Broadband to Rural America: Report on a Rural Broadband Strategy, Michael J. Copps, Acting Chairman, 

May 22, 2009)

Question 7. You mentioned the disparity in speeds set by RUS and how that undermines the technology neutral responsibilities of RUS. Is it your view that there 

should be a universal goal for broadband speed, and should the actual speed match 

what providers advertise to customers, particularly during times of peak usage? 

Answer. We oppose a lesser speed standard for would-be borrowers who seek to 

deploy wireless networks. In the interim rules, RUS established the minimum rate 

of data transmission as 3 Mbps for mobile broadband and 5 Mbps for fixed 

broadband. Attaching a value and setting a lower data transmission requirement to 

mobile service is contrary to the technology neutrality statutory directive. As mentioned previously, if broadband is deployed in a scalable manner then the sky is the 

limit for speed, which is crucial given that it is hard to know what will be needed 

as more adopt broadband and use it for more complex applications and tasks. It is 

important that we don’t put a false ceiling on broadband capability. It is difficult 

to predict what broadband speeds will be required in the near future, but if the past 

is any guide, speed requirements will continue to increase dramatically and support 

mechanisms should reflect such networks demands. It is also important that providers deliver what they advertise, especially at peak hours, because anchor institutions, businesses, and individuals rely on carriers advertised speeds and plan accordingly.

Question 8. Could you describe how many of your members have accepted the responsibility of being the carrier of last resort to ensure every American has access 

to phone service which is now shifting into access to broadband service? How many 

of your members participate in the RUS broadband loan program? 

Answer. Nearly all of NTCA’s 570 member cooperatives and commercial companies utilize the Universal Service Fund and adhere to carrier-of-last-resort responsibilities to serve every American who requests service. Small, rural providers will 

continue this tradition of deploying the most advanced services available to rural 

America as long as support is available to help them recover reasonable costs of 

service. The carrier-of-last-resort requirement has been successful and is an essenVerDate 0ct 09 2002 12:54 Dec 11, 2012 Jkt 041481 PO 00000 Frm 00097 Fmt 6621 Sfmt 6621 I:\DOCS\112-30\74372.TXT BRIAN
1686

tial piece of the puzzle that ensures customers in rural telcos’ service territories 

have advanced communication services. Without such obligations to serve all customers, some providers will continue to ‘‘cherry-pick’’ only the most profitable households and businesses and leave less profitable areas behind. Many NTCA members 

have participated in the RUS broadband loan program. The only Broadband Loan 

recipient since the 2008 Farm Bill was an NTCA member. 

(1687)

FORMULATION OF THE 2012 FARM BILL 

(CONSERVATION PROGRAMS) 

THURSDAY, APRIL 26, 2012

HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON CONSERVATION, ENERGY, AND FORESTRY, 

COMMITTEE ON AGRICULTURE, 

Washington, D.C. 

The Subcommittee met, pursuant to call, at 9:32 a.m., in Room 

1300, Longworth House Office Building, Hon. Glenn Thompson 

[Chairman of the Subcommittee] presiding. 

Members present: Representatives Thompson, Goodlatte, 

Stutzman, Gibbs, Roby, Huelskamp, Hultgren, Ribble, Schrader, 

Owens, McIntyre, Costa, Walz, Pingree, Sablan, and Peterson (ex 

officio). 

Staff present: Brent Blevins, Tamara Hinton, Josh Maxwell, 

John Porter, Patricia Straughn, Lauren Sturgeon, Suzanne Watson, John Konya, Merrick Munday, Anne Simmons, Jamie Mitchell, 

and Caleb Crosswhite. 

OPENING STATEMENT OF HON. GLENN THOMPSON, A 

REPRESENTATIVE IN CONGRESS FROM PENNSYLVANIA 

The CHAIRMAN. Good morning, everyone. This hearing of the 

Subcommittee on Conservation, Energy, and Forestry to discuss 

the conservation programs in advance of the 2012 Farm Bill will 

come to order. I will start out with my opening statement. 

Once again, good morning and welcome. I want to welcome everyone to this Conservation, Energy, and Forestry Subcommittee 

hearing to examine the conservation programs in the context of the 

2012 Farm Bill. Now we began the information gathering process 

for the next farm bill 2 years ago, and since then, we have conducted 11 audit hearings, and four nationwide field hearings to 

look for ways to improve agriculture programs for farmers and increase efficiency. 

In the audit hearing conducted by this Subcommittee, we discussed more than 20 conservation programs administered by 

USDA, and identified areas of duplication and overlap. In our field 

hearings, we heard time and time again from farmers and ranchers 

across the nation about the importance of conservation programs to 

their livelihoods. 

Now this week we began the next series of hearings on the Subcommittee level to gather input from national agricultural leaders 

and stakeholders. We know that voluntary conservation programs 

are critical in assisting producers in land management decisions 

1688

and implementing conservation practices, and in many cases, conservation programs are lifelines for farmers. 

Our farmers and ranchers, through the assistance and incentives 

provided by the farm bill conservation programs, have voluntarily 

worked to reduce soil erosion, increase wetlands, improve water 

quality, and preserve farmland and wildlife habitat. The environmental gains that they have achieved are a testament to our producers, who are truly the most dedicated conservationists. 

The conservation programs have grown significantly in size and 

scope since the 1985 Farm Bill. The 2002 Farm Bill raised conservation spending by $17 billion over 10 years, which was an 80 

percent increase. Congress increased the commitment to important 

programs like the Conservation Reserve Program and the Environmental Quality Incentives Program, while also creating new programs like the Conservation Stewardship Program to increase participation in conservation practices. Then the 2008 Farm Bill 

strengthened the conservation title with an additional commitment 

of $4 billion over 10 years. It includes new regional and cooperative 

partnership programs as well as the reauthorization and increased 

spending of current programs. Additionally, the 2008 Farm Bill created new conservation programs aimed at enhancing cooperation 

among producers and conservation organizations. Now these programs have helped support conservation initiatives in areas such 

as the Chesapeake Bay watershed, which has great importance to 

the farmers and ranchers in Pennsylvania and throughout the MidAtlantic region. 

We had an easier time improving conservation programs in our 

last two farm bills when we could afford to increase spending. 

Today, this Committee is faced with a very different budget situation. Last fall as a part of the proposed Deficit Reduction Agreement, the House and Senate Agriculture Committees worked together to develop a proposal for the Super Committee. We put forward a proposal that streamlined program delivery in many areas, 

and included the consolidation of numerous programs, including 

several under the conservation title. While the Super Committee 

failed to reach agreement, the Agriculture Committees showed that 

they could work together to do their part. I, for one, believe the agriculture community deserves a farm bill that develops—that is developed through regular order. Regular order provides a more thorough process to really get it right when it comes to prioritizing conservation programs that are working and streamlining any programs with overlapping missions and goals. 

Today, not only will the Agriculture Committee have to do our 

part within the overall deficit situation, but as all of us know, we 

have dozens of programs, including many under the conservation 

title, with no baseline past 2012. 

The Senate put forward its draft today, its proposal for the farm 

bill last week, which is slated to be marked up today, and it utilizes many of the ideas produced during the Subcommittee process. 

It would reduce spending by approximately $6.5 billion over 10 

years. As we move forward, it is important that when we find these 

savings, we must maintain our ability to provide the same level of 

on the ground service to our farmers and ranchers, and that is why 

we are here today, to hear your perspective on various proposals 

1689

being considered as we move forward on the House side with reauthorization. 

When it comes to the farm bill, which is really the most significant piece in defining public policy to guide agriculture, for me, it 

comes down to three principles that we have enjoyed in this country and we need to make sure we preserve into the future: that 

America always has the most affordable, highest quality, and safest 

food supply anywhere in the world. 

Now I would like to thank all of our witnesses for being here 

today. I want to extend a warm welcome to a resident of Pennsylvania’s 5th District who is going to be on our second panel, Mr. 

Carl Homan, fifth generation dairy farmer from Centre County, 

and I really appreciate, Mr. Homan, your participation here today. 

He has extensive experience utilizing Title II programs and will—

certainly will offer his thoughts on how we should move forward. 

I look forward to the testimony of all the witnesses. My sincere 

appreciation to each one of you coming and bringing your expertise 

and your experience to help us in developing a sound farm bill, 

going forward. 

[The prepared statement of Mr. Thompson follows:]

PREPARED STATEMENT OF HON. GLENN THOMPSON, A REPRESENTATIVE IN CONGRESS

FROM PENNSYLVANIA

Good morning. I want to welcome everyone to this Conservation, Energy, and Forestry Subcommittee hearing to examine farm bill conservation programs. 

We began the information gathering process for the next farm bill 2 years ago. 

Since then, we have conducted 11 audits of farm programs and four nationwide field 

hearings. 

In the audit hearing conducted by this Subcommittee, we discussed more than 20 

conservation programs administered by USDA and identified areas of duplication 

and overlap. 

In our field hearings, we heard time and again from farmers and ranchers across 

the country about the importance of conservation programs to their livelihoods. 

Today, we’re here to discuss how to move forward. We are eager to hear your perspective on ways we can streamline and consolidate conservation programs to better 

serve you. 

We know that voluntary conservation programs work. 

Our farmers and ranchers, through the assistance and incentives provided by 

farm bill conservation programs, have voluntarily worked to help reduce soil erosion, increase wetlands, improve water quality, and preserve farmland and wildlife 

habitat. 

The environmental gains they have achieved are a testament to our producers, 

who truly are the most dedicated conservationists. 

Conservation programs have grown significantly in size and scope since the 1985 

Farm Bill. 

The 2002 Farm Bill raised conservation spending by $17 billion over 10 years, 

which was an 80% increase. 

Congress increased the commitment to important programs like CRP and EQIP 

while also creating new programs like CSP to increase participation in conserving 

practices. 

Then the 2008 Farm Bill strengthened the conservation title with an additional 

commitment of $4 billion over 10 years. 

It included new regional and cooperative partnership programs as well as the reauthorization and increased spending of current programs. 

Additionally, the 2008 Farm Bill created new conservation programs aimed at enhancing cooperation among producers and conservation organizations. 

That helps target conservation initiatives in areas such as the Chesapeake Bay 

watershed, which has great importance to the farmers and ranchers in Pennsylvania. 

We had an easier time improving conservation programs in our last two farm 

bills, when we could afford to increase spending. 

1690

However, as we work towards the next bill, this Committee will be faced with a 

very different budget situation. 

Not only will the Agriculture Committee have to do our part within the overall 

deficit situation, but as all of us know, we have dozens of programs with no baselines, many under the umbrella of conservation. 

This farm bill gives the Committee an excellent opportunity to prioritize conservation programs that are working and streamline any programs with overlapping missions and goals. 

We, as a Committee, will examine how to consolidate the current conservation 

programs so that conservation dollars can be utilized more efficiently. 

We started that effort last fall, when the House and Senate Agriculture Committees worked together to develop a proposal for the Super Committee. 

Had the Super Committee succeeded, we would have put forward a proposal that 

included the consolidation of several programs and streamlined program delivery. 

The Senate put forward its draft proposal last week, and it utilizes many of the 

ideas produced during the Super Committee process. It would reduce spending by 

approximately $6.5 billion over 10 years. 

It’s important that when we find these savings, we maintain our ability to provide 

the same level of on-the-ground-service to our farmers and ranchers. 

I believe we are up to that task. 

I’d like to thank all of our witnesses for being here today. I look forward to hearing your thoughts on streamlining programs today. 

I want to extend a warm welcome to a resident of Pennsylvania’s 5th district on 

the second panel. 

Mr. Carl Homan is a fifth generation farmer from Centre County. 

He has extensive experience utilizing Title II programs and will offer his thoughts 

for how we should move forward. 

I look forward to your testimony and thank you for driving down here to share 

your experience.

The CHAIRMAN. And with this, I now yield to the Ranking Member of the full Agriculture Committee, Mr. Peterson, for an opening 

statement. 

OPENING STATEMENT OF HON. COLLIN C. PETERSON, A 

REPRESENTATIVE IN CONGRESS FROM MINNESOTA 

Mr. PETERSON. Thank you, Mr. Chairman, and I want to also 

thank the witnesses and thank you for having this hearing today. 

The conservation provisions that we put in the Super Committee 

bill, in spite of the fact that we had to reduce spending, I think 

there is a general consensus that we did a pretty good job in putting that together. It appears to be the basis for what we are going 

to do here moving ahead. But I would like to focus, if I could, on 

some issues that are important to me, and that I think need to be 

focused on or understood in the context of what we are doing here. 

A lot of it revolves around the CRP program where I see a number 

of our witnesses have testimony today about some of them completely contrary to each other. 

But first of all, we recognize, given what is going on in the economics of agriculture and the way rental rates have gone up, land 

prices have gone up, that land is going to come out of CRP, and 

it is coming out of CRP. And I would argue that we are doing a 

pretty good job of sorting out what should be out and what should 

be in as we go through the process of these sign ups. We hope half 

the acres that are coming out are going back in. In other words, 

we are losing—6 million acres come out, we are probably going to 

get 3 million acres back. So we are going to end up at 25 million 

acres, which is what was in the Super Committee bill at some 

point, here in the next few years. 

1691

You know, these land prices and rental rates, as Mr. Greenspan 

said, we have some kind of exuberance going on in agriculture. I 

don’t think it is going to cause the kind of bubble that we had at 

other times when it burst, but clearly, these prices and rental rates 

are, in many cases you cannot justify what is going on. But the 

neighbors are looking at the people that are coming to them and 

offering them a lot of money to break up their CRP. And so I drive 

around my district and I cannot—I have never seen anything like 

what is going on right now. The land that is being broke up—land 

that should not be farmed is being broke up. All of the tree lines 

are being taken out, all of the old homesteads are being bulldozed 

down. If you don’t think things are changing, they are, and this is 

going on all over the country. 

So I would argue that—and I have seen somebody in the testimony said that we should freeze rental rates. I think we should 

raise the rental rates. I think they are out of whack from what reality is today, and the rental rates in CRP are about 25 percent of 

what the rent is for farmland. Now the Secretary moved to raise 

the rental rates on continuous, which is fine, but you know, the 

pressure is on the big tract CRP. And I worked very hard to get 

wildlife benefits as one of the criteria for CRP, and I will guarantee 

you, if we lose this big tract CRP, we are going to lose the wildlife 

benefits that we have developed in this country. You know, you are 

not going to raise the kind of ducks and pheasants and deer and 

turkeys on just the filter strips. You need big tract CRP to spread 

out these predators, give the wildlife a chance to survive, and that 

has to be part of what we do, going forward. 

So we have to focus on this as and get this right. With the 

haying and grazing there have been some improvements there, but 

frankly, this land needs to be managed. You know, there is no reason that you can’t run cattle on this land, and it does more good 

for the wildlife and for the land than not running cattle on it. You 

know, we still have penalties if you allow for haying and grazing, 

which I don’t think makes any sense. 

Another thing that is still in the law that needs to be focused on 

is a holdover from 1985, and at that time it was not a conservation 

program. When CRP was started, it was to reduce production, to 

get lands out of production. We had too much production and the 

prices had collapsed, so it was about getting land out of production. 

So there is still a prohibition against being able to sign up CRP 

that it was not in the program. And so we have a lot of land in 

my district that should be in CRP that can’t get in, that can’t go 

into the general sign up because it doesn’t have base acres. You 

know, that is something that needs to go away. It is no longer relevant to what is going on in this day and age, and we are keeping 

land out of CRP that should be in. I know of two tracts that have 

been broken up so that they can plant them into soybeans for 2 

years so they can then get them into CRP. You know, this is—these 

things we need to fix in this bill this year. 

The other thing we need to fix is what we tried to do in 2008, 

and that is the sod buster situation, and I am glad to see there is 

an amendment in the Senate, or I guess it is in the manager’s 

amendment to include something very similar to what we put in 

in the 2008 bill in the House on sodsaver. You know, we need to 

1692

get that done. We have land being broken up that has never been 

broken. They are dragging up rocks bigger than a house out of 

these things. This is land that should not be farmed, and we are 

allowing the crop insurance system to provide a backstop for these 

people to do this. They know they can break up this land and the 

crop insurance is going to cover them, even if they don’t get a crop, 

and most of them know they aren’t going to get a crop. 

So I hope that we can focus on some of these real issues and not 

get off on this ideology about well, we have to take every CRP acre 

in the country out so we can have cheap corn. You know, that is 

a short-sighted policy, and you know, I understand that people 

liked it when we had $2 corn. You know, it made it easier for the 

livestock industry, but, we never had $2 corn. There wasn’t any 

farmer that could grow corn for $2. The reason we had $2 corn was 

because we subsidized it, and what really stuck out, is that we got 

blamed, our corn farmers, for the subsidies, but actually the livestock people got the benefit. So ethanol changed all that and now 

we have a more market-driven system, but we shouldn’t throw the 

baby out with the bathwater. This thing is stabilizing. We are 

going to have corn coming down in price over the next number of 

years. We should not destroy this CRP system that we put together 

that brought back the wildlife in this country, just because of some 

short-term spike in corn prices. 

So now that I have vented, I will yield back. I am sure I don’t 

have any time left. Thank you, Mr. Chairman. 

[The prepared statement of Mr. Peterson follows:]

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

CONGRESS FROM MINNESOTA

Good morning. Thank you Chairman Thompson and Ranking Member Holden for 

holding today’s hearing. 

The current farm bill expires in September and I am pleased that the Committee 

is continuing the reauthorization process with today’s hearing. 

Conservation programs play an important role in preserving our natural resources 

and provide producers with the necessary tools to meet regulatory requirements. In 

this budget environment, it is especially important to ensure that current conservation programs are operating as efficiently as possible. 

I do believe that there are some areas of the conservation title that can be 

changed to both achieve savings and better reflect what’s needed on the ground. 

One example is helping to ensure that CRP lands are available for grazing and 

other economic uses. This is what we tried to achieve last fall through the Super 

Committee process and I am pleased to see the Senate act in a similar fashion. 

One issue that has recently been brought up is conservation compliance. I think 

that simply re-linking compliance to crop insurance could potentially cause more 

problems than it would solve. I’m interested in hearing our witnesses’ opinions on 

the issue, particularly how we would administer the program because, given the 

budget cuts the Department has been forced to take, I’m not sure RMA or FSA or 

NRCS have the resources that would be needed to handle the increased workload. 

An issue that is of particular importance to me, that I’m hopeful can be addressed 

in the next bill is regional flooding issues. I think that there are conservation programs currently in place both within the farm bill and outside of it that can be used 

to build up water retention sites and address flood control problems in areas of the 

country like the Red River Valley. Taking proactive steps now can save taxpayers 

money down the road after flood damage occurs. 

Again, I thank the Chair for holding today’s hearing and look forward to hearing 

from our witnesses.

The CHAIRMAN. I thank the Ranking Member. The chair would 

like to request that other Members submit their opening stateVerDate 0ct 09 2002 12:54 Dec 11, 2012 Jkt 041481 PO 00000 Frm 00104 Fmt 6601 Sfmt 6601 I:\DOCS\112-30\74372.TXT BRIAN
1693

ments for the record so the witnesses may begin their testimony 

and to ensure that there is ample time for questions.

PREPARED STATEMENT OF HON. MARTHA ROBY, A REPRESENTATIVE IN CONGRESS

FROM ALABAMA

Mr. Chairman. I want to first thank the witnesses for testifying here today on 

the importance of conservation and offering changes to the various programs. The 

conservation title of the farm bill has been vital in assisting our farmers in being 

better stewards of their land—helping with technical assistance and other financial 

assistance. 

As many of you know, going into the next farm bill, we are faced with extreme 

fiscal constraints. We on this Committee need to make very difficult decisions in 

finding billions of dollars in savings while ensuring the decisions we make are the 

most effective, efficient and allows farmers do what they do best—farm. 

Whether we are talking about nutrition, conservation or safety nets, this Committee will need to make decisions with as much information as possible and I 

thank all of the witnesses being here today to help us in this process. 

During my travels around my district and in meetings with my Agriculture Advisory Board, I have heard concerns over the Conservation Reserve Program. A significant portion of productive farmland in my district is land rented by farmers. 

Over the years, these farmers—many of them who themselves are or have enrolled 

in CRP and other conservation programs—have seen landowners decide to enter 

their land into CRP rather than continue renting the productive land to farmers. 

This has been making it more difficult for the farmers to maintain their farms, as 

well as, the ability for new and young farmers to find productive land to rent for 

production. 

Out of these conversations, last year I introduced H.R. 3454, the Preserving Marginal Land and Protecting Farming Act. This legislation would incrementally reduce 

the acres of land enrolled in CRP down from the authorized 32 million acres to 24 

million acres by 2017. Additionally, it would make class I or class II land under the 

land capability classification system no longer eligible to be enter into CRP. Approximately 6.9 million acres of land enrolled in CRP is class II land. 

I am not up here to argue that CRP is not a valuable program. CRP is an important program to ensure that marginal and highly erodible land—some land that 

should probably never been farmed in the first place—is taken out of farming. However, the intent of the program was not to compete against a farmer for access to 

highly productive land. At time that the Federal Government is looking for savings, 

one way is to ensure that the land in CRP is the land that the program originally 

intended to target. 

My approach would save billions of dollars and ensure that the program is going 

after environmentally sensitive land. I appreciate that a number of the witnesses 

today have considered this and other changes to CRP that would save billions in 

taxpayer dollars, ensure that only the most sensitive land is protected, and that 

needed productive farmland is available to farmers. 

Chairman Thompson, thank you for holding this hearing and I look forward to 

working with you in the future on this and other issues as we move forward with 

drafting a farm bill.

The CHAIRMAN. Welcome to our first panel of witnesses who are 

seated here. Before I do introductions and we get started, just a reminder, the lighting system in front of you, we ask you to limit 

your—we have your—be assured that each of us have had in hand 

your written testimony, and so for your verbal testimony please 

limit it to 5 minutes. The lights are meant as a reminder of that. 

When you hit the yellow light, you will have approximately 1 

minute left. If you are like me, you need that cue, and when it hits 

red, 5 minutes is complete and we ask that you finish up at that 

point so we can leave lots of time for great exchange with questions 

as we go forward. 

I want to welcome our first panel. Joining us we have Mr. Gene 

Schmidt, President of the National Association of Conservation Districts. We have Mr. Jon Scholl, President of the American Farmland Trust; Mr. Patrick O’Toole, President of the Family Farm AlliVerDate 0ct 09 2002 12:54 Dec 11, 2012 Jkt 041481 PO 00000 Frm 00105 Fmt 6601 Sfmt 6601 I:\DOCS\112-30\74372.TXT BRIAN
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ance; Mr. David Nomsen, Vice President of Pheasants Forever; Mr. 

Garry Niemeyer, President of the National Corn Growers Association. Thank you all, and Mr. Schmidt, please begin when you are 

ready. 

STATEMENT OF GENE SCHMIDT, PRESIDENT, NATIONAL

ASSOCIATION OF CONSERVATION DISTRICTS, WASHINGTON, 

D.C. 

Mr. SCHMIDT. Thank you, Chairman Thompson, Ranking Member Peterson, and Members of the Committee, and special thank 

you, Chairman Thompson, for your opening remarks on the benefits we have made in conservation, but also the needs that we have 

going into the future, and thank you for your perspective on that. 

On behalf of the National Association of Conservation Districts 

that has some 3,000 member districts across the country, I thank 

you for the opportunity to be here today and speak for them. 

As you stated, I do currently serve as the President of the National Association of Conservation Districts. My wife and I own and 

operate a commercial seed business in northwest Indiana, where 

we farm 1,500 acres of seed corn, beans, and wheat. We use a variety of conservation practices on our farm, including minimum till, 

strip till, no-till, cover crops, stream buffers and windbreaks, and 

I truly know the firsthand value of those conservation practices 

and necessity for strong conservation on the land. 

About 2 weeks ago, as you folks are aware, more than 100 tornadoes swept across the Plains. Within the last year, we faced extreme flooding in the Mississippi and Missouri Rivers, among others, affecting thousands of producers and private landowners. We 

also, not so long ago, witnessed extreme wildfires in Arizona, New 

Mexico, and Texas. Last year, the Great Plains and the South suffered a record drought, requiring emergency haying and grazing, as 

you mentioned, on CRP lands. And although we experienced major 

weather conditions, extreme weather conditions, we did not see the 

reoccurrence of the Dust Bowl that we saw back in the 1930s. 

Why? Because we have implemented many conservation practices, 

programs that help mitigate the risks associated with these extreme weather events. 

Conservation programs provide a strong risk management tool, 

mitigating many times the risks that are put on producers, landowners, home owners, and local communities throughout this country. 

Conservation districts are the delivery system set up in the 

1930s to be the gatekeepers of private working lands. Districts are 

the local authority to provide resource support for delivery, to bring 

partnerships and coalitions together, and in doing so, over the 

years we have helped to restore and maintain the most precious resources. 

While we understand the current economic climate, we must also 

acknowledge the investing and putting conservation on the ground. 

Investment in conservation simply makes sense. Producers are already faced with the challenge of doing more with less. Conservation is a tool that is available to every producer. Not only do farm 

bill conservation programs play a role in supporting clean air, clean 

water, and productive soils, they also help producers implement 

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conservation practices through voluntary incentive-based methods, 

rather than through a top down regulatory approach, as well as 

support our nation’s long-term economic and food security. These 

programs can include developing a strong conservation plan for better accountability for Federal dollars spent, and streamlining the 

conservation program participation processes to allow for quicker 

and easier accessibility for producers and landowners. 

That is why we support the Senate framework for Title II in the 

2012 Farm Bill. We fully recognize the need to get our nation’s financial house in order, and we understand that means cuts to farm 

bill programs. We are extremely pleased the Committee’s leadership has come with a strong, balanced plan that fairly recognizes 

the critical value of locally led conservation on the landscape. We 

are in a situation where additional cuts to conservation programs 

above the $6 billion outlined in the Senate’s version of Title II 

would put the very viability of these programs at risk. Congress 

needs to determine whether conservation and protection of our natural resources of today is more important than the escalated costs 

that we would receive as a repair of those conditions later. It is an 

old adage that goes like this, ‘‘An ounce of prevention is worth a 

pound of cure.’’

In light of the budget situation, NACD supports consolidation of 

programs as an important goal of the conservation title, and Chief 

White’s delivery streamlining system. Farm bill conservation programs should be resource driven and locally led. The program delivery must be tailored to the natural resource needs in the state 

and local areas. Local conservation districts, local boards, and state 

technical committees help provide for that asset. 

As we look into consolidation, we must be careful not to lose the 

critical functions that help complete the cycle of resource needs on 

the land. 

Further decreasing the funding, the implementation of the farm 

bill programs would be an additional challenge. The technical assistance is critical in ensuring farm bill programs and for the implementation and accountability. 

In conclusion, the farm bill programs show a track record of success. Every dollar spent has seen return. Because of the 2008 Farm 

Bill and previous ones you stated, we have had successes. As a producer, I use many of these programs in my own operation and 

know firsthand the tremendous value and return on investment 

that they bring to producers across this country. 

Thank you for the opportunity to address the folks on the Committee. 

[The prepared statement of Mr. Schmidt follows:]

PREPARED STATEMENT OF GENE SCHMIDT, PRESIDENT, NATIONAL ASSOCIATION OF

CONSERVATION DISTRICTS, WASHINGTON, D.C. 

Good morning, Chairman Thompson, Ranking Member Holden, and Members of 

the Subcommittee. On behalf of the National Association of Conservation Districts 

and our 3,000 member districts across the country, I thank you for the opportunity 

to be here today. 

As you know, I currently serve as President of NACD. My wife and I own a farm 

and seed business in Hanna, Indiana, where we farm 1,500 acres of seed corn, seed 

beans, and wheat. We use a variety of conservation practices on our land, including 

minimum till, no-till, cover crops, stream buffers and windbreaks. I know firsthand 

the value—and the necessity—of strong conservation on the land. 

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Two weeks ago, more than 100 tornadoes swept across the plains. Within the last 

year we have faced extreme flooding along the Mississippi and Missouri Rivers—

among others—affecting thousands of producers and private landowners, and we 

also witnessed extreme wildfires in Arizona, New Mexico, and Texas. Last year, the 

Great Plains and South suffered a record drought, requiring emergency haying and 

grazing on CRP land; and although we experienced extreme weather conditions, we 

did not see a reoccurrence of the Dust Bowl. Why? Because we have implemented 

many conservation practices that mitigate the risks associated with extreme weather. Conservation programs provide a strong risk management tool—mitigating risk 

for producers, landowners, homeowners and local communities. 

Conservation Districts are the delivery system set up in the 1930’s to be the gate 

keepers of private working lands. Districts are the local authority to set work priorities, help producers implement practices with accountability, provide resource support for delivery, and bring partnerships and coalitions together. In doing so, we 

have sustained our most precious resources. 

While we understand the current economic climate, we must also acknowledge the 

investment of putting conservation on the ground. Investing in conservation simply 

makes sense. Producers are already faced with the challenge of doing more with 

less, and conservation is a tool that is available to every producer. Not only do farm 

bill conservation programs play a key role in supporting clean air, clean water and 

productive soils, they also help producers implement conservation practices through 

voluntary, incentive-based methods—rather than through a top-down regulatory approach—as well as support our nation’s long-term economic and food security. These 

programs can include developing a strong conservation plan for better accountability 

of Federal dollars spent and streamlining the conservation-program participation 

processes to allow for quicker and easier accessibility for producers and landowners. 

That is why we support the Senate Framework for Title II in the 2012 Farm Bill. 

We fully recognize the need to get our nation’s financial house in order, and we understand that means cuts to farm bill programs. We’re extremely pleased that Committee leadership has come up with a strong, balanced plan that fairly recognizes 

the critical value of locally-led conservation at the landscape scale. We are in a situation where additional cuts to conservation programs, above the $6 billion outlined 

in the Senate’s version of Title II, will put the very viability of these programs at 

risk. Congress needs to determine whether conservation and protection of natural 

resources today is more important than the escalated costs of repair in the future. 

It’s as the old adage goes, an ounce of prevention is worth a pound of cure. 

In light of the budget situation, NACD supports consolidation of programs as an 

important goal of the conservation title, and Chief White’s Conservation Delivery 

Streamlining Initiative in the field. Individual, private landowners will benefit from 

streamlining when programs are easier to access and manage. Farm bill conservation programs should be resource-driven and locally-led with sufficient flexibility to 

direct funding to local priorities and concerns. Program delivery must be tailored 

to the natural resource needs in the states and local areas. Local Conservation District Boards, Local Work Groups and State Technical Committees must help identify 

local needs, apply limited financial assistance, and maximize conservation benefits. 

As we look at consolidation, we must be careful not to lose any of the critical program functions that help complete the cycle of resource needs on the land. For example, consolidation includes farm bill easement programs. Easements retain working lands which over time include the operation and maintenance components that 

fee simple acquisitions do not. We must assure that the easement programs are 

maintained to provide for protection of our farmland, wetlands, and highly erodible 

soils. The easement programs provide a ‘‘buffer effect’’ to land use change, which 

occur on many fronts of our society as the population grows and more demand is 

put on our natural resources. Thus, easements effectively secure the natural resources, being protected by conservation practices, to achieve economic and environmental benefits for future generations. 

With any further decreases in funding, the implementation of farm bill programs 

would be an additional challenge. Technical assistance is critical to ensuring farm 

bill programs are implemented with accountability. Technical assistance dollars will 

be more important than ever to ensure we have adequate capabilities to get conservation delivered. For example, we have completed successful work achieving 

water quality in watersheds across the country, from the East in the Chesapeake 

to the North in Lake Erie to the West in Oregon. By using Technical Assistance, 

we help producers implement practices such as using cover crops and conservation 

tillage to reduce soil erosion and runoff. Having a conservation plan in place allows 

each producer to look at his resource needs in order to address the bigger picture 

of resource needs. 

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In conclusion, these farm bill programs show a track record of success, and every 

dollar spent has seen a return. Because of the 2008 Farm Bill, we are better prepared to meet future resource needs, and we must continue to fund these programs. 

As some have referenced, we think the conservation title may be the hallmark of 

the 2012 Farm Bill. As a producer, I have used many of these programs on my own 

operation and know first-hand the tremendous value and return on investment they 

bring to the producer and even more importantly, to society. 

This concludes my testimony. Thank you, again, for allowing me the opportunity 

to be here today. I am happy to answer any questions you may have.

The CHAIRMAN. Thank you, Mr. Schmidt. 

Mr. Scholl, go ahead and proceed when you are ready for 5 minutes. 

STATEMENT OF JON SCHOLL, PRESIDENT, AMERICAN 

FARMLAND TRUST, WASHINGTON, D.C. 

Mr. SCHOLL. My name is Jon Scholl. I am the President of the 

American Farmland Trust. We spent the last 30 years working at 

the intersection of agriculture and the environment. We work to 

protect farmland from unsound farming practices, and keep farmers on the land. Before joining AFT, I had the privilege of serving 

4 years as the ag counselor to the EPA Administrator in the last 

Bush Administration. Before that, I worked 25 years for the Illinois 

Farm Bureau in a variety of capacities, but throughout my entire 

career, I am very proud to say that I have lived on and been a partner in a family farming operation in McLean County, Illinois. 

Our farmers and ranchers face great pressure to produce food, 

fiber, and fuel while maintaining healthy soils, protecting water 

quality, and providing wildlife habitat. Rapidly rising world food 

demand creates incredible economic opportunity for agriculture, 

but it also makes it even more imperative for us to address the conservation challenges we face here at home. 

In light of these challenges, I offer five key points. First, funding 

for conservation is critical. The need and demand for assistance is 

so great that in any other situation, I would be asking for more 

money for these programs, as I am sure many of us would. Four 

out of every ten applications for EQIP are rejected for lack of funding. The Farm and Ranch Land Protection Program has a whole 

year of projects waiting to be funded. But in spite of this and in 

light of the critical budget challenges our nation faces, we believe 

effective conservation solutions can still be provided with the $6 

billion in cuts called for last fall by the Super Committee, as well 

as the recently released proposal from Senators Stabenow and Roberts. 

Second, we urge support for our Farm and Ranch Land Protection Easement Program. We have lost 23 million acres of farmland 

to development between 1982 and 2007, an area the size of Indiana, yet we are expected to produce more food than ever before. 

Permanent conservation easements protect agricultural land from 

development, safeguard local agriculture economies, and help farmers and ranchers transition their land to the next generation. We 

support the creation of a Consolidated Working Lands Easement 

Program to take over the functions of the Farm and Ranch Land 

Protection Program, and the Grasslands Reserve Program. However, it is important that the working lands easement option remain distinct from easements that seek to retire fragile land from 

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production. The Agricultural Conservation Easement Program created in the Senate proposal is an excellent model for this. 

Third, we support the new Regional Conservation Partnership 

Program contained in the Senate proposal. This program gives 

local producers and conservationists a tool to come together to address natural resource concerns. It is also competitive and meritbased, which means that the resources will go where they can do 

the most good. This model represents a huge leap forward in how 

conservation is delivered, allowing us to be very strategic in spending our limited conservation dollars. 

Fourth, we believe that EQIP and CSP provide distinct benefits 

and must remain separate programs. EQIP assists with individual 

practices. CSP helps farmers and ranchers take additional steps 

needed to achieve a high level of conservation performance on the 

whole farm. We propose enhancing CSP by increasing its focus on 

local conservation priorities, tightening the eligibility requirements, 

and tying program benefits to measurable conservation performance. 

Fifth, we believe conservation compliance should continue to be 

attached to the centerpiece of the farm safety net as it has been 

in the past. Given the likely changes in the safety net, this means 

reattaching it to the crop insurance premiums support. The Economic Research Service has reported that in the last 25 years, conservation compliance has reduced annual soil erosion on our most 

vulnerable soils by 40 percent. Another ERS analysis shows that 

if we act now, very few additional farmers would come under the 

compliance provisions with their reattachment to crop insurance. 

RMA and crop insurance agents would not have new burdens. 

Compliance works. It needs to remain an important component of 

the new farm safety net. 

We must not lose ground, either on our farms and ranches, or 

our farm policy. I applaud your efforts to craft a conservation title 

that will help to assure our resource base is protected and meet the 

growing need for food, fiber, fuel, and in a time of tightening budget constraints. Your work is important. We are prepared to help 

you meet our common challenges. 

Thank you. 

[The prepared statement of Mr. Scholl follows:]

PREPARED STATEMENT OF JON SCHOLL, PRESIDENT, AMERICAN FARMLAND TRUST, WASHINGTON, D.C. 

Good morning,

Chairman Thompson, Ranking Member Holden and other Members of the Committee, thank you for inviting me to testify today. My name is Jon Scholl. I am the 

President of American Farmland Trust, which is headquartered in Washington, DC. 

I am also a partner in a family farm in McLean County, Illinois. 

American Farmland Trust is an organization that has for the last thirty years 

worked at the intersection of agriculture and the environment. We work to protect 

farmland and promote sound stewardship while keeping farms and ranches economically viable. Before joining American Farmland Trust, I had the privilege of 

serving for 4 years as the Agricultural Policy Counselor to the Administrator of the 

United States Environmental Protection Agency during the Administration of 

George W. Bush. Before that, I worked at the Illinois Farm Bureau for 25 years in 

a variety of capacities. 

I want to start by thanking Chairman Lucas and Ranking Member Peterson, as 

well as Subcommittee Chairman Thompson and Ranking Member Holden, for taking the initiative to work on the farm bill this year in the midst of all the partisanVerDate 0ct 09 2002 12:54 Dec 11, 2012 Jkt 041481 PO 00000 Frm 00110 Fmt 6601 Sfmt 6621 I:\DOCS\112-30\74372.TXT BRIAN
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ship and budget challenges here in Washington. I look forward to working with you 

to pass a farm bill this year, because we all know that the budget situation will 

likely be worse if we are forced to wait a year. 

As someone involved in my family’s farm operation, a former EPA agricultural appointee, and the President of American Farmland Trust, I have seen the benefit of 

the farm bill conservation programs from many different angles. These programs 

are critically important tools for meeting the conservation challenges that we face. 

Having spent my life in agriculture, I know that farmers and ranchers across this 

country feel increasing environmental pressure as concerns mount over threats to 

soil, water quality, air quality, and wildlife. This pressure is coming not just from 

regulators, but from citizens and, increasingly, the corporations to whom we sell our 

products. At the same time, I know that farmers and ranchers have a deep regard 

for the land and take their responsibility as stewards very seriously. The farm bill 

conservation programs are the key bridge between this stewardship ethic and the 

pressures that farmers face. They are the ‘‘fair deal’’ between producers and the rest 

of society, where both parties contribute resources and both benefit, whether from 

greater resilience and efficiency on the farm or from abundant natural resources 

and a cleaner environment. In a world where we try to solve most environmental 

problems through regulations, these programs are voluntary and incentive-based. 

They work for farmers, which means that they also work for the environment. 

Between the conservation programs, conservation compliance, and independent efforts, farmers and ranchers have already made big conservation gains. They reduced 

soil erosion by 40 percent between 1982 and 1997. They retired over 30 million of 

their most sensitive acres, turning them over to native plantings that provide wildlife habitat and build healthy soils. And they reduced losses of nitrogen and phosphorous by a fifth to a half in the Upper Mississippi River Basin and the Chesapeake Bay Region. Benefits in other areas of the country will be disclosed in future 

USDA reports. 

Nevertheless, there is much more work to be done. Indeed, the U.S. Department 

of Agriculture indicates that the agriculture sector is the largest source of nutrient 

loading in the country’s impaired rivers and lakes and a major source of air pollutants like ammonia, nitrous oxide, and methane. Agriculture is also the source of 

seven percent of U.S. greenhouse gas emissions. According to USDA, 62 percent of 

the cropped acres in the Upper Mississippi River Basin require additional conservation treatment, and 15 percent are ‘‘critically under-treated.’’ In the Chesapeake 

Bay, 80 percent need treatment and 19 percent are critically under-treated. These 

numbers are not just abstract figures; they are a threat to the strength and resilience of American agriculture. Farm and ranch production depends on natural resources like healthy soil and abundant, clean water. 

At the same time, world food demand is exploding. By 2050, the world will hold 

2.3 billion more people. Incomes will rise, leading to more demand for meat and 

dairy products. World consumers will require over a billion more tons of grain and 

200 million more tons of meat. Overall, food production will have to increase by 

70%. This astonishing rise in demand represents an opportunity for agriculture as 

an industry, but it will also intensify pressure on natural resources. 

Clearly, if we are going to maintain a thriving agriculture sector, continue to protect our natural resources, and provide the food security that is so central to our 

national security, we must have a strong conservation title in the next farm bill. 

We cannot lose ground. This will be a challenge given the budget constraints that 

we face, but we at American Farmland Trust have some proposals that can help 

achieve that goal. We developed these proposals through workshops with farmers 

and ranchers from across the United States and extensive research. 

Funding 

Adequate funding is critical to the success of the conservation programs. However, 

given the budget environment, we believe that the funding level established in the 

Agriculture Committees’ recommendations to the Super Committee is a fair deal. 

This proposal limited the conservation title cut to roughly $6 billion, or ten percent 

of the 10 year baseline, and the Senate’s draft bill does the same. I urge the House 

Agriculture Committee to hold the line on this funding level. 

The need and demand for the conservation programs is so great that in any other 

situation I would be telling you that we need more money. We have a great suite 

of conservation programs in place to deliver that assistance, but the funding is 

never adequate to meet the demand.. For example, four out of every ten applications 

for EQIP assistance had to be rejected for lack of funding in FY 2010. The Farm 

and Ranch Land Protection Program has a backlog of a whole year of projects waiting for funding. Producers are waiting to enroll hundreds of thousands of acres in 

the Wetlands Reserve Program and Grassland Reserve Program, and millions of 

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acres in the Conservation Stewardship Program. When farmers and ranchers are 

lined up to do the right thing for their operations and for the environment, and they 

are making a substantial investment of their own money, Congress should be willing to help. I know that you have difficult decisions to make, but I urge you to keep 

these important factors in mind when making your funding decisions. 

Farmland Protection 

One of the most important functions the conservation title plays is to protect farm 

and ranch land from development and ensure that it is available for productive agriculture. The need is great. Our country lost 23 million acres of farmland to development between 1982 and 2007, an area the size of Indiana, yet we are expected to 

produce more food, fiber and fuel than ever before. Every minute of every day, more 

than an acre of farm and ranch land is lost to agriculture forever. 

Luckily, there is a solution: the permanent protection of farm and ranch land. As 

of July 2011, state and local government farmland protection programs in 30 states 

had collectively protected over 2.5 million acres of agricultural land, with help from 

Federal programs. In addition, this mechanism has been shown to help facilitate the 

transfer of farms to the next generation within farm families, to enable beginning 

farmers to access land at an affordable price, to support local economic development 

activity and to encourage investments by farm-based businesses in farm communities stabilized with protected farmland. 

Today, both the Farm and Ranch Land Protection Program (FRPP) and the Grassland Reserve Program (GRP) contribute to the permanent protection of farm and 

ranch land. Since its creation is 1996, FRPP has helped state and local governments 

and private partners in the land trust community protect over 810,000 acres of valuable agricultural lands. Since FRPP works through local partnerships that leverage 

state, local, and private funds, FRPP projects have leveraged nearly two non-Federal dollars for every Federal dollar spent. In addition, the local entities handle the 

lion’s share of the administrative duties involved in completing projects. 

Given the budget situation and the call for simpler conservation programs, we 

support the creation of a consolidated working lands easement structure to take 

over the functions of FRPP and GRP. We believe this will reduce bureaucracy and 

make the system easier for farmers and ranchers to use. Both the Super Committee 

proposal and the Senate draft bill include an Agricultural Land Easement (ALE) option that would achieve this goal. 

Any new consolidated easement structure must reflect the core principles that 

American Farmland Trust has advocated for over many years. We call them the 

Three P’s: purpose, permanence and partnerships. First, the purpose must be to protect working lands and keep them working. Second, all easements must be permanent. And finally, the easements must work through local partnerships that provide 

flexibility and leverage non-Federal funds. As part of the partnership structure, we 

feel it is important that local entities be required to contribute some cash matching 

funds to ensure that they have skin in the game. The draft Senate bill’s ALE program embodies these principles and I urge this Committee to follow this tried-andtrue formula as you put together your easement package. 

The Three P’s are noteworthy in part because they distinguish working land easements from the other main easement program in the conservation title, the Wetlands Reserve Program (WRP). WRP retires land from production rather than protecting working lands, includes term easements as well as permanent easements, 

and operates in a top-down manner with the Natural Resources Conservation Service (NRCS) executing the transaction directly with the landowner, rather than 

through state and local partners. While we strongly support WRP and recognize 

that there is a desire to consolidate all of the easement options into one program, 

we believe that it is critical that any consolidation proposal reflect these key differences. The Senate’s proposed Agricultural Conservation Easement Program 

achieves this differentiation nicely. 

Another feature that will help working land easements be efficient and effective 

is a certification process for partners. This will allow highly experienced partners 

to carry out farmland protection work with fewer bureaucratic requirements from 

NRCS, including less frequent updates of the partner’s formal agreement with the 

agency. This process reflects the reality that some state and local entities have been 

engaged in farmland protection work longer than USDA and have sophisticated programs that are tailored to local needs. Certification ensures effective oversight with 

the minimum regulatory burden. Both current law and the Senate’s draft bill include a provision for a certification process for partners, and I encourage the House 

to do the same. 

I urge the Committee to provide robust funding for a consolidated working lands 

easement option in your final bill. In addition, if you choose to consolidate working 

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lands easements and wetlands easements under one umbrella, there must be a firewall between the funding for the two options. We support the structures in the 

Super Committee proposal and the draft Senate bill, which achieved this firewall 

while also allowing some level of flexibility within individual states. 

Strategic Conservation 

One of the best opportunities we have to advance conservation in spite of tight 

budgets is to adopt what we call ‘‘strategic conservation.’’ Historically, our conservation delivery system has been designed to provide assistance to anyone who signed 

up as a cooperator. This has done a great job getting a base of conservation on the 

land, but when you measure it against the significant challenges we face as an industry, it can amount to what NRCS Chief Dave White calls ‘‘random acts of conservation.’’ Prior farm bills have started a move to more strategic conservation 

through programs like the Cooperative Conservation and Partnership Initiative 

(CCPI) and the Agricultural Water Enhancement Program (AWEP). We need to continue that move in the coming farm bill. 

Strategic conservation is founded on the basic principle that all acres are not created equal. Conservation challenges are concentrated in particular parts of the landscape. For instance, some fields are more prone to runoff than others, some watersheds have more acute water quality problems, and some regions contain more 

threatened wildlife habitat. We need to have a mechanism to concentrate our efforts 

in these areas and get a critical mass of conservation on the ground. This strategic 

approach will help us to really move the needle on our most critical conservation 

challenges, which in turn will help stave off or beat back regulation and demonstrate to the public that agriculture is improving the environment. 

Past efforts to focus on critical areas have been derailed when it seemed that bureaucrats were making arbitrary decisions as to which areas were important and 

which were not. This is why we support a bottom-up model where local stakeholder 

partnerships identify a conservation challenge and apply through a merit-based system to receive NRCS assistance in addressing it. 

One of the most important benefits of strategic conservation is that producers can 

be involved in driving the effort. Farmers and ranchers know best what works on 

their land and, with technical assistance support, how to implement it most effectively. Involving them up-front in a strategic initiative with a clearly defined goal 

can help the initiative succeed by improving participation and developing win-win 

solutions. For instance, the success of the NRCS Sage Grouse Initiative is due in 

part to the leadership of local ranchers, who saw the production benefits of improving wildlife habitat. 

AFT has had success leading a CCPI project to reduce nitrogen losses in the 

Upper Salt Fork Watershed in Champaign County, Illinois. This project has significantly raised awareness of the issue and used targeted approaches to increase adoption of innovative practices that retain nitrogen fertilizer on farmland, including 

split fertilizer applications. Local farmers and conservationists alike have praised 

the partnership-based project structure. 

Strategic conservation can do a lot for the cost-effectiveness of conservation. For 

instance, according to USDA, conservation efforts in the Upper Mississippi River 

Basin would be four-to-five times more effective at stopping per-acre phosphorous, 

nitrogen and sediment losses, if they were applied to the right acres. This shows 

in stark terms just how effective it is to focus conservation efforts on ‘‘critically 

under-treated acres.’’ By conducting scientific assessments at the beginning of the 

effort, strategic conservation efforts can identify these critical acres and direct financial and technical assistance to the producers who manage them. This simultaneously helps the farmers who are most in need and maximizes environmental benefits from our limited conservation dollars. 

Finally, strategic conservation can strengthen the current conservation delivery 

model by enabling partnerships among diverse stakeholders. Partnerships are critical to the success of efforts that involve a wide variety of interests and that cross 

political jurisdictions, as many resource concerns do. They can improve outreach and 

engagement, bring additional resources to the table, break down administrative barriers that would otherwise exist, and extend the life of the project beyond the day 

when the Federal funding dries up. 

The 2012 Farm Bill must enshrine strategic conservation as an essential tool in 

the conservation toolbox and outline standards and procedures to ensure effectiveness and accountability. In order to be most effective, individual projects should be 

able to draw on each of the core conservation programs—working lands, easements, 

and land retirement—so that they always have access to the right tool for the job. 

To ensure that the strategic conservation model demonstrates its worth and maintains the support of agricultural producers and taxpayers alike, we propose that 

1702

every project should be required to collect outcomes data and provide public reports 

on their achievements. The Super Committee proposal and the draft Senate bill both 

included a Regional Conservation Partnership Program that fits this model, and I 

urge this Committee to include a similar structure in your bill. 

The potential benefits of strategic conservation are so great that we would support 

devoting up to 20% of the mandatory funding for the core conservation programs 

to this approach. This would reserve the majority of conservation funding for producers across the landscape, while making a bold investment to help solve the most 

vexing conservation challenges that we face. 

Conservation Stewardship Program 

We strongly support the Conservation Stewardship Program (CSP) because we believe it plays a unique role in the suite of conservation programs. In light of budget 

constraints, CSP’s distinctive aspects must be accentuated to ensure that it complements the Environmental Quality Incentives Program, and steps must be taken 

to ensure that CSP is delivering the maximum additional benefits with every contract. 

CSP’s unique features include:

(1) Whole-Farm Systems: CSP requires producers to enroll their entire operations and focuses on management-based conservation systems that apply to 

the entire production system, not single practices for individual areas of the 

farm.

(2) Five-to-Ten-Year Contracts: CSP contracts last for 5 years with the possibility of renewal for another 5 years, as opposed to EQIP contracts, which finish 

when the conservation practice has been applied. This enables adoption of more 

complex conservation systems.

(3) Baseline Performance: Producers must have attained a ‘‘stewardship threshold’’ of conservation for at least one resource concern prior to enrolling in the 

program, which gives producers an incentive to apply basic conservation, either 

through EQIP or independently, in order to gain acceptance into CSP.

(4) Minimum Performance Requirement: Producers must attain the stewardship 

threshold for at least one priority resource concern by the end of their contract 

term. This focuses the program on the most important local problems and gives 

producers a target to shoot for.

(5) Performance Measurement: Acceptance into the program and level of payments are based on the additional conservation performance that producers 

commit to achieve over the life of their contract. This represents the beginning 

of a much-needed paradigm shift in the conservation programs, from focusing 

on the ‘‘outputs’’ that program can achieve, such as acres of practices or miles 

of fence, to focusing on the actual conservation ‘‘outcomes’’ that deliver real benefits for the land.

Given these unique benefits of CSP, we believe that EQIP and CSP must remain 

separate, rather than being merged. The distinctions between them are too great. 

However, it is imperative that EQIP and CSP be coordinated so that producers are 

not confused and each program can specialize and excel in its own objectives. We 

believe that the following proposed changes would make CSP both more distinct 

from EQIP and more complementary of it. Our three main program changes—

strengthening the focus on priority micro-resource concerns, improving additionality, 

and continuing the move towards pay-for-performance conservation—make it clear 

that CSP is focused on helping farmers and ranchers take additional steps to achieve 

a high level of conservation performance on a whole-farm basis. EQIP remains the 

go-to program for addressing discrete conservation challenges on an operation and 

implementing a basic level of conservation. 

First, we propose that the program ranking criteria be modified to strengthen the 

focus on local conservation priorities. Currently, NRCS State Conservationists select 

3–5 priority macro-resource concerns, out of a total of eight, to focus on in the different regions of their state. These macro-resource concerns are relatively blunt instruments: Soil Erosion, Soil Quality, Water Quantity, Water Quality, Air Quality, 

Plants, Animals, and Energy. We recommend that State Conservationists instead be 

required to select 5–6 priority micro-resource concerns out of a total of 28. Microresource concerns are much more detailed. Examples include gully erosion, soil salinity, insufficient water, nutrient loss, airborne soil particulates, and terrestrial 

wildlife. Prioritizing at this finer level would significantly strengthen the program’s 

focus on the most pressing concerns, yet allow flexibility as priorities change from 

year to year. It would more precisely reflect the challenges in each CSP sub-state 

ranking area and provide a greater measure of local control. 

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Second, steps must be taken to increase the amount of additional conservation 

performance producers are required to achieve during their contracts. Most importantly, the eligibility requirements should be modified. Currently, the eligibility requirements for initial contracts only require producers to address one priority 

macro-resource concern to the stewardship threshold by the end of the contract period. We recommend that producers be required to achieve the threshold level for 

two priority macro-resource concerns. In addition, the contract ranking factors 

should be tweaked to ensure that new conservation performance is weighted more 

highly than existing performance. Finally, eligibility requirements for CSP contract 

renewals must be increased to ensure that producers are providing significant additional conservation benefits through their renewed contracts. 

Finally, CSP must continue to advance toward measuring producers’ actual conservation performance. This presents a technical challenge for NRCS, and must be 

balanced against concerns for user-friendliness, but it would greatly improve the 

program’s cost-effectiveness, allow more sophisticated application ranking, and help 

demonstrate the program’s public benefits. 

Conservation Reserve Program 

The Conservation Reserve Program (CRP) has been the subject of much debate 

recently, in light of high commodity and land prices. We do not presume to know 

the right number of total acres for this program. However, we do believe that it is 

possible to adapt the CRP for today’s circumstances. In a nutshell, we believe that 

CRP must be focused on retiring the most fragile land. There are currently 6–7 million acres of highly productive land in the program, mostly as a result of the practice of enrolling whole fields. Going forward, we believe that whole field parcels in 

diverse landscapes should be split in order to enroll the more sensitive areas while 

allowing the productive areas to be farmed. This would increase the overall benefits 

per CRP acre while integrating it more seamlessly into the working agricultural 

landscape. 

Conservation Loan 

I want to briefly mention another powerful tool for stretching conservation dollars: 

the Conservation Loan Program that was included in the 2008 Farm Bill. While it 

is located in the credit title, this provision must be considered as part of the suite 

of conservation programs. 

The Conservation Loan Program offers a huge bang for the buck. Its budget cost 

is near zero yet it yields $150 million in loans for implementing conservation practices based on an approved conservation plan. These loans help producers access upfront capital for large conservation investments and allow them to amortize the cost. 

Conservation loans must be fully repaid. 

This program could be strengthened by revising the current statute to allow 

USDA to guarantee up to 90 percent of the loan principal amount, rather than 75 

percent. This would bring conservation loans in line with other USDA loan programs. In addition, the program must maintain its current balance between direct 

loans and guaranteed loans. The vast majority of conservation loans currently are 

direct loans through the Farm Services Agency. However, the Office of Management 

and Budget is pushing to offer only guaranteed loans. We believe that producers 

should have the option to either seek a guaranteed loan through a private lending 

source or to apply for a direct loan through USDA. 

Technical assistance 

One method of improving the cost-effectiveness of the conservation programs that 

is often overlooked is to provide adequate technical assistance (TA). TA is the 

science-based process of assessing resource concerns, educating producers about options for addressing them, and designing conservation plans that fit smoothly within 

a farm operation. TA helps ensure that producers apply fully functioning conservation practices, reducing the likelihood that a buffer strip erodes or an animal waste 

lagoon leaks. Producers often cite TA as the most important factor influencing their 

adoption of conservation measures. In many cases, excellent TA can render financial 

assistance unnecessary. 

The growth of the conservation programs over the past few farm bills has severely 

stretched NRCS’s TA resources. We have three proposals to address this concern:

(1) Align Mandatory TA funding with Producer Needs: Currently, the funding 

for technical assistance from mandatory farm bill programs is only available 

after a contract is signed. This is too late in the planning process. The trigger 

for charging NRCS technical assistance to mandatory conservation programs 

should be earlier in the conservation planning process, if the producer’s statement of objectives includes obtaining farm bill conservation program assistance.

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(2) Leverage Private Resources: The use of third party technical service providers can augment NRCS resources by providing certified soil and water conservation professionals to assist producers plan and implement conservation 

practices in locations where the workload exceeds the capacity of local field offices.

(3) Focus TA Resources on Critical Areas: NRCS must be enabled to focus field 

staff to address high-priority resource concerns in order to achieve more intensive planning, outreach and implementation on those concerns. 

Conservation Compliance 

I have laid out a number of changes that we believe can strengthen the conservation title programs and make them more cost-effective. There is one additional conservation provision that is highly effective, voluntary, and doesn’t add to the Federal 

budget: conservation compliance. Conservation compliance is an important good-government provision. It ensures that we are not paying producers out of one hand to 

take actions that will negatively impact natural resources, while also paying them 

out of the other hand to implement conservation practices. It only applies to producers who choose to accept certain USDA program payments. Under conservation 

compliance, these producers must agree to implement basic conservation measures 

that protect soil on highly erodible lands and must refrain from draining wetlands 

for crop production. 

Our modest proposal is that this system, which has applied to commodity support 

payments and other programs since 1985, and which applied to the crop insurance 

premium subsidies until 1996, be reattached to crop insurance premium subsidies 

going forward. This has recently become a contentious issue. To my mind the controversy is needless and shortsighted. I would like to offer three main points for consideration on the subject. 

First, conservation compliance is a highly effective tool in protecting soil and wetlands. The USDA Economic Research Service has reported that in the past 25 years, 

conservation compliance has reduced annual erosion on our most vulnerable soils by 

40%. That comes out to 295 million tons of soil saved annually—enough to cover 

the National Mall from the steps of the Lincoln Memorial to the steps of the Capitol, 

at twice the height of the Washington monument. In addition, in that same time 

period we’ve gone from losing tens of thousands of acres of wetlands on farms every 

year, to actually gaining wetlands. Conservation compliance has been a major factor 

in achieving the goal of no-net-loss of wetlands on farms. In short, compliance 

works. 

Second, we are at risk of losing ground on compliance. It appears that subsidized 

crop insurance is on track to become the centerpiece of the farm safety net as Direct 

Payments go away. Since crop insurance is not covered by conservation compliance, 

this may significantly reduce the incentive for farmers to continue following their 

conservation compliance plans—putting soil and wetlands in jeopardy. To be clear, 

compliance would still apply to the conservation programs, disaster payments, loans 

and the new Title I, but if it is not applied to the core of the safety net, its effectiveness will be greatly diminished. 

Third, conservation compliance should be integral to the new farm safety net, no 

matter how it’s configured. Since 1985, compliance has been a successful part of 

farm policy, helping to justify spending taxpayer dollars on commodity programs 

and giving farmers an additional incentive to protect the long-term productive capacity of their land. This arrangement needs to continue into the future. As crop 

insurance becomes the focal point of the future safety net, we need to assure that 

it carries the same responsibility farmers have become accustomed to with farm programs of the past. 

I believe compliance represents a covenant between farmers and society. It is reasonable for society to expect a basic level of stewardship to be applied in exchange 

for programs that help provide some measure of economic stability on the farm. I 

know farmers know it’s the right thing to do, despite the political debate this issue 

gets caught in here in Washington, D.C. 

The good news is that if we make this change today, we will spare farmers from 

difficult changes. They will not face new administrative headaches. They will still 

be able to purchase their crop insurance, get their bank loans, farm their land and 

receive crop insurance indemnities, just like they do now. If a farmer is found to 

be out of compliance at any point, and they exhaust the 1 year grace period without 

coming back into compliance, they would merely lose eligibility for the Federal crop 

insurance premium subsidy. Their crop insurance coverage would not go away—and 

neither would their loans or their indemnities—just the subsidy, and just until they 

come back into compliance. And just to be very clear, no farmer will ever be kicked 

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out of compliance because of a big rainstorm—the program already has a clear exemption for extreme weather. 

If we act now, very few additional farmers would be subject to conservation compliance. The impact would be limited to, at most, five percent of wheat production, 

two percent of corn and soybean production, and less than one percent of cotton and 

rice production. 

The crop insurance industry also will not face major new headaches. With better 

than 80% participation and a significant reinvestment in the coming farm bill, crop 

insurance enrollments are not likely to be in jeopardy. Crop insurance agents would 

not do any enforcement. NRCS and FSA would spot-check and enforce just like they 

do now under farm commodity programs. 

Conservation compliance is a proven, effective conservation tool and a key accountability measure to help ensure taxpayer support for the farm safety net. It 

only makes sense that it should be attached to the primary safety net program, as 

it has been in the past. 

Conclusion 

As the Members of this Committee well know, our country is richly blessed with 

abundant natural resources, most of which are on private farms and ranches. When 

producers and the public cooperate, we can do a lot to safeguard the productive capacity of our farm and ranch land and ensure abundant natural resources for all. 

The farm bill conservation title is the opportunity for agricultural producers to come 

together with their fellow taxpayers to address the challenges ahead and lay a 

strong foundation for the future of agriculture. Again, we cannot afford to lose 

ground. 

The Agriculture Committees’ recommendations to the Super Committee and the 

draft Senate bill both contain many excellent conservation provisions. I am confident that this Committee will be able to build on these efforts to craft a robust 

conservation title, despite the budget challenges. 

Thank you, Mr. Chairman, for the opportunity to share our views on these important issues. I would be happy to address any questions you have. 

* * * * *

American Farmland Trust is the nation’s leading conservation organization dedicated to saving America’s farm and ranch land, promoting environmentally sound 

farming practices and supporting a sustainable future for farms. Since its founding 

in 1980 by a group of farmers and citizens concerned about the rapid loss of farmland to development, AFT has helped save millions of acres of farmland from development and led the way for the adoption of conservation practices on millions more.

The CHAIRMAN. Thank you, Mr. Scholl. 

Mr. O’Toole, go ahead and proceed with your 5 minutes. 

STATEMENT OF PATRICK O’TOOLE, PRESIDENT, FAMILY FARM 

ALLIANCE, WASHINGTON, D.C. 

Mr. O’TOOLE. Thank you, Mr. Chairman, Ranking Member Peterson, and Members of the Committee. It is a great opportunity 

for me to be here. I am President of the Family Farm Alliance. We 

represent farmers and ranchers that irrigate in the 16 western 

states. 

Water is the bottom line for us. We work with the Bureau of Reclamation. Bureau of Reclamation irrigators are our members. 

We think that the conservation title of the farm bill is a critical 

part of our future, and in the West, I appreciate the comments of 

Mr. Peterson on what is working in his district, and it is so interesting in this country how differentiated the 100th Meridian where 

rainfall is more prodigious than other areas, but water is the bottom line for all of us. Whether it be climate-driven, changes in how 

rainfall comes—last year we had the wettest year in our history. 

In 1881 our ranch started. We have been there 130 years. Last 

year was the wettest year we ever had. This year is the driest. 

What I will tell you in this farm bill, we are moving in a future 

where there are clearly less dollars going to be available to impleVerDate 0ct 09 2002 12:54 Dec 11, 2012 Jkt 041481 PO 00000 Frm 00117 Fmt 6601 Sfmt 6601 I:\DOCS\112-30\74372.TXT BRIAN
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ment programs. You all know that. We know that. What we need 

is flexibility. I use the word nimble. We have to be able to understand that farmers are the ultimate adjusters. We adjust ourselves, 

we—Family Farm Alliance wrote a paper 6 years ago about climate. We were some of the first ones to talk about the issue, and 

what we need is adaptability, and we need a Federal Government 

that understands that adaptability so that we can react to whatever that climate reality is. 

So I would tell you that Family Farm Alliance was involved in 

the last farm bill. We worked on a program called AWEP, the Agriculture Watershed Enhancement Program. There is magic going 

on, I can tell you specifically, in the West. I call it the Islands of 

Renaissance that are happening all over the western part of the 

United States, and it is because farmers, ranchers, conservationists 

have gotten together to understand the critical needs of working together. We have a directive from every part of the Federal Government, whether it be the State Department or whether it be international agencies telling us we have to produce more food. We have 

to do that in the context of conservation. 

Our ranch has sort of a motto that there is no intrinsic contradiction between conservation and production if we are smart enough 

to do both, yet it is going to be the programs that come through 

with—in our minds and in the Family Farm Alliance experience, 

much more on the ground relationships where devolvement of some 

of the responsibilities that come out of D.C. need be much more 

state-driven and much more local. So I think that is our message. 

One of the other messages that I was asked at a conference recently, what are the things that make you wake up in the middle 

of the night, and the number one priority for the Family Farm Alliance is the fact that we do not have enough young people in agriculture. I think this Committee is cognizant of that, and we have 

to make a real effort to realize that we have to have more young 

people. The numbers of eight percent of farmers are under 36 years 

of age, that just isn’t, in our minds, sustainable. 

I come from a district in southern Wyoming and northern Colorado conservation district, and I don’t know how Mr. Schmidt 

ranks his membership of conservation districts, but we think ours 

is one of the most successful. We have the largest river restoration 

in the United States within our CS. We have a project with Trout 

Unlimited on fish passage and endangered species issues that is 

phenomenally successful. The message that came to me as I came 

back here to talk to you was that it is that local component, that 

ability to leverage dollars. And what is happening in these Islands 

of Renaissance that I talk about is not just the Federal dollars. The 

Federal dollars are leveraged dollars for other dollars, and it is so 

critically important and why we emphasize the AWEP program 

and that it be done in a way so that entire irrigation districts, entire conservation districts, can participate, leveraging the dollars in 

a much more efficient way. 

I thought on one other thing that is very recent in terms of what 

wakes me up in the middle of the night, and we have had such success with our river restoration. I call it the integration of irrigation 

and fishery. I went out the other day to check on some cows that 

we are calving, and I looked up over this area that is filled with 

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endangered fish, and there was a whole rookery of great blue herons. Those herons are now benefitting from the tremendous work 

we have done on the fishery, maybe to the expense of some of the 

fishery. So, everything is a balance, but what I would like to just 

express to you one more time is that—make these programs as 

local as possible and as flexible as possible, and give farmers the 

chance—farmers and ranchers the chance to improvise on the reality of the future that we are going to be looking at. 

Thank you so much for this opportunity. 

[The prepared statement of Mr. O’Toole follows:]

PREPARED STATEMENT OF PATRICK O’TOOLE, PRESIDENT, FAMILY FARM ALLIANCE, 

WASHINGTON, D.C. 

Good morning, Chairman Thompson, Ranking Member Holden, and Members of 

the Committee. My name is Patrick O’Toole, and I serve as President of the Family 

Farm Alliance (Alliance). I am honored to be here today to discuss farm bill conservation programs and the challenges and opportunities facing western farmers 

and ranchers who depend upon adequate water supplies that irrigate the arid West. 

The Alliance is a grassroots organization of family farmers, ranchers, irrigation 

districts and allied industries in 16 western states. The Alliance is focused on one 

mission: To ensure the availability of reliable, affordable irrigation water supplies 

to western farmers and ranchers. We are also committed to the fundamental proposition that western irrigated agriculture must be preserved and protected for a host 

of economic, sociological, environmental and national security reasons—many of 

which are often overlooked in the context of other Federal policy decisions. 

Today, irrigated agriculture in the American west faces some of the most vexing 

and complex challenges in addressing crucial water quantity and quality issues. 

Water is the lifeblood of irrigated agriculture in the West, and the ever growing 

competing demands for water many times outstrips the available supply, setting up 

conflict between farmers and cities, the environment and even between other farmers over limited and uncertain irrigation water supplies. Given the increasing importance of growing a safe, stable supply of abundant food for this nation and the 

world, we must continue to manage and protect these limited water supplies necessary to adequately and efficiently irrigate western crops so important to meeting 

this goal. And, through the conservation programs authorized by the farm bill, necessary water and natural resource conservation and management tools and partnerships are made available to farmers and ranchers that can help them to successfully 

meet these challenges. 

The future of American agriculture may very well hinge on policy decisions your 

Subcommittee and the Committee on Agriculture will address in the coming 

months. The Alliance believes that, by utilizing the examples of successful American 

food and fiber producers, private landowners, and on-the-ground conservation practitioners, your Subcommittee has a unique opportunity to make farm bill title II programs more effective, more efficient, and more user-friendly. This is especially important now, with the tough budget times we are facing and will continue to face 

in the near future. 

The Alliance supports incentive-driven conservation programs, more local and 

state control of the funding for those programs, increased emphasis on deteriorating 

forested watersheds, and streamlined implementation. We have specific recommendations on how to improve the Agricultural Watershed Enhancement Program (AWEP). And we are concerned that over half of today’s active farmers and 

ranchers are between 45 and 64 years old. We must find ways to encourage young 

farmers and ranchers to stay with agriculture, and farm bill conservation programs 

that can be tailored to help achieve that goal. 

We believe the practical experience of our membership, coupled with the many agricultural water and natural resource policy issues our organization has been involved with over the past several years gives us a unique perspective to provide specific ideas on how conservation programs can be delivered more efficiently and encourage more participation from western farmers and ranchers. On behalf of the Alliance, I urge you to consider the recommendations included in this testimony to 

achieve this goal. 

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Introduction 

The most important policy for keeping farms and ranches intact and healthy, 

while providing the environmental protections sought by society is a strong economy. Farm bill conservation programs fill an essential niche in maintaining a strong 

quality of life in the rural West. For more than 75 years, American taxpayers have 

invested in conservation through the farm bill. These investments in private lands 

and waters have delivered cost-effective benefits far beyond the property lines of 

farmers and ranchers, extending robust returns for every taxpayer who buys food 

at the market, enjoys fresh air and clean water, and recreates in the great outdoors. 

These returns include significantly improved fish and wildlife habitat, improved air, 

soil and water quality, ensured long-term productivity of our agricultural lands, increased outdoor recreational opportunities, and increased financial returns for rural 

communities. 

Rural America faces unprecedented challenges to its competitiveness in crop production and its sustainability as a steward of natural resources and wildlife habitat. 

Funding provided by Natural Resource Conservation Service (NRCS) programs is leveraged many times over with a multitude of private, state and other Federal funding sources—a model of programmatic efficiency. Yet, the real power of farm bill 

conservation programs has proven to be the ‘‘boots on the ground’’ ability to fully 

realize the potential for innovative and non-traditional partnerships. Such partnerships have yielded measurable and practical results shown to enhance competitiveness and bolster sustainability. 

‘‘Western Water Management Case Studies’’

The Family Farm Alliance played an active role in the development of the last 

farm bill’s conservation title. In particular, working with a diverse coalition of commodity groups, conservation organizations, and urban water users, we helped develop the framework that ultimately became the Agricultural Water Enhancement 

Program (AWEP). In 2010, we released a report (Western Water Management Case 

Studies) that describes a dozen real-world examples of water conservation, water 

transfers and markets, aging water management infrastructure problems, and watershed restoration and enhancement projects. An important objective of this report 

was to demonstrate that water managers, ranchers and farmers are resourceful and 

creative individuals who should play an active role in resolving the water conflicts 

of the West. My testimony today incorporates some of the ‘‘lessons learned’’ from 

that report and touches on other matters critical to the future of western farmers 

and ranchers’ ability to provide food, fiber and energy to our nation and the world. 

Observations and Recommendations on Water Conservation Programs 

In the western U.S., we need policies that encourage agricultural producers to 

work together with each other and with many applicable Federal and state agencies 

in a strategic, coordinated fashion. This is especially true now more than ever before 

due to the limited financial resources of the Federal Government and the need to 

continue to effectively and efficiently protect our limited natural resources so important to this nation’s food productivity. We have prepared the following observations 

and associated recommendations that we would like to see incorporated into the 

next farm bill. 

Concerns with AWEP 

AWEP is a newly-established part of the Environmental Quality Incentives Program (EQIP), a program administered by the Natural Resources Conservation Service (NRCS). The main difference between typical EQIP projects and AWEP projects 

is that applications for project funding are made directly to the U.S. Secretary of 

Agriculture from an organization on behalf of a group of agricultural producers who 

intend to make water conservation improvements in a geographic area. 

The Family Farm Alliance was part of a diverse coalition formed during the 

crafting of the last farm bill that focused exclusively on the development of the 

AWEP concept. Our primary motive for engaging in this process was to provide additional funding opportunities for irrigation districts and other agricultural water 

delivery and management organizations to solve aging infrastructure and water conservation challenges in a more coordinated and effective manner. The original concept behind AWEP was to focus on cooperative approaches to enhancing water 

quantity and/or quality on a regional scale. This new program—in tandem with multiple conservation tools (including farmland management practices, easement purchases, and ecosystem restoration assistance)—was intended to provide flexibility to 

cooperative nontraditional conservation partners to achieve improved water quantity 

and quality goals. 

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Some of our members have witnessed firsthand the types of challenges that 

AWEP advocates were trying to address. For example, the 2002 Farm Bill contained 

$50 million of EQIP funding to implement water conservation measures in the 

Klamath Basin of northern California and southern Oregon. These Federal funds 

were matched by $12.5 million of local money from individual landowners. While the 

water conservation measures undertaken undoubtedly contributed to improved 

water use efficiency on individual farms, the EQIP program was not designed to coordinate conservation benefits to meet specific regional goals, such as conserving 

water for storage and future use. Irrigation districts and other, larger conservation 

entities, which many times coordinate conservation projects to maximize benefits, 

were not eligible to compete for these funds to make the necessary improvements 

to the delivery system to effectively capture this conserved water to meet unmet demands. We believe this was an opportunity lost, one that could have provided regional water supply solutions to some of the complex problems experienced in Klamath. 

Our interest in implementing AWEP, in part, was intended to address these types 

of challenges. There is a need to fund projects that provide water quality and/or 

water quantity improvements at a scale that benefits more than just the individual 

participating producers. In many instances, coordinated regional water conservation 

efforts can lead to improved water quantities and quality that can only be physically 

captured and managed by the water delivery organizations to meet overall goals and 

objectives. We had hoped that AWEP would provide substantial matching grant 

funding to irrigation districts or other water agencies, which are already in a position to work with multiple producers to achieve locally-generated, measurable objectives and results. If consensus at a regional level can be reached on a coordinated 

and integrated approach to conserving water to meet unmet needs, there will be a 

better chance of positive community participation and ultimately, a much larger return on the Federal investment. 

In our view, the original AWEP proposal was solid from a conceptual standpoint, 

but by the time the concept made it through the legislative and administrative process, the program that is now in place is not being implemented in a manner consistent with the original vision. In Arizona, for example, state NRCS local working 

groups came up with a list of priorities and resource concerns at the request of 

NRCS headquarters in Washington, D.C. While irrigation efficiency was one of the 

highest priorities listed, local working groups noted that AWEP simply was not 

being applied in a way that could maximize its potential benefits. Rather than providing funds directly to irrigation districts, the districts instead have been put in 

situation where they essentially pass the phone number of the local NRCS office on 

to the individual landowner, and NRCS takes over from there. In essence, this 

AWEP has simply become an expansion of the existing EQIP program, which was 

definitely not the intent when this concept was crafted 4 years ago. 

We also have grave concerns regarding recent AWEP spending priorities. Almost 

50% of the $4.7 million in AWEP programs funded in FY 2011 in seven western 

states emphasized ‘‘focusing on the transition of irrigated cropland to dryland agriculture use’’ or to ‘‘permanently retire’’ irrigated cropland. The original intent behind AWEP was to find ways to help farmers and ranchers improve water conservation, management, reuse and efficiency while keeping their operations viable. Using 

farm bill conservation programs to eliminate irrigated agricultural lands altogether 

at a time when worldwide demand for food is growing every day defies common 

sense. 

Recommendations to Improve AWEP 

We must create opportunities within the new farm bill to further improve upon 

AWEP’s initial concept, such as:

• Provisions should allow AWEP to provide direct payments to irrigation districts 

to work directly with their landowner member farmers on NRCS-approved coordinated water conservation and management projects. While NRCS should 

still approve the contracts, we believe more efficient results that provide measurable, coordinated improvements on the ground will occur if the irrigation districts distribute the funds and work with the landowners directly. These districts can provide opportunities for innovative solutions to water management 

problems that currently cannot be achieved simply due to bureaucratic barriers 

and narrowly focused programs. Administrative expenses for such partners 

should be allowed, but capped;

• Irrigation districts and/or landowners should be allowed to implement water 

conservation or water quality projects outside of the normal projects funded 

1710

under the EQIP program, given that they can show improvements to either 

water quantity or quality;

• Irrigation districts or similar entities should be allowed to be the basis for ‘‘pooling’’ arrangements, where the benefits of a project which affects multiple landowners is funded by ‘‘pooling’’ their individual AWEP interests into a larger, coordinated project;

• Direction must be provided to improve how NRCS program administrators deliver timely and accurate information, provide reliable and transparent processes, and set firm deadlines;

• Administrative costs associated with any work performed by the NRCS should 

be capped at a reasonable level;

• The role of the Bureau of Reclamation in coordinating with NRCS in the implementation of this program in western states must be well defined, and should 

compliment the collaborative philosophy (between the Departments of Agriculture and Interior) embedded in the ‘‘Bridging the Headgates’’ initiative endorsed by both the Bush and Clinton Administrations;

• The program should provide assurances that the intent is not to reallocate 

water away from agriculture, but to help stretch limited water supplies for future regional beneficial use. We do not believe AWEP monies should be used 

to retire farmland or convert irrigated ground to dryland crops. It must also recognize the traditional deference of Federal agencies to state water laws and allocation systems;

• The money obligated for these programs in the farm bill needs to be ‘‘no year’’ 

money, so that it doesn’t have to all be obligated in the first year, with nothing 

left in later years. This has proven to be real hindrance for projects that take 

more than 1 year to build. Water managers have also noticed that the NRCS 

funding levels fluctuate, and so they are never sure what level of funding their 

farmers will receive. During the application process to secure funding, NRCS 

should agree how much a district is going to receive and ensure this money will 

be there. To minimize administrative complications, sharing some of the control 

over funds with the partnering irrigation districts would simplify the responsibilities of the NRCS. Districts could be held accountable through audits and 

reports delivered to the NRCS. We would be happy to sit down with Committee 

staff and NRCS leadership to help create a workable and efficient solution to 

this challenge; and

• We have previously shared proposed draft language with NRCS that could address the issues concerning NRCS entering into agreements with irrigation districts on AWEP activities in a manner similar to how NRCS enters into EQIP 

agreements with Tribes. We would be happy to share this with Committee staff 

to gain additional thoughts on this matter.

We look forward to working with your Committee further to help improve this 

vital program. 

The Need to Support Local Efforts to Manage Western Watersheds: A Case 

Study 

We strongly believe that local, regional and state land managers should be encouraged and provided the tools to lead watershed enhancement efforts. The best 

decisions on natural resources issues happen at the state and local level. The 2010 

Family Farm Alliance case study report includes one such example in the Little 

Snake River watershed of Wyoming, where my family operates a sheep and cattle 

ranch. Since 1991 numerous agencies, organizations, and NGO’s have recognized 

landowners and the local governmental natural resource agency, the Little Snake 

River Conservation District (LSRCD), as leaders in natural resource conservation. 

Numerous articles featuring work conducted by the LSRCD, area land owners, and 

its partners have been featured in popular publications like the Farm Journal, Beef 

Today, Bugle Magazine, Wyoming Wildlife, and Range magazines as well as peer reviewed journal publication in the Journal of Soil and Water Conservation (2008) and 

the Journal of Rangeland Ecology (2009). 

These successful efforts have all been locally-led. Conservation of natural resources in the Little Snake River Basin integrated with agrarian life style and perpetuation of this culture is the highest priority for the local community in the Little 

Snake Basin. In Wyoming, the local residents have passed a conservation property 

tax to carry on this work. Since 1990 this tax has generated approximately $8 million in local revenues. These funds have leveraged over $40 million dollars in project 

money to implement conservation and development projects in the Little Snake 

River Basin. 

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Today, the Little Snake River Basin hosts a myriad of wildlife and robust natural 

resources while sustaining compatible agricultural uses and natural resource-based 

recreation businesses. This was accomplished through local leadership and commitment of the Little Snake River Conservation District working collaboratively with 

over 30 different partner organizations and agencies that have assisted in the conservation of the Little Snake Basin, in a collaborative locally-led process. 

Innovation in Conservation Program Delivery 

Direct funding to large umbrella organizations to implement conservation on a 

landscape, district, or regional scale must be included in the new farm bill. Excessive administration, expensive, and time consuming delays are the norm under the 

current system, where numerous individual contracts are held with individual land 

owners. Significant administrative and financial savings could be realized through 

single contracts with umbrella organizations such as conservation districts, irrigation districts, watershed coalitions, grazing associations, and other nongovernmental 

organizations that could significantly decrease the cost of program delivery and increase efficiency. 

There are over fifty farm bill programs, including dozens under the conservation 

title—CRP, WRP, EQIP, AWEP, etc. Some of these programs should be consolidated. 

Also, under current policies, agency officials in Washington, D.C. allocate these 

funds—based on Federal, national priorities—and the states are handed down specific funding for each of the individual programs. So, for example, one state may receive from Washington, D.C. $6 million in WRP funds which may not even be needed in that state, whereas EQIP programs which are in high demand in that particular state are under-funded. Our members believe local farmers and ranchers 

who are interested in implementing conservation projects would be better served if 

the Federal NRCS puts all the conservation money for a given state into just a 

handful of funding programs. Then—let the states determine which programs get 

funded. 

The present priority system places too much emphasis on whatever national policy is driving current decision-making. In the past, the states local priorities drove 

50% of the decision-making criteria. Now, it appears that projects are first evaluated 

on whether or not they meet national priority, which accounts between 10–25% of 

the total ranking. In essence, this ends up disqualifying meaningful local projects, 

and by default drives funding towards those river basins which have the most national political clout. 

Local and state priorities should be the drivers of conservation. One size does not 

fit all. Conservation needs of a rice farm in Arkansas are much different than those 

of a rancher in Wyoming or a coffee producer in Hawaii. Local control for identification of conservation needs and allocation of funding must be restored. We believe 

the national priority ranking criteria should be completely eliminated, and instead, 

a block of conservation funds should be provided to each state, where local and state 

priorities end up driving how funds are spent on the ground, consistent with each 

program’s authorities and goals. States should be allowed to voluntarily assume primacy for implementation of the conservation title of the farm bill with block grants 

to the states. This would result in increased efficiency and delivery of conservation 

needs within each state. Most state have mirror agencies, Departments of Agriculture, Wildlife, Natural Resources, and Engineers that have the capacity to implement conservation programs. This type of approach is already in place for portions 

of the Clean Water Act. Significant cost saving to the Federal Government could be 

realized by reduction in duplicate effort with the states. 

Reorganization of USDA 

Another concern expressed by many of our farmers and ranchers is that, unlike 

the situation that occurred prior to the 2002 Farm Bill, Farm Services Agency (FSA) 

and NRCS are both now staffed to provide financial accounting services. Since inheriting the financial administration of the conservation title in the 2002 Farm Bill, 

NRCS has become increasingly a financial administrative agency, with the Government Accounting Office (GAO) continually redirecting the agency to move towards 

financial administrative compliance and accountability. This has resulted in shifts 

in expenditures away from providing conservation technical assistance to farmers 

and ranchers in addition to changes in personnel within the agency from soil scientist and agronomist to contract specialist and accountants. In a nutshell, this can 

lead to both agencies using precious conservation dollars on accounting duties, when 

those funds would be better served supporting on-the-ground conservation projects. 

We recommend that the next farm bill direct that accounting services be placed 

back into the hands of FSA, where those duties were competently performed prior 

to the 2002 Farm Bill. We want to see NRCS doing what it does best, which is proVerDate 0ct 09 2002 12:54 Dec 11, 2012 Jkt 041481 PO 00000 Frm 00123 Fmt 6601 Sfmt 6621 I:\DOCS\112-30\74372.TXT BRIAN
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viding conservation technical assistance to all producers. This could ultimately better position NRCS at the local level by putting more emphasis and funding in support of state and local conservation experts, instead of placing them in a position 

where they have to crack the whip on program accounting. Streamlining the functions of both agencies would also result in significant savings while having no impact of delivery of the farm bill. Savings would be realized in personnel, equipment, 

supplies, transportation, and overall overhead expenditures. 

Conservation Recommendations from Related Farm Bill Policy Forums 

The Family Farm Alliance continues to build coalitions and create alliances to advocate for constructive changes to the farm bill conservation title that benefit irrigated agriculture. We are lead partners in the Johnson Foundation national freshwater ‘‘Call to Action’’, the Western Agriculture and Conservation Coalition, and the 

2011 blue ribbon panel convened by the Natural Resources Conservation Service. I 

also serve on the advisory committee for AGree, a new national high-profile initiative to transform food and agriculture policy. All of these forums will likely have 

an influence on the emerging farm bill. I’d like to summarize below some of the key 

recommendations derived from two these forums, which I believe fortify the general 

philosophy contained in our above recommendations. 

Recommendations of the Western Agriculture and Conservation Coalition 

A western coalition of agricultural and conservation organizations has come together to urge that Congress pass the farm bill this year and maintain conservation 

program funding. As a member of the steering committee for the Western Agriculture and Conservation Coalition, we seek to advocate for balanced management 

of resources in the rural West. Following the 2012 Family Farm Alliance annual 

conference in Las Vegas last February, we met with representatives of the California Farm Bureau Federation, Trout Unlimited, Wyoming Stock Growers Association, The Nature Conservancy, Arizona Public Lands Council, Environmental Defense Fund, Public Lands Council and the Irrigation Association and announced the 

formation of this unique coalition, which seeks to advocate for balanced management of resources in the rural west. The goals of the Coalition are to support the 

common interests of agriculture and conservation through targeted education, advocacy, and outreach and to engage decision makers and resource managers in the 

spirit of collaboration to further a shared vision for a rural west that is economically 

and environmentally sustainable. For the 2012 Farm Bill, this Coalition believes:

• Priority Title II programs must receive sufficient funding so that on-farm operational, resource conservation, local economic, and rural sustainability goals are 

met;

• Enhanced programmatic efficiencies can be achieved, which will facilitate access 

to program funding, and lead to more effective project implementation and 

fewer obstacles for landowners and conservation partners. Improving the Agricultural Water Enhancement Program is one such example;

• Program delivery could be improved and yield broader positive impacts if interagency cooperation among and between resource management agencies and the 

USDA was better-defined; and

• Local, regional and state land managers should be encouraged and provided the 

tools to lead watershed enhancement efforts at the landscape level.

From a personal standpoint, working with this coalition has been positive and rewarding, and a refreshing change from some of the tired and worn messaging we 

constantly hear from more agenda-driven activist groups who use the farm bill as 

a forum to actually denigrate farmers and ranchers. This is unfortunate, because 

this sort of negativity does not reflect what is truly happening on the ground. Our 

recent involvement with the Coalition leads us to believe that policy makers and 

the public appreciate the positive examples of how conservation groups and farmers 

and ranchers can work collaboratively with government agencies on ‘‘win-win’’ solutions that are good for agriculture and the environment. We should be thinking of 

ways to mobilize the public to act favorably on issues that are critical to maintaining economically viable ranching and conservation of resources and to demonstrate 

the important partnership between land stewards and conservation interests. 

The Coalition has emphasized that continued funding of Title II priority programs 

produces results that are timely, effective, more efficient and jobs-oriented. This coalition continues to urge Congress to preserve funding for USDA conservation programs and to take steps to provide farmers and ranchers with the resources necessary to continue enhancing soil, water quality and wildlife on agricultural land. 

For further detail on the Coalition’s specific recommendations, please see the copy 

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of the Coalition’s March 2, 2012 letter to Congressional agriculture committees, 

which is attached to this testimony. 

Recommendations of the Resource Conservation Act Blue Ribbon Panel 

In late 2010, I was appointed to a Blue Ribbon Panel established to support the 

development of the NRCS Program and Policy Statement. The first meeting of the 

Panel occurred in early 2011 in Washington. Over the next several months, I helped 

organize and spoke at three western regional workshops and the National Agricultural Landscapes (NAL) Forum, held here in Washington, D.C. Several other Family 

Farm Alliance leaders were chosen to speak at the regional workshops, as well. In 

the end, we supported the following major recommendations that emerged from the 

NAL:

• Improve Jurisdictional Flexibility and Share Responsibility—Local state, tribal 

and regional directors must be allowed to make resource decisions and to innovate based on local conditions.

• Improve Program Efficiency and Inter-Agency Cooperation—Greater facilitation 

of inter-agency learning and cooperation is required to improve conservation 

outcomes.

• Target Regulations and Reduce Uncertainty—the U.S. Department of Agriculture (USDA) must harmonize regulations to avoid redundant requirements 

that do not enhance protection.

• Leverage Program Assistance to Maximize Program Effectiveness—Partnerships 

and leveraging state, local and private funding are essential to achieving resource conservation goals.

• Expand Market-Based Solutions—Government can play a supportive role in developing ecosystem market regulatory and environmental quality standards.

We urge your Subcommittee to review the findings presented at the NAL Forum 

and seek to incorporate these recommendations and this type of philosophy to improve delivery of farm bill title II programs. 

The Critical Need to Incentivize and Encourage Young Farmers 

We are in danger of losing a generation of young farmers, and productive farmlands and western agriculture’s traditional water supplies are transferred to other 

uses as multiple demands for water increase. This is all happening at a time when 

the United Nations projects that the world will need to produce 70 percent more 

food by 2050 to keep pace with world population growth and hunger. Nationally, the 

median age of active farmers in America has never been higher, with the percentage 

of farmers under 50 years old continuing to plummet. More than half of today’s 

farmers are between 45 and 64 years old, and only six percent of our farmers are 

younger than 35. 

While there is renewed interest among young people to enter farming today, unfortunately the larger trend is an increase in the average age of the American farmer. To reverse this course, our country must take bold action to ensure that aspiring 

farmers have access to land, health care, capital, education and training. Congress 

should invest now in a farm bill that helps young Americans enter into and succeed 

in farming, and that creates incentives for diversified and sustainable agriculture. 

The next farm bill should create policies that can attract and retain young farmers to benefit the future of American agriculture, as well as the stability of America’s food supply. One specific action that would help would be for Congress to reauthorize adequate funding for the Beginning Farmer and Rancher Development Program (BFRDP). More generally, another means of bringing new faces into agriculture and keeping young people in the business is to create a more certain, relaxed and reasonable regulatory environment. Increasingly, we hear reports that 

level of Federal regulations affecting American agriculture has reached such a magnitude that family farmers and ranchers fear regulations more than most other 

stressors in their profession. These conversations are often about the frustration 

they feel over the amount of time they spend dealing with regulations and bureaucracy in managing their business. All of these regulations hit small family farmers 

the hardest, since they often do not have the resources at their disposal to deal with 

the maze of the required paperwork and regulatory record-keeping. These sometimes daunting requirements could be moving young people to choose careers other 

than farming, at a time when there aren’t many young people left in this line of 

work. 

Today, our own western farmers and ranchers are being subjected to potentially 

restrictive and duplicative Federal regulations on many fronts. Many of these rules 

have cropped up in just the past 2 years. The related uncertainty that comes with 

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all of this increased regulatory scrutiny will make it much harder for these farmers 

to survive in such a harsh economy. Eliminating just a few of these farmers could 

impart huge limitations on our future ability to feed our country and the world. 

Western family farmers and ranchers need to be shown—through leadership and 

development of common sense agriculture and water policy priorities—that what 

they do everyday really does matter to this country. The Family Farm Alliance has 

spent much of the past decade developing specific, common-sense recommendations 

for more effective regulations that would protect the environment, human health 

and safety in a more streamlined and effective manner. While we understand that 

the focus of today’s hearing is on the conservation title of the farm bill, this issue 

is critically important to the future of western irrigated agriculture. At the appropriate time, we would be happy to share those recommendations with you and other 

Members of the Committee on Agriculture. 

Conclusion 

Throughout the western United States, family farms and ranches have facilitated 

the conservation and stewardship of the region’s natural resources while anchoring 

our rich cultural heritage and identity. It is a landscape and a way of life that works 

for rural economies and resource conservation. Here, private land stewardship is the 

key to continued conservation innovation, resource and habitat enhancements, and 

sustainable working land partnerships. It is a region in which farmers and ranchers 

have been finding ways to successfully balance resource stewardship and their bottom line, thanks in part to the availability of farm bill conservation programs. 

We need Federal land and water policies that are based on sound science and that 

reward producers who care about the environment in providing affordable food and 

fiber and bringing economic health to our rural communities. We need to encourage 

young agricultural producers, rather than litigious, anti-agriculture activist groups. 

Properly managing watersheds and encouraging Federal agencies to work with the 

agricultural community to solve local water problems are imperative. 

Thousands of water and land conservation projects have been completed across 

the western United States, and these efforts should continue. We urge this Subcommittee and the Committee on Agriculture to continue to make farm bill conservation programs a priority and to fund these programs accordingly. 

We stand ready to further assist you in your efforts to more effectively utilize 

farm bill programs to the benefit of both agricultural production and natural resource conservation results. 

Thank you for this opportunity to provide testimony to you on this matter, which 

is very important to the family farmers and ranchers of our membership. 

ATTACHMENT

March 2, 2012

Hon. DEBBIE STABENOW,

Chairwoman,

Senate Committee on Agriculture, Nutrition, and Forestry, 

Washington, D.C.;

Hon. PAT ROBERTS,

Ranking Minority Member, 

Senate Committee on Agriculture, Nutrition, and Forestry, 

Washington, D.C.

Re: Farm bill conservation priorities for coalition of western agriculture and conservation groups

Dear Chairwoman Stabenow and Ranking Member Roberts:

Throughout the western United States, family farms and ranches have facilitated 

the conservation and stewardship of the region’s natural resources while anchoring 

the region’s rich cultural heritage and identity. It is a landscape and a way of life 

that works for rural economies and resource conservation. Here, private land stewardship is the key to continued conservation innovation, resource and habitat enhancements, and sustainable working land partnerships. It is a region in which 

farmers and ranchers have been finding ways to successfully balance resource stewardship and their bottom line, thanks in part to the availability of farm bill conservation programs. Managing water quantity and quality is a key resource concern 

for the undersigned groups. 

Unfortunately, these constructive partnerships and the environmental benefits 

they generate will disappear if we cannot find ways to bring more farmers and 

ranchers into the fold and encourage young farmers to stay in the business. NationVerDate 0ct 09 2002 12:54 Dec 11, 2012 Jkt 041481 PO 00000 Frm 00126 Fmt 6601 Sfmt 6621 I:\DOCS\112-30\74372.TXT BRIAN
1715

ally, the median age of active farmers and ranchers in America has never been 

higher, with the percentage of farmers under 50 years old continuing to plummet. 

More than 1⁄2 of today’s farmers are aged between 45 and 64, and only six percent 

of our farmers are younger than 35. The next farm bill needs to reflect a philosophy 

that can attract and retain young farmers for the future of American agriculture, 

and the stability of America’s food supply. 

The most important policy for keeping farms and ranches intact and providing the 

environmental services sought by society is a strong economy. Farm bill conservation programs also fill an essential niche in maintaining a strong quality of life in 

the rural West. For more than 75 years, American taxpayers have invested in conservation through the farm bill. These investments in private lands and waters have 

delivered cost-effective benefits far beyond the property lines of farmers and ranchers, extending robust returns for every taxpayer. These returns include significantly 

improved fish and wildlife habitat, improved air, soil and water quality, ensured 

long-term productivity of our agricultural lands, increased outdoor recreational opportunities, reduced regulatory burdens on farmers and ranchers, and increased financial returns for rural communities. Farm bill activity should be enhanced by further encouraging the development of private markets that reward landowners for 

good actions on the ground while creating environmental benefit.

For these reasons, a western coalition of agricultural and conservation 

organizations has come together to ask you to pass the farm bill this year 

and maintain funding for conservation programs important for the West.

This coalition urges Congress to preserve funding for USDA conservation programs and to take steps necessary to provide farmers and ranchers with the resources necessary to continue enhancing soil, water quality and wildlife on agricultural land. With this letter, the coalition outlines a set of principles that lawmakers 

should observe as they seek ways to trim the Federal deficit and proceed with writing the conservation title of the 2012 Farm Bill. While many of the undersigned organizations have additional priorities for the 2012 Farm Bill, the following recommendations represent the priorities on which we have reached consensus.

1. Agriculture Water Enhancement Program, Cooperative Conservation 

Partnership Initiative, Wildlife Habitat Incentive Program, Farm and 

Ranch Lands Protection Program, Grassland Reserve Program, Environmental Quality Incentive Program are particularly important to 

achieving conservation and rural economic and social goals in the 

West. These programs in Title II must receive sufficient funding so that 

on-farm and on-ranch operational, resource conservation, local economic, and rural sustainability goals are met. Some specific policy changes 

to consider:

• Strengthen conservation programs to increase accessibility and ensure they 

work better for more producers.

• Maintain current funding levels for the priority programs.

• Eliminate $50K payment limit for WHIP.

• Allow third parties to hold GRP easements directly after execution, without 

requiring the easements to first be held by USDA.

• Ensure that EQIP remains available for use across all land ownerships.

2. Enhance programmatic efficiencies to facilitate easier access to program funding, more effective project implementation and fewer obstacles for landowners and conservation partners (for example, improving 

the Agricultural Water Enhancement Program). Specific recommendations include:

• Strengthen NRCS Technical Assistance capacity for both program implementation and non-farm bill conservation planning.

• Consolidation should enhance conservation outcomes.

• Consolidation of conservation programs must be structured appropriately so 

as to increase flexibility for USDA while maintaining purposes of priority programs like EQIP, GRP and WRP.

• In AWEP and CCPI, allow qualifying partners to help producers address resource issues in a more flexible and efficient manner so they can maintain 

profitability and avoid potential future environmental regulatory actions.

• Maintain current provisions in AWEP and CCPI requiring partners to commit 

resources to projects while providing USDA with discretion to prioritize proVerDate 0ct 09 2002 12:54 Dec 11, 2012 Jkt 041481 PO 00000 Frm 00127 Fmt 6601 Sfmt 6621 I:\DOCS\112-30\74372.TXT BRIAN
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posals from partners who offer the most additional resources for project implementation.

• Continue and expand applicability of WRP Reserved Rights Pilot Program 

where determined by the USDA to be consistent with existing conservation 

plans and as a tool by which to achieve resource conservation objectives.

• Remove 7 year ownership requirement for WRP.

• Changes to CRP to provide more flexibility for adjusting grazing frequency so 

long as the ecological functions of the land and water are maintained. Additionally, allow wild horses owned by the Bureau of Land Management to 

graze CRP acres consistently with maintaining ecological integrity. BLM 

would make payments to landowners for this service.

• Changes to WRP, GRP, and FRPP to allow increased flexibility regarding 

third party involvement including management of easements and meeting 

non-Federal matching requirements.

3. Program delivery could be improved and yield broader positive impacts if interagency cooperation is better defined. Additional recommendations:

• Throughout the conservation title, ensure that priority be given to projects 

that address the greatest resource concerns most effectively. Provide for 

greater interagency coordination at Federal, state and local levels in the development and delivery of conservation.

• Ensure that the long tradition of partnerships among USDA, private landowners, and conservation partners is continued, encouraged and expanded.

4. Local, regional and state land managers should be encouraged and 

provided the tools to lead watershed enhancement efforts.

• NRCS at the state level should be encouraged and provided the resources to 

more effectively engage with partners in watershed planning, enhancement 

and restoration efforts.

• Strengthen partnership-driven programs such as AWEP and CCPI, which 

allow partners including local, regional and state land managers to lead watershed enhancement efforts.

• Provide for greater flexibility within such partnership programs, including 

making the funding approved for such projects ‘‘no year’’ money, thus enabling large and complex watershed-scale conservation initiatives to be leveraged to their greatest potential.

5. Support Beginning Farmers and Ranchers.

Reauthorize funding for the Beginning Farmer and Rancher Development Program (BFRDP).

We appreciate your consideration of our interests and look forward to working 

with you to put together the strongest conservation title possible that is responsive 

to western as well as national interests. 

Signed,

The Western Agriculture and Conservation Coalition Steering Committee:

Trout Unlimited 

Family Farm Alliance 

The Nature Conservancy 

Public Lands Council 

Environmental Defense Fund 

California Farm Bureau 

Arizona Public Lands Council 

Wyoming Stock Growers Association 

Irrigation Association

Affiliates:

The Freshwater Trust 

Montana Stock Growers Association

CC:

Hon. FRANK D. LUCAS,

Chairman,

House Committee on Agriculture;

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Hon. COLLIN C. PETERSON, 

Ranking Minority Member 

House Committee on Agriculture.

The CHAIRMAN. Thank you, Mr. O’Toole. Now I yield to the 

Ranking Member for the purpose of the introduction of our next 

witness. 

Mr. PETERSON. Thank you, Mr. Chairman. Mr. Nomsen is a constituent of mine, even though he works for a national organization 

which I would say is the premiere group in terms of providing wildlife habitat technical assistance and benefits. He and I were at a 

Pheasants Forever banquet in my district a couple of weeks ago, 

and that little chapter there in Otter Tail County raised $3 million 

of private money to work with what we are doing here in Congress. 

So Mr. Nomsen has been the lead guy on the conservation issues 

in the last couple farm bills for the wildlife interests, and we welcome him to the Committee. 

STATEMENT OF DAVID E. NOMSEN, VICE PRESIDENT OF

GOVERNMENTAL AFFAIRS, PHEASANTS FOREVER, INC., ST. 

PAUL, MN 

Mr. NOMSEN. Thank you, Mr. Chairman, Ranking Member Peterson. You know, that Otter Tail chapter banquet that we were at, 

Mr. Peterson, was Minnesota’s leading chapter last year and as you 

mentioned, they did $3 million worth of work out there with our 

farmers and landowners in that area, a tremendous success story 

for the Otter Tail chapter. 

It is my pleasure to be here today also representing the views of 

the Association of Fish and Wildlife Agencies, Ducks Unlimited, the 

Izaak Walton League of America, Pheasants Forever, the Theodore 

Roosevelt Conservation Partnership, the Mule Deer Foundation, 

Masters of Foxhounds, the Campfire Club of America, Wildlife Forever, the Archery Trade Association, the Wildlife Management Institute, Hope and Young Club, Quail Unlimited, the Boone and 

Crockett Club, the Dallas Safari Club, the National Rifle Association, Orion the Hunter’s Institute, the Wild Sheep Foundation, 

Delta Water Fowl, the Catch a Dream Foundation, and Whitetails 

Unlimited. 

Clearly, farm bill conservation programs are of importance to our 

nation’s sportsmen and sportswomen, and of course, support our 

nation’s hunting heritage. 

The farm bill conservation title is driven by proven successful 

programs, and we certainly support programs like Conservation 

Reserve and the Wetlands Reserve Program. The Voluntary Public 

Access Habitat Incentive Program, or ‘‘Open Fields’’ Program, was 

part of the 2008 Farm Bill, and while it is relatively new, it has 

been a tremendous success. Access to private lands is incredibly 

important to all of our members, and farmers and landowners benefit from reduced liability in these situations, so it has become a 

real win-win across the country to complement conservation and 

lands that are open to the public for hunting. 

I would like to caution the Committee, however, about the Conservation Reserve Program. I have lived in the prairie region of the 

country, the northern plains for my entire life and career. I have 

lived in Iowa, South Dakota, North Dakota, and now in Minnesota, 

1718

of course, and I too have never seen the pressures that are on the 

landscape right now. You cannot drive anywhere without coming 

across new rock piles that are out there on native prairies, lands 

that have never, ever seen a plow before, very shallow, thin soils 

in some cases, on very steep slopes. Shelter belts being plowed up, 

CRP lands leaving the landscape, and in some cases, these decisions just aren’t going to be sustainable, and I am very concerned 

about what is happening out there right now. 

I am glad we have the Conservation Reserve Program to help 

with these issues. CRP now has a 25+ year history, becoming one 

of USDA’s flagship most successful conservation programs, and it 

has evolved and it needs to continue to evolve to fit that landscape 

and work with our nation’s farmers and landowners. You hear a lot 

about the targeting of the CRP Program, and I would like to mention that in my view, when you talk about targeting, you also talk 

about that mix of large tracts of CRP, along with selective small 

areas. We cannot have a CRP that is just buffer strips and small 

odd areas here and there. While that may work for some species 

of wildlife that are edge species and don’t need those types of habitats, if we want to have a CRP that works for the wildlife legacy 

that helped reauthorize that program in the 1990s, we are talking 

about a program that doubled and tripled pheasant populations, 

provided several million more water fowl annually to the fall flight. 

For those types of benefits to continue, we do need large tracts of 

lands in CRP, planted to good covers, and managed appropriately 

for wildlife and wildlife benefits. 

CRP has many other benefits, of course, as well. I recall testifying before this same Subcommittee a number of years ago. One 

of the points in my testimony in the mid-1990s was the fact that 

the CRP Program was providing the economic stability and security 

to the point that 28 percent of North Dakota’s farmers were still 

on the farm because of CRP. Clearly, times have changed, but it 

is a point that really talks about the strength of that program over 

time, and it needs to continue as a flagship program. 

In 2007, commodity prices spiked somewhat and about 21⁄2 million acres mostly left the CRP Program. Right now we are in the 

middle of a general signup for CRP, and as others have indicated, 

probably about 3 million acres or so is going to be leaving the program as well, a majority of those lands likely coming back into 

commodity production. My point is that the farmers, the landowners, the contract holders are making those decisions, and the 

program is working and it needs to continue to work on a voluntary 

basis with those farmers and landowners making their best decisions about what to do with those lands. 

Last fall, as the leadership of the committees worked on the 

Super Committee process and worked up a framework for the farm 

bill, we were pleased that there was a lot of bipartisan support 

from both sides, and like others before me, I am going to support 

the Senate mark that is up this morning. I say that reluctantly. We 

are going to take $6 billion away from conservation programs. 

There are consequences to that in terms of soil, water, and wildlife 

resources, and clearly, I am concerned about the potential reductions, especially to the Conservation Reserve Program. However, 

we have to find ways to do more with less, and one of the things 

1719

we are doing is through our Farm Bill Biologists Program at 

Pheasants Forever, helping farmers and landowners make good decisions about the suite of resource conservation programs that are 

available. Recently they helped with forums and workshops around 

the country to provide CRP signup. They are doing a great job in 

the West as sage grouse managers for the Sage Grouse Initiative 

through NRCS as well. 

Last, our groups support the continuation and the expansion of 

conservation compliance. We are especially proud to support the 

sodsaver provisions that were included in the Senate mark this 

morning. It is a strong policy that will help complement conservation programs that go forward at perhaps reduced levels. 

Thank you, Mr. Chairman, for the opportunity. I look forward to 

the questions. 

[The prepared statement of Mr. Nomsen follows:]

PREPARED STATEMENT OF DAVID E. NOMSEN, VICE PRESIDENT OF GOVERNMENTAL

AFFAIRS, PHEASANTS FOREVER, INC., ST. PAUL, MN 

Mr. Chairman, Members of the Committee, my name is Dave Nomsen. I am the 

Vice President of Governmental Affairs with St. Paul, MN based Pheasants Forever 

and I reside in Garfield, MN. I am a professional wildlife biologist with expertise 

in wildlife and farm bill conservation policies and programs. 

I am here today representing the 700 nationwide chapters of Pheasants and Quail 

Forever and our 140,000 members. These chapters complete on average more than 

30,000 individual projects annually with conservation minded farmers and ranchers 

on 300,000 acres. The vast majority of these projects is completed on private lands 

and involves grassland establishment and management. Projects involve the establishment of nesting, brood rearing, and winter cover for pheasants, quail, and a wide 

array of wildlife. 

Collectively, our members and supporters represent a sizable cross-section of our 

nations’ citizenry, and we appreciate the increased role and importance of conservation in agriculture and its role in private land stewardship that has led to consensus 

and partnerships among government and private interests, farm and commodity 

groups, individual farmers and ranchers, and hunters and anglers. 

I am pleased today to not only offer our views but also those of the Association 

of Fish and Wildlife Agencies, Ducks Unlimited, Izaak Walton League of America, 

Pheasants Forever, and the Theodore Roosevelt Conservation Partnership. 

While we all know that conservation programs protect the soil, clean the water 

and create abundant wildlife habitat, what we often overlook is the economic activity generated through conservation. For example, hunters and anglers spend approximately $86.1 billion pursuing their passions every year. Wildlife watchers 

spend roughly $51.3 billion each year. These expenditures include everything from 

rods and reels, guns, ammunition, boats, decoys, bows and arrows and tree stands, 

to hotel stays and dinners in small rural towns across the country. Jobs related to 

these expenditures are important, especially in the small, rural towns throughout 

America, and most importantly, these are jobs that stay at home and cannot be exportable to other countries. In South Dakota alone the total economic value of just 

pheasant hunting has been estimated at $253 million dollars per year. Adequately 

funded conservation title programs protect both the hunting and angling economy 

as well as our agricultural and rural economy. It’s equally important to note that 

during these increasingly difficult times, sportsmen spending generates $406 million 

in Federal taxes per year and state and local taxes of $378 million per year. Conservation programs like CRP and WRP help provide the backbone to support the 

diversity of wildlife that drives this essential sector of our economy. So, when you 

are weighing how much and which programs to cut in the upcoming farm bill debate, and we all understand that that needs to be done, remember, when you save 

money from reducing conservation programs, there is a direct cost to the outdoor 

related sports industry through loss of opportunities and loss of jobs in addition to 

lessened levels of soil, water, and wildlife conservation on the landscape. 

It is our view that even with possible cuts to conservation title programs of up 

to nearly $6 billion as was outlined by Committee leadership in last falls super committee process, that completing a farm bill now is our top priority. 

1720

Sportsmen and sportswomen support a farm bill conservation title that is driven 

by proven successful programs including the Conservation (CRP) and Wetlands Reserve (WRP) programs, working lands programs including the Environmental Quality Incentives Program (EQIP), the Conservation Stewardship Program (CSP) and 

others. The Voluntary Public Access Habitat Incentives Program (VPA–HIP) is a 

relatively new program as part of the 2008 Farm Bill; however, this program has 

quickly become a top priority program encouraging landowners to allow access to 

private lands for hunting. Landowners are encouraged to incorporate wildlife friendly management practices and landowners benefit from reduced levels of liability. 

VPA–HIP supported state access programs like the SD ‘‘Open Fields’’ or Nebraska’s 

CRP-Managed Access Program support strong rural communities as well as our nation’s hunting heritage. These are all examples of voluntary incentive-based programs that help our nation’s farmer and rancher stewards with projects and practices that improve water quality, reduce soil erosion, and enhance and protect wildlife habitat. All Americans benefit from a strong suite of conservation programs. 

Given the likelihood the successful CRP program will be reduced further by several million acres, it’s important to continue to target remaining and new CRP lands 

to maximize benefits. We strongly support continuation of the CRP-State Acres for 

Wildlife Enhancement (CRP–SAFE) practices that are now in 36 states and more 

than 900,000 acres. SAFE is an excellent example of CRP in harmony with existing 

farming and ranching operations. I would caution the Committee, however, that 

without continued efforts to keep CRP economically competitive and viable, the program will continue to decline in areas of the country like the northern plains. Additionally, we support language encouraging maintaining the soil, water, and wildlife 

benefits from expired CRP lands that exit the program. Some lands should be transferred to easement programs like WRP and GRP, other lands should become priority 

enrollment in working lands programs like EQIP and CSP. USDA should be directed to maintain all possible acreages in various CCRP and CREP programs to 

continue CRP’s environmental and wildlife legacy. 

We are strong supporters of the successful Wetlands Reserve Program and urge 

the Committee to provide mandatory baseline funding for a WRP-like program in 

the 2012 Farm Bill. The Wetlands Reserve Program (WRP) has been instrumental 

in helping farmers find better uses for those extremely difficult places to farm. WRP 

has enabled farmers and ranchers to restore vital wetlands on their property, improving water quality and providing vital wildlife habitat for not only waterfowl, but 

threatened and endangered wildlife as well. Funds from WRP provides a great tool 

for producers to invest in more and better tillable acres, while deriving many other 

benefits from their WRP acres. 

The Wildlife Habitat Incentives Program (WHIP) has also been a proven successful program. As the Committee debates streamlining and improving efficiencies, consider language supporting waivers for certain participants and state lands that 

would benefit an agricultural producer. 

Farmers and ranchers, conservationists and sportsmen, and all citizens have 

much to gain from successful, sustainable farming that conserves soil, water and 

wildlife. The regional partnership program developed in the Super Committee report 

is a great idea that needs to find its way in this next farm bill. Regional partnerships fueled by local diverse interest groups and supported by Federal, state and 

private funders, are a key to accomplish watershed approaches and solutions that 

will yield a good farm economy and a healthy sustainable environment. I encourage 

the House Agricultural Committee to include the Regional Partnership Program in 

this next farm bill. Following is a current summary of the Pheasants Forever Farm 

Bill Biologist partnership program:

• Pheasants Forever (PF) and Quail Forever (QF) Farm Bill Biologist (FBB) Program started in South Dakota in 2003 with four positions; there are currently 

98 partnership positions in 17 states. Since inception, these biologists have 

made over 70,000 landowner contacts impacting 2.2 Million acres.

• Funding sources are diverse, and the effort would not be possible without the 

financial support from State Fish and Wildlife Agencies, USDA–NRCS (contribution agreements or contracts), USFWS, Joint Ventures, Local PF/QF chapters, watershed groups, foundations, and various other state and local partners. 

FSA is also a key partner.

• With the increasing wildlife focus as part of the farm bill and various state initiatives (i.e., NRCS National Initiatives, State Wildlife Action Plans), FBB’s add 

wildlife technical assistance capacity in USDA offices. They assist NRCS/FSA 

and other conservation partners maximize the benefits conservation practices 

provide on a landscape scale.

1721

• Our biologists may become involved in other opportunities such as, expanding 

private land acres open to the public through the USDA Voluntary Public Access and Habitat Incentive Program (VPA–HIP), we currently host three positions in PA.

• In August 2011, PF entered into an agreement with the Intermountain West 

Joint Venture, USFWS, and NRCS to assist in the delivering the NRCS Sage 

Grouse Initiative (SGI). PF will host positions and provide administrative/financial assistance for all SGI positions in 11 states. PF is also assisting with the 

Lesser Prairie Chicken Initiative with three new positions in TX, and one in 

NM.

State Year Implemented Number of Biologists 

South Dakota 2003 8

Nebraska a 2004 16

Minnesota 2004 9

Ohio 2005 8

Wisconsin 2007 6

North Dakota 2008 5

Iowa 2009 12

Illinois 2010 2

Kansas 2010 8

Colorado 2010 3

Idaho 2010 5

Pennsylvania 2011 5

Missouri b 2005–2008, 2011 3

Washington 2011 2

Nevada 2011 2

Texas 2011 3

New Mexico 2011 1

Total 98

a Nebraska also implemented a Coordinating Wildlife Biologist Program in 2007 that utilizes 

different partnerships to coordinate conservation program delivery. bThree year position, 2005–2008 that completed partnership agreement, this became a permanent private lands position within the State Wildlife Agency. Partnership was renewed in 2011 

for three new positions. 

Mr. Chairman, it is the combination of both programs and policies that is important as the overall funding levels from previous years are decreased. We support 

continuing policies for sodbuster, swampbuster, and conservation compliance. Conservation compliance provisions can provide reasonable levels of support for soil and 

water resources and we support tying these provisions to all forms of Federal supVerDate 0ct 09 2002 12:54 Dec 11, 2012 Jkt 041481 PO 00000 Frm 00133 Fmt 6601 Sfmt 6621 I:\DOCS\112-30\74372.TXT BRIAN

11230118.eps
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port including crop insurance. Copied below is a recent letter in support of a strong 

sodsaver provision to help protect critical native prairie resources. We recognize and 

appreciate this Committee’s past efforts in this area and hope that the 2012 Farm 

Bill will build upon those efforts and strengthen provisions to help landowners make 

sound land-use decisions. 

Mr. Chairman, that concludes my testimony. Thank you for the opportunity to appear before you today. I’d be happy to answer any questions. 

ATTACHMENT

American Fisheries Society * American Fly Fishing Tackle Association * American 

Sportfishing Association * Archery Trade Association * Association of Fish & Wildlife Agencies * Berkley Conservation Institute * Boone & Crockett Club * Conservation Force * Delta Waterfowl Foundation * Ducks Unlimited Izaak Walton League 

of America * Mule Deer Foundation * National Shooting Sports Foundation * Orion 

the Hunter’s Institute * Pheasants Forever * Public Lands Foundation * Quail Forever * Quality Deer Management Association * The Nature Conservancy * The 

Wildlife Society * Theodore Roosevelt Conservation Partnership * Trout Unlimited 

* Whitetails Unlimited * Wild Sheep Foundation Wildlife Forever * Wildlife Management Institute

April 13, 2012

Hon. DEBBIE STABENOW,

Chairwoman,

Senate Committee on Agriculture, Nutrition, and Forestry 

Washington, D.C.;

Hon. PAT ROBERTS,

Ranking Minority Member, 

Senate Committee on Agriculture, Nutrition, and Forestry 

Washington, D.C.

Dear Senators Stabenow and Roberts:

Our organizations represent millions of hunter and angler conservationists, scientists, and outdoor enthusiasts who are closely following the important debate over 

the upcoming farm bill reauthorization. We appreciate your bipartisan cooperation 

last summer in concluding draft farm bill recommendations for the so-called Super 

Committee, and urge you to continue in that vein to support strong conservation 

provisions robustly funded, as reauthorization proceeds through regular order. We 

write you today to respectfully request that you include a strong sodsaver provision 

in the next farm bill, modeled on the provisions of the Senate floor-passed version 

of the farm bill passed December 14, 2007, H.R. 2419, the Food and Energy Security 

Act of 2007. 

Farmers have long been some of the nation’s foremost conservationists. As you 

move forward to write a new farm bill, it will be important to include effective economic support programs that will allow farmers to continue farming in uncertain 

times and ensure that farmland will not be developed for other uses that are incompatible with conservation. At the same time, it will be equally important to link 

those support programs to basic, sensible conservation provisions, such as sodsaver, 

to encourage responsible stewardship of agricultural land and direct program benefits to acreage that is most suited for crop production. With budget pressure on existing USDA conservation programs increasing, linking basic farm support programs 

to reasonable conservation requirements makes sense. 

In conclusion, we strongly believe it is vital that the farm bill include effective 

economic support programs and that those programs be coupled with a strong 

sodsaver provision. Doing so will promote continued excellent stewardship of America’s farmlands and foster production of crops, clean water and abundant populations of fish and wildlife. Thank you for your sincere consideration of our request, 

and we look forward to working with you in the coming months to achieve that goal.

The CHAIRMAN. Thank you, sir. I now recognize for 5 minutes 

Mr.—is it Niemeyer? 

Mr. NIEMEYER. That is correct. 

The CHAIRMAN. Mr. Niemeyer. It is good to see you again. I think 

I saw you last in Springfield, Illinois——

Mr. NIEMEYER. Absolutely. 

1723

The CHAIRMAN.—at a Subcommittee hearing there. So go ahead, 

sir. 

STATEMENT OF GARRY NIEMEYER, PRESIDENT, NATIONAL 

CORN GROWERS ASSOCIATION, AUBURN, IL 

Mr. NIEMEYER. Chairman Thompson, Ranking Member Holden, 

and Members of the House Agriculture Subcommittee on Conservation, Energy, and Forestry, I appreciate the opportunity to testify 

before you today on behalf of the National Corn Growers Association regarding farm bill conservation programs. My name is Garry 

Niemeyer. I currently serve as President of NCGA. My wife Cheryl 

and I have been farming in Auburn, Illinois, for the past 41 years, 

where we raise corn and soybeans. I am also pleased to report that 

my testimony today has the full support of American Farm Bureau 

Federation, American Soybean Association, National Association of 

Wheat Growers, National Cotton Council, National Farmers Union, 

and USA Rice Federation. This broad consensus amongst farms 

groups is a significant achievement and is the result of nearly a 

year of discussions about how to structure conservation programs 

that deliver environmental benefits, while also improving productivity and reducing costs on the farm. 

In light of the difficult fiscal and economic conditions that our 

nation faces today, our groups recognize the monumental task before this Committee to advance a new farm bill that addresses a 

broad range of nutrition and agriculture concerns across the country. Our growers also understand that they must be part of the solution to address our nation’s budget deficits and are prepared to 

accept spending reductions in farm programs. However, the size 

and scope of these cuts must not jeopardize important program 

functions. We believe there are opportunities in the conservation 

title to consolidate or eliminate redundant programs in order to 

achieve savings, while also working more effectively for producers. 

Our organizations have expressed support for the Title II framework in the 2012 Farm Bill that the Senate and House Agriculture 

Committees began developing last fall. This consolidates 23 conservation programs into 13, while maintaining the same tools that 

were available to farmers in the past. Our growers are seeking simplification, flexibility, and consolidation in these programs, and we 

believe these goals are achieved in the Senate Agriculture Committee’s recent draft language. As regulatory pressures on producers 

continue to increase, working lands programs have become essential to achieving environmental goals. The Environmental Quality 

Incentives Program delivers conservation dollars to assist landowners who face natural resources challenges on their land. We 

support the continuation of a 60 percent carve out for livestock producers and for the proposal to consolidate the Wildlife Habitat Incentives Program into EQIP with a five percent funding allocation. 

The Conservation Stewardship Program was modified and expanded in the 2008 Farm Bill, which has allowed a greater number 

of producers to participate in recent years. CSP prioritizes more 

complex management efforts by offering higher payments. NRCS 

should be given greater flexibility in determining the potential outcome of these practices for farmers wishing to enroll. 

1724

The Conservation Reserve Program is the largest and one of the 

most important USDA conservation programs, providing many benefits, including wildlife habitat, water quality improvements, and 

outdoor recreation. Considering current budget constraints, our 

groups have been supportive of gradually decreasing the CRP cap 

to 25 million acres to achieve savings from Title II. However, environmentally sensitive or fragile lands should be the program’s priority, with the focus on targeted enrollment and re-enrollment of 

field borders and filters and buffer strips. As acreage leaves CRP, 

we believe it is important that sound conservation practices be 

adopted for those acres with an opportunity for landowners to enroll them in the Working Lands Program. We also support conservation cost-share work to be undertaken in the final year of the 

CRP contract, as well as more flexibility on haying and grazing options. 

Farmers are exceptional stewards of the environment. Our livelihoods depend on preserving land and water resources. Voluntary 

conservation programs developed over the past 30 years help farmers and ranchers play a major role in improving our environment, 

while also expanding their sources of income and keeping them on 

the land. We hope this Committee will choose to continue to invest 

in these programs through a robust and efficient conservation title 

in the new farm bill. 

Thank you for the opportunity to testify today on behalf of NCGA 

and a number of other agriculture organizations, and we hope—are 

hopeful that Congress can act swiftly to pass the farm bill before 

the end of 2012. Thank you. 

[The prepared statement of Mr. Niemeyer follows:]

PREPARED STATEMENT OF GARRY NIEMEYER, PRESIDENT, NATIONAL CORN GROWERS

ASSOCIATION, AUBURN, IL 

Chairman Thompson, Ranking Member Holden and Members of the House Agriculture Subcommittee on Conservation, Energy, and Forestry, I appreciate the opportunity to testify before you today on behalf of the National Corn Growers Association (NCGA) regarding farm bill conservation programs. My name is Garry Niemeyer, and I currently serve as President of NCGA. My wife Cheryl and I have been 

farming in Auburn, Illinois for the past 41 years where we raise corn and soybeans. 

The National Corn Growers Association represents more than 37,000 corn farmers 

from 48 states. NCGA also represents more than 300,000 corn growers who contribute to check off programs and 27 affiliated state corn organizations across the 

nation for the purpose of creating new opportunities and markets for corn growers. 

I am also pleased to report that my testimony today has the full support of the 

American Farm Bureau Federation, American Soybean Association, National Association of Wheat Growers, National Cotton Council, National Farmers Union, and 

USA Rice Federation. This broad consensus amongst farm groups is a significant 

achievement and is the result of nearly a year of detailed discussions about how to 

structure conservation programs that deliver environmental benefits while also improving productivity and reducing costs on the farm. 

As this Committee and the Congress consider legislation to authorize a new farm 

bill, American farmers are preparing to take on an even greater role in meeting the 

growing demands of world consumers. The harsh reality is that billions of people 

in the world today remain hungry and the numbers are rising, a trend the Food 

and Agriculture Organization (FAO) of the United Nations reports will continue for 

another 30 years. The FAO says this translates into needing to increase agricultural 

production by 70 percent over this period. Others place it at 100 percent. Many people cite these figures and discuss how important it is that we reach these goals, although very few are taking a critical and comprehensive look at our policy decisions 

today in light of this objective. However, we are confident that with the right mix 

of policies, U.S. agriculture will help the world to meet these growing demands in 

1725

a sustainable way, while at the same time remaining a bright spot in our nation’s 

economy and contributing to its recovery. 

Our confidence comes from agriculture’s ability, led by advances here in the U.S., 

to generate and adopt technological innovations that increase productivity and efficiency. Seed technologies, for example, along with modern production and conservation practices have allowed us to use far fewer resources while substantially increasing productivity. We have become more sustainable, even while we help meet the 

pressing need for an expanding food supply. In fact, the average bushels per acre 

of corn increased from 114 in 1995 to 153 in 2010, a productivity increase greater 

than 30 percent. These remarkable numbers and the promise of new production 

technologies on the horizon translate into U.S. farmers’ ability to meet all our needs 

for food, feed, fuel and fiber. 

It is important to acknowledge that farm bill conservation programs have had significant positive impacts over the past several decades, which have led to lasting 

environmental improvements on agricultural lands. The Field to Market initiative’s 

2009 report Environmental Resource Indicators for Measuring Outcomes of On-Farm 

Agricultural Production in the United States shows positive trends for all major 

commodities in the U.S. A combination of technology adoption, improved management practices, and voluntary conservation programs have resulted in dramatic conservation benefits in U.S. corn production. Over a 20 year period from 1987–2007, 

soil erosion per bushel of corn decreased 69 percent, energy use per bushel of corn 

decreased 37 percent, irrigation water per bushel of corn decreased 27 percent, 

greenhouse gas emissions per bushel of corn decreased 30 percent, and land use per 

bushel of corn decreased 37 percent. 

In light of the extremely difficult fiscal and economic conditions that our nation 

faces today, our groups recognize the monumental task before this Committee to advance a new farm bill that addresses a broad range of nutrition and agriculture concerns across the country. Our growers also understand they must be part of the solution to address our nation’s budget deficits and are prepared to accept spending 

reductions in farm programs. However, the size and scope of these cuts must not 

jeopardize important program functions. Fortunately, we believe there are opportunities in the conservation title to consolidate or eliminate duplicative programs in 

order to achieve savings, while also working more effectively for producers. 

NCGA and the aforementioned agricultural organizations have expressed support 

for the Title II framework in the 2012 Farm Bill that the Senate and House Agriculture Committees began developing last fall, which consolidates 23 conservation 

programs into 13 while maintaining the same tools that were available to farmers 

in the past. Our growers are seeking simplification, flexibility, and consolidation in 

these programs, and we believe these goals are achieved in the Senate Agriculture 

Committee’s recent draft language. 

As regulatory pressures on agricultural producers continue to increase, working 

lands programs have become essential to achieving environmental goals. The Environmental Quality Incentive Program (EQIP) remains a popular program that delivers effective conservation dollars to assist landowners who face natural resource 

challenges on their land. Between 2009 and 2011, EQIP helped farmers and ranchers implement conservation measures on more than 38 million acres. Above all, 

EQIP should preserve the full flexibility needed to adjust the program over time to 

focus on evolving issues and allow improvements to program features based on national, state and local needs. We support the continuation of a 60 percent carve-out 

for livestock producers, as well as the proposal to consolidate the Wildlife Habitat 

Incentive Program (WHIP) into EQIP with a five percent funding allocation. 

The Conservation Stewardship Program (CSP) was modified and expanded in the 

2008 Farm Bill, which has allowed a greater number of producers to participate in 

recent years. It is now one of the largest USDA conservation programs, with nearly 

38 million acres enrolled from 2009–2011. CSP prioritizes more complex management efforts, such as advanced nutrient management, by offering higher payments. 

The Natural Resources Conservation Service (NRCS) should be given greater flexibility in determining the potential outcome of these practices for farmers wishing 

to enroll in the program. 

We support the creation of a consolidated easement program to encompass the 

Wetlands Reserve Program (WRP), Grasslands Reserve Program (GRP), and Farm 

and Ranch Lands Protection Program (FRPP). The proposed changes would establish a more secure, longer term funding source for these important programs rather 

than authorizing for the duration of only one farm bill at a time. 

The Conservation Reserve Program (CRP) is the largest and one of the most important USDA conservation programs, providing many benefits including wildlife 

habitat, water quality improvements, and outdoor recreation. Considering current 

budget constraints, our groups have been supportive of gradually decreasing the 

1726

CRP cap to 25 million acres to achieve savings from Title II. However, environmentally sensitive or fragile lands should be the program’s priority, with the focus 

on targeted enrollment and reenrollment of field borders and filter and buffer strips. 

As acreage leaves the CRP, we believe it is important that sound conservation practices be adopted for those exiting acres with an opportunity for landowners to enroll 

them in working lands programs. We also support conservation cost-share work to 

be undertaken in the final year of a CRP contract, as well as more flexibility for 

haying and grazing options on CRP land. 

Our groups support the creation of a Regional Conservation Partnership Program 

by consolidating the Agricultural Water Enhancement Program (AWEP), Cooperative Conservation Partnership Initiative (CCPI), Chesapeake Bay Watershed Initiative (CBWI), and Great Lakes Restoration Initiative (GLRI). This will allow USDA 

to leverage state, local, and non-governmental organization funds to address targeted conservation priorities. 

The demand for technical assistance continues to increase, yet funding for technical assistance has been relatively flat over the years. We recommend that Congress provides adequate funding and training for NRCS field staff to help address 

on-farm conservation challenges. We encourage the Committee to look at a longterm view of budgeting for technical assistance that balances national priorities 

with local needs. In addition, the consolidation of programs should result in the 

streamlining of the application processes to minimize paperwork and ease implementation. 

In certain regions of the country, weather patterns in recent years have resulted 

in excess water and an increased desire to install drainage management on fields. 

Farmers have requested certified wetlands determinations from NRCS at a record 

pace, and currently, there is a backlog of 13,000 requests over four states (North 

Dakota, South Dakota, Minnesota, and Iowa). NRCS is working to accelerate the 

process while also bringing more consistency to how the determinations are made 

and ensuring mitigation options. Congress should provide resources to ensure the 

backlog is dealt with as expeditiously as possible. 

One of the most important steps USDA took in the past decade was the establishment of the Conservation Effects Assessment Program (CEAP) in 2003 to develop 

a scientific understanding and method for estimating the environmental effects of 

conservation practices on agricultural landscapes at national, regional, and watershed scales. In the past 2 years, CEAP assessments have been completed for the 

Upper Mississippi River Basin, Chesapeake Bay Region, Great Lakes Region, and 

Ohio-Tennessee Basin. Using the survey work conducted by the National Agricultural Statistics Service (NASS), CEAP is a highly efficient and cost effective way 

to demonstrate the outcomes of the conservation practices used by farmers and 

ranchers. CEAP also enhances NRCS’s ability to ensure that farmers and ranchers 

are focusing on top resource challenges. Without the NASS-supplied survey data, 

CEAP would not be able to provide its statistically valid and science-based estimates 

of agriculture’s conservation accomplishments and the associated benefits for natural resources and the environment. This Committee should ensure that CEAP and 

the underlying NASS survey collection receives continued funding into the future. 

Farmers are exceptional stewards of the environment because our livelihoods depend on preserving land and water resources. We are committed to leaving our environment in better shape than we found it so resources can be passed on to the next 

generation to farm. Most producers throughout America view protecting agricultural 

land as more than a worthwhile goal. It is a lifelong commitment. Voluntary conservation programs developed over the past 30 years help farmers and ranchers play 

a major role in improving our environment while also expanding their sources of income and keeping them on the land. We hope this Committee will choose to continue to invest in these programs through a robust and efficient conservation title 

in the new farm bill. 

Thank you for the opportunity to testify today on behalf of NCGA and a number 

of other agricultural organizations. We are hopeful that Congress can act swiftly in 

the coming weeks and months to pass the farm bill before the end of 2012. 

ATTACHMENT

April 20, 2012

Hon. DEBBIE STABENOW, 

Chairwoman, 

Senate Committee on Agriculture, Nutrition, and Forestry, 

Washington, D.C.

Dear Sen. Stabenow:

1727

Farmers are exceptional stewards of their land and water resources. They have 

to be. Their livelihood depends on preserving those resources. Even more important 

for most producers is a desire to conserve so that the resource can be passed on to 

the next generation to farm. Most farmers throughout America view protecting agricultural land as more than a worthwhile goal. It is a lifelong commitment. These 

farmers not only lead by example on their own farms, but they actively work to promote land stewardship elsewhere. Voluntary conservation programs developed over 

the past 30 years help farmers and ranchers play a major role in improving our environment while also expanding their sources of income and keeping them on their 

land. 

The undersigned groups urge you to oppose attaching conservation compliance 

provisions to the crop insurance program. We fear this would cause numerous unintended consequences, including the potential loss of financing from our lenders, an 

undermining of the public-private partnership between the Federal Government and 

crop insurance companies, and a potentially unbalanced approach to a new mandate 

(depending on whether such a program covers only program crop commodities or is 

also applied to specialty crops). 

The 1985 Farm Bill included two compliance provisions—highly erodible land conservation (sodbuster) and wetland conservation (swampbuster). The two provisions, 

collectively referred to as conservation compliance, require that in exchange for certain U.S. Department of Agriculture (USDA) program benefits, a producer agrees 

to maintain a minimum level of conservation on highly erodible land and not to convert wetlands to crop production. 

Conservation compliance affects most USDA benefits administered by the Farm 

Service Agency (FSA) and the Natural Resources Conservation Service (NRCS). 

These benefits include commodity support payments, disaster payments, farm loans 

and conservation program payments. If a producer is found to be in violation of conservation compliance, a number of penalties are enforced. 

Some groups and individuals believe that crop insurance should be added to the 

list of benefits that could be lost if a producer is found to be out of compliance. Federal crop insurance premium assistance was originally included as a benefit that 

could be denied under the conservation compliance provisions; however, this was removed in the 1996 Farm Bill. This was due largely to the fact that Congress wanted 

to encourage producers to purchase crop insurance and to do so at higher levels of 

buy-up coverage so that ad hoc disaster assistance became unnecessary. 

Since elimination of direct payments appears inevitable and high commodity 

prices have resulted in few or no countercyclical payments or marketing loans, some 

are concerned there is no motivation for producer compliance with conservation requirements. Such groups fail to recognize that producers are the original conservationists and they want to take care of their land. It will also still be required for 

commodity support payments, disaster payments, farm loans and other conservation 

benefits. Farm groups are willing to attach conservation compliance to any new 

commodity programs encompassed in this farm bill, but such linkage should not be 

required for crop insurance. 

It is critical to maintain a workable crop insurance program. Without it, many 

producers could not secure financing. In addition, if there was a severe weather occurrence and producers became out of compliance, serious issues could arise in their 

ability to secure financing. 

We believe it unwise to make any changes in this farm bill that would dissuade 

producers from purchasing crop insurance. With elimination of direct payments, 

crop insurance is an absolute necessity for producers. If we do not have a workable 

crop insurance program and a high level of participation in that program, we will 

invariably fall back into the cycle of annual ad hoc disaster assistance programs. 

It is also important to remember that implementing a crop insurance/conservation 

compliance provision would not be simple, nor are the details of such a proposal yet 

fleshed out. Who will enforce these compliance provisions? With the FSA furloughing staff and planning to close 130 offices, is there sufficient personnel? Will 

compliance provisions be applied to owners of land or operators? Will specialty crops 

be included under such a mandate or simply applied to program crop commodities? 

We appreciate your consideration of our views and urge you to reject the linkage 

of crop insurance with conservation compliance requirements. 

Sincerely,

American Association of Crop Insurers

American Farm Bureau Federation

American Soybean Association

American Sugar Alliance

1728

ARMtech Insurance Services, Inc.

CGB Diversified Services

Crop Insurance and Reinsurance Bureau

Crop Insurance Professionals Association

COUNTRY Mutual Insurance Company

Farm Credit Council

Farmers Mutual Hail Insurance Company of Iowa

Great American Insurance Company

Heartland Crop Insurance, Inc.

Independent Community Bankers of America

John Deere Insurance Company

NAU Country Insurance Company

National Association of Wheat Growers

National Barley Growers Association

National Corn Growers Association

National Council of Farmer Cooperatives

National Sorghum Producers

National Sunflower Association

Producers Ag Insurance Group, Inc.

Rain and Hail, LLC

Rural Community Insurance Services

Southwest Council of Agribusiness

United Fresh Produce Association

U.S. Canola Association

USA Dry Pea & Lentil Council

Western Growers

Western Peanut Growers Association

The CHAIRMAN. Thank you, Mr. Niemeyer. Thank you to all the 

witnesses for your testimony. 

The chair would like to remind Members that they will be recognized for questioning in order of seniority from Members who were 

here at the start of the hearing, and after that, Members will be 

recognized in order of arrival. I appreciate Members understanding. I will proceed with the first 5 minutes of questions. 

I will start with Mr. Schmidt. Mr. Schmidt, you mentioned in 

your testimony the importance of technical assistance in administering conservation programs, and in fact, I couldn’t agree more. 

I think that is boots on the ground. Technical assistance is incredibly important. In my opinion, the 2008 Farm Bill put more emphasis on administrative activities and programs opposed to technical 

assistance and boots on the ground. So I will start with you, sir. 

Would you agree with this, and if so, how should we address this? 

Mr. SCHMIDT. Thank you, Chairman Thompson, and that is so 

critical. As Mr. Peterson spoke, we have dollars in agriculture and 

we hope that atmosphere continues. We don’t always know that, 

but usually when there are dollars in agriculture, there are individuals—producers looking for things to do the right way. And that 

technical assistance, we know there are dollars are—those kinds of 

things happening. We want to make sure that those folks have the 

expertise to do whatever conservation practice that they have in 

mind is done the right way. Technical assistance is looked upon so 

strongly from that initiative to help those folks who want to do the 

right thing, how do they spend that money most wisely, most efficiently, and we get the best impact of that conservation practice. 

1729

So that is why that TA is so important, that technical assistance 

is so important, to help those producers, landowners try to do the 

right thing with the right technical ability in their local communities. 

The CHAIRMAN. Thank you, sir. 

Mr. Niemeyer, you stated that the demand for technical assistance continues to increase, yet funding has remained flat. Why specifically do you believe that has been the trend, and what are your 

thoughts on the issue? 

Mr. NIEMEYER. Congressman, one of the things that I have in my 

testimony is CEAP, Conservation Effects Assessment Program, and 

this is where NRCS does assessments. We think that they estimate 

the environmental benefits very effectively. We feel that CEAP has 

been particularly important in the Chesapeake Bay watershed and 

the Upper Mississippi River Basin to demonstrate how farmers are 

doing conservation to the land. 

As farmers face regulatory scrutiny, USDA needs a tool to demonstrate where progress has been achieved and where challenges 

still exist. It is always best to build on programs around sound 

science and data so we can better understand where to target future resources. 

The CHAIRMAN. Thank you. 

Mr. Scholl, you state in your testimony that in the Chesapeake 

Bay, 80 percent of the lands need treatment, and 19 percent are 

critically under-treated. How can we help encourage more farmers 

to enroll in these programs, especially the most critically undertreated? 

Mr. SCHOLL. Well, there are a number of things we can do. One, 

a lot of the work that you are trying to do with this Subcommittee 

that we have seen in some of the proposals certainly help in terms 

of making sure that the programs we have are understandable, 

they are easily accessible, and relevant to the local needs of a local 

area, trying to direct more program resources to opportunities 

where local people have an opportunity to be able to develop partnerships and put forward plans and ideas in terms of how they can 

effectively deal with their local resource concerns are very important. And of course there are going to be a number of issues or 

number of opportunities as we see this bill continue to progress, to 

make sure that there is adequate funding that can be strategically 

placed in areas where we know we have significant challenges, and 

clearly, the Chesapeake Bay is one. It also can be very helpful in 

making sure the farmers, the producers have the tools they need 

to be making the progress we want them to make. 

The CHAIRMAN. Thank you. Mr. Scholl, you made it clear that 

you believe that strategic conservation is a cornerstone in the next 

farm bill. I want to get your opinion. Today the Senate is marking 

up—and obviously it sounds like you have looked at that. Do you 

believe that the Senate draft accomplishes this goal? 

Mr. SCHOLL. Yes, we do feel that it is a big step forward in terms 

of making sure that the limited dollars we have available will be 

put to strategic use. A number of the points that I have raised in 

terms of developing local partnerships, being able to target to local 

resource concerns, and frankly, be able to compete for dollars to 

incentivize people to put their best foot forward clearly is an apVerDate 0ct 09 2002 12:54 Dec 11, 2012 Jkt 041481 PO 00000 Frm 00141 Fmt 6601 Sfmt 6601 I:\DOCS\112-30\74372.TXT BRIAN
1730

proach that we think can be successful. We have seen things like 

through the Cooperative Conservation Partnership Initiative in the 

last farm bill, that that kind of approach works and we think it 

does probably hold the best promise in terms of making sure the 

limited dollars we have available are going to get to the areas 

where the greatest needs are. 

The CHAIRMAN. Thank you. At the request of the Ranking Member, I recognize Mr. Costa next, for 5 minutes. 

Mr. COSTA. Thank you very much, Mr. Chairman, and the Ranking Member. I have another committee going on concurrently and 

I need to get over there, but I do want to touch upon the conservation title and its impact, because we have done a lot of good work 

as a result of the 2008 Farm Bill that we all worked on together 

that had terrific bipartisan support. It was the only bill in that session of Congress that passed both Houses, regular order, went 

through a Conference Committee, due to the good leadership of 

Congressman Peterson and Goodlatte, and hopefully we can repeat 

that. 

Mr. O’Toole, you talked in your testimony about government 

should be allowed to voluntary assume primacy on the conservation 

title by using block grants to states, I believe. Please walk me 

through how that would happen, and where would the oversight 

be? 

Mr. O’TOOLE. Well, our personal experience is that the programs 

as they are designed right now, Idaho and Wyoming and Colorado 

particularly, there is money turned back because it is not an appropriate program for the state. There isn’t enough sign up, and it is 

our feeling that those decisions are much better made at local—at 

a local level and at a state level. Interestingly in Colorado and Wyoming, both states have different matching capabilities. In Wyoming it is a wildlife trust fund, and in Colorado it is——

Mr. COSTA. Who would do the oversight of the block grants? 

Mr. O’TOOLE. Who would do the oversight? I think that there is 

a Federal role, but our family has done conservation easements in 

both Colorado and Wyoming. There was an——

Mr. COSTA. Would this create more work for NRCS or FSA? 

Mr. O’TOOLE. Pardon? 

Mr. COSTA. Would this create more work for NRCS or FSA? 

Mr. O’TOOLE. It is our perspective that it will create less and it 

will be much more efficient by being more local. We have had oversight, as I said, on the FRPP from D.C. and we found that that 

process was not as effective as what was happening locally with the 

various programs that occur within the states. 

Mr. COSTA. Mr. Nomsen, the EQIP program has been one of the 

real highlights of the 2008 Farm Bill across the country, and certainly in a host of efforts to conserve and focus on both water and 

air resources efforts. It has been very successful in the agricultural 

region in the Silicon Valley. 

The focus on the Senate draft, I believe, incorporates, I have 

been told, the Wildlife Habitat Incentives Program into EQIP 

under wildlife habitat practices. I am wondering whether or not 

you think that is an appropriate way to dovetail that in and make 

it work. Frankly, our experience is probably true across the country. It is oversubscribed and if we get a farm bill out this year, we 

1731

have to figure out ways to provide greater support for it. Could you 

comment? 

Mr. NOMSEN. Thank you, Congressman. The EQIP program is a 

tremendous program to help farmers and ranchers with working 

lands, and I am very supportive of adding the element from the 

WHIP program so we have wildlife incentive practices within EQIP 

at at least five percent. You know, it is just a tremendous program 

and we can do much more with it. 

The current NRCS Sage Grouse Initiative is helping us put range 

conservationists on the ground in many of the western states, and 

it becomes a real win-win for ranchers and for wildlife. The ranchers are benefitting from improved range conditions, brush removal, 

prescribed burning, and some of those efforts that can provide better range land for their operations, and at the same time we are 

doing great things for the sage grouse. It is a tremendous success 

story. 

Mr. COSTA. If you were ranking in terms of priorities within the 

various titles within the farm bill, and you had your druthers, 

what would you like to see in terms of us focusing—in terms of the 

current funding that we have provided for EQIP program? Would 

you like to see us increase it or what changes would you offer? 

Mr. NOMSEN. Well, I would just offer that as difficult as the discussions have been, I am very pleased that they have been bipartisan on both sides. I mean, it has been a very difficult job to talk 

about removing $6 billion from conservation. If we didn’t have to 

do that, it would be better, but I do think that some of the policies 

across many of this suite of programs will be beneficial into the future. 

Mr. COSTA. All right. Thank you very much, Mr. Chairman. I 

thank the Ranking Member for your deference, and I will get to my 

next committee. 

The CHAIRMAN. I thank the gentleman, and I now recognize the 

gentleman from Ohio, Mr. Gibbs, for 5 minutes. 

Mr. GIBBS. Thank you, Mr. Chairman. First of all, I would like 

to say the EQIP program has been a great program and a lot of 

producers, including myself in the past, have taken advantage of 

it. 

I want to try to get a little handle—we talk about what Mr. Peterson was talking about, the land that has been set aside, and of 

course, back in the 1980s we actually had what, ten percent set 

aside in addition to this CRP ground because of the—what was 

happening with the surpluses of grain. But I would like to—maybe 

Mr. Schmidt might be the best one to answer this. The 32 million 

acres now capping at 25 million acres, does anybody really have a 

handle on—since we have to cut $6 billion, does anybody really 

have a handle of how many acres should absolutely be protected. 

Also, how many acres could be—should never be tilled but maybe 

should still be protected but could be pastured. Where are we? I am 

just trying to get a handle of what you think the acreage might be, 

or maybe it is 25 million acres. I don’t know, I am just—I don’t 

know. Mr. Schmidt might be the best one to——

Mr. SCHMIDT. Thank you, Congressman, and we have taken a 

look at that aspect and in respect to Congressman Peterson’s remarks earlier on, one of the biggest concerns we had in the acres 

1732

coming out of CRP that we know back in the 1985 Farm Bill that 

we had somewhat of a production reduction part of that aspect. The 

acres that have come back out of the CRP, our concern is that we 

know under some full block acreages that went into CRP, there is 

probably some sensitive lands within those blocks. We look at that 

acreage cutback to the 25 million acres, we want to make sure that 

those sensitive lands are protected by some kind of a conservation 

practice. We know there are productive lands out there that are 

probably in a Conservation Reserve Program that probably need to 

be back in production, but we also realize that within that block, 

there are probably sensitive lands. We want to make sure that we 

maintain through a conservation plan or some mechanism that we 

maintain the sensitivity from the water quality aspect, the conservation aspect. Bringing some of those CRP acres back in probably today is a little bit less of a concern because of the cover crop 

activity you are seeing take over in the industry. 

You know, I was taught as a youngster that the best way to 

maintain soil health is have a live crop on a piece of land at all 

times. That is where the cover crop aspect comes in. So there are 

technologies that have changed, a lot of new expertise in agriculture today that we didn’t have back in 1985 that turn a tremendous aspect. But we see a pretty good balance, given, when you 

talk wildlife, the wildlife habitat, those kind of things. There are 

a lot of new conservation practices that help us maintain the sensitivity of those lands under the CRP acreage total that we think we 

can maintain a true environmental benefit, even if we have to look 

at that 25 million. 

Mr. GIBBS. Okay, and I guess that goes a little bit back to Mr. 

Nomsen from Pheasants Forever. You made a comment about wildlife habitat, not the blocks. Did you want to expound a little bit further on that? If we have to actually cut some of those blocks up, 

the impact or can we actually do it and maybe pasture some of 

those non-sensitive areas and still protect water quality and——

Mr. NOMSEN. Congressman, that is a good point. You know, one 

of the challenges that we have had is as we have talked about reducing the overall size of the CRP is to make the program a much 

more dynamic program and move acres through this program. Let 

us help beginning farmers and ranchers with expired CRP lands 

that have improved plans by leaving buffers in place and moving 

into farming operations. Let us help grazing operations do the 

same thing. Let us take some of the sensitive lands and move them 

into more permanent and long-term easement protection, and let 

us be more aggressive about expiring CRP and buffers, leaving the 

buffers in place. Too much of the CRP is leaving right now and it 

is ending up fence row to fence row, ditch to ditch production, and 

that is just going to cause more soil erosion and water quality problems. 

So those are the types of policies that we are looking for in the 

next farm bill that will help with the potential reduction of the 

overall size of the program. 

Mr. GIBBS. Is that—going back to Mr. O’Toole, flexibility, that is 

what you were really asking for, the ability for the locals to—and 

the farmers, the stakeholders to be able to look at that and make 

some of those determinations, give them that flexibility when they 

1733

have to decide what is sensitive and what can maybe be pasture 

and protected? 

Mr. O’TOOLE. Yes, sir, and I was part of a group—Congressionally mandated group that looked at the conservation part of the 

farm bill hearings last year. I attended hearings in Phoenix, Portland, and Ft. Collins, Colorado, and it was a very consistent message. We need to get people out of the offices and onto the ground. 

We need to make the system work faster. If we, in fact, are going 

to have the driest and then the wettest year behind each other, we 

have to be flexible enough to be able to adjust to whatever those 

realities are. If there is one message, it is that things are changing 

for a lot of different reasons, a lot of market changes, a lot of climatic realities that we are all dealing with, and I think that the 

role of NRCS—and I will just tell you personally, it is so frustrating to have good men in an office doing administrative work 

when they need to be on the ground. 

Mr. GIBBS. Thank you, Mr. Chairman. 

The CHAIRMAN. I thank the gentleman. I now recognize the gentleman from Oregon, Mr. Schrader, for 5 minutes of questioning. 

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

I am very interested in Mr. O’Toole’s ending comments there. I 

guess a question for each of the panelists, I would be interested in 

your perspective on how you judge the outcomes of the various programs that are out there. How do we as legislators, not experts in 

wildlife biology or soil erosion or in some cases, perhaps, some of 

us not being farmers—I am a farmer—but how do you—how are we 

to judge whether or not a particular CRP, CSP, EQIP easement 

program is actually working? What sort of data, actual data is collected by NRCS or whoever? Who are the boots on the ground actually collecting data out there? Mr. Schmidt, we start with you. 

Mr. SCHMIDT. Well thank you, Congressman. Just a little bit of 

that background—and I appreciate it. Accountability is so important, and as we experienced in a private project within NRCS and 

the Chesapeake Bay, we went out and did some one-on-one research with agriculture, making sure—the background right now 

and the model data we have is based on conservation practices. 

Somebody took some kind of monetary—a cost-share program, 

whatever, from that scenario. We know there is conservation on the 

land that would have been done voluntarily. You know, I am, as 

you said, a farmer. I am driving down the road, I look at my neighbor. It looks like he is doing a good job. Sometimes I just copy him. 

I didn’t go for cost-share. Sometimes we don’t have enough boots 

on the ground to get that job done. 

We want to make sure and we did that. We found that at the 

Chesapeake Bay there was roughly about 30 percent more conservation on the land than what is actually being accounted for in 

the model data we had. So some mechanism—through a conservation plan, some mechanism to truly get accountability of the actual 

conservation plans out there so we can address the needs as we see 

them, the flexibility to address that, but we truly need some mechanism to account for more of that conservation so we do have a 

mechanism, as you said, to measure truly what is out there and 

the benefits of the programs that you all provide and fund to help 

us maintain. 

1734

Mr. SCHOLL. I am sure there are a lot of folks with a lot of degrees behind their name that would be very good at answering that 

question. I don’t pretend to be able to give you a lot of specific details in terms of how you select the appropriate outcomes and exactly what those outcomes should be, but I do certainly concur with 

the intent of your question to say they are critically important. One 

of the things I would encourage this Committee to look at is efforts 

like the CEAP program that USDA has that I think really is making steps forward in terms of trying to identify what are the benefits in real concrete terms that we get from the investment we 

make in EQIP and all these other programs. Outcomes are in important, particularly in a day and age when the public is very concerned about accountability, and we want to make sure that dollars 

are being used effectively. It is great to know how many miles of 

terraces we have put in, but at the end of the day, we really need 

to know, did it have the desired impact on water quality or wildlife 

habitat or whatever the issue we are looking at. 

And so I would encourage you to especially look at those means 

that we can help empower those experts to be able to help us better 

understand those outcomes, what we are getting from the investment we are making, and if we are making progress towards that 

mark. 

Mr. O’TOOLE. If I were not here today I would be in Klamath 

Falls in a meeting of a group called the Intermountain Joint Venture, which is about migratory birds. You know, what I talked 

about earlier, these Islands of Renaissance that are happening all 

over, it is because coalitions of people are coming together. We are 

working with Family Farm Alliance, with Environmental Defense 

Fund, Nature Conservancy, Trout Unlimited, as well as Wyoming 

Stock Growers Association, Farm Bureau groups. 

In reference to how we understand how this balance of conservation and production happen, here is a number that really struck 

me. The largest duck count since 1955 is now, and one of the 

things that we are understanding from the conservation side is the 

value of flight irrigation in terms of habitat for migratory birds. We 

at NRCS and many people in agriculture were being asked to do 

more efficiency, more efficiency, more side rules, more pivots. That 

is good to a point, but the reality is when you look at a watershed, 

a watershed is a sponge that has all kinds of various benefits, and 

to understand the balance of those benefits for birds and wildlife 

and production is the future. And I would just tell you that the criteria are because we are now partnering with people that we were 

maybe considered adversaries a few years ago. We now have a new 

look on how you do the critical parts of production and maintain 

those other values. 

Mr. NOMSEN. Congressman, each fall I try and personally measure the success of these conservation programs afield, and I measure it by the number of birds in the bag. But maybe to build on 

that a little bit, if you look, for example, at upland bird hunting, 

it is a billion-dollar industry in this country. Pheasant hunting in 

the State of South Dakota is averaged just short of a $1⁄4 billion 

each year. That is a tremendous economic driver for that small, 

rural state and a lot of those rural economies. Motels are full, resVerDate 0ct 09 2002 12:54 Dec 11, 2012 Jkt 041481 PO 00000 Frm 00146 Fmt 6601 Sfmt 6601 I:\DOCS\112-30\74372.TXT BRIAN
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taurants are full. Conservation programs are a tremendous part of 

our hunting heritage and our rural economy. 

Mr. NIEMEYER. Congressman, I have already spoke on the effects 

of CEAP, and I think that is the way you determine on sound 

science and data. However, I want to go back to something in a different format. 

You know, these voluntary programs do work. We have worked 

with Field to Market on a report—in a report that came out in 

2009. From 1987 to 2007, we found evidence of continuing environmental improvements for corn production over the past several 

years, and it has a lot to do with conservation programs. Soil erosion per bushel of corn decreased 69 percent in those 20 years. Energy use per bushel of corn decreased 37 percent in those 20 years. 

Irrigation use per bushel of corn decreased 27 percent. Greenhouse 

gas emissions per bushel of corn decreased 37 percent. We do have 

data to prove that all these policies that we work with on a voluntary method have worked very proactively. 

Mr. SCHRADER. Just a final comment, Mr. Chairman. I know my 

time has expired, but I just want to make it clear to the Committee 

and to everyone out there, and hopefully to the—of our next farm 

bill, that with limited dollars, it would really be smart of us to use 

CEAP or some other program to decide which of these programs is 

giving the biggest bang for the buck. I know we all have favorites, 

but we cannot afford to do everything all the time anymore, so we 

have to really figure out which programs are giving us the biggest 

bang for the buck. 

Thank you. 

The CHAIRMAN. I thank the gentleman. I now recognize Mr. 

Ribble of Wisconsin, for 5 minutes of questioning. 

Mr. RIBBLE. Thank you, Mr. Chairman. I want to thank the 

panel for taking some time with us this morning. Actually, we will 

start and see how this goes time-wise with asking you all to respond to this question. 

Earlier in the year I had a town hall with about 130 farmers and 

landowners in Wisconsin. We talked specifically about the farm 

bill, including the area of conservation. I am wondering if each of 

you would tell me, what is the number one guiding principle that 

this panel ought to be following as we draft the farm bill? And then 

what is your number one priority? Mr. Schmidt, we will start with 

you. 

Mr. SCHMIDT. Thank you, Congressman. I think going back to an 

earlier statement, probably the number one—when we look at limited dollars and how do we get the most impact for the dollars we 

have available, it is the flexibility that you folks can look at in a 

program process that gives us that ability at the local level to 

maximize either by matching funds, whatever, the flexibility to utilize those dollars. I think above all, even though we have a shrinking budget and the streamline aspect to me is a priority. How do 

we make it more efficient and easier for those farmers or producers 

to participate in, but more importantly, when you have some voluntary—and normally you do. People want to do the right thing. 

We don’t always provide the ability for those folks to do the right 

thing, so that technical assistance aspect of helping those folks 

make the right choice, right decision with the dollars that are out 

1736

there, whether it is Federal dollars or local dollars, to get the best 

impact of those dollars that are out there. I think that is key. That 

is a priority. 

Mr. RIBBLE. Thank you. 

Mr. SCHOLL. Number one principle, I would say engagement of 

producers. I do very strongly believe that it is in our own best interest as farmers to do the right thing by our natural resource protection. I know the public is demanding that. I think there is a lot 

of desire on the part of farmers to want to apply the kind of practices and the like. Oftentimes we are dealing with complex issues 

and the technical assistance and the like is very important. But 

really trying to engage people and have the tools and resources 

available is probably the number one principle I would offer. 

The number one priority, clearly, from my organization’s standpoint I would say maintaining and building a viable Farm and 

Ranchland Protection Program. I cited statistics in terms of the 

amount of land we have lost, and one of the points I would make 

is that it is some of our best land that we have lost. And when you 

look at the growing demands and the pressures upon that land resource, there are many instances where we regret that we have lost 

that land and that is even going to become more acute into the future. So making sure we keep a viable program to help protect land 

and keep it in agricultural production would be our number one 

priority. 

Mr. RIBBLE. Thank you. 

Mr. O’TOOLE. Sir, a few years ago I had the opportunity to spend 

an afternoon with Wendell Barry, and he is a fellow that has written significant books on agriculture and farming. And he said 

something to me that really stuck, and it is that if you love the 

land, you have a responsibility to it. And in the context of this 

hearing and this question and the issue of conservation, farmers 

have to realize that just as much as when we as a country said we 

want you to produce fuel as well as food, we have to send the message out that conservation is an integral part of food production. 

My primary concern, number one concern, and I said it earlier 

was how do we recruit another generation of people into farming? 

And the message cannot be a negative message. The message to 

young people is we need you. We need you to be farmers to produce 

food, but we also want you to have that conservation ethic that I 

referred to. If we use those as guiding principles, it makes an awful 

lot of difference. The messaging to young people is very critical 

right now as it relates to how do we recruit new people into agriculture. 

Mr. RIBBLE. Thank you. 

Mr. NOMSEN. Congressman, I would also talk about giving producers an adequate safety net so that they can invest in conservation programs, and the combination of conservation and having 

strong partnerships with producers out there on the landscape, 

that is the win-win for everybody. When we are doing good things 

for soil and water conservation and for wildlife and wildlife habitat—the mission of Pheasants Forever is all about habitat. You 

know, there isn’t a farmer or rancher out there that isn’t better off 

if they have some lands devoted to conservation. Conservation 

practices help protect America’s production and our farm economy, 

1737

and they have tremendous benefits like the rural recreation benefits from sportsmen, hunters, and fishers across the landscape and 

outdoor recreationalists as well. So those would—I would offer 

those as my principles to look at as you move forward on the farm 

bill. 

Mr. NIEMEYER. I would agree with what Mr. Nomsen just said, 

and also add that the Senate bill was carefully crafted. We took 23 

programs and took them down to 13, and it was a $6 billion hit. 

Now we all realize we have a deficit in the budget we have to deal 

with, but no more, because we believe that any steeper cuts to 

these programs would jeopardize the basic functions and make 

them ineffective. And as a farmer and in this farm bill, hopefully 

it will pass the Senate and pass the House. We are very supportive 

of the proposal developed by Chairman Debbie Stabenow and 

Ranking Member Roberts. And we hope to have prompt action on 

this bill, and we urge the House to pass the legislation in 2012 as 

well. Thank you. 

Mr. RIBBLE. Thank you. Thank you, Mr. Chairman. I yield back. 

The CHAIRMAN. I thank the gentleman. I now recognize Mr. Walz 

for 5 minutes. 

Mr. WALZ. Thank you, Mr. Chairman, and thank you for putting 

together such a great panel. I very much appreciate this. 

Before I start, I would like to make note for my colleague from 

Maine, Ms. Pingree had to leave, but she wanted me to note that 

Mr. Walt Whitcomb is here today. He is the Maine Agriculture 

Commissioner, and also a dairy farmer. So welcome, Mr. 

Whitcomb, today. 

Each of you, thank you. Thank you for clearly understanding and 

articulating that agricultural production and economic prosperity is 

not mutually exclusive from sound environmental stewardship, articulating that in a way that I think the public needs to hear us 

say more. Thanks also for understanding and for the opportunities 

you create in rural America, for understanding that our rural areas 

are not just undeveloped urban areas, that there is a distinct difference and a reason in the choice of lifestyle that is out there, and 

for protecting our outdoor heritage. It is not just a hobby to go out, 

it is a part of who we are, and understanding that that all intertwines together, making those areas the place where we choose to 

live. So I am very encouraged when I hear all of you. I think the 

thoughtful responses and an understanding, and trying to come 

with and deal with reality as it is with a tightening budget situation, each of you really hit on something very important. How do 

we measure and get the most bang for the buck of getting those 

things there? I would also say the interconnectedness of everything 

that we do—Mr. Niemeyer, you brought up an incredibly valuable 

point that it is hard to think about, because it takes a vision. There 

is going to be an increasingly crowded and hungry world out there, 

and for us to be able to fulfill the responsibility to our people and 

to the world to feed and to clothe and to power them—research dollars into ways that we can improve and get more. I mean, it is 

hard for me to imagine that you see people complaining about 180 

bushel corn out there, that we can do better than that. And we can. 

And this is going to be a part of that, as we cut down, getting more 

1738

off less land, getting more in a smart manner. So I am very, very 

appreciative of what all you are saying. 

Mr. O’Toole, I am going to narrow in here on something that 

struck at me on this, the Beginning Farmer and Rancher. It is a 

program that—thanks with Ranking Member Peterson’s guidance 

for me, it is an issue that I came to understand how important it 

is in my district, and putting in provisions to make sure we are 

transitioning to our next generation, and making sure that this is 

not only a profitable industry, but it is one where they feel the 

same sense of pride and connection to the land. 

So what we tried to do was put in some provisions that targeted 

again, if you will, targeted and set aside for those beginning farmers and ranchers. And I would like some of you with any expertise 

or any interaction you have had with that program to maybe comment a little bit on this. One of the things was—and in the Senate 

bill I am glad to see includes $25 million for the TIP program, 

transitioning those CRP acres over to a beginning farmer and 

rancher. Is it a good start? Any insight from any of you, if you just 

go right down the line, and is this beginning farmer and rancher 

program working, and is it a smart use of taxpayer dollars to target it to them? 

With that, Mr. Niemeyer? 

Mr. NIEMEYER. Absolutely. In our community, the average age of 

a farmer is 58 years of age. Unfortunately, my children do not 

want to farm, and I feel bad about that. But I really think that we 

need to get a new, younger generation involved in farming. 

In response to one of your other questions, a smaller CRP means 

more competitive enrollment so that USDA can target program dollars to the most sensitive lands, including buffer strips and filter 

strips where maximum environmental benefits can be achieved. 

But market forces often dictate planting decisions, so what is important is that USDA—is that we have an adequate Working 

Lands Program in place so the producers can grow crops while continuing to address the conservation concerns. 

Mr. NOMSEN. Congressman, this is an incredibly important area 

because it does look to the future and the future land stewards out 

there that are going to protect and preserve and continue our 

strong ag economy in this country, and right now some place on the 

Senate side this morning, Senator Klobuchar is offering an amendment to CRP to talk about encouraging beginning ranchers to implement grazing operations. And we think that is also part of the 

future as CRP continues to evolve and work for farmers and landowners. 

Mr. O’TOOLE. Yes, sir. Actually my son and daughter are at the 

ranch. That is one of the reasons that I am able to be here today. 

They have both participated in purchase of livestock and purchase 

of land through that specific program. I think it is absolutely the 

right direction to be in, and critical, because it is not only the dollars and the low interest rates, it is the message. And the message 

is as important as anything. And I know this Committee deals with 

a lot of other issues, like forestry. Our operation is absolutely dependent on forest permits, and Federal land. That is the way the 

West works. I think that we need to be very aggressive, and when 

those permits are available, there are people that talk about retireVerDate 0ct 09 2002 12:54 Dec 11, 2012 Jkt 041481 PO 00000 Frm 00150 Fmt 6601 Sfmt 6601 I:\DOCS\112-30\74372.TXT BRIAN
1739

ment. That is absolutely the wrong direction. We should be bringing young people into integrating their opportunities. The same 

thing with water. There is a huge debate in the West right now, 

should water go to growth? Water needs to maintain itself on farms 

and ranches so that we can produce food. And that debate is ongoing and the pressures are fairly significant. But I can tell you that 

Mr. Vilsack has been very aggressive in his articulation of how important it is, and I can tell you that from our perspective at Family 

Farm Alliance, it is our absolute number one issue of importance. 

Mr. WALZ. Well, I am very appreciative. Mr. Scholl, do you have 

a comment on this? I was just going to also mention, Mr. Schmidt, 

you brought up something good that is a portion of this beginning 

farm and rancher, it is providing that technical assistance that I 

can’t—you have stressed it many times and I think that is wise advice. 

Mr. SCHOLL. Yes, I do have a comment. Clearly, the programs 

you have cited, as I have traveled around the country talking to 

folks, they are very popular and they do get a very critical need, 

the human resource issue in agriculture is something that we all 

are very concerned about and needs to be addressed. Providing options for folks. One that hasn’t been mentioned is the Conservation 

Loan Program as another means by which somebody that needs to 

do something to address resource concerns has the ability to do 

that, especially the folks that are just getting started. 

But I would also take a step back and say that I am very proud 

of the fact that my farming operation that we have two of the next 

generation, even after my brother and I, involved in it, and what 

you do overall in terms of the economic viability of agriculture is 

so critical. The reasons those two from the next generation are involved in my operation is because they see a chance to have a good 

living, do something they really enjoy, compared to when I was in 

college, I am sorry to say, there was more of the attitude of, ‘‘Gee, 

you can go to town and have a lot better life.’’ I think that has 

turned. That is very positive and the decisions you make really 

helped influence that. 

Mr. WALZ. Thank you. Thank you, Mr. Chairman. 

The CHAIRMAN. I thank the gentleman. Now I am pleased to recognize the full Committee Ranking Member, Mr. Peterson, for 5 

minutes. 

Mr. PETERSON. Thank you, Mr. Chairman. 

Mr. O’Toole, you mentioned that NRCS and FSA are both writing 

checks, and this is something we talked about in the 2008 bill and 

weren’t able to get anything done. But I don’t believe that Congress 

has actually ever picked a side in this discussion about whether 

both the agencies should be writing checks. And the staff tells me 

that the agency heads, during the second Bush Administration, 

made this decision. So it sounds to me like you feel the Committee 

should look into this issue. I don’t know if that is the case, and 

maybe—have you discussed this with other groups or with Secretary Vilsack? 

You know, I have talked out there with some of my folks and if 

you want to get these NRCS people out on the ground, they should 

not be sitting in the office filling out forms and writing checks. I 

don’t think, but——

1740

Mr. O’TOOLE. It isn’t just the writing of the check part of it, Congressman. You know, my own personal experience—and we live 

right on the state line and so we have double the regulatory situation than most people do. You know, so we see offices in both 

states, and maybe—I don’t think this is out of bounds, but I feel 

like there is almost a lack of trust of farmers, and so——

Mr. PETERSON. Lack of what? 

Mr. O’TOOLE. Lack of trust. And the paperwork—we have 

watched over a decade or 15 years. Guys that were out there when 

you made a call to NRCS, there were out there with measurement 

devices and getting their feet dirty and being with you. That 

doesn’t happen anymore. It doesn’t happen at that level anymore, 

and it is critically important as we go into a much more restricted 

budget situation, we all know the budget is going to be influential. 

If you trust farmers, you are not going to have to do the paperwork and the administrative stuff that has just—it just seems like 

it has increased and increased and increased. So I will tell you that 

it is based on my personal experience, it is based on hearings that 

I did last year. I was shocked at the number of farmers who participate in NRCS. It was not a big enough number to achieve our 

goals, and a lot of that was because the feeling that the process 

was just so unwieldy that it wasn’t working for them. 

Mr. PETERSON. Well, yes, I agree. We have been—as I said, we 

tried to address this somewhat in the last bill but we got pushed 

back from the time the conservation district supposedly making 

any streamlining of that. 

But, I would say a lot of that is actually caused by us, by what 

we have put on the Department, and they are so afraid to do anything anymore, and there are a lot of people in this country that 

do not trust farmers, that are hostile to farmers. They are suing 

people and driving up the cost of things and telling farmers how 

to do things. They have no idea what they are talking about. They 

want to interject themselves for ideological reasons, or some of 

these groups created a job for themselves by stirring up controversy. So there are a lot of problems, and we would like to simplify this but, it is that I just think that NRCS is not good at filling 

out forms and writing checks, and there is no reason for that. That 

could be done at FSA. They are better at that. 

Mr. O’TOOLE. I couldn’t agree more. 

Mr. PETERSON. If we get rid of direct payments, they are going 

to have less to do at FSA, so shift some of that stuff over there and 

get these NRCS people out there in the country. 

Which leads me to the next issue that I probably shouldn’t even 

wade into, but this whole issue of the tying conservation compliance to crop insurance. I have had discussions about this, and I 

don’t see how this can work without doing serious damage to the 

crop insurance system. We made a conscious decision in 1996 to 

separate these, and I, for the life of me, cannot see how you are 

going to be able to comply with this or make it work without damaging the system. Nobody has been able to explain that to me. 

The second thing, and some people advocate to have an all or 

nothing deal, so if you have an NRCS agent that finds you out of 

compliance, you are going to lose your entire subsidy. It is too severe, and that is never going to happen. The Congress is never 

1741

going to support that. So if we are going to do anything, it has to 

be more graduated. 

Finally, I don’t think there are people to do this. You know, the 

NRCS doesn’t have the people to do this. They can’t even file—get 

the 1026’s. We have a backlog in our area of thousands of 1026’s 

they can’t get to. How in the world are they going to get out there, 

and who is going to make the crop insurance agents, the people 

that are going to do the conservation compliance? I don’t think this 

is a realistic idea. I am not necessarily against the idea of trying 

to have some tie there, but nobody has been able to explain to me 

how this would work, and frankly, I don’t think there has been a 

discussion between all the different groups to come to any kind of 

middle ground that people could live with. The end result is going 

to be it is not going to happen, but—I have gone over my time, but 

I see a couple people want to respond. Mr. Scholl? 

Mr. SCHOLL. Thank you for raising the issue. Obviously this is 

one of the big unresolved issues or controversial issues out there, 

and I do think it is important that we address it. You know, how 

we do it, I guess I would suggest we do it the same way we have 

been doing it with the commodity programs that we had. We——

Mr. PETERSON. If I could stop you right there. You know, one of 

the other problems I was going to mention is that you have completely different approach by NRCS in counties that are right next 

to each other, so you have a situation where you don’t have the 

same kind of application of this situation. That is another problem. 

Mr. SCHOLL. And that is certainly an issue in some of the hearings and the meetings we have had that has been raised, and it 

needs to be addressed, but you don’t need to have crop insurance 

agents enforcing this thing. It is a matter of if they have a subsidized policy that they are presenting, you sign an affidavit saying 

you have a conservation plan if you have highly erodible land, and 

then it goes into the system that is currently used in USDA of spot 

checks and the like, just like it is with other farm program payments. I think in terms of what was done in 1996, I mean, I wasn’t 

here but crop insurance was certainly in a very different state at 

that point than it is today. A lot of progress has been made in 

terms of developing products. 

Mr. PETERSON. One of the main reasons we did it was to get 

more people to take crop insurance. We still have a problem in the 

South where they are not in the crop insurance system, and that 

was why the decision was made was to make it more for people to 

get into crop insurance so we wouldn’t have all these disaster problems and ad hoc disaster bills and all this other stuff. So I just 

think we have to be careful about this, because the way we are 

heading here there isn’t going to be a safety net anymore for farmers. And I frankly think that what we are doing, what is going on 

in the Senate is a mistake because when these prices go down, and 

they will, there is not going to be any floor under them. And this 

happened in 1996 when we did Freedom to Farm and it collapsed, 

and 2 years later, we spend more money than we ever spent in history bailing people out. Well I just want to tell people that this 

time when these prices go down, and they will, there isn’t going to 

be any money to bail anybody out. So people better be careful about 

what they are doing here. It is all good to look at this when the 

1742

prices are good and everybody has been making a lot of money, but 

I have been around long enough to know that is going to go the 

other way. 

Mr. SCHOLL. May I offer one more comment? I also want to compliment the work that you have done over the years in addressing 

the compliance issues, because you have put a lot of provisions in 

the law that I think have helped address a lot of the concerns you 

hear from producers as to why we may not want to do this. I mean, 

the idea of giving an exemption for extreme weather events is a 

good example, the idea of giving a person a year to be able to come 

into compliance if they are out of compliance. The goal of this is 

to get people in compliance to make sure we protect our natural resources. It is not to build a list of violators to play I got you, and 

you have really helped craft a program that does much more specifically get at if there is a problem, let us try to work with folks, 

give them the time and the effort—or the resources they need to 

address it. That program has evolved too, which makes a much 

more attractive option, particularly when you look at the fact that 

it has been pretty effective in terms of controlling erosion in particular, as you look at these policy decisions you are going to be 

making. 

Mr. PETERSON. Mr. Niemeyer, if you could give a quick response 

and then we can go on to our second panel. 

Mr. NIEMEYER. Again, we have a difference of opinion. NCGA 

supports title—compliance of all Title I programs, including any 

new program established in the 2012 Farm Bill. Compliance is already required for commodity support payments, disaster payment 

loans, and other conservation benefits. We should not create disincentives to purchase crop insurance, which is a critical risk tool 

for all farmers. If the farmers do have a more workable crop insurance program and a high level of participation, we will likely fall 

back into the cycle of an annual ad hoc disaster assistance program 

which you were talking about, Congressman Peterson. 

Linking conservation compliance to crop insurance could risk the 

potential loss of financing from our lenders, which would affect our 

very abilities to operate and compliance could—would disrupt the 

important public-private partnership between the crop insurance 

companies and USDA and create concerns more over who acts as 

the regulator. 

Thank you. 

Mr. PETERSON. I yield back. 

The CHAIRMAN. I want to thank the witnesses in the first panel 

for your testimony. It is greatly appreciated. 

I would like to now welcome our second panel of witnesses to the 

table joining us, so please come up and take your place. We are 

joined on the second panel by Mr. David Bell, Executive Director 

of the Wild Blueberry Commission of Maine, on behalf of the Specialty Crop Farm Bill Alliance. We have Mr. Randall C. Gordon, 

Acting President of National Grain and Feed Association; Mr. Carl 

Homan, fifth generation dairy farmer, Homan Family Dairy Farms, 

on behalf of the National Sustainable Agriculture Coalition; Ms. 

Sara Hopper, Agricultural Policy Director, Environmental Defense 

Fund; and Mr. David Petty, cattle producer, representing the member—who is a member of the National Cattlemen’s Beef Association 

1743

from Eldora, Iowa, which is the new home of my oldest son and my 

daughter-in-law. So I am looking forward to come visit you sometime. 

All the witnesses are settled in. Let us begin. Mr. Bell, please 

begin when you are ready. 

STATEMENT OF DAVID K. BELL, EXECUTIVE DIRECTOR, WILD 

BLUEBERRY COMMISSION OF MAINE, ORONO, ME; ON

BEHALF OF SPECIALTY CROP FARM BILL ALLIANCE 

Mr. BELL. Thank you. Good morning, Chairman Thompson, distinguished Committee Members. Thank you for the opportunity to 

speak to farm bill conservation programs. I am David Bell, the Executive Director of the Wild Blueberry Commission of Maine, but 

today I come before you as a representative of the Specialty Crop 

Farm Bill Alliance, a broad coalition of specialty crop interests nationwide. We have over 300 different crops or commodities as part 

of the Alliance, over 120 members, and we were formed or got together to work specifically on the 2008 Farm Bill. We are grateful 

for the specialty crop focus that did come out of the 2008 Farm Bill, 

and look forward to working with you on ways to ensure that our 

industry is able to continue to provide Americans with access to 

abundant, affordable supply of nutritious fruits and vegetables, and 

other specialty crops. 

American consumers want an agricultural production system 

that not only produces abundant, affordable, safe food and fiber, 

but also conserves and enhances the natural resource base and protects the environment. Unfortunately for producers, investments in 

natural resource management and conservation are rarely recouped 

in the global marketplace. Access to conservation programs such as 

EQIP, WHIP, and CSP, we all know the full names by now this 

morning, are critically important to specialty crop producers and 

our U.S. citizens. 

We do have some specific recommendations that we would like 

to offer to Congress, and specifically regarding the EQIP conservation practices. In certain parts of the country, producers feel that 

the NRCS and conservation districts don’t necessarily market equitably to specialty crop producers. We would ask Congress to consider, since we are roughly 25 percent of the production value of 

the U.S. agriculture, that EQIP funding be looked at accordingly. 

Many specialty crop producers need irrigation water to meet demands for crop quality, and in many parts of the country, efforts 

to protect aquatic habitat will require producers to develop alternative water sources. As part of EQIP, we ask that you prioritize 

the sustainable use of ground and surface water for irrigation as 

a national priority. 

Regions of the country are also working to create air quality regulations that will affect farmers, and again, we ask you to consider 

creating an air quality program with dedicated funding within 

EQIP. 

We also face a lot of pest management challenges in specialty 

crops, and these are becoming more acute and complicated for a 

few key reasons. One, new invasive species, also knowledge-based 

pest management systems, Integrated Pest Management is becoming more complicated and we request that the time limitations on 

1744

Integrated Pest Management cost-share programs be eliminated 

within EQIP. We also suggest that NRCS should work more closely 

with land-grant universities and other entities to develop models 

for using EQIP funds to enhance pesticide stewardship. 

Regarding WHIP, Congress should work directly—should direct 

the WHIP program to allow for organizations to work with multiple 

private landowners within a year. This would allow organizations 

familiar with regulatory requirements of law, such as the Endangered Species Act, to solve habitat conservation concerns of multiple private landowners efficiently. 

Regarding CSP: better tailor it to local and regional needs, and 

therefore make it more useful for specialty crop producers, we suggest adding pest management as a priority area that can qualify 

for participation in the CSP program. 

I thank you for the opportunity to testify, and I look forward to 

questions. Thank you. 

[The prepared statement of Mr. Bell follows:]

PREPARED STATEMENT OF DAVID K. BELL, EXECUTIVE DIRECTOR, WILD BLUEBERRY

COMMISSION OF MAINE, ORONO, ME; ON BEHALF OF SPECIALTY CROP FARM BILL

ALLIANCE

Introduction 

Thank you Chairman Thompson and Ranking Member Holden for holding this 

hearing on the conservation title of the farm bill. I appreciate the opportunity to 

speak to you today regarding the conservation priorities of the specialty crop industry. As we all are aware, sound conservation practices are of critical importance to 

the ability of farmers to succeed and continue to provide an abundant supply of 

healthy food, feed and fiber to America. 

My name is David Bell and I serve as Executive Director of the Wild Blueberry 

Commission of Maine, which is devoted to the mission of assisting wild blueberry 

growers in developing sustainable practices and competing in a global food market. 

However, today I am joining you as a representative of the Specialty Crop Farm Bill 

Alliance (SCFBA), a broad coalition of specialty crop interests nationwide. The Alliance, which represents close to 300 different commodities and has nearly 120 members, was formed prior to the 2008 Farm Bill. As you know, with the support of 

Members of this Committee, that farm bill contained a solid investment in programs 

that are important to enhancing the competitiveness of U.S. specialty crop farmers. 

We are grateful for that focus on our sector and look forward to working with you 

on ways to ensure that our industry is able to continue providing Americans with 

access to an abundant, affordable supply of nutritious fruits and vegetables and 

other specialty crops. 

Today, United States consumers have affordable access to the most abundant and 

diverse food supply in the world. However, aside from market diversity and competitive prices, consumers demand that food be held to very high quality standards. 

Likewise, consumers want an agricultural production system that not only produces 

abundant, affordable, safe food and fiber, but also conserves and enhances the natural resource base and protects the environment. 

Unfortunately for producers, investments in natural resource management and 

conservation are rarely recouped in the global market place. The short-term economic value for the farmer does not compare to the long term ecological and fiscal 

benefits for the public and for future generations. The increased benefits for the 

public come in the form of a more stable and productive farm economy and an improved environment. Protecting the environment and productivity today will mean 

less cost for U.S. consumers in the future and will therefore assist in ensuring sustainability in the years ahead. 

Current conservation programs administered by the USDA Natural Resources 

Conservation Service (NRCS) assists specialty crop farmers in meeting the multiple 

challenges of addressing sustainability, increasing environmental regulations while 

meeting U.S. consumer demand for abundant, safe, and reasonably priced food all 

within the competitive pressures of a global economy. Because of these factors, access to conservation programs such as the Environmental Quality Incentives Program (EQIP), Wildlife Habitat Incentives Program (WHIP), Conservation StewardVerDate 0ct 09 2002 12:54 Dec 11, 2012 Jkt 041481 PO 00000 Frm 00156 Fmt 6601 Sfmt 6621 I:\DOCS\112-30\74372.TXT BRIAN
1745

ship Program (CSP) are critically important to specialty crop producers and U.S. 

citizens. Farmers’ natural affinity for the environment, coupled with technical assistance and the resources necessary to implement conservation practices, results in 

long term stability for the nation’s food supply. Our specific concerns and recommendations to strengthen current conservation programs include: 

Environmental Quality Incentives Program (EQIP) 

Issue: For a variety of reasons, EQIP Conservation Practices are not marketed to 

specialty crop producers equitably across the country. 

Policy Recommendation: Since specialty crop producers account for approximately 

25% of the production value of U.S. agriculture, Congress should apportion EQIP 

funding accordingly. This would set the expectation for NRCS to meet specialty crop 

producer conservation needs across the U.S.

Issue: Specialty crop producers need irrigation water when it is dry to maintain 

quality standards of their crops. In many areas of the country natural water bodies 

have limited ability to supply irrigation water during dry periods and maintain necessary fish habitat. NRCS EQIP sustainable water use practices and programs 

should be available to specialty crop producers needing assistance to meet state or 

Federal environmental or habitat objectives. 

Policy Recommendation: As part of EQIP, prioritize the sustainable use of ground 

and surface water for irrigation as a separate national priority, rather than being 

included within the non-point pollution category.

Issue: In many specialty crop growing areas, air quality concerns and regulations 

related to agriculture are increasing. 

Policy Recommendation: Congress should create an air quality program under 

EQIP with dedicated funding.

Issue: Pest management challenges for specialty crop producers are becoming 

more acute and complicated due to invasive species, phase out of older effective control materials, new research on crop/pest interactions and knowledge based management systems such as Integrated Pest Management (IPM). 

Policy Recommendation: Time limitations on Integrated Pest Management (IPM) 

cost-share practices should be eliminated as pest populations are dynamic over time 

and innovative IPM programs are continually evolving to address ever changing 

pest complexes. 

Policy Recommendation: NRCS should work with land-grant universities and 

other entities to develop model programs for using EQIP funds to enhance pesticide 

stewardship. 

Wildlife Habitat Incentives Program (WHIP) 

Issue: Increasingly, specialty crop producers need to meet state and/or Federal 

habitat requirements as mandated by laws such as the Endangered Species Act 

(ESA). Often navigating the complex rules associated with these laws requires specific understanding and skills farmers do not have. Models have been developed 

whereby nongovernmental organizations assist private landowners such as farmers 

in meeting ‘‘consultation requirements’’ with agencies by serving as the landowner 

agent. This is an efficient approach as each farmer does not have to become an expert in the implementation of ESA policies. However, in the 2008 Farm Bill a limitation on an entity accessing WHIP funding precludes an agent working with many 

landowners in a single year. 

Policy Recommendation: Congress should direct the WHIP program to allow for 

organizations to work with multiple private landowners within a year. 

Conservation Stewardship Program (CSP) 

Issue: regarding the Conservation Stewardship Program, we believe that this program is based on a sound premise, incentivizing producers who adopt or maintain 

a wide range of conservation management practices aimed at resources such as soil, 

water and wildlife management. As you know, the CSP program addresses seven 

resource concerns: soil quality, soil erosion, water quality, water quantity, air quality, plant resources and animal resources. 

Policy recommendation: In order to better tailor the program to local and regional 

needs and therefore, make it more useful for specialty crop producers, we suggest 

adding pest management as a priority area that can qualify for participation in the 

CSP program. This would add a resource concern to CSP’s list of resource concerns. 

I know the Members of this Committee are aware that states can focus on three 

to five priority concerns. 

1746

Closing 

Mr. Chairman and Ranking Member Holden, these are the highlights of the results of the farm bill review which the Specialty Crop Farm Bill Alliance (SCFBA) 

undertook over the course of the 18 months to assess the various titles of the farm 

bill to determine their impact on the specialty crop industry. As part of that review, 

I served as chair of the SCFBA working group that examined the conservation title. 

As you are well aware, the Senate Agriculture Committee has released their version 

of the farm bill and we appreciate the work of Chairwoman Stabenow and Ranking 

Member Roberts. We pledge to continue working with them and you on these policy 

recommendations to ensure that specialty crop producers can participate in meaningful and effective ways to conserve and maintain resources needed for environmentally sound agriculture production. Thank you again for this opportunity and I’ll 

be happy to answer questions.

The CHAIRMAN. Thank you, Mr. Bell. 

Mr. Gordon, when you are ready you can proceed with your 5 

minutes. 

STATEMENT OF RANDALL C. GORDON, ACTING PRESIDENT, 

NATIONAL GRAIN AND FEED ASSOCIATION, WASHINGTON, D.C. 

Mr. GORDON. Thank you, Chairman Thompson, and we appreciate you and commend you and this Subcommittee for holding this 

hearing on the conservation provisions of the 2012 Farm Bill. I am 

Randy Gordon, the acting President of the National Grain and 

Feed Association. Our membership consists of more than 1,000 

grain and feed, grain processing, biofuels, exporting, and other 

grain-related companies that operate more than 7,000 facilities and 

handle more than 70 percent of the U.S. grain and oilseed crop. 

Most of members, though, are country grain elevators and feed 

manufacturers that are small businesses and operate in rural communities throughout the nation. 

The NGFA strongly supports efforts by this Congress and the 

Administration to reduce, streamline, and better rationalize the 

plethora of conservation programs that currently exist to make 

them more efficient, understandable, and cost effective. We in particular support conservation programs for working farmlands, and 

the idling of cropland that is truly environmentally sensitive, 

where it is necessary to protect water quality, as currently is accomplished through various components of the Conservation Reserve Program, particularly the continuous sign up provisions. 

But we do believe that the 2012 Farm Bill presents a tremendous 

opportunity for Congress to reset the CRP to reflect the reality of 

modern farming practices, including no-till and other agronomic 

practices, and to ensure that it no longer idles prime farmland. At 

the outset, we commend Congressman—Congresswoman Roby and 

Congressman Stutzman for introducing separate bills that we believe would move the CRP in decidedly the right direction. We also 

commend Chairman Lucas and Ranking Member Peterson for their 

efforts with the Super Committee to try and reshape the CRP. 

The 2007 Natural Resources Inventory Report prepared by 

USDA, the most recent data publicly available, indicates that more 

than 8.7 million acres enrolled in the CRP at that time consisted 

of prime farmland. Freeing up those acres and other non-environmentally sensitive acres will be essential if U.S. agriculture is 

going to continue to grow and be a generator of jobs to meet the 

strong demand for food, feed, biofuels, and exports necessary to 

meet what the United Nations projects will be a 70 percent inVerDate 0ct 09 2002 12:54 Dec 11, 2012 Jkt 041481 PO 00000 Frm 00158 Fmt 6601 Sfmt 6601 I:\DOCS\112-30\74372.TXT BRIAN
1747

crease in global demand for food by 2050. We do believe the CRP 

can be structured in a way that enhances and fosters U.S. agriculture’s ability to supply competitively priced corn and proteins to 

meet domestic and export demand, particularly for our livestock 

and poultry producers, enhance opportunities for beginning and 

tenant farmers to enter the business, and further economic opportunity and the quality of life in rural America. In this regard, a November 2011 survey of farmers conducted by the National Young 

Farmers Coalition found that 68 percent said access to land is the 

biggest single challenge they face. 

Protecting environmentally sensitive land and enhancing the 

ability of U.S. farmers and ranchers to produce to meet growing demand are mutually compatible goals, but to achieve those twin 

goals, we respectfully recommend that Congress implement several 

statutory changes in the 2012 Farm Bill to reform the CRP and facilitate the return to production of idle land that can be farmed in 

environmentally sustainable ways. 

First and foremost, we do urge a significant reduction in the current 32 million acre CRP cap. At a minimum, we think land capability Classes I and II, which amount to about 7.1 million acres, 

generally should be prohibited from future enrollments and reenrollments. Further, as mentioned previously, a total of as many 

as 8.7 million acres of prime farmland, inclusive of the 7.1 million 

acres I just mentioned, should be phased out as USDA transitions 

to a smaller, more targeted CRP. We also believe USDA should be 

directed to manage any reenrollments this year of acres expiring on 

September 30, 2012, in a similar manner. 

Second, we recommend eliminating the current discretion for 

USDA to exceed this current 25 percent limit on CRP enrollments 

in individual counties, because of the economic damage that these 

heavy enrollments in certain states have caused to rural communities. We also recommend that Congress strongly considers requiring within that 25 percent cap a certain, say, five percent allowance for the most environmentally sensitive land eligible for continuous sign up enrollments. 

Third, we encourage Congress to consider whether to provide a 

specific percentage or acreage-based figure within the CRP that 

should reserve—be reserved for the enrollment of the most environmentally sensitive lands and wetlands. There are some conservationists that argue that about 8 million acres of the CRP potentially could be consumed by such truly environmentally sensitive 

enrollments, which we do believe belong in the program. 

Fourth, we encourage Congress to include language restricting 

enrollments of whole fields and whole farms by requiring such land 

to meet a higher EBI scoring mechanism than currently exists for 

partial field enrollments. 

And finally, we do support allocating scarce conservation funding 

for existing CRP Transition Incentive Programs, and programs like 

that that benefit young farmers and socially disadvantaged farmers. We also have some recommendations in our testimony that 

would enhance the transparency of how USDA is managing the 

CRP program which currently is fairly obscure and obtrusive in the 

databases that we have been able to access. 

Thanks for the opportunity and I look forward to your questions. 

1748

[The prepared statement of Mr. Gordon follows:]

PREPARED STATEMENT OF RANDALL C. GORDON, ACTING PRESIDENT, NATIONAL

GRAIN AND FEED ASSOCIATION, WASHINGTON, D.C. 

Chairman Thompson, Ranking Member Holden, and Members of the Subcommittee, the National Grain and Feed Association (NGFA) commends you for conducting this hearing on the conservation provisions of the 2012 Farm Bill, and appreciates this opportunity to testify. 

I am Randy Gordon, Acting President of the NGFA. Our Association was established in 1896, and consists of more than 1,000 grain, feed, processing, exporting 

and other grain-related companies that operate more than 7,000 facilities and handle more than 70 percent of all U.S. grains and oilseeds. Our membership includes 

grain elevators, feed and feed ingredient manufacturers, biofuels companies, grain 

and oilseed processors and millers, exporters, livestock and poultry integrators, and 

associated firms that provide goods and services to the nation’s grain, feed and processing industry. The NGFA also consists of 26 affiliated State and Regional Grain 

and Feed Associations, and has strategic alliances with the North American Export 

Grain Association and Pet Food Institute. 

The United States is blessed to have the most abundant, most affordable and 

safest food supply in the world. Our nation also still is the engine that drives the 

production of key agricultural commodities and products to feed an expanding world 

population. That demand shows no sign of letting up. The United Nations currently 

projects that feeding a rapidly growing global population of more than nine billion 

in 2050 will require a 70 percent increase in global food production. And while U.S. 

producers have harvested near record crops in recent years, domestic demand also 

has increased—particularly for U.S. corn to meet fuel ethanol demand resulting 

from the Renewable Fuels Standard mandate and strong crude oil prices. 

The long-standing commitment by the United States to free enterprise, U.S. agricultural growth, and working lands conservation programs are essential and critical 

components to meeting this demand for food, feed, biofuels and exports—and doing 

so in an environmentally sustainable way. 

The NGFA strongly supports efforts by Congress and the Administration to reduce, streamline and better rationalize the plethora of existing conservation programs to make them more effective and efficient. We also strongly support including 

provisions in the 2012 Farm Bill that encourage prudent conservation practices by 

agricultural producers, which serve in their best interest in protecting the viability 

of cropland for succeeding generations. The NGFA in particular supports conservation programs for working farmlands, and the continuation of programs that idle 

cropland that is truly environmentally sensitive or necessary to protect water quality, as is accomplished through such programs as the continuous signup provisions 

of the Conservation Reserve Program (CRP). 

However, we believe the 2012 Farm Bill presents a tremendous opportunity to 

bring long-needed reforms to the CRP, on which I wish to focus during the remainder of this testimony. 

Today’s farming practices are dramatically different than what existed when the 

CRP was established a quarter century ago. Advancements in insect-resistant and 

herbicide-tolerant seed varieties, conservation and no-till farming, and other agronomic practices have made it possible to farm more U.S. acreage in environmentally 

sustainable ways. USDA’s Economic Research Service, in a report issued in 2011, 

found that of the world’s row crop production grown using conservation tillage practices to protect soil from wind and water erosion, the United States accounted for 

nearly 75 percent of soybeans, 45 percent of corn and 40 percent of wheat. By contrast, as recently as 1990, only 26 percent of planted acres in the United States 

were farmed using such conservation tillage practices. Further, because of the introduction of new biotechnology-enhanced crops, farmers no longer have to cultivate 

the soil several times a year to control weeds, thereby reducing soil disturbance and 

improving water infiltration. The NGFA strongly believes that current agronomic 

and technology practices employed by U.S. farmers should guide decisions made by 

Congress as it devises policies governing the size, scope and role of the CRP under 

the 2012 and future farm bills. 

But in fact, CRP policy under the farm bill and its implementation by USDA has 

not kept pace with these changes in improved farm production practices. There is 

strong evidence that millions of acres of productive land suitable for row-crop production that can be farmed in an environmentally sustainable way remain locked 

up in the CRP. The 2007 Natural Resources Inventory prepared by USDA’s Natural 

Resources Conservation Service (NRCS)—the most recent data publicly available—

1749

1 NRCS defines ‘‘prime farmland’’ as ‘‘land that has the best combination of physical and 

chemical characteristics for producing food feed, forage, fiber, and oilseed crops and that is available for these uses. It has the combination of soil properties, growing season, and moisture supply needed to produce sustained high yields of crops in an economic manner if it is treated and 

managed according to acceptable farming methods. In general, prime farmland has an adequate 

and dependable water supply from precipitation or irrigation, a favorable temperature and growing season, an acceptable level of acidity or alkalinity, an acceptable content of salt or sodium, 

and few or no rocks. Its soils are permeable to water and air. Prime farmland is not excessively 

eroded or saturated with water for long periods of time, and it either does not flood frequently 

during the growing season or is protected from flooding.’’ 2 National Soil Survey Handbook Part 622, Natural Resources Conservation Service website. 

Accessed 17. 

indicates that more than 8.7 million acres of ‘‘prime farmland’’ 1 were enrolled in 

the CRP at that time. Other considerations in determining prime farmland include 

land use, frequency of flooding, irrigation, the water table and wind ‘‘erodibility.’’ 2

It includes all land in Land Capability Classes I and II, and some land considered 

to be Land Capability Class III. 

While the NGFA believes fragile land that cannot be farmed in an environmentally sustainable way belongs in the CRP, the idling of productive resources 

through land-idling conservation programs costs jobs, stymies growth and, in the 

case of land resources, has the potential to impact negatively the cost and availability of food. 

Further, the idling of these productive U.S. crop acres in the CRP is contrary to 

world environmental protection because it encourages shifts in agricultural production to South America and other countries that do not have the type of environmental policies, regulations and farming practices that encourage sustainable food 

production as exist in the United States. Indeed, in the last decade the United 

States has had zero growth in total planted acreage, while the rest of the world 

has increased planted acreage by 152 million acres—about 60 percent of the size of 

total U.S. plantings. Meanwhile, the CRP—in acreage terms—still represents the 

fourth largest U.S. ‘‘crop.’’ Trends like that not only undermine global environmental protection but also U.S. agricultural competitiveness in world markets. 

In short, we believe now is the opportune time for Congress to implement meaningful reforms of the CRP, and focus scarce conservation dollars on working farmlands and the idling of only truly environmentally sensitive acres. 

Damaging Impact of Idling Productive Farmland 

The CRP is currently capped at 32 million acres under the Food, Conservation 

and Energy Act of 2008. We hasten to add that this statutory provision is a hard 

cap, but historically has been treated by USDA in its implementation of CRP as a 

goal to attain. If, as we believe, the goal of the CRP should be to maximize environmental benefits of enrolled acreage, such an unconditional, over-arching commitment to enroll a specific number of acres at or near the cap is misguided. For instance, the rental rate associated with enrolling acres eligible for the continuous 

signup provisions of the CRP—such as filter strips along waterways—may be considerably more expensive on a per-acre basis. But the resulting environmental benefits far exceed those associated with enrolling flat land that can be farmed in environmentally sustainable ways. 

Continuation of the CRP at its current authorized level creates significant challenges to U.S. agriculture’s ability to: (1) adequately meet growing domestic and export demand for grain, feed and grain products; (2) provide opportunities for young 

farmers, ranchers and tenant farmers to become involved in production agriculture; 

and (3) increase economic opportunity and quality of life in rural communities. 

Let me touch on each of these briefly:

➢ Adequately Supply Domestic Demand at Competitive Prices: While U.S. 

producers have enhanced productive capacity for particularly corn and soybean 

production, increases in domestic demand continue—particularly for use as 

biofuels. Further, despite near-record crop production, grain stocks on a world 

basis remain comparatively tight. While U.S. corn yields have increased by 

about 2.5 bushels per acre per year since 1996, such yield growth generally has 

occurred during benign weather. Further, U.S. carryover stocks of corn and 

other feed grains are at historically low levels. Expansion of U.S. planted acres 

could help offset yield variability resulting from weather anomalies, particularly 

given tightening stocks-to-use ratios.

➢ Producing and Competing in Global Markets: As noted previously, between now and 2050, the world’s population is projected to grow by more than 

30 percent, resulting in an estimated 2.3 billion more consumers of food and agVerDate 0ct 09 2002 12:54 Dec 11, 2012 Jkt 041481 PO 00000 Frm 00161 Fmt 6601 Sfmt 6621 I:\DOCS\112-30\74372.TXT BRIAN
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riculture products. Food security—both physical and economic access to sufficient food—is vital to helping preserve world peace and averting shortages that 

have led to protests and riots in several foreign countries, as witnessed a few 

short years ago.

Export markets for grain and grain-based products continue to experience 

strong demand. In addition, export demand for beef, pork and poultry has been 

one of the most dynamic growth markets in the last 15 years. And new trade 

agreements being implemented now with South Korea, Colombia and Panama 

are projected to expand such demand even further. The United States has the 

comparative advantage to grow this export business—and do so in an environmentally sustainable way. But that will happen only if our livestock and poultry 

producers have access to competitively priced grain and protein supplies to fuel 

that growth. Some U.S. operations already have imported feed ingredients, and 

the economics of these businesses are shifting investment toward South America. It is imperative that the United States ensure that it has the capacity to 

meet the demand of these U.S.-based enterprises that create jobs and economic 

growth here, rather than overseas.

Further, there are increasing indications that more volatile weather patterns 

may result in drier than normal conditions in important grain-producing regions of the world, including Russia, northern China, some portions of Canada 

and the U.S. upper plains states, as well as some portions of South America, 

particularly Argentina. Indeed, U.S. corn production dipped each of the past 2 

years because of weather anomalies. Exacerbating this situation is the simple 

fact that there currently are not enough arable acres of farmland globally to 

satisfy the future demand for food. And where farmland is available, the competition for acres between crops is intense. The current size and management 

of the CRP run counter to both the need and the opportunity to meet increasing 

global demand for U.S. agricultural products.

➢ Continue to Provide Opportunities to Enter Production Agriculture to 

Young Farmers, Ranchers and Tenant Farmers: Young and tenant farmers 

and ranchers face economic barriers to enter production agriculture, in part because they need to bid against the government for available cropland. Sixtyeight percent of farmers rank land access as the biggest challenge facing beginning farmers, according to a November 2011 study released by the National 

Young Farmer’s Coalition. The same study found that farmers younger 30 were 

significantly more likely to rent land (70 percent) than those older than 30 (37 

percent).

Research currently underway for the National Grain and Feed Foundation has 

found that several states historically have operated the CRP in a way that 

statewide rental rates closely approximate average cropland rental rates as 

computed by USDA’s National Agricultural Statistics Service. Rather than rent 

or sell, many landowners choose to harvest these CRP rental payments, which 

is detrimental to young and tenant farmers attempting to enter production agriculture or who are struggling to expand and build economic-sized units for their 

business operations. This is a particularly acute concern to the future of U.S. 

production agriculture, given the aging demographics of the nation’s agricultural producers. A ‘‘right-sized’’ CRP and programs like the Transition Incentives Program (TIP) can help encourage future generations to enter the farming 

profession, particularly young and small-scale tenant farmers.

➢ Increase Economic Opportunity and Quality of Life in Rural America:

The negative impacts of idling productive farmland in the CRP also manifest 

themselves at the local rural level. As productive resources are idled, opportunities to make long-term livable wages are drained from rural communities. The 

CRP, if not right-sized and managed properly with a focus on the most environmentally sensitive lands, slams the door on economic activity that is the lifeblood of rural economies. Idle land reduces economic activity generated by seed 

sales, tractor sales and servicing, custom harvesting crews, fertilizer and chemical dealers, and hired help. Land-idling programs that pit the government 

against commercial farmers in bidding for land cause more people to lose jobs 

and encourage a continued population exodus from rural communities. And 

landowners who often move away from their rural communities take the money 

associated with CRP rental payments with them.

A March 6, 2011 article from The Spokesman-Review in Spokane, Washington, is just one of many examples of this damaging impact. The newspaper 

quotes Greg Partch, a county commissioner in Washington State as saying: 

‘‘CRP is killing our towns. When farmers take a conservation payment rather 

1751

than plant a crop, they don’t buy fuel and fertilizer, they don’t buy machinery 

and seed, and they don’t hire help for the harvest. In short, the payments stifle 

the local economies by suppressing high production agriculture in an area that 

boasts some of the best wheat-growing conditions in the world.’’

This is but one example of the real-world impact that heavy acreage-idling in 

the CRP—in some cases exceeding 25 percent Congressionally mandated maximum cap of the county’s cropland—is having on once-vibrant rural communities. 

Recommendations for Change to CRP 

The NGFA believes that the goals of protecting environmentally sensitive land 

and enhancing the ability of U.S. farmers and ranchers to produce to meet the 

world’s growing demand for food, feed, biofuels and exports are mutually compatible. 

But to accomplish those twin goals, we believe it is necessary for Congress to reboot 

the CRP to make it more responsive and right for the times. 

As noted previously, the National Grain and Feed Foundation currently is in the 

midst of a research project that is evaluating the CRP. We anticipate that additional 

recommendations will flow from the results of that study, which is projected to be 

completed in late May. 

But based upon the findings thus far, the NGFA recommends that the following 

legislative changes be included in the 2012 Farm Bill to reform the CRP and facilitate the return to production idled land that can be farmed in an environmentally 

sustainable way:

➢ First and foremost, we recommend that the current 32 million acre maximum 

CRP cap be reduced significantly. At a minimum, Land Capability Classes I and 

II (approximately 7.1 million acres) should be prohibited from future enrollments and re-enrollments. Further, as cited previously, a total of more than 8.7 

million farmland acres (including some Land Capability Class III acres) of 

‘‘prime farmland’’ were enrolled in CRP as of 2007 (the most current data available from NRCS). In the 30 states with the greatest CRP enrollments, approximately 8.5 million acres are considered to be prime farmland. Such good quality 

land currently idled in the CRP is highly concentrated in several major grainproduction states like Kansas, North Dakota, Minnesota, Missouri, Oklahoma 

and Texas. This land can be can be farmed in an environmentally sustainable 

way to meet growing food demand.

➢ Second, eliminate the discretion for USDA to exceed the 25 percent limit on 

CRP enrollments in individual counties because of the economic damage such 

enrollments have had on rural communities. There are indications that USDA 

may be using outdated cultivated cropland data in some counties when determining the 25 percent cap, which we believe Congress should require the Department to recalculate. Further, we recommend that USDA be required to reserve within the 25 percent county limit at least a five percent allowance for 

acres enrolled in the wetlands reserve and continuous sign-up process.

➢ Third, the NGFA urges that Congress direct that USDA transition to a smaller 

CRP by reducing the number of ‘‘prime farmland’’ acres enrolled. In managing 

this transition, we support requiring USDA to offer penalty-free early outs of 

Land Capability Classes I, II and III enrolled in CRP, with producers doing so 

required to implement prudent conservation practices on such lands. We also 

believe USDA should carefully manage any reenrollments of acres expiring on 

September 30, 2012 in a similar manner.

➢ Fourth, we encourage Congress to consider whether to provide a specific 

percentage- or acreage-based figure within the CRP reserved for the most environmentally sensitive lands. As of April 2011, the CRP included 5 million acres 

enrolled under continuous signup procedures. Some conservation leaders have 

expressed concern that adequate CRP acreage should be reserved each year to 

ensure that such environmentally sensitive lands can be enrolled, with some 

suggesting that as many as 8 million acres of the CRP should be reserved for 

such high-priority enrollments. We believe this is an issue what warrants 

Congress’s attention as it considers the future of the CRP.

➢ Fifth, we encourage Congress to include legislative language that would restrict whole-field and whole-farm enrollments in the CRP by requiring such 

land to meet a more stringent environmental benefits index (EBI) scoring 

threshold than partial-field enrollments. During the early years of CRP enrollments, whole farms and whole fields were enrolled, which brought in land of 

varying quality.

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➢ Sixth, the NGFA supports allocating additional available conservation funding 

for the Transition Incentives Program, currently authorized at $25 million, for 

transitioning expired CRP acreage from retired or retiring landowners to beginning or socially disadvantaged farmers. This program quickly reached its capacity after being authorized as part of the 2008 Farm Law, and needs additional 

resources.

In addition, the NGFA encourages Congress to include, as part of the farm bill 

process, the following directives to USDA in its implementation and administration 

of the CRP in the future:

➢ Direct USDA’s Farm Service Agency and NRCS to compile a report within 1 

year of enactment, and updated biannually thereafter, to bring increased transparency to how the CRP is being managed. Among other things, we believe such 

a report should include: (1) the quantity of acreage enrolled in CRP by Land 

Capability Class; (2) a compilation of such Land Capability Class acreage by 

county; and (3) the identity of counties that are at or near the 25 percent enrollment cap. We also recommend that USDA be required to post this report on 

its website. These data will increase transparency and enable USDA and stakeholders to better analyze the prudent management of the CRP going forward.

➢ Consider either freezing CRP rental rates for 3 to 5 years or implementing a 

percentage-based limit on rental rates paid for CRP land compared to average 

county rental rates.

➢ Limit the number of CRP general sign-ups offered. 

Conclusion 

The NGFA believes it is important for future conservation policies to focus on: (1) 

providing access to sufficient acres to meet demand growth, without shorting supplies necessary to grow important demand sectors, such as exports, feed, and domestic livestock and poultry markets; (2) working farmlands, minimizing reliance on 

idling of productive land resources and strengthening the economies of rural communities while still achieving environmental and other policy goals; (3) continuing 

to provide future opportunities for young farmers and ranchers, as well as tenant 

farmers, to be involved in U.S. production agriculture; and (4) minimizing the negative impacts of the CRP in undermining jobs, local rural economies and depopulating rural communities. 

The NGFA recognizes the importance of, and supports, strong conservation programs for working farmlands as part of any successful farm policy, and encourages 

Congress to designate such programs as a priority with scarce available funding. 

Thank you for the opportunity to testify, and we look forward to working with you 

as the Committee addresses these important issues in the farm bill. I would be 

pleased to respond to any questions you may have.

The CHAIRMAN. Thank you, Mr. Gordon. 

I am pleased to once again welcome Mr. Homan. Mr. Homan, go 

ahead and proceed with your 5 minutes of testimony. 

STATEMENT OF CARL V. HOMAN, DAIRY PRODUCER, HOMAN 

FAMILY DAIRY FARMS, CENTRE HALL, PA; ON BEHALF OF 

NATIONAL SUSTAINABLE AGRICULTURE COALITION 

Mr. HOMAN. Thank you, Chairman. I thank you, all the Members 

of this Committee, for your service to me as a citizen of the United 

States, and your government hours spent. 

As this Subcommittee considers conservation, energy, and forestry, thank you for the opportunity to speak to you how the farm 

bill conservation programs have helped my farm, and how important it is in the next farm bill to strengthen these programs so that 

other farmers in Pennsylvania and across this country also have 

the opportunity to improve their operations. 

My wife Diane, my son Justin, and myself operate a 75 cow dairy 

farm in Centre County near Centre Hall, Pennsylvania. We own 

275 acres and rent additional acres to produce crops for our livestock. With our grandchildren on the property, this Pennsylvania 

Century Farm has provided a home for seven generations of famiVerDate 0ct 09 2002 12:54 Dec 11, 2012 Jkt 041481 PO 00000 Frm 00164 Fmt 6601 Sfmt 6601 I:\DOCS\112-30\74372.TXT BRIAN
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lies since 1906. Protecting and sustaining the farm for our family, 

the community, and the nation is an important value of my family, 

so I have been involved in farmland preservation and formed an ag 

security area in our township. I have served 6 years on the Centre 

County Ag Land Preservation Board. In 2008, I was honored to be 

named the year’s Outstanding Farmer Conservationist by the Centre County, Pennsylvania, Conservation District, so I can directly 

speak to how the resources and technical assistance offered to 

farmers by the USDA conservation programs protects the natural 

resources of our community, improves the productivity and profitability of our farm. 

I would like to talk about the ways in which conservation programs have been used on our farm. The CSP program administered 

by the USDA Natural Resources Conservation Service, our farm is 

enrolled in CSP through 2016. The cost-share provided by the CSP 

has allowed us to incorporate what are called conservation enhancements to the farm. Three years ago, we started a pasture 

project in which increased grass cover and legumes—and this produces the nitrogen for the crops and produces a better crop, and 

more feed value in the pasture, while also keeping the fields in 

grass longer than a standard crop rotation. This improves the quality of our soil while also reducing nutrient sediment runoff. 

As for writing the next farm bill, I urge Members of this Committee to maintain a strong funding base for Conservation Stewardship Programs. That is one of my main concerns. 

The EQIP program has been very important in helping to protect 

the natural resources on our farm. For just one example, we use 

EQIP funding to establish sod waterway to prevent spring rains 

and snow melt from carrying sediment into the nearby streams. 

EQIP is a very important part of the USDA’s conservation toolbox, 

providing cost-share payments for structure practices, as well as 

initial cost sharing support to farmers who want to begin to increase their level of stewardship through management change. 

There are things we can do to make the EQIP more useful to farmers, and I have included a few of my own recommendations in my 

written testimony. 

The CREP program is part of the larger program called CRP. It 

is one of the most cost effective programs in the Commonwealth of 

Pennsylvania for reducing pollution into our local streams and into 

the Chesapeake Bay. On my farm, we have enrolled 6.6 acres of 

wet pasture acreage along the stream in CREP and created a forestry buffer. CREP has provided rental payments to help offset the 

loss of this pasture acreage. These measures not only improve 

water quality, but also improves the health of our dairy herd and 

increases our ability to manage the movement of the cattle. 

I hope that I have given you some ideas of how important the 

farm bill conservation programs are to farmers like myself. We can 

and have implemented many improvements on our own, and these 

improvements need to be recognized, but there are certain improvements that will be out of reach economically for many farmers 

without solid conservation support in the next farm bill. 

I appreciate the opportunity to be here today and share with you 

my ideas, and I will be happy to try to answer any questions that 

you might have. 

1754

[The prepared statement of Mr. Homan follows:]

PREPARED STATEMENT OF CARL V. HOMAN, DAIRY PRODUCER, HOMAN FAMILY DAIRY

FARMS, CENTRE HALL, PA; ON BEHALF OF NATIONAL SUSTAINABLE AGRICULTURE

COALITION

Good morning, Chairman Thompson, Ranking Member Holden, and Members of 

the Subcommittee on Conservation, Energy and Forestry. Thank you for the opportunity to testify about the importance of the farm bill’s conservation programs from 

a farmer’s perspective. 

My wife Diane, my son Justin, and I operate a 75 cow dairy farm in Centre County near Centre Hall, Pennsylvania. We also have 275 acres and rent additional land 

on which we grow crops. With our grandchildren now on the property, the farm has 

provided a home for seven generations of our family. In 2007, the farm was designated a Pennsylvania Century Farm. 

Protecting and sustaining the farm for our family, the community, and the nation 

is an important value to my family. In addition, I helped form Centre County’s first 

Agriculture Security Area in the 1990’s to protect farmland from a highway bypass. 

And I have served for 6 years on the Centre County Agricultural Land Preservation 

Board. 

In 2008, I was honored to be named that year’s Outstanding Farmer Conservationist by the Centre County Pennsylvania Conservation District, and I remain a 

firm believer in the value of conservation to our farm. The resources and technical 

assistance offered to farmers by USDA’s conservation programs protect the natural 

resources of our local communities. Many conservation practices can also improve 

the operations’ bottom line. 

In addition, our farm is in a watershed that ultimately drains into the Chesapeake Bay. We know that how we and our neighbors manage our farms affects 

water quality in Centre County and all the counties downstream clear down to Virginia. The farm bill’s conservation programs serve a critically important role in controlling the loading of nutrients and sediment into Pennsylvania’s streams, and the 

Chesapeake Bay itself. 

We have used a no-till system for the past 10 years to keep soil in place, reducing 

sediment and nutrient run off from our fields. We use a complex resource-conserving 

rotation of corn, oats, wheat, alfalfa, clover, timothy hay, soybeans, and rye cover 

crops that builds healthy soils. We incorporated cover crops in the rotation 5 years 

ago, using mostly rye and occasionally wheat But we also saw that we needed to 

improve the conservation performance of our farm and turned to the farm bill conservation programs for cost-share and technical assistance. 

Conservation Stewardship Program (CSP) 

The CSP is a whole farm and comprehensive working lands conservation program 

administered by USDA’s Natural Resources Conservation Service (NRCS). CSP targets priority resource issues in specific states and watersheds, paying farmers to 

adopt new conservation enhancements and manage ongoing conservation activities 

to help solve priority resource concerns. CSP payments are directly linked to environmental benefits derived from particular practices and conservation systems. 

The program helps farmers use their management skills to maintain and enhance 

the land and the food, fiber, and fuel that it produces. In the first 3 enrollment 

years (2009, 2010, and 2011), CSP enrolled 30,197 farmers and ranchers operating 

nearly 38 million acres of farm and ranchland that is now under 5 year, renewable 

CSP conservation contracts. In each of those years, demand for the program exceeded acreage available by about 2 to 1, resulting in very competitive enrollments. 

The 2012 sign-up for CSP is offering 37 conservation practices and 68 conservation enhancements as well as supplemental payments for resource-conserving crop 

rotations. Conservation performance is tied to how effectively the activities and enhancements address the priority resource concerns for the state or region within a 

state, and payment rates are calibrated directly to expected environmental benefits. 

The enhancements are unique to CSP and help drive advanced conservation. For 

instance, for cropland, some of the top ranking enhancements include continuous 

cover cropping, using cover crops as nitrogen sources, resource-conserving crop rotation, continuous no-till, extension in the size and scope of riparian buffers and field 

borders, transition to organic cropping systems, and advanced high level integrated 

pest management. Top livestock enhancements include intensive managed rotational grazing, rotation of feeding and supplementation areas, and managing access 

to water bodies and streams. 

Our farm is enrolled in the CSP through 2016. The cost-share provided by CSP 

has allowed us to incorporate conservation enhancements to the farm. Three years 

1755

ago, we started a pasture project in which increased grass cover and legumes are 

used to increase nitrogen value and feed value to our pastures, while also keeping 

the fields in grass longer than a standard crop rotation. This improves the quality 

of our soil, while also reducing nutrient and sediment runoff. 

As you write the next farm bill, I urge Members of this Committee to maintain 

a strong funding base for the Conservation Stewardship Program. That is my main 

recommendation. 

Beyond enough funds, there are other changes that could be made to increase the 

program’s effectiveness and make it work better for farmers and ranchers. These 

improvements should be made to CSP in the next farm bill:

• Simplify the program by ranking proposals solely according to the environmental benefits score secured by the total conservation system, including the new enhancements to be adopted and the existing conservation baseline. Every aspect of the CSP design, including payment formulations and ranking, should keep the focus on conservation outcomes, adaptive 

management, and continual improvement, not on the timing of initial adoption.

• Allow producers to renew their CSP contracts so long as they have satisfied all previous contract obligations and increased their conservation score since the previous renewal. Currently, CSP contracts can only 

be renewed once. This creates a barrier to fulfilling the purpose of the program, 

to advance ongoing and adaptive land stewardship to maintain and improve environmental performance. We have major resource challenges and we need policy that sends the right long term signals to farmers. 

Environmental Quality Incentives Program (EQIP) 

EQIP has played a key role in helping to protect and enhance natural resources 

on the farm. We used EQIP funding to establish sod waterways that prevent spring 

rains and snow melt from carrying sediment to waterways. EQIP is an essential 

piece of USDA’s conservation toolbox, providing one-time cost-share payments for 

structural practices as well as initial cost-share support to farmers who want to 

begin to increase their level of stewardship through management changes. But 

EQIP could be improved to make it more useful to farmers. 

First, EQIP, and in fact all the conservation programs, needs to focus 

more on reducing nutrient losses. All over the world there are streams, lakes 

and coastal areas that are suffering from low oxygen because of excess nutrients. 

In the Chesapeake Bay watershed, we are under a lot of pressure to put in more 

practices to reduce our nutrient losses quickly. EQIP and other farm bill conservation programs need to focus on that. The Chesapeake Bay Watershed Program that 

you created in the last farm bill has helped Pennsylvania farmers a lot, and you 

ought to continue that program. 

Second, in order to ensure the program is achieving results and the biggest bang for the buck, you should bring back progressive planning requirements. A progressive planning requirement used to be applied to EQIP but 

the program currently has no statutory planning standard. In Pennsylvania, we 

have a planning requirement for livestock operations that works well. Bringing back 

the progressive planning requirement for all of EQIP will help ensure that practices 

funded by the program are aimed at really solving resource problems. Under progressive planning, all funded projects would address priority resource concerns and 

promote progress toward the non-degradation or sustainable use criteria for those 

concerns. With progressive planning, farmers can receive technical assistance in 

identifying conservation issues on their farm and measuring their progress in dealing with the issues. This can help ensure the best use of the limited conservation 

dollars in these difficult fiscal times. 

Third, the farm bill should eliminate the unfair $20,000 payment limitation for organic farmers through the EQIP Organic Initiative. The same 

EQIP payment limit should apply regardless of type of farm. Our farm does not use 

the EQIP organic provisions from the 2008 Farm Bill, but we have seen the role 

that organic farms can provide to increase the value and diversity of farming, especially for beginning farmers. In Pennsylvania, the Department of Agriculture has 

initiated a ‘‘Path to Organic Transition’’ program to provide technical assistance to 

farmers in transition to organic agriculture, including assistance with developing 

local markets. The Path to Organic Program has two main purposes: first, to provide an incentive for farmers to make the transition to certified organic production 

practices; and second, to evaluate organic production practices as tools in improving 

soil health, protecting water quality and sequestering atmospheric carbon on a pilot 

basis outside of the traditional research environment. EQIP funding provided to orVerDate 0ct 09 2002 12:54 Dec 11, 2012 Jkt 041481 PO 00000 Frm 00167 Fmt 6601 Sfmt 6621 I:\DOCS\112-30\74372.TXT BRIAN
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ganic farmers, on an equal level with other farmers, can help them implement 

sound conservation practices that are consistent organic production systems. 

Conservation Reserve Program 

Our farm also has enrolled acreage in the Conservation Reserve Enhancement Program (CREP) component of the Conservation Reserve Program.

CREP is one of the most cost-efficient and effective programs in Pennsylvania for 

reducing pollution in the Chesapeake Bay watershed. On my farm, we enrolled 6.6 

acres of wet pasture acreage along a stream in CREP and created a forest buffer. 

CREP provide a rental payment to help offset the loss of pasture acreage. We then 

used funding from the Penns Valley Conservation Association and the National Fish 

and Wildlife Foundation to improve management of the pasture with fences, a cattle 

walkway and a watering system. These measures not only improved water quality, 

they also improved the health of dairy herds and increase our ability to manage the 

movement of the cows with rotational management and other practices. 

In addition to CREP, Pennsylvania can benefit from the continuous Conservation 

Reserve Program (CCRP) that provides for the establishment of contour grass strips, 

wetland buffers, filterstrips, and other practices that intersperse smaller acreages 

taken out of production with productive land. Pennsylvania has also designated 

acreage identified in our Pennsylvania State Wildlife Action Plan for enrollments in 

the CRP’s State Action for Wildlife Enhancement (SAFE) component. The SAFE 

project targets 5,200 acres of seasonal pools and early successional grass for enrollment. This habitat supports sensitive wildlife identified in the Pennsylvania State 

Wildlife Action Plan. 

The next farm bill should direct USDA to retain sufficient acreage for the 

continuous sign-up in CCRP, CREP, and SAFE. At least 25 percent of total 

CRP acreage should be available for CCRP, CREP, and SAFE enrollment. The CRP 

should be managed to by the Farm Service Agency to ensure that no fewer than 

500,000 acres are available each year for CCRP and CREP enrollment. 

Cooperative Conservation Partnership Initiative 

In July 2011, the NRCS approved a Conservation Cooperative Partnership Initiative for the Chesapeake Bay Watershed (CCPI–CBW). This initiative, sponsored by 

the Chesapeake Bay Foundation, includes a Healthy Dairies, Healthy Streams 

(Pennsylvania) component to implement agricultural best management practices on 

dairy farms; restore about 12 miles of riparian buffers; and treat animal concentration areas and barnyards to reduce sediment and the loss of nutrients into streams. 

The CCPI–CBW emphasizes a ‘‘systems approach,’’ allowing landowners to carry 

out multiple conservation practices and management techniques that work together 

to address potential nitrogen and phosphorus losses in agricultural runoff. NRCS 

leverages financial and technical assistance with partners’ resources to install soil 

erosion-control practices, manage grazing lands, improve forestlands, establish cover 

crops, and reduce on-farm energy usage. On our farm, we used funding from the 

CCPI–CBWI to provide a concrete base and a walkway with a geo-surface in the 

barnyard. This improved surface makes it easier to keep manure and water separates. It also keeps our cows cleaner and has improved herd health. 

I understand the Committee may be working on a successor to the CCBI called 

Regional Conservation Partnerships. In developing the revised program, I urge you 

to explicitly include reducing nutrient losses as one of the priorities, to provide as 

much flexibility as possible so that local partnerships can pursue innovations in conservation practices and program delivery, and provide a mechanism for non-governmental organizations to receive USDA assistance for delivering technical assistance 

to producers participating in the partnerships. 

In conclusion, I appreciate this opportunity to be here today to talk about the importance of conservation programs to my farm and to share some ideas with you. 

I will be happy to try to answer any questions you may have.

The CHAIRMAN. Thank you, Mr. Homan. 

Ms. Hopper, please go ahead and proceed with 5 minutes for 

your testimony. Thank you. 

STATEMENT OF SARA HOPPER, AGRICULTURAL POLICY

DIRECTOR, ENVIRONMENTAL DEFENSE FUND,

WASHINGTON, D.C. 

Ms. HOPPER. Chairman Thompson and Members of this Subcommittee, thank you for the opportunity to testify. My name is 

1757

Sara Hopper, and I am the Agricultural Policy Director for Environmental Defense Fund. EDF is a nonprofit organization dedicated to using science and economics to find practical and lasting 

ways to meet our biggest conservation challenges. We believe that 

economic prosperity and environmental stewardship can go hand in 

hand, and nowhere is that more true than in the management of 

America’s working farms, ranches, and private forest lands. 

The continuing economic prosperity of agriculture is critical to 

the nation, but it is also true that agriculture has a significant environmental footprint. That is why EDF is so interested in ways to 

advance both the economic and the environmental sustainability of 

agriculture. In the past, periods of high commodity prices have 

spurred the conversion of marginal, environmentally sensitive 

lands to crop production. When this happened in the 1970’s, Congress recognized that the dramatic increases in soil erosion that followed threatened not only environmental quality, but also longterm productivity. In the 1985 Farm Bill, it created the Conservation Reserve Program and designed other new Federal policies to 

reduce erosion and the loss of wetlands. Each farm bill since then 

has reaffirmed the commitment to conservation that Congress 

made in 1985. Funding for conservation incentives has increased 

significantly over the years, helping producers improve stewardship 

as they have increased productivity. 

But while significant progress has been made, environmental 

problems associated with agricultural production persist, and in 

some cases, they are getting worse. Pressure on the American landscape is building. The need to increase production to feed a growing 

global population means it is more important than ever to maintain 

and strengthen our commitment to conservation. 

As you know, however, this is a difficult time to write a farm bill, 

given the budget challenges that we face. Fortunately, Members 

and staff of this Committee have already done considerable good 

work on which to build. Last fall when Committee leaders worked 

to develop recommendations to the Super Committee, they didn’t 

focus only on cutting spending, they also thought carefully about 

what policy improvements could be included to make conservation 

programs more effective. We believe the work done last fall showed 

a continuing commitment to conservation in the face of significant 

budget pressure. 

As you develop the 2012 Farm Bill, we urge you to maintain that 

commitment by doing two things. Number one, minimize cuts to 

conservation programs, and number two, improve policies within 

the conservation title to ensure that we can accomplish more, even 

with fewer resources. 

We believe it is important that Members recognize that any cuts 

to conservation programs will be painful. These programs are oversubscribed now at current funding levels. Many of you have producers in your districts who may have applied and been turned 

away due to insufficient funding. When funding is cut, that gap between producer demand and available resources will grow. Policy 

improvements can help reduce, but can’t eliminate the impact of 

cuts, so minimizing the cuts is critical. 

With respect to policy improvements, I want to focus today on 

one thing that can help us get the most bang for the Federal conVerDate 0ct 09 2002 12:54 Dec 11, 2012 Jkt 041481 PO 00000 Frm 00169 Fmt 6601 Sfmt 6601 I:\DOCS\112-30\74372.TXT BRIAN
1758

servation dollar, and that is promoting partnerships. The 2008 

Farm Bill included two new initiatives, the Cooperative Conservation Partnership Initiative, and Agricultural Water Enhancement 

Program, designed to engage state and local partners in projects to 

help producers address state and local conservation priorities. 

These initiatives share three important features. First, they leverage resources from partners, bringing additional money to the table 

to help producers solve environmental problems. Second, they rely 

on local leadership to focus resources where they are most needed, 

and third, they help demonstrate results, because partners have to 

help with the monitoring evaluation and reporting of project outcomes. 

We strongly support the inclusion of a larger, stronger partnership program in the 2012 Farm Bill. This program should be built 

on the best aspects of the 2008 Farm Bill’s Cooperative Conservation provisions. Emphasizing partnerships in the next farm bill will 

help stretch Federal conservation dollars further, focus resources to 

solve problems, and demonstrate results. Demonstrating results is 

important. We need to get better at quantifying the environmental 

benefits that conservation programs help producers deliver to the 

public. Doing more to engage partners who can help with that 

would be a big step in the right direction. 

The policies included in the conservation title of the 2012 Farm 

Bill will do a lot to determine whether conservation programs will 

be effective in helping the nation meet its conservation challenges. 

EDF looks forward to working with this Committee to ensure that 

the 2012 Farm Bill includes the strongest possible conservation 

title. Thank you again for the opportunity to testify. 

[The prepared statement of Ms. Hopper follows:]

PREPARED STATEMENT OF SARA HOPPER, AGRICULTURAL POLICY DIRECTOR, 

ENVIRONMENTAL DEFENSE FUND, WASHINGTON, D.C. 

Chairman Thompson, Ranking Member Holden, and Members of the Subcommittee, thank you for the opportunity to testify concerning conservation programs and the 2012 Farm Bill. My name is Sara Hopper, and I serve as Agricultural Policy Director for Environmental Defense Fund (EDF), a nonprofit organization dedicated to using science and economics to find practical and lasting ways to 

meet our most serious conservation challenges. On behalf of over 700,000 members, 

EDF forges partnerships and works to harness the power of market incentives to 

advance environmental solutions. We believe that economic prosperity and environmental stewardship can go hand in hand, and nowhere is that truer than in the 

management of America’s working farms, ranches and private forestlands. 

Over the past 2 centuries, agriculture has transformed the American landscape. 

Farmers, ranchers, and private forest landowners have contributed significantly to 

economic and social progress in this country, but this progress has not come without 

environmental costs. In the past, periods of high commodity prices have spurred the 

conversion of marginal, environmentally sensitive lands to crop production. Congress recognized that the resulting increases in soil erosion and degradation of other 

important natural resources threatened not only environmental quality, but also 

farm profitability and productivity over the long term, and it responded with Federal policies that promoted conservation. 

In the years following the Dust Bowl, for example, USDA’s newly established Soil 

Conservation Service (now the Natural Resources Conservation Service) and new 

Federal policies assisted farmers in improving the management of their lands to reduce soil erosion. When high commodity prices in the 1970s caused production to 

expand onto marginal lands again, the result was another dramatic increase in soil 

erosion. Policymakers responded by creating the Conservation Reserve Program and 

by designing other policies in the 1985 Farm Bill to reduce erosion and the loss of 

wetlands. 

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Each farm bill since 1985 has reaffirmed the commitment to conservation that 

Congress made in 1985. Funding for conservation incentives has increased significantly over the years, helping farmers, ranchers and private forest landowners to 

improve stewardship as they have increased productivity. 

But while significant progress has been made, environmental problems associated 

with agricultural production persist, and in some cases they are getting worse. Soil 

erosion is still excessive in many places, and nitrogen and phosphorus lost from crop 

and livestock operations contribute significantly to water quality impairments in too 

many of the nation’s rivers, lakes and bays. 

Commodity prices have increased again, intensifying pressure on the American 

landscape. And with the global population projected to increase from approximately 

seven billion today to nine billion by 2050, the need to increase production to meet 

expected future global demand means that it is more important than ever not only 

to maintain, but to strengthen, our commitment to conservation. 

As Congress takes up the 2012 Farm Bill, however, it faces the significant challenge of how to strengthen conservation programs even as it cuts overall farm bill 

spending to help reduce the Federal budget deficit. The proposal that leaders of the 

House and Senate Agriculture Committees developed last fall for the Joint Select 

Committee on Deficit Reduction (the Super Committee) would have cut $23 billion 

over 10 years from farm bill spending, including roughly $6 billion from conservation programs. In view of increasing demands on our natural resources, $6 billion in cuts to Federal conservation spending will be painful. Yet leaders of the House and Senate Agriculture Committees worked in a bipartisan way last fall to minimize the impact 

of that level of cuts by also including in the proposal to the Super Committee policy 

improvements designed to increase the effectiveness of conservation programs. 

While the failure of the Super Committee to reach a larger agreement meant that 

last fall’s proposal did not advance, we believe the work done by Members and staff 

of this Committee on the conservation title of that proposal demonstrated a continuing, strong commitment to conservation—even in the face of significant budget 

pressures. As you build upon that work in developing the conservation title of the 

2012 Farm Bill, we urge you to maintain that commitment. We believe that the 

three most important ways in which you can do that are to:

• Ensure that conservation spending cuts do not exceed $6 billion over 10 years;

• Ensure that if the Conservation Reserve Program (CRP) is to be smaller, it and 

other conservation programs will be effective in both maintaining and building 

upon the conservation benefits CRP has delivered to date; and

• Promote partnerships that leverage resources from non-Federal sources and 

help focus conservation efforts to address the most significant conservation challenges associated with agricultural production.

Ensure That Conservation Spending Cuts Do Not Exceed $6 Billion Over 10 

Years 

The $23 billion cut in overall farm bill spending proposed last fall—and reaffirmed in the farm bill draft that the Senate Agriculture Committee is moving forward this week—represents a significant contribution to deficit reduction. As you 

know, however, the House Budget Committee and others have proposed deeper cuts 

to total farm bill spending. While we recognize the challenge that Members of this 

Committee will face in moving a bill through the House that cuts no more than $23 

billion total, we believe that whatever happens, it is critical that Congress not cut 

more than $6 billion from conservation programs over the next 10 years. 

Ensure the Effectiveness of a Smaller CRP 

Under the 2008 Farm Bill, CRP was capped at 32 million acres, and current enrollment stands at almost 30 million acres. Both last fall’s proposal to the Super 

Committee and the draft conservation title released Friday by the Senate Agriculture Committee reduce the size of CRP in order to generate savings. The Senate 

draft would step enrollment down to a maximum of 25 million acres by 2017. 

Ensuring that the return of roughly 4 million acres of conservation land to production does not increase soil erosion, worsen existing water quality problems (particularly in the Upper Mississippi River Basin) or harm wildlife populations will require a careful effort by Congress and the Administration to ensure that the right 

incentives are available to keep the most environmentally sensitive lands enrolled 

in CRP. 

Just as importantly, we need a focused effort over the next few years to make 

sure that when sensitive land is taken—or kept—out of production and enrolled in 

CRP or another conservation program, it is enrolled in the right practice to achieve 

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the desired conservation objectives. For example, if the most pressing conservation 

challenge in a particular watershed is the loss of nitrogen from farm fields to 

ground or surface water, we need a strategic effort to identify what types of filtering 

practices—including riparian buffers and wetlands specifically designed to remove 

nitrogen from water flowing from agricultural operations—need to go in what places 

in the watershed to solve the problem. This kind of targeted approach will also ensure that we can achieve important conservation objectives while minimizing the 

total amount of land removed from production. 

The 2012 Farm Bill should also include policies that will help make it more economically attractive for owners and operators of land that is leaving CRP to manage 

that land in ways that are consistent with maintaining the existing cover (grasses 

or trees). The other conservation programs authorized through the farm bill can and 

should play an important role in accomplishing this, for example by offering incentives for owners and operators to transition land under an expiring CRP contract 

to a grazing operation. 

Promote Partnerships 

The 2008 Farm Bill included two new initiatives—the Cooperative Conservation 

Partnership Initiative (CCPI) and Agricultural Water Enhancement Program 

(AWEP)—designed to encourage partner-led projects that help producers address 

specific conservation priorities in particular geographies. These initiatives share 

three important features:

1. They leverage the resources of partners (including state and local government 

entities, producer groups and conservation organizations), bringing additional 

funding to the table to help producers in a project area to solve a particular resource challenge facing them. This promotes coordination of effort at the national, state and local level and helps improve the effectiveness of government 

spending to address state and local conservation priorities.

2. The initiatives encourage and rely on local leadership in focusing resources 

on achieving particular conservation outcomes in particular areas. Achieving 

such outcomes requires getting producers in the right places in a watershed or 

other specific geographic area implementing the right practices in sufficient 

numbers to actually make a difference.

3. CCPI and AWEP require partners to play a role in the monitoring and evaluation of project outcomes and to report on project results. The monitoring and 

evaluation provisions of these initiatives are important to advancing existing efforts by USDA and its partners to quantify the conservation benefits delivered 

by conservation practices and approaches. Quantifying the benefits from practices supported through Federal conservation programs is critical to ensuring 

that taxpayers are getting their money’s worth from these programs.

One of the most important things Congress can do in the conservation title of the 

2012 Farm Bill is to build upon these two initiatives by creating a larger, stronger 

partnership program. Some specific improvements we believe you should consider 

making in this new partnership program are:

• Strengthen monitoring, evaluation, and reporting of the conservation outcomes 

achieved through partner-led projects. Ensuring that state and local partners 

help track and report on the outcomes achieved through the projects in which 

they participate is critical to ensuring Federal dollars are well spent, so any 

new partnership program included in the 2012 Farm Bill should include strong 

monitoring, evaluation and reporting provisions. We suggest you consider providing more guidance in the farm bill regarding what kinds of monitoring and 

evaluation activities partners should carry out. Monitoring and evaluation 

should go beyond determining what practices were implemented on the ground. 

Monitoring and evaluation plans should include an assessment of the effectiveness of practices in affecting resource conditions and/or some link to ongoing 

monitoring of actual conditions, so that the conservation benefits delivered 

through partner-led projects can be quantified. Policymakers and stakeholders 

do need to recognize that there may be a delay between the time projects are 

implemented and when results can be seen, but we also need a better understanding of what we are gaining or can expect to gain in terms of real environmental progress if we are to maintain support for voluntary conservation programs over the long term.

• Provide greater flexibility for NRCS to obligate funding for partner-led projects 

beyond a single fiscal year. The current inability of NRCS to commit funding 

up front to multi-year, partner-led projects has made it more difficult for partners to enlist producer participation. Partners cannot count on each year’s fundVerDate 0ct 09 2002 12:54 Dec 11, 2012 Jkt 041481 PO 00000 Frm 00172 Fmt 6601 Sfmt 6621 I:\DOCS\112-30\74372.TXT BRIAN
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ing for producer contracts until it is obligated, so they cannot help the agency 

sign up producers continuously. In addition, each year the agency must decide 

how much of the funding allocated for the initiatives should be used to fully 

fund projects approved in previous years and how much should be used to approve new projects. Fixing this problem would provide greater flexibility to partners and more predictability for farmers while making implementation of partnership programs easier for the agency.

• Consider whether the agency needs additional authority to use group contracts.

Because many projects approved through a partnership program may be focused 

on helping producers address a particular local, state or regional priority, these 

projects may require many producers in the project area to implement a single 

practice or a narrow set of practices on their land. This means many small individual contracts and a significant workload for NRCS field staff in the project 

area. In other cases, a project may require a single structure or set of structures 

that will benefit multiple producers, but which will be challenging to implement 

via individual contracts with each of them. While we support language continuing to ensure funding flows to producers, greater flexibility on the issue of 

whether that happens through individual producer contracts or some other 

mechanism is something that should be considered.

• Maintain the authority and flexibility NRCS currently has to develop and 

launch additional landscape-scale initiatives. Over the past few years, NRCS 

has launched several conservation initiatives that do not rely on partners but 

use farm bill conservation programs—particularly the Environmental Quality 

Incentives Program (EQIP) and Wildlife Habitat Incentives Program (WHIP)—

to help producers successfully address resource challenges of regional and national importance, thereby reducing the need for future environmental regulations. The Sage Grouse Initiative is one of these initiatives. It represents a focused effort to improve populations of the bird, which is a candidate for listing 

under the Endangered Species Act, so that listing (and the regulatory requirements that come with it) will be unnecessary. NRCS engaged scientists to help 

design the initiative and ensure that EQIP and WHIP dollars were targeted to 

the places within the range of the bird where the right practices and activities 

could have the most significant positive impact. If this initiative and others like 

it are successful, the agency will have succeeded in helping producers solve 

wildlife conservation challenges in a way that also reduces conflict and uncertainty—a win-win. We believe maintaining flexibility for the agency to respond 

to similar circumstances in the future is important.

The policies included in the conservation title of the 2012 Farm Bill will determine to a significant extent whether conservation programs can be effective in helping the nation meet current and future conservation challenges, even as funding for 

these programs is reduced. EDF looks forward to working with Members and staff 

of this Committee in the weeks and months to come to ensure that the 2012 Farm 

Bill includes the strongest possible conservation title. Thank you again for the opportunity to testify.

The CHAIRMAN. Thank you, Ms. Hopper. As a veteran staffer of 

this Subcommittee, you did well to come in under the time limit 

too, so thank you. 

Mr. Petty, I recognize you for 5 minutes, please. 

STATEMENT OF DAVID D. PETTY, CATTLE PRODUCER, IOWA 

RIVER RANCH; MEMBER, ENVIRONMENTAL WORKING 

GROUP, NATIONAL CATTLEMEN’S BEEF ASSOCIATION, 

ELDORA, IA 

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

Subcommittee. I am Dave Petty, a cattle producer from the Iowa 

River Ranch in Eldora, Iowa. I operate a commercial cow/calf herd 

and retain ownership of my calves through the feedlot side of my 

business. The other half of my operation consists of corn and soybean crops, and they are rotated on minimum till land. I am a 

member of the Iowa Cattlemen’s Association, and the National Cattle and Beef Association. 

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America’s cattle producers have a vested interest in keeping the 

land healthy and productive, the air and water clean, and the wildlife abundant, while maintaining diverse ecosystems. We are an innovative industry that utilizes the latest science to find more effective and efficient ways to raise the most wholesome, nutritious, and 

affordable beef in the world. According to a study by Washington 

State University, beef production today results in 16 percent less 

carbon emissions, takes 33 percent less land, and requires 12 percent less water than our industry did in 1977. Today we produce 

13 percent more beef with 33 percent fewer cattle. 

A fundamental cornerstone of our industry is being stewards of 

our nation’s land and natural resources. As you can tell by my 

farm’s name, we are located along the Iowa River, so I am constantly thinking about conserving our natural resources. This is a 

responsibility that our industry takes seriously, and by utilizing 

tools through the conservation program in the farm bill, our partnership with the government has strengthened. 

NCBA’s membership supports efforts to maintain continued support for working lands programs, while increasing their flexibility 

and effectiveness. We fully understand that money is limited, and 

we strongly support eliminating overlap and redundancy within 

programs. 

One of the most popular programs utilized by cattle producers is 

EQIP. This voluntary financial cost-share program provides incentives to cattle producers for efforts to incorporate best management 

practices on their operations. We strongly support the continuation 

of EQIP programs and the provision from the 2008 Farm Bill that 

allocates 60 percent of EQIP funds to livestock. 

Environmental regulation is a challenge for the livestock industry, and EQIP is a cost-share program producers may use to be in 

compliance. As farm bill discussions continue, we encourage you to 

support efforts to streamline the approval process and reduce backlogs in applications. 

Cattle producers support working lands programs that keep land 

in production. Geographical differences dictate production systems 

throughout the United States. NCBA supports flexibility of conservation programs to meet the diversity of our industry from coast 

to coast. 

Another program that is important to cattle producers is CRP. 

Our membership discourages enrollment in entire fields and farms 

to CRP, which makes it difficult for beginning or disadvantaged 

producers to enter into farming and ranching. NCBA’s membership 

believes that in all instances of haying and grazing on lands enrolled in CRP, payment should be reduced by the value of the forage harvested or grazed. We also believe that managed grazing on 

CRP lands should be permitted during primary nesting seasons 

where the State Technical Advisory Committee recommends it 

under an approved plan. 

NCBA does not support grazing on CRP lands as a part of a continuous grazing program, but we do support haying or grazing in 

order to maintain plant health and proper resource management 

with payment reductions. We encourage the Subcommittee to add 

more flexibility for grazing of CRP lands in the 2012 Farm Bill. 

Also, we urge the Subcommittee to consider flexibility for grazing 

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and haying in CRP lands during natural disaster periods. By allowing emergency use of these lands for haying and grazing, affected 

livestock producers would be able to find grass to feed their cattle 

and stay in business. 

When it comes to implementation of USDA’s conservation program, it is imperative that we ensure adequate support and technical assistance to make these programs successful. Ranchers need 

a dependable and recognized source of technical assistance in order 

to meet rangeland conservation needs. 

The conservation programs authorized by the farm bill are a 

great asset to cattle producers. We want to see them continued and 

refined to be more effective and efficient and protecting the environment in a sensible manner. 

In closing, the beef industry not only plays a significant role in 

rural America, but also in the U.S. economy. We look forward to 

working with the Agriculture Committee to ensure that those of us 

in the beef business have the ability to do what we do best: produce 

the world’s safest, most nutritious, abundant, and affordable beef 

products, all the while giving the consumers the choice they deserve. Please work with me as I work to feed the world and pass 

down my farm to my daughter. 

We appreciate the opportunity to visit with you, and I look forward to answering any questions you may have. Thank you. 

[The prepared statement of Mr. Petty follows:]

PREPARED STATEMENT OF DAVID D. PETTY, CATTLE PRODUCER, IOWA RIVER RANCH; 

MEMBER, ENVIRONMENTAL WORKING GROUP, NATIONAL CATTLEMEN’S BEEF

ASSOCIATION, ELDORA, IA 

Mr. Chairman, Ranking Member Holden and Members of the Subcommittee, my 

name is David Petty and I am a cattle producer from the Iowa River Ranch in 

Eldora, Iowa. I was raised on a family farm and started my own diversified farm 

and cattle operation in 1973. I operate a commercial cow/calf herd and retain ownership of my calves through the feedlot side of my business. The other half of my operation consists of corn and soybean crops that are rotated on minimum-tilled land. 

I am a member of the Iowa Cattlemen’s Association and the National Cattlemen’s 

Beef Association (NCBA). I have been a board member of the Iowa Environmental 

Protection Commission for 8 years and am currently serving as the Chairman. Also, 

I serve on NCBA’s Environmental Stewardship Award Program’s Committee and 

NCBA’s Environmental Working Group. Last, I am a member of the government’s 

Farm, Ranch and Rural Communities Federal Advisory Committee. 

NCBA is the nation’s oldest and largest trade association representing America’s 

cattle producers as a strong and united voice in our nation’s Capital. On behalf of 

NCBA’s membership we appreciate the opportunity to share the importance of conservation programs and what they mean to cattlemen and cattlewomen throughout 

the country. The name of my farm is the Iowa River Ranch and as you can tell from 

the name my land runs for 4 continuous miles along the river. Taking care of our 

natural resources is a priority for cattle producers and for those of us located near 

waterways it becomes an even bigger part of my every day activities. 

America’s cattle producers are committed to raising the most wholesome, safest, 

nutritious and affordable beef products in the world. We have continually used 

science to find ways to produce more beef by using fewer natural resources. In fact, 

according to a study by Washington State University, compared to 1977, beef production today results 16.3 percent less carbon emissions; takes 33 percent less land; 

and requires 12 percent less water. All of this is achieved today, with 30 percent 

fewer beef cattle in the United States. With the global population growing exponentially, the demand for high quality and affordable beef will also continue to increase. 

U.S. cattlemen are ready to meet this challenge but in order to do that we must 

also discuss one of the fundamental cornerstones of our industry—being stewards 

of our nation’s land and natural resources. 

The livelihood of our industry is directly related to the health of the land, soil, 

air and water throughout the cattle industry. Conservation of our nation’s natural 

1764

resources is critical to the vitality of our industry. Cattlemen have a vested interest 

in keeping the land healthy and productive, water and air clean, wildlife abundant 

while maintaining diverse ecosystems. Mother Nature is the biggest challenge for 

cattle farmers and ranchers. Everyday our industry has to adapt to the weather conditions and natural disasters that threaten our natural resources. Additionally, 

urban encroachment and the misinterpretation and misapplication of environmental 

laws are challenges to cattlemen. It’s imperative for our nation to conserve natural 

resources and cattle farmers and ranchers have a vested interest in conserving 

these resources. Our industry continually evaluates the latest science to help in decisions to further conserve these resources. It is our responsibility to operate as environmentally friendly as possible and utilizing tools through the conservation programs in the farm bill will help us in further strengthening a partnership with the 

government. 

NCBA’s policy on natural resources and conservation emphasizes the government’s role to enhance an individual’s right of free choice in land use, soil and water 

conservation, energy use and development utilizing working lands. All of these 

methods should be based on sound science and economics. State laws and individual 

private rights should be preeminent in the use of water and other natural resources. 

To accomplish this overall policy NCBA’s membership supports efforts in the farm 

bill to:

1. Improve the attractiveness, accessibility and efficiency of existing NRCS programs to encourage voluntary participation by beef producers.

2. Maintain equitable funding for conservation programs important for beef producers and associated natural resources to ensure the livestock sector is not disproportionately impacted by budget limitations, budget reductions, or other program funding changes.

3. Federal conservation programs that provide flexibility to states for establishing statewide or regional priorities.

4. A preference to NRCS programs, such as the Environmental Quality Incentive Program, that enhance air, soil, and water quality, wildlife habitat, and 

grazing land health on all lands in production, and

5. A continuation of the voluntary NRCS Grassland Reserve Program and Farm 

and Ranchland Protection Program for the protection of working agricultural 

lands for future generations.

6. Continued funding for the Wetland Reserve Program (WRP) to meet increased demand for the Grazing Reserve Pilot Program within WRP. Also need 

to improve the effectiveness by allowing land owner-approved third parties to 

hold, enforce, and negotiate easements.

Within the conservation title of the farm bill, NCBA supports efforts to maintain 

continued support for working lands programs while increasing the effectiveness 

and flexibility of the programs. Knowing the limited resources that are available, 

NCBA would like to see overlap and redundancy in programs eliminated, and efficiency of programs improved. The way to get the best value out of these program 

dollars is to have the method of delivery as clear, concise, and quick as possible. 

The Environmental Quality Incentive Program (EQIP) is the most popular and effective programs utilized among cattle producers. This voluntary financial cost-share 

program provides incentives to cattle producers for their environmental stewardship. USDA’s Natural Resources Conservation Service (NRCS) assists producers in 

the development of long range conservation plans, and then offers incentives 

through cost sharing for the landowner to incorporate best management practices 

to accomplish the objectives of the plan. EQIP is the best tool cattlemen on the 

ground have to implement conservation practices that allow them to be in compliance with environmental regulations. NCBA’s membership strongly supports the 

continuation of the EQIP program and the provision from the 2008 Farm Bill that 

dedicates sixty percent of EQIP funds to livestock. Environmental regulatory concerns continue to be a threat to our industry. Programs like EQIP allow producers 

the opportunity to work in a collaborative manner to comply with regulations. As 

Congress evaluates the EQIP program we would encourage the participation of custom operators to apply for contracts to the same degree as direct operators. We 

would also support efforts to streamline the application process to reduce the length 

of time it takes to approve an application. 

One of the reasons EQIP is so popular among ranchers is the fact that it is a 

working-lands program. We believe that conservation programs that keep land in 

production and do not artificially limit its use are best for the ranchers and for 

reaching the goal of conserving our resources. Other working-lands programs that 

we support include the Wildlife Habitat Incentive Program (WHIP) and the GrassVerDate 0ct 09 2002 12:54 Dec 11, 2012 Jkt 041481 PO 00000 Frm 00176 Fmt 6601 Sfmt 6621 I:\DOCS\112-30\74372.TXT BRIAN
1765

land Reserve Program (GRP). These programs help keep landscapes in tact, keep 

producers on the land, address resource concerns, and mitigate mounting environmental pressures. WHIP’s cost-sharing and technical assistance provisions provide 

assistance to conservation-minded landowners who are unable to meet the specific 

eligibility requirements of other USDA conservation programs. A healthy wildlife 

population is generally a sign of a healthy ecosystem, which is conducive to a 

healthy cattle operation. 

Also, NCBA supports continued funding for the voluntary Grassland Reserve Program (GRP) and Farm and Ranchland Protection Program to help conserve our nation’s working grasslands. There is a tremendous interest in these programs from 

the ranching community. NCBA supports efforts to increase the flexibility of conservation programs for the continued participation from the cattle industry. Our 

membership also supports efforts to improve the program’s effectiveness by allowing 

land owners the ability to choose third parties to hold, enforce and negotiate easements. This would allow land trusts to apply their expertise in perpetual easement 

management and administration, and enable GRP dollars to potentially be combined 

with dollars from other conservation programs. The Grassland Reserve Program has 

been very successful in helping landowners restore and protect grassland while 

maintaining the acres for grazing and haying. 

The CRP is a program designed for the purposes of reducing soil erosion, protecting water quality, enhancing habitat for wildlife, and decreasing overuse of 

lands not suited to farming. These are worthy goals, but we believe the USDA 

should consider targeting the program to acres that would produce the most significant environmental benefits. Emphasis should be placed on enrolling buffer strips, 

grass waterways, and only the most environmentally sensitive portions of farms so 

that program dollars provide the most benefit to the public. We discourage the enrollment of entire fields or farms; a practice that we believe adversely affects local 

economies, makes it difficult for beginning or disadvantaged producers to enter 

farming and ranching, and may not provide the level of environmental benefits that 

we believe should be the focus of the program. NCBA’s membership believes that 

in all instances of haying or grazing on lands enrolled in the CRP, continuous signup CRP, or CREP, the payment should be reduced by the value of the forage harvested or grazed. We also believe that managed grazing on CRP lands should be 

permitted during the primary nesting season where State Technical Advisory Committees recommend it under an approved plan. 

While NCBA does not support grazing of CRP lands as part of a continuous grazing program, we do support haying and grazing to maintain plant health and proper 

resource management when determined by the NRCS, with reductions in payments 

whenever appropriate. We encourage the Committee to add more flexibility for grazing of CRP lands in the 2012 Farm Bill. Emergency use of CRP lands during a disaster declaration due to drought or fire on private or public rangelands is important 

to ranchers. By allowing emergency use of these lands for haying or grazing, affected livestock producers would be able to find grass to feed their cattle and able 

to stay in business. We support the continued allowance of CRP lands for this reason at the designation of the Secretary of Agriculture through state advisement and 

encourage the Committee to increase flexibility when entire states or regions are 

impacted by a natural disaster. Additionally, we support payment reductions when 

CRP lands are used in cases of disaster. 

When it comes to the implementation of USDA’s conservation programs, it is imperative that we ensure adequate support and technical assistance to make these 

programs successful. Resources must be allocated to maintain adequate NRCS personnel at the local level to provide the technical assistance necessary to implement 

successful rangeland conservation programs. Ranchers need a dependable and recognized source of technical assistance in order to meet rangeland conservation needs. 

USDA’s conservation programs are a great asset to cattle producers. We want to 

see them continued and refined to make them more producer-friendly and more effective in protecting the environment in a sensible manner. NCBA looks forward to 

working with the Committee to assure any revisions to the conservation programs 

continue to serve the needs of cattle producers across the country. Thank you for 

the opportunity to express NCBA’s views with you here today.

The CHAIRMAN. Thank you, Mr. Petty. I thank all the witnesses 

for your testimony, and we will proceed with questioning. I will 

take the liberty of taking the first 5 minutes. 

Mr. Petty, we will just start at that end of the table. Now you 

stated in your testimony that the National Cattlemen’s Beef Association is generally opposed to enrolling entire fields or farms into 

1766

CRP. I agree that we need to target the lands most in need, and 

shouldn’t encourage productive lands being taken out of agriculture. How can we discourage enrollment of entire fields and 

farms, and do you have an opinion on whether the Senate draft 

being marked up at this moment addresses this issue? 

Mr. PETTY. It is trying to get the most sensitive land in CRP is 

the goal here. A lot of times—and I have some of my own where 

in the beginning when CRP was put in, you were able to put the 

whole field in which makes—if you had enough growing ground, 

but every piece of ground has some real productive ground, so 

maybe that is being split out of there now. As I have reenrolled my 

CRP, I have either reenrolled it or kept it all in grasslands and 

converted it into pasture. I have not had the chance to look at the 

Senate bill, so I don’t have a comment on that. 

The CHAIRMAN. Okay. I appreciate that. 

Ms. Hopper, what conservation program do you believe gets the 

most environmental benefit for the taxpayers’ dollar, that return on 

investment? 

Ms. HOPPER. I think that all of the programs—the programs that 

we have now all serve different functions. Some are focused on land 

retirement, the creation of wetland habitat, taking sensitive lands 

out of production. Some are focused on improving environmental 

benefits through practices on working lands. So it is a little bit of 

an apples and oranges comparison, but——

The CHAIRMAN. It is, but what is the most attractive apple or orange out there? 

Ms. HOPPER. Okay. Well the most attractive apple or orange for 

me are these cooperative conservation approaches. 

The CHAIRMAN. Partnerships. 

Ms. HOPPER. Yes. So the two new initiatives included in the last 

farm bill were the Cooperative Conservation Partnership Initiative 

and Agricultural Water Enhancement Program, and both of those 

leverage resources from partners. No money goes to partners under 

the—all the money goes to producers to implement conservation on 

the ground. But by bringing partners to the table, you are 

leveraging resources from those partners, and you are helping to 

focus resources in a particular area, and usually it is a state or 

local partner so they have identified the biggest conservation priority in their area. They already have relationships, they are working on the ground. They want to solve a particular problem, and 

I think that is a real good way to focus resources with local leadership, and the provisions include monitoring evaluation components. 

The partner has to help with that so we then get reporting on results, which is really important to spending taxpayer dollars most 

efficiently. 

The CHAIRMAN. Brings in the accountability part. 

Ms. HOPPER. Yes. 

The CHAIRMAN. Thank you. 

Mr. Homan, you discussed the importance of conservation programs with regard to the Chesapeake Bay watershed. What do you 

think the cost of complying with the TMDL will be on Pennsylvania farmers, and what role does conservation play, obviously, in 

the Commonwealth? 

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Mr. HOMAN. I really can’t make a quote on costs. I am not up 

to date on all the statistics on that part, but every ounce of participation that we can get on the farmland is definitely a big plus to 

the end result, and that is the waters of the Chesapeake. The local 

eyes on the situation are generally the general public driving by, 

and their concerns or not being knowledgeable of the practices that 

are taking place, and simply wondering what effect they are going 

to be. The end result is when you see the clean productive water 

coming off the lands that normally were in that surprising rain in 

the winter months, chocolate brown. 

The CHAIRMAN. Speaking of local eyes, what is your impression 

with the conservation investments that we have done? I know you 

have been very involved with the agriculture community in the 

Centre County area. What is your impression on water quality in 

our local watersheds, those immediate to your farmlands and most 

other farmlands in Centre County? How are we doing? 

Mr. HOMAN. I feel we are doing an excellent job in moving forward to getting more people involved in the areas of even the simple practices of no-till, but sometimes to move in that direction, it 

costs a farmer an investment in a different piece of equipment 

which doesn’t come cheap. But I am seeing good results in every 

area that we are emphasizing these conservation practices and taking advantage of the technical assistance being provided through 

NRCS to implement these projects and implement them correctly. 

The CHAIRMAN. All right. Well I am glad to hear that, because 

I mean, that is my impression from local watersheds as well. We 

take a lot of pride in them and we know if our local watersheds 

are clean and looking good that are adjacent and running through 

our farmlands, the Chesapeake has got to be getting better. 

Mr. HOMAN. Yes. 

The CHAIRMAN. Mr. Gordon, you mentioned NGFA supports efforts by Congress and the Administration to reduce, streamline, 

and better rationalize the plethora of existing conservation programs to make them more efficient, more effective. I have heard 

that used in a lot of testimony today. After seeing the Senate’s 

mark, what further recommendations, if any, would you give to this 

Committee? 

Mr. GORDON. Well, I do think the Senate bill does move it in the 

right direction. I believe the direction this Committee had made 

through Chairman Lucas and Ranking Member Peterson also certainly did that by consolidating programs, trying to rationalize 

them within groupings moving forward. So we do think both of 

those initiatives are movements in the right direction. 

The CHAIRMAN. Great, thank you. 

Mr. Bell, you stated that the EQIP conservation practices are not 

marketed to specialty crop producers equitably across the country. 

Why do you believe this is so? 

Mr. BELL. Well, we—the way the Specialty Crop Farm Bill Alliance works is we have working groups that represent the diversity 

of our very diverse sector across this country look at the conservation title. And we had multiple conference call meetings last year 

in preparation for the farm bill coming up, and it was very interesting when we talked about the specifics of the programs, that it 

was real clear that in some counties, some water conservation disVerDate 0ct 09 2002 12:54 Dec 11, 2012 Jkt 041481 PO 00000 Frm 00179 Fmt 6601 Sfmt 6601 I:\DOCS\112-30\74372.TXT BRIAN
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tricts in some parts of the country, we weren’t getting great service 

from the—some water conservation districts and NRCS. Then, in 

other parts of the country, there was very little focus on that ag 

sector. We really don’t know why, whether it is a question of resources or inertia, staff is more comfortable working in a row crop 

system, or whatever the dynamic is. The only way that we could 

think to maybe raise the consciousness with the agency is to ask 

Congress to make sure they are focusing on that area. 

We understand it is a challenge with the diversity of U.S. agriculture across the country. You know, you ask staff to wear many 

hats and have a whole lot of expertise, but we do feel that in some 

parts of the country, specialty crop farmers are not focused on by 

the conservation programs. 

The CHAIRMAN. Thank you. I now recognize Mr. Gibbs, from 

Ohio, for 5 minutes. 

Mr. GIBBS. Thank you, Mr. Chairman. I want to go back to the 

first question I asked the first panel. Mr. Gordon, in your testimony, you talk about the CRP land, and if I am looking at—doing 

it right, 16 to 17 million acres, in your testimony shouldn’t be reenrolled or shouldn’t be in CRP, and you also went on to talk about 

81⁄2 million acres are—is probably land that shouldn’t be in there 

that is concentrated in certain states. I guess the first part of my 

question is, is that correct that 15 or 17 million acres shouldn’t be 

in CRP that is currently in CRP? 

Mr. GORDON. No. Our testimony really focuses on prime farmland as USDA defines that, and the most recent data that we are 

able to access—and this is one of the requests that we have of the 

Committee is to have USDA be more transparent in updating data 

on enrollments of different land classes that are in the CRP. But 

it indicates back in 2007 there were about 8.7 million acres of 

prime farmland enrolled in the CRP. About 7.1 million of those 

were in the highest land classes that—and so that is—we have a 

research project underway through our National Grain and Feed 

Foundation right now that is coming at this from the standpoint 

of let us look at the kinds of acres that are in CRP right now and 

not name a number as to how low the CRP should go. Let us rationally look at the kinds of acres that can be cropped and in an 

environmentally sustainable way to meet growing world food demand, to meet budget——

Mr. GIBBS. I know we have to find a balance, because we got——

Mr. GORDON. It is about 8.7 million acres, and about 8.5 million 

of those are in 30 states that have the highest CRP enrollment. 

Mr. GIBBS. Well that is—the second part of my question is—and 

that talks about this 25 percent limit, whether you can exceed, and 

I don’t know if that is part of the problem that is making a higher 

number of states. I am sure we have all of these acres inventoried, 

so we have to know what the maximum amount in each state 

should be in sign up. Is that a correct assumption? 

Mr. GORDON. Well, that is an assumption that we should have, 

but again, these data aren’t very transparent right now as to which 

counties are exceeding that 25 percent number. Early on in the 

CRP, there were a lot of counties that did exceed that CRP 25 percent cap, and it really did devastate some rural communities. It 

1769

took a lot of rural businesses out, and so that is a fact that we need 

to have more data on. 

Mr. GIBBS. Okay, but that is, Mr. Chairman, that is an interesting point because we have to make sure that land that is sensitive, environmentally fragile, and also protect our watersheds. We 

are protecting that with our limited amount of dollars and it seems 

to make sense that we ought to know what—how much land in 

each state would fall in that category and what is in the CRP and 

make those adjustments. Of course, there has been more flexibility 

of states, but there have to be some parameters set, so I thought 

that was interesting. I couldn’t get a straight answer so much from 

the first panel on that, other than they need more flexibility, and 

I know there is always this push/pull between livestock producers 

and grain producers, and we have to find some type of balance 

there. But our main incentive now should be to protect those sensitive lands where back in 1985, the main incentive was a little 

more toward the production side, and in the 1995 Farm Bill it 

probably starting moving that way. 

Mr. GORDON. Right. That is what we concur. 

Mr. GIBBS. And Mr. Petty, Cowman’s—you have the National 

Cattlemen’s Association, right? Yes. So land that is in CRP that 

maybe is not as sensitive—maybe we ought to have two classes 

when you are talking about the rents or something—I don’t know—

that can be pastured but still maybe should never be farmed or 

tilled. I think you are moving that way. That is what I got out of 

your testimony. Is that right? 

Mr. PETTY. Well that is a really difficult thing when you look at 

the land rental rates, because even though today CRP rates are 

much higher than they were 10 years ago, they have fallen behind 

significantly from today’s cash rents in the adjoining fields. So it 

is end of the day economics usually determines whether people are 

going to pull that in—leave it in or pull it out, and——

Mr. GIBBS. Well this goes back to my point, I guess. We are going 

to see more land come out of CRP, when we have $13 soybeans and 

$5 to $8 corn, and economics are going to drive that, so that is why 

it is more important that we actually identify those lands with the 

limited dollars that we have to protect. 

Mr. PETTY. Yes. Now into the 25 percent, I am quite certain the 

25 percent is a limit per county, any land within a county, so 

that—those numbers would be very accessible within a county office. You know, they have to keep track of that and not go above 

it, so those numbers could be put together pretty easily on a county 

basis. You know, we just believe that the most sensitive grounds 

should be qualified under EBI, and then—and not the other 

ground. 

Mr. GIBBS. Mr. Chairman, I am out of time. Just to finish up, 

I just want to request of the Committee or request of the USDA 

or NRCS those numbers. I think that would be helpful when we 

do the bill. Thank you. 

The CHAIRMAN. Without objection. 

[The information referred to is located on p. 1789.] 

I now recognize the gentlelady from Alabama, Mrs. Roby, for 5 

minutes of questioning. 

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Mrs. ROBY. Thank you, Mr. Chairman, and I appreciate all of you 

on the panel being here. 

Mr. Gordon, to go back to the questioning of my colleague just 

a minute ago and expand on some of the questions that he has 

asked. As you know, we have a bill and you have already addressed 

that earlier, and I appreciate that, that deals with CRP and in the 

specific classes of property that we believe are creating an issue of 

competition amongst our farmers that lease property—and there 

are several issues that play into this, but most importantly going 

back to the 25 percent cap that was just mentioned. How does this 

happen? How do we got to a point—I mean, in Alabama we have 

a disproportionate number of acres, particularly even in my 16 

county district. How does it happen that this cap is exceeded? 

Mr. GORDON. Well, there was authorization in the farm bill in 

the 1985 statute that allowed counties to exceed the 25 percent 

limit, and it was amended—initially it was the county committee 

that could make those sorts of decisions, and then it was amended, 

I believe, in the 1995 Farm Bill, 1996 Farm Bill that would require 

the county FSA committee to certify that—or the county—it is actually the county commission or the county board to certify that 

doing so would not cause economic benefits to the county. And that 

became somewhat of a political conversation that would occur, so—

but where those waivers were granted, even though we think—and 

in our testimony we cite the comments of one county commissioner 

in Spokane, Washington, who said that CRP—because they exceeded those 25 percent caps in some counties in Washington State 

have really devastated those rural towns, so——

Mrs. ROBY. Right. Well, let us talk about, then, the rental rates 

again. I mean, going back to the previous question just to delve a 

little bit deeper. In these counties, the rental rate in some instances is really close to the CRP rate, and more land is going into 

CRP and it is harder for farmers to compete in renting the land. 

Do we know if those higher rates have caused these inflated rental 

rates? 

Mr. GORDON. Congresswoman Roby, we currently have—and I 

appreciate Mr. Peterson’s question and comments earlier on this 

question as well. We currently, through our foundation, are doing 

an analysis of the rental rates, the CRP rental rates on a county 

and state by state basis, and in some states, Mr. Peterson is exactly right, that CRP rental rate is dramatically lower than the 

county rate. In other states, Texas is an example, the CRP rate in 

some counties and areas within the state exceed the local land 

rental rate, so it is not a uniform system, and I apologize if our testimony would lead you to believe that we wanted that nationwide 

because it is not—it is more of a regional, state by state basis. 

Mrs. ROBY. Sir, and if you travel around Alabama’s 2nd District, 

all you have to do is sit down with some of our farmers and you 

will find out very quickly that Alabama has a different set of problems. 

Mr. GORDON. Well we do expect results of that soon, and we 

will——

Mrs. ROBY. Well I look forward to that. I look forward to that, 

because that certainly will play into this analysis from a legislative 

perspective. 

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How does the USDA determine which acres are accepted? 

Mr. GORDON. Well, that is one of the—kind of the moving targets, because within each sign up they will look at the Environmental Benefits Index and change that from sign up to sign up. 

Now they have announced with this current general sign up that 

it will be based on the same criteria used last time, but that has 

been a flexible kind of a marker that has changed from sign up to 

sign up, and that is one of the, again, transparency issues we think 

needs to be clarified a little bit. 

Mrs. ROBY. Do you have ideas about how this specific program 

can be modified so we can help our young and beginning farmers 

to access the productive land? 

Mr. GORDON. Thanks. We do think the TIP program is a tremendous program and a good opportunity to invest monies to allow 

both beginning farmers and socially disadvantaged farmers to get 

into the business of agriculture. My understanding is it is capped 

at about $25 million a year right now, and meets that cap every 

year. There is pent up demand for use of that program. So that is 

one area that we do recommend that perhaps some additional funding might be appropriate. 

Mrs. ROBY. And I was going to ask that question as well about 

your suggestion for a specific cap, but I heard you in your answer 

to Mr. Gibbs that that is not actually the approach that you are 

taking. You want to have this analysis county by county or state 

by state in order to determine how this program has affected——

Mr. GORDON. Really looking at the environmental classes of the 

land and what makes sense to bring out of the CRP in a rational 

way. 

Mrs. ROBY. Sure. And my time has expired, and I would like to 

submit some other questions for the record. 

The CHAIRMAN. Without objection. I would ask that any questions submitted by Members of the Committee, that if we get a 

prompt response back, answers in response to that. 

Now I thank the gentlelady and now recognize the Ranking 

Member of the full Committee. 

Mr. PETERSON. Thank you, Mr. Chairman. I apologize for having 

to miss—I feel like I am coming in out of left field here, because 

I haven’t heard the discussion. I had all these meetings set up before I knew I was doing this. 

At the time we started CRP it was not a conservation program, 

and we made a lot of progress. I mean, the EBI, frankly if they are 

using what they used last year, it is by and large getting the land 

that should be in, in, and the land that shouldn’t be in, out. It is 

doing a pretty good job, and they have tightened up on that criteria 

every year almost. I had a lot of guys this last year in my part of 

the world didn’t get into the program because the EBI scores were 

so high they couldn’t meet them. You know, even the guys that 

agreed to plow up the CRP and plant the mixture they wanted and 

all that stuff, and there are some issues there as well. 

But one of the issues I had that I was wondering about, Mr. Gordon, is in your report here you are talking about this Land Capability Class I and II, which is kind of a broad category that was 

created back in the 1950s or 1960s, from what I understand, and 

I don’t know if it is applicable to what we are trying to do with 

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CRP or not. But NRCS doesn’t use this anymore. I mean, I don’t 

know anybody using this classification, so I guess I am curious. 

Why are you using that when nobody—when everybody else has 

moved away from it? 

Mr. GORDON. Thank you, Mr. Peterson. We do understand that 

there are—and I would like to expand in my comments for the 

record, if I could on that to do a little more research on that, but 

our understanding is that they are still trying to keep some data 

based along those lines. They haven’t been publicizing those, as you 

note, but it clearly was a way that Soil Conservation Service and 

others used at that time to look at where is—what is the best quality farmland we have in the United States. 

And so the reason we are trying to use that is to focus again on 

the productive farmland that we think if the CRP is to be 

downsized in the matter which it apparently will occur, that that 

is maybe one approach to take to looking at making sure we get 

the right acres. But we will provide more for the record on that, 

and I appreciate the question. 

[The information referred to is located on p. 1792.] 

Mr. PETERSON. We are not able to correlate it in any way. We 

have looked at it, tried to figure out and make some sense out of 

it, and I understand it is being used in a broader level for analysis, 

but I am not sure it is getting us—there are places in this country 

where some questionable land that has gotten into the CRP, and 

frankly have been changes by this Committee that have allowed 

people to do things that I don’t personally agree with, that allowed 

land into the CRP. I don’t know why we have it in there. I have 

been in those parts of the world. It looks to me like that is land 

that just is no good for anything else, and I don’t think it is any 

good for wildlife. I am not sure. I guess it is just a way to get those 

people some money or something. And so I, for one, would be perfectly willing to tighten up on some of these practices in Alabama 

and some of these other places, Texas, where we have a huge 

amount of land in West Texas and New Mexico and Colorado and 

southeast Kansas that if you look at where the concentration is and 

if you go look at some of that land, I don’t know what it is providing. I just hope that we can work together, because we don’t 

want to destroy—I mean, there is a lot of land that should not be 

farmed. And as I said earlier, I am very interested in the wildlife 

aspects to this, and there is no way you are ever going to be able 

to buy enough land with the Fish and Wildlife Service and the 

state DNRs that is going to provide what CRP provides. You know, 

you get them—they go buy a 40 acre tract from Fish and Wildlife. 

They have a wetland and whatever. There isn’t a duck or a pheasant on that tract, because all around it is farmland. Every predator 

in the area goes to that, and if they try to breed, they get wiped 

out. What CRP does is it spreads this out. When you have 160 

acres or a section, the predators can’t—that is how it used to be, 

and that is why wildlife has come back. And so we need to keep 

that in the mix. I am all for the continuous and the buffers and 

all that sort of thing, but we don’t want to throw the baby out with 

the bathwater. 

And the reason I am so passionate about this, when I was a kid, 

I used to shoot my limit of ducks every morning and I would shoot 

1773

my limit of pheasants every afternoon. We had tremendous wildlife 

where I grew up. That was when we had the Soil Bank. That is 

how old I am. And the Soil Bank went away. All that land got 

plowed up, put into production. There isn’t a duck or a pheasant 

within 30 miles of where I grew up, and we don’t want to get back 

into that. It will never come back. So we want to make sure we 

keep some diversity out there on the land, and hopefully we can 

work together to do that. 

Thank you, Mr. Chairman. 

The CHAIRMAN. I thank the Ranking Member, and actually before we adjourn, let us see if there are any additional closing remarks you would like to make. 

Mr. PETERSON. You have given up on me. 

The CHAIRMAN. I think you did it, that is what it sounded like 

to me. 

I want to just take the opportunity to thank all the witnesses, 

both panels who were here. I though we had some very good perspectives that were brought to a very important issue as we prepare to get this farm bill hopefully over the finish line in 2012. We 

all know we need to do that. You know, as I took note of this panel 

and the last panel, there seems to be a consensus, at least from my 

perspective. Here are some of the things I heard: obviously a consensus on the need as we approach the 2012 Farm Bill, a need for 

recognition of the fiscal restraints as a country that we are under 

and a need for fiscal responsibility as we go forth in defining agriculture policy, which is what the farm bill is so important for. But 

I heard words like certainly the need for flexibility, the need to 

build in avenues for local direction and input in the decisions regarding conservation. Obviously the word efficiency came up over 

and over again. The fact that conservation dollars are well-leveraged through partnerships and the importance of those partnerships, and the importance of that leverage, the return on investment that conservation should provide in terms of the outcomes for 

the taxpayer investment. The importance of technical assistance 

and to move towards—get that rebalance so we have those boots 

on the ground, and finally, what I heard referenced is it is incredibly important to being able to make sure that America always continues to have the most affordable, highest quality, and safest food 

supply, in that succession, with our family farms, making sure we 

keep family farms in operation. 

So I very much want to thank everybody for their participation, 

and Members for their involvement today. Under the rules of the 

Committee, the record of today’s hearing will remain open for 10 

calendar days to receive additional material and supplementary 

written responses from the witnesses to any questions posed by a 

Member. 

This hearing of the Subcommittee on Conservation, Energy, and 

Forestry is adjourned. 

[Whereupon, at 11:58 a.m., the Subcommittee was adjourned.] 

[Material submitted for inclusion in the record follows:] 

1774

1775

SUBMITTED STATEMENT BY THOMAS A. HAMMER, PRESIDENT, NATIONAL OILSEED

PROCESSORS ASSOCIATION

Chairman Thompson, Ranking Member Holden, and Members of the Subcommittee, thank you for conducting this hearing on the conservation provisions of 

the 2012 Farm Bill. 

I am Tom Hammer, President of the National Oilseed Processors Association 

(NOPA), which represents the U.S. soybean, canola, flaxseed, sunflower seed, and 

safflower seed processing industries. NOPA’s 12 member companies crush approximately 95 percent of all soybeans processed in the United States. NOPA member 

companies process more than 1.6 billion bushels of oilseeds annually at 61 plants 

in 19 states located throughout the country. 

The competition for land is fierce between food, fiber, fuel, and wildlife and the 

environment; and governments around the world should balance and embrace resource protection measures and productivity enhancements. 

In the United States, 30 million acres of farmland have been rented from farmers 

by the USDA through the Conservation Reserve Program (CRP) to control surplus 

production and protect the environment. These acres are now being viewed as a 

source of land to relieve the pressure from food and fuel demands. Environmental 

and wildlife advocates are caught in the middle. 

If we step back, we can see that food, fiber, fuel and good stewardship practices 

are not mutually exclusive. Modern agriculture can provide adequate food, fiber, energy and better wildlife habitat on a sustainable basis, but some policy adjustments 

are needed in the 2012 Farm Bill. 

NOPA believes that the fundamental objectives of Federal commodity supports 

and conservation programs must take into account the dramatic shifts that have 

taken place in global agriculture markets. Outdated supply control programs must 

be redesigned to provide market-driven and risk management tools to our farmers 

and ranchers. CRP is a prime example; in 1985 Congress did not anticipate that 

land would be rented in virtual perpetuity. Ten years was viewed as sufficient time 

for grain demand to rebound. The long-term 10 year CRP contract seemed like a 

more economical and environmentally sound method of idling acres than annual 

acreage set-aside or paid diversions. Today, in some cases, many of the 10 year contracts have been rented for 20 years, going on 30 years. 

Federal support and environmental programs must be flexible to reflect the challenges farmers and ranchers face in the 21st century. NOPA believes now is the 

time for Congress to take bold steps to substantially reduce the current CRP cap 

of 32 million to 15 million acres and expedite their release,. Acres are needed now. 

Congress, has the opportunity to implement meaningful reforms, and to focus the 

very scarce conservation dollars on working farmlands—idling only the truly environmentally sensitive acres such as filter strips along waterways and sensitive border strips. Policies that support the idling of whole-fields and whole farms should 

end because they fail to recognize the fact that farming practices have changed dramatically since CRP was established 25 years ago. Advancements in insect-resistant 

and herbicide-tolerant seed varieties, conservation and no-till farming, and other agronomic practices have made it possible to farm more U.S. acreage in environmentally sustainable manner. Bringing land back into production will take time. So, 

now is the time to release the maximum amount of high quality arable and tillable 

land in the CRP to meet the growing need of a hungry world and increase the profitability of rural communities. This opportunity must not be lost. 

Global corn supplies are slated to reach a 39 year low stocks-to-use ratio by August 2012. Any significant summer weather adversity to U.S. corn growing conditions which threatens yields will further tighten balance sheets sending prices even 

higher. Chinese import demand for corn is ramping higher directly into this untenable situation. Food consumers and livestock feeders will bear the brunt of any further price advances. 

World soybean production is logging the largest ever year-on-year decline, estimated at 29 million MT, (roughly 11%) due to production shortfalls in the U.S. last 

fall and in South America this spring. U.S. soybean carryover supplies for August 

2012 will certainly post near-record, if not record shortages prior to harvest. 

World corn and soybean demand are out-stripping production capabilities on currently utilized acreage, given any significant weather adversity which is for all intents, a given. 

FAO predicts world grain production will increase one percent this year to a 

record 2.4 billion tons, keeping global supplies stable. The world stocks-to-use ratio 

should remain about the same at just under 22 percent, FAO says. Wheat production is expected to be off 3.6 percent, due to smaller harvests in Ukraine, 

Kazakhstan, China, Morocco and Europe, but world corn production should rise 3.7 

1776

percent, thanks to U.S. plantings. FAO sees the oilseed market tightening significantly, with the stocks-to-use ratio falling from 18.7 percent to 13.2 percent. Soybean production is projected to fall ten percent, which would be one of the steepest 

declines on record. Total oilseed production is expected to fall nearly four percent. 

With annual Federal deficits of more than $1 trillion projected as far as the eye 

can see and a Federal debt approaching $16 trillion the U.S. can no longer afford 

to spend on non-essentials—retiring crop land that can be farmed with modern technology without degrading the environment is such a non-essential. Instead, put the 

crop land back into production where it is earning tax revenue for the Federal Government, not costing the Federal Government. Perhaps Congress should consider 

something as simple as spending limitation on CRP. Such a limitation would focus 

on creating a more environmentally efficient program by assuring that the most 

fragile acres are enrolled, Congress would have to set a number. Currently CRP 

costs approximately $1.9 billion annually. NOPA recommends a spending cap of $1 

billion. on CRP. 

NOPA believes debate and policy discussions provide Congress with the best opportunity to reduce the size and scope of CRP from the current cap of 32 million 

acres to a more environmentally and fiscally responsible cap of 15 million acres. 

The Conservation Reserve Program—Time for Reform 

• Idling productive farmland in the CRP limits agriculture’s capacity to expand 

production to meet the strong demand for additional feed grains for livestock, 

fuel, and export growth. 

Population Growth 

• The United Nations Population Division estimates that world population will 

reach 9.3 billion by 2050. Developing countries economic and population growth 

will lead to increased food demand—a growing middle class, increased urbanization, and diet diversification, requiring a 70 percent increase in global food production.

• The ‘‘Middle Class’’ outside the U.S. is expected to double by 2020—to one billion households. 

Global Demand Growth 

• Drought in South America is creating a serious deficit in the global soybean 

supply that could take years to erase. World soybean production in 2011/12 is 

forecast to be 4.9 million metric tons lower this month to 240.2 million. Crop 

failures in the region are expected to reduce global exports of soybeans by four 

percent this year to 89 million tons. The global stocks carryout could also fall 

by 20 percent this year to 55.5 million tons. 

Income Stability 

• In light of the poor crop situation in South America, U.S. cash soybean prices 

surged again in March 2012—rising nearly $1 per bushel. The price rally gathered even more momentum after the March 30 planting intentions report, which 

indicated an unexpectedly low U.S. acreage for soybeans this year.

• Prices almost certainly will set an all-time high in 2011/12. The U.S. seasonaverage farm price was forecast up to $12.00–$12.50 this month from $11.40–

$12.60 last month.

• Agricultural crop prices are at some of their highest levels and prices are expected to remain high for the next 10 years, red meat and poultry prices are 

also expected to remain high for the next 10 years. U.S. net farm income is at 

its highest level. U.S. agricultural exports in FY 2011 reached a record $137.4 

billion and are projected to reach $168 billion by 2021. 

Crop Production—CRP Ranked Fourth 

• Based on the USDA’s April 2012 World Supply and Demand Estimates, the 

United States is expected to plant 95.9 million acres of corn, 73.9 million acres 

of soybeans, 55.9 million acres of wheat, 13.2 million acres of cotton, 6 million 

acres of sorghum and 2.62 million acres of rice.

• The 2008 Farm Bill authorized up to 32 million acres in the CRP. The current 

CRP has approximately 30 million acres of land that is currently idled. That 

makes CRP the fourth largest crop—equaling all the cotton, rice, and sorghum 

planted on an annual basis. 

Land Constraints 

• The U.S. faces natural resource constraints—the ability to expand productive 

land for food, feed, and fuel.

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• The most recent Natural Resources Inventory (NRI) conducted by USDA was 

done in 2007. Nationally, 202.5 million acres of prime farmland are being 

cropped. Urban and rural sprawl is eating away millions of productive farmland 

acres annually.

• Global expansion due to global biofuel’s production is boosting demand for feed 

stocks, such as grains and vegetable oils (South American continues to grow 

and expand clearing rainforests/pasture and into row crop production). The U.S. 

has limited availability of additional acreage for cropland, and much of it is 

more environmental sensitive than the land that is locked in CRP. 

Conservation Reserve Program of 1985—Times and Circumstances Have 

Changed 

Taxpayers spend approximately $1.9 billion on CRP rental payments a year. Can 

these dollars be better targeted to meet environmental, wildlife and the need to 

meet food, feed, and fuel needs? NOPA believes the answer is YES. The current 

budget deficit should cause Congress to lower the CRP acreage cap. Other programmatic decisions should also be debated, such as: adequacy of feed and forage 

supplies, rental rates, allowed uses of the land, whole farm and whole field enrollments, and rankings under the Environmental Benefits Index, to name a few. 

NOPA Encourages Congress to take bold steps to provide:

• 15 million acre acreage cap;

• $1 billion cap on expenditures;

• Penalty free early out; and

• No new acres permitted into program until supply and demand estimates and 

stocks-to-use ratios don’t show near record shortages.

The 2008 Farm Bill authorized the CRP at 32 million acres. Over the next 10 

years, over 25 million acres will expire, providing an opportunity to evaluate enrollments. 

Advances in conservation technology such as seed, biotechnology enhancements, 

tillage, and other agronomic practices have resulted in more U.S. acreage being environmentally sustainable—a dramatic change from when CRP was first implemented in the mid-1980s. 

It is time to move away from idling of productive lands and use of a reserve to 

restrict gain supply and boost prices and focus on protecting the most environmentally sensitive land or fragile lands, thereby enhancing the ability of U.S. farmers and ranchers to meet the world’s growing demand for food, feed, biofuels and 

exports. It is important that sound conservation practices be adopted for those 

exiting acres, with an opportunity for landowners to enroll them in working lands 

programs. 

As stated by Randy Gordon, Acting President, National Grain and Feed Association (NGFA), the NGFA Foundation is in the midst of a research project that is 

evaluating the CRP. The NGFA Foundation anticipates that additional recommendations will come from the results of that study, projected to be completed 

in late May 2012. 

Based upon the findings thus far, NOPA supports NGFA’s recommendations that 

the following legislative changes be included in the 2012 Farm Bill to reform the 

CRP and facilitate the return of idled land that can be farmed in an environmentally sustainable way:

• Reduce the current 32 million acre maximum CRP cap significantly. At a minimum, Land Capability Classes I and II (approximately 7.1 million acres) 

should be prohibited from future enrollments and re-enrollments. A total of 

more than 8.7 million farmland acres (including some Land Capability Class III 

acres) of ‘‘prime farmland’’ were enrolled in CRP as of 2007 (the most current 

data available from National Recourse Conservation Service (NRCS)). In the 30 

states with the greatest CRP enrollments, approximately 8.5 million acres are 

considered to be prime farmland. Such good quality land currently idled in the 

CRP is highly concentrated in several major grain-production states—Kansas, 

North Dakota, Minnesota, Missouri, Oklahoma, and Texas. This land can be can 

be farmed in an environmentally sustainable way to meet growing food and feed 

demands.

• Eliminate the discretion for USDA to exceed the 25 percent limit on CRP enrollments in individual counties because of the economic damage such enrollments 

have had on rural communities. There are indications that USDA may be using 

outdated cultivated cropland data in some counties when determining the 25 

percent cap, Congress should require the Department to recalculate. Further, 

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recommend that Congress should require USDA to reserve within the 25 percent county limit at least a five percent allowance for acres enrolled in the wetlands reserve and continuous sign-up process.

• Congress should direct that USDA transition to a smaller CRP by reducing the 

number of ‘‘prime farmland’’ acres enrolled. In managing this transition, require 

USDA to offer penalty-free early outs of Land Capability Classes I, II and III 

enrolled in CRP, with producers doing so required to implement prudent conservation practices on such lands. USDA should carefully manage any re-enrollment of acres expiring on September 30, 2012, in a similar manner.

• Congress should include legislative language that would restrict whole-field and 

whole-farm enrollments in the CRP by requiring such land to meet a more 

stringent Environmental Benefits Index (EBI) scoring threshold than partialfield enrollments. During the early years of CRP enrollments, whole farms and 

whole fields were enrolled, which brought in land of varying quality.

• Congress should allocate conservation funding for the Transition Incentives Program, currently authorized at $25 million, for transitioning expired CRP acreage from retired or retiring landowners to beginning or socially disadvantaged 

farmers.

In addition, NOPA encourages Congress to include as part of the farm bill process 

the following directives to USDA in its implementation and administration of the 

CRP in the future:

• Direct USDA’s Farm Service Agency and NRCS to compile a report within 1 

year of enactment, and updated biannually thereafter, to bring increased transparency to how the CRP is being managed. Such a report should include: (1) 

the quantity of acreage enrolled in CRP by Land Capability Class; (2) a compilation of such Land Capability Class acreage by county; and (3) the identity of 

counties that are at or near the 25 percent enrollment cap. Also recommend 

that USDA be required to post this report on its website. This data will increase 

transparency, and enable USDA and stakeholders to better analyze the prudent 

management of the CRP going forward.

• Consider either freezing CRP rental rates for 3 to 5 years or implementing a 

percentage-based limit on rental rates paid for CRP land compared to average 

county rental rates.

• Encourage increased flexibility for haying and grazing of CRP when states or 

regions are impacted by a natural disaster. By allowing use of these lands for 

haying and grazing, affected livestock producers may be in a better position to 

feed livestock and stay in business and not forced to liquidate their livestock.

• Accelerate the process of converting price and income support programs to land 

stewardship and wildlife habitat programs on working lands.

• Limit the number of CRP general sign-ups offered. In addition NOPA believes 

USDA should not accept any acres from the 2012 General CRP sign up that just 

concluded. We

• Further, the time is very short, but an emergency early-out could still be offered 

for 2012 to address supply concerns. 

Conclusion 

NOPA believes that it is time to move away from idling of productive land and 

focus on protecting the most environmentally sensitive land or fragile lands, thereby 

enhancing the ability of U.S. farmers and ranchers to produce to meet the world’s 

growing demand for food, feed, biofuels and exports. NOPA also believes it is important that sound conservation practices be adopted for those exiting acres with an 

opportunity for landowners to enroll them in working lands programs. 

If we step back, we can see that food, fuel and wildlife are not mutually exclusive. 

Modern agriculture can provide adequate food, some energy and better wildlife habitat on a sustainable basis but some policy adjustments are needed in the next farm 

bill. 

Mr. Chairman, thank you for the opportunity to share our views on the conservation title. NOPA looks forward to working with the Committee as it develops the 

2012 Farm Bill. 

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SUBMITTED STATEMENT BY DAN SEBERT, EXECUTIVE DIRECTOR, NATIONAL

WATERSHED COALITION

Chairman Lucas and Members of the House Agriculture Committee, I am providing these comments as a summary of the interests and concerns of local watershed project sponsors across the country. I live and work in both Lincoln and 

Pawnee Counties in Oklahoma. I’m an agricultural producer, Chairman of the Lincoln County Conservation District, a local watershed project sponsor and Executive 

Director of the National Watershed Coalition. I offer the comments below representing the National Watershed Coalition. On behalf of the Coalition we appreciate the opportunity to provide comments during the House farm bill field and D.C. 

hearing process. 

My home county has six USDA-assisted watershed projects that include 63 flood 

control dams. These dams provide over $10 million in annual benefits in flood damage reduction, soil erosion control, water supply, recreation and fish and wildlife 

habitat. The dams benefit more than 1,240 farms and ranches, protect 100 bridges 

and hundreds of miles of roads. Five of the lakes formed by Watershed Program 

dams provide the sole source of water for more than 16,000 residents in five Lincoln 

County communities. These and thousands of other projects across the nation are 

important to the land and water resources of this nation. 

Principal to my perspective on this program is the notion that it is a federally 

assisted partnership. State and local entities must be full and equal partners in 

shaping the future, just as they were when the legacy of this program was created. 

The Watershed Program works successfully where other Federal water resource programs will not. The program is right sized for local landscapes, insuring conservation of natural resources, prudent water resource management and securing both 

environmental and economic benefits. This success can be credited to local watershed sponsors, who make decisions as close to the on-the-ground issues as possible. 

While the watershed program has its own authorizing legislation, the current 

farm bill has served as an important piece of legislation to drive the rehabilitation 

of aging dams built under the USDA Small Watershed Program. The NWC believes 

that the current farm bill process presents a continuing important opportunity for 

Congress to extend the public benefits derived from work performed under the Watershed Program. 

If we analyze USDA Watershed Program information and use the farm bill process as a timeline, we see an interesting and perhaps alarming trend. When the rehabilitation amendments were passed in the year 2000 and a farm bill was being 

developed less than 50 of the 11,000 watershed program dams in the nation were 

more than 50 years old. The average age of the 11,000 dams was 34 years. By the 

end of 2011, nearly 1⁄5 of the 11,000 watershed dams in the nation had reached the 

end of their 50 year planned service life; and by 2016 almost 2⁄3 of the watershed 

dams will reach this milestone. Congress, local sponsors and USDA must engage 

now and address this growing issue in an aggressive, practical and strategic manner. 

We ask that you include authorization for the Watershed Rehabilitation Program 

in the farm bill. We would also ask the House to authorize funding for rehabilitation 

of aging watershed dams in the coming farm bill. Our recent disappointment with 

last minute Senate action which removed the modest funding level for the Program 

from their version of the Bill cannot be overstated. 

Once authorization is in place we would ask House Committee members to join 

us in working with appropriators to insure authorized funding is fully appropriated. 

All across this nation, local sponsors are working diligently to secure land rights 

and generate matching funds. Based on the credibility and accountability of these 

local sponsors much has been achieved in anticipation of Federal watershed rehabilitation funds. A reliable and steady appropriation from Congress is needed to assist sponsors in making efficient use of the often-limited local resources. 

We ask that as you develop the conservation title of the new farm bill, that you 

continue to consider the importance of the USDA Watershed Program as well. The 

inclusion of the Watershed Rehabilitation Program in the coming farm bill is critical 

to keeping USDA engaged in the commitment made to local watershed project sponsors. If authorization and funding are not addressed the partnership that has accomplished so much will be abandoned. Abandonment of economic, natural resource, 

flood protection, water supply, health and safety and environmental benefits makes 

for bad business sense. Perhaps even worse is the potential abandonment of the 

Federal and local $15 billion national financial investment in conservation infrastructure that provides $2.1 billion in annual benefits to over 48 million citizens. 

Watershed project sponsors fully recognize that the House Agriculture Committee 

does not have direct responsibility in the area of appropriations. However, we would 

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be remiss if we did not point out that the impact of the decline in funding for the 

Watershed Program can certainly be seen across the nation as well as in my home 

state Oklahoma. We believe that the Administration’s recent recommendations for 

no funding are not in touch with the reality of the documented need and demand 

for the program. We have a significant number of well-planned projects across the 

nation that are waiting on the necessary funding to be completed. Fluctuations in 

the USDA Watershed Program budget make it extremely difficult to maintain experienced watershed personnel and sufficient technical assistance. 

We appreciate the past efforts of this Committee to provide oversight for the watershed program. We support your efforts to educate the Administration at all levels 

concerning the necessity to embrace and acknowledge the value and success of the 

Watershed Program and the investment, benefits and partnership it represents. We 

pledge our continuing support for your actions on behalf of watershed sponsors 

across the country. 

Rehabilitation of Aging Watershed Dams 

As you know Congress authorized the USDA Natural Resources Conservation 

Service (NRCS) to assist communities in rehabilitating their aging watershed dams 

when it enacted the Small Watershed Rehabilitation Amendments of 2000. With 

your leadership this came about as a result of the initiative of watershed project 

sponsors, the excellent partnership that existed between the sponsors, landowners, 

community leaders, state conservation agencies, state dam safety agencies, and 

NRCS as well as foresight of Congress in protecting an important national infrastructure. The act pertains to flood control dams built under the Flood Control Act 

of 1944 (Public Law 78–534), the Watershed Protection and Flood Prevention Act 

of 1954 (Public Law 83–566), Resource Conservation and Development, and a pilot 

watershed program (1952–1954). 

Communities with watershed projects have enjoyed a long tradition of protecting 

lives and property and conserving natural resources. More than 11,000 dams and 

associated conservation practices have been constructed in 2,000 watershed projects 

in 47 states since 1948. 

Major Rehabilitation Issues for Watershed Sponsors 

As sponsors consider the future of their projects they face several major issues, 

among those are:

• Most of the watershed dams were constructed with a designed or expected life 

span of 50 years. There are watershed dams that already exceed their design 

life and that number will soon grow to more than 7,000 with in the next 5 

years.

• The extremely serious trend of reduction or redirection of technical and administrative assistance dedicated to the program from the principal Federal partner 

USDA–NRCS and the subsequent loss of institutional program knowledge has 

made it difficult for sponsors to secure the assistance needed to keep operation 

and maintenance efforts current. It has also affected the ability to keep rehabilitation work on schedule even when adequate local or Federal funds are available.

• Some dams no longer meet current dam safety standards. Many dams were 

originally constructed to protect rural agricultural land and now there are 

homes, highways and other structures downstream that would be at risk if the 

dam failed. There are 1,700 high hazard dams and 2,000 more that were designed as low hazard, but are now classified as high hazard due to potential 

loss of life or property.

• Although sponsors have usually maintained the dams in good condition, components such as metal and concrete components of the principal spillway in some 

dams have deteriorated over the years and need replacement. Some structures 

have filled with sediment, reducing the floodwater storage.

• While most of the dams are safe, there are some that pose a threat to public 

health and safety if they should fail, especially to those who live or work downstream, or those who use the reservoirs as a source of drinking water. Some 

dams also have the potential for creating adverse environmental impacts in the 

same downstream flood plain they have been protecting.

Watershed Rehabilitation Program efforts represent a successful partnership that 

must be maintained. Local sponsors and their state level partners are working diligently to meet their responsibilities. It also requires that USDA–NRCS maintain 

the technical and administrative resources to deliver the program. It requires overVerDate 0ct 09 2002 12:54 Dec 11, 2012 Jkt 041481 PO 00000 Frm 00192 Fmt 6621 Sfmt 6621 I:\DOCS\112-30\74372.TXT BRIAN
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sight and funding from Congress. We appreciate your efforts to assist in maintaining the resources and support necessary for future success. 

We appreciate this Committee allowing the National Watershed Coalition an opportunity to provide comments on behalf of local watershed project sponsors. 

SUBMITTED LETTER BY RUSS SHAY, DIRECTOR OF PUBLIC POLICY; LYNNE SHERROD, 

WESTERN POLICY MANAGER, LAND TRUST ALLIANCE

April 25, 2012

Hon. FRANK D. LUCAS,

Chairman,

House Committee on Agriculture, 

Washington, D.C.;

Hon. COLLIN C. PETERSON,

Ranking Minority Member,

House Committee on Agriculture, 

Washington, D.C.

Dear Chairman Lucas and Ranking Member Peterson,

The Land Trust Alliance (the Alliance) would like to submit this testimony for the 

record of your hearing on conservation programs in the 2012 Farm Bill. 

The Alliance promotes voluntary private land conservation to benefit communities 

and natural systems. We work with more than 1,700 local, state and national land 

trusts across America. The Alliance has worked in the past several farm bills to 

maximize funding for the purchase of conservation easements in the farm bill, and 

to increase land trusts’ ability to partner with Natural Resources Conservation 

Service (NRCS) to deliver these and other Federal conservation programs to landowners. The result has been highly leveraged conservation of working lands. 

We appreciate the difficult task before you in balancing the need to control Federal spending while ensuring that the positive conservation outcomes of past farm 

bills are not casualties of disproportionate cuts. 

Easement programs like the Farm and Ranch Lands Protection Program (FRPP) 

and Grassland Reserve Program (GRP), administered by NRCS, are now conserving 

hundreds of thousands of acres of environmentally and economically important landscapes across America. While our member land trusts and the landowners they 

work with use many of the farm bill conservation programs, these two easement 

programs are the two most often identified by Alliance members as critical sources 

of funding for their conservation work nationwide. 

Thank you for considering the following recommendations to increase the effectiveness of the conservation easement programs in the 2012 Farm Bill. 

Maximize Funding for Perpetual Working Lands Easements 

(1) Securing funding for perpetual easements to protect working farms, 

ranches and forests is the Alliance’s top priority for the 2012 Farm Bill. There 

is strong and growing demand for these programs from producers.

(2) Preserve the integrity of the working land conservation easements.

The proposal for a consolidated ‘‘Agricultural Conservation Easement Program’’ 

with a distinct leg for ‘‘Agricultural Land Easements,’’ seems to be a reasonable 

framework for ensuring that the important functions of FRPP and GRP remain 

intact.

Conservation dollars leveraged through local partner match and landowner contributions, invested in perpetual conservation easements, are a cost effective 

way to secure a land base for agricultural economies, sustain wildlife and other 

important natural resources, secure our national food supply, and protect the 

economic viability and quality of life of many rural communities. 

Embrace Match Alternatives 

(1) Don’t limit landowner generosity. Give landowners the option of donating additional easement value to fulfill the match requirement for NRCS funds. 

The current requirement for a cash match restricts the use of FRPP and GRP 

for many landowners and land trusts. We support limiting Federal funding to 

no more than 50% of the value of an easement, but believe that allowing match 

requirements to be satisfied through the broadest possible means will afford 

NRCS the ability to more strategically target critically important productive 

lands.

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Requiring cooperating entities to provide a cash match for easement projects 

can prevent important conservation in rural regions of the country that do not 

have state or local government funding for conservation and may result in missing strategically important conservation opportunities.

(2) Restore the Department of Defense’s ability to provide a match for 

conservation easement programs. Prior to the 2008 Farm Bill, funding from 

the Department of Defense (DOD) Readiness and Environmental Protection Initiative (REPI) provided a vitally important source of match for FRPP in several 

states, allowing cooperating entities to purchase conservation easements from 

farmers and ranchers whose lands also helped insulate military bases from encroaching development. It also simultaneously advanced important national defense goals. When the 2008 Farm Bill converted FRPP into a grant program, 

it had the unintended consequence of disallowing use of these funds under the 

‘‘no Federal to Federal match’’ rule. In many cases buffer funds served as the 

only source of match for cooperating entities. Its loss has effectively shut down 

use of FRPP in these areas, and has set back what was a productive partnership between NRCS and DOD. 

Streamline the Application and Appraisal Process for FRPP & GRP 

Both NRCS and the Alliance members who utilize these programs share the goal 

of completing projects in a timely and efficient fashion but we want to ensure that 

the farm bill pays close attention to the following issues:

(1) Streamline the landowner application processes. NRCS now requires 

multiple forms from landowners, some of which require the landowner to register with outside organizations (for administration of AGI requirements and 

new Federal contracting rules). We hope the farm bill will direct the administering agencies to simplify these requirements and find a way to better equip 

landowners to meet them. The current process can be difficult to comply with, 

particularly for landowners without reliable Internet access. NRCS is not 

equipped in every region to effectively help landowners complete these applications. With the elimination of many NRCS offices nationwide, this situation will 

only grow worse.

(2) Streamline appraisal practices. Appraisal reviews are essential to prevent abuse, but delays in agency appraisal reviews have been the single 

largest factor in slowing down FRPP projects. Improving this area is critical to shortening the time needed to close FRPP/GRP transactions.

We strongly advocate for aligning all existing Federal requirements regarding 

conservation easement appraisals. Currently the Internal Revenue Code section 

170(h) rules, required for any transaction involving a landowner donation of 

value, requires appraisals to be completed within 60 days of recording the final 

documentation. NRCS allows 90 days for appraisal reviews, which plays havoc 

with closings all across the country, and in many instances has necessitated 

paying for costly new appraisals and in conflicts where land values have 

changed in the interim. 

Allow Eligible Entities To Hold Forest Legacy Easements, Subject to the 

Approval of the State Program 

(1) Some landowners are hesitant to put their lands under conservation easements held by state agencies. Allowing state foresters an option to place easements purchased with Forest Legacy funds with eligible entities, so long as the 

easements remained consistent with the state Forest Legacy plan, would enable 

some states to enroll strategically important forest lands they might not be able 

to protect otherwise.

We recognize and appreciate your determination to meet the needs of a growing 

nation, while embracing the significance of its working landscapes and the landowners who steward them. 

Thank you for considering our views regarding these critically important programs. For your information, we have also included our comments regarding conservation programs in the recent Senate draft farm bill. 

Respectfully yours,

RUSS SHAY, LYNNE SHERROD,

Director of Public Policy; Western Policy Manager. 


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ATTACHMENT

April 24, 2012

Hon. DEBBIE STABENOW,

Chairwoman,

Senate Committee on Agriculture, Nutrition, and Forestry, 

Washington, D.C.;

Hon. PAT ROBERTS,

Ranking Minority Member,

Senate Committee on Agriculture, Nutrition, and Forestry, 

Washington, D.C.

Dear Chairwoman Stabenow and Ranking Member Roberts:

The Land Trust Alliance wishes to commend you and your staff for the draft farm 

bill recently posted on the Committee’s website. 

The Alliance promotes voluntary private land conservation to benefit communities 

and natural systems. We work with more than 1,700 local, state and national land 

trusts across America, many of whom work with NRCS and other USDA agencies 

to protect working farm, ranch and forest lands across America. 

As you know, we have paid special attention to the working land easement programs, including the Farm and Ranch Lands Protection Program (FRPP) and Grassland Reserve Program (GRP), now combined in your draft bill as Agricultural Land 

Easements under the Agricultural Conservation Easement Program. We want to 

thank you for the thoughtful way this has been done in the draft, and for the funding levels provided for these easements. 

The need and demand for the easement program from farmers, ranchers, forest 

owners and their conservation partners will continue to grow, and we will continue 

to advocate for funding adequate to that demand. At the same time, in the context 

of spending reductions throughout the bill, we greatly appreciate the funding levels 

you have provided for the Agricultural Land Easement Program. 

We also wish to thank you for increasing the spending caps we understand you 

have agreed to for the Forest Legacy Program and the Community Forest Program, 

also of great interest to our members. 

We look forward to working with you to ensure that the best possible bill moves 

forward. We have attached more detailed observations about Subtitle H to this letter. 

Respectfully yours,

RUSS SHAY, LYNNE SHERROD,

Director of Public Policy; Western Policy Manager. 

ATTACHMENT

Observations related to Subtitle H 

1. Overall, the language does a good job of conveying the distinct differences 

and separation needed between the two legs of the new Agricultural Conservation Easement Program: Agricultural Land Easements (ALE) and Wetland 

Easements.

2. We are pleased with the proposed administration of this program as well as 

the defined appraisal process which specifies use of the Uniform Standards of 

Professional Appraisal Practices.

3. Cost share concerns:

a. We believe the waiver authority for grasslands under Section 1265B(2)(C) 

that allows the Secretary to provide up to 75 percent of the fair market value 

in the case of grasslands of special environmental significance is a very useful 

exception to the general policy of limiting the Secretary to providing no more 

than 50 percent of the fair market value, and will help the new program 

greatly as we transition from an NRCS acquisition program under GRP to a 

program relying on third parties to hold easements.

b. We would like to see increased flexibility in the approach to the 50 percent 

match required for other ALE projects, including farm and ranch land easements, to allow the Secretary to recognize eligible entity expenditures and 


112301116.eps
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landowner donations in cases where they will advance strategically important 

conservation.

c. We regret that the Committee has not chosen to restore the ability of the 

U.S. Department of Defense to provide matching funds for ALE projects, 

which they did with FRPP projects until that was quite inadvertently halted 

by language changes in the 2008 Farm Bill. We believe that partnership was 

a very valuable one for conservation.

4. We thought the intent of the cost-share language for ALE easements is to 

replicate the requirements currently in place. Some of our partners questioned 

whether the language succeeds in doing that, and we will want to carefully 

work through this language with you to make sure it does. It appears that the 

new language actually requires a higher cash match for those cases where 

there is already a significant landowner donation of value.

5. Thank you for continuing to recognize the importance of allowing eligible entities to use their own templates for easements that are consistent with the purposes of the program and provide effective enforcement of the conservation values.

6. We understand and agree that the Federal investment in easements must be 

protected by a right of enforcement, but believe that the changes in the 2008 

Farm Bill better addressed this issue through the provision of a contingent 

right of enforcement to the Secretary. This comes down to a very important 

question of who has the primary responsibility for enforcement of an easement, 

and that must belong to the eligible entity.

7. It is also understandable that there is provision for the treatment of any potential violation [Section 1265B(b)(4)(E)]. However, this is drafted in a way that 

could provide for draconian penalties far beyond the cost of correcting any 

harm, with no clear assurance that the eligible entity would be allowed a reasonable opportunity to resolve any concern before an agreement would either 

be terminated or a refund requested. 

Other Conservation Issues 

1. Thank you for introducing expanded compatible uses to the Wetland Easements as well as decreasing the ownership requirement from 7 years to 24 

months. The 7 year requirement has been a barrier to important wetland conservation, and ignored circumstances including bankruptcies and other unforeseen ownership changes.

2. Thank you for the reported increases in the funding caps for the Forest Legacy and Community Forest Programs, which are of great interest to many of 

our members. 

SUBMITTED QUESTIONS

Response from Gene Schmidt, President, National Association of Conservation Districts 

Questions Submitted By Hon. Glenn Thompson, a Representative in Congress from 

Pennsylvania 

Question 1. In Alabama, agriculture and forestry are synonymous—so I was 

pleased that the last farm bill included changes to treat forest owners the same as 

farmers in the conservation title—in programs like EQIP, WHIP, and CSP. A big 

concern in Alabama with respect to forestry is making sure we have healthy forests 

that can support our strong forest products. How do these programs enable that? 

Are there things we can do to strengthen this? 

Answer. Conservation districts are the local decision makers, using expertise and 

site specifics in conservation application. I truly believe that with a locally-led process and proper program implementation, the priorities of healthy forests will continue to be put into practice. 

We support the changes made to programs like EQIP in the 2008 Farm Bill that 

include a forestry component. Through cost share programs like EQIP, these programmatic changes have assisted landowners in making forestry conservation a priority in their conservation plans and implementation. When a producer or private 

landowner works with the local conservation district, a conservation plan is created. 

This often includes a suite of best management practices that address different land 

use concerns. Through the conservation plan, you get the most return on investment. Therefore, in order to strengthen these programs and healthy forests, it is 

critical that we emphasize the importance of conservation planning. We support the 

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extension of these provisions and will be happy to work with the Committee to ensure their inclusion in the 2012 Farm Bill.

Question 2. Several farmers have expressed a frustration with the Conservation 

Stewardship Program (CSP). I understand that this is a voluntary program, but it 

has been express that some of the practices do not make sense and that money 

could be used for a wide range of other practices that would be more beneficial to 

conservation. Some examples of questionable practices include: cutting hay fields in 

reverse, putting ramps in water troughs, and killing trees for woodpeckers to nest 

in. Do you feel this is a wise expenditure of taxpayer dollars and if so why? If not, 

how should we modify CSP to stop these practices? 

Answer. Conservation district supervisors take pride in working with the private 

landowner to put the right practices on the right acres. They use a plethora of information in order to prescribe such practices and heavily rely on the Field Office 

Technical Guide. The guide varies by conservation district, to reflect the priorities 

for each area. Those priorities are determined by local working groups and State 

Technical Committees. This guide defines set standards by the U.S. Department of 

Agriculture based on sound science. These standards and practices are vetted and 

each serves a purpose when implemented. It is extremely important to have a document that may act as verification of the prescribed best management practices 

(BMP).

Question 3. Half of my state of Wisconsin is covered by forests and the majority 

of these are owned by families and individuals. These hard working families supply 

the raw materials for our state’s robust forest products industry, which supports almost 90,000 direct jobs. Most of these families pride themselves in doing things on 

their own, but outside events can sometimes take over. I’ve heard from farmers in 

Wisconsin who in some cases have lost significant acreage due to fires and need to 

restore their forests. How do the conservation programs in farm bill help these families out? Are the current authorities sufficient to provide them with forest management assistance when needed? 

Answer. As these emergency situations continue to occur, it is critical that there 

is a flexibility built into conservation programs to be able to assist in these restoration efforts. That said, a well managed forest is less likely to fall into dismay. Dollars spent on preventative maintenance will have a much better return on investment, as compared to that spent on corrective maintenance. This past year, we have 

seen severe weather events. From intense drought to extreme rainfall, conservation 

allows us to protect our most precious resources that provide us with food, shelter, 

recreation, natural beauty, and economic benefit. Properly managed acres are less 

susceptible to damage, so it is important that the landowner receive the proper assistance in maintaining their land. 

The addition of forestry provisions in the 2008 Farm Bill, allowing forestry conservation to be a cost shared practice in programs like EQIP, was a very positive 

step in the rehabilitation of forest lands. Such provisions help landowners with a 

number of best management practices to assist in forest production goals. As previously mentioned, these provisions should be extended in the 2012 Farm Bill. 

Questions Submitted By Hon. Marcia L. Fudge, a Representative in Congress from 

Ohio 

Question 1. Agriculture is Ohio’s number one industry, and over $7 billion in agricultural products are sold from Ohio. At a time when individuals and private businesses are doing more with less money, Congress needs to ensure that the best, 

most efficient Federal programs are prioritized, and in terms of agricultural conservation programs, the Farm and Ranchland Protection Program (FRPP) provides 

an incentive for landowners to permanently protect their farmland and maintain 

prime farmland for the future. Understandably, the 2012 Farm Bill will consolidate 

programs, including the FRPP. How should funding be prioritized between conservation programs that provide permanent protections and those that are not permanent? 

Answer. As resource needs vary across the nation it is important to put the right 

practice on the right acre. Resource priorities are determined through a locally-led 

process at the district level. This process allows landowners to have the ability to 

apply practices that best fit their goals. By catering the resource priorities to each 

location, tax payers get the most out of their investment. 

Both permanent protections, or easements, and nonpermanent easements hold a 

value for the conservation of our natural resources. Permanent easements allow the 

beneficiary the ability of knowing what they are buying over time. These easements 

also create a permanent habitat for local wildlife and ensure continued soil health. 

Nonpermanent easements provide benefit to the local landowner that wants to parVerDate 0ct 09 2002 12:54 Dec 11, 2012 Jkt 041481 PO 00000 Frm 00197 Fmt 6621 Sfmt 6621 I:\DOCS\112-30\74372.TXT BRIAN
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ticipate in a program, like CRP, the flexibility to participate. Without shorter terms, 

landowners may be discouraged from participating at all.

Question 2. The population of Ohio exceeds 11.5 million, with several densely populated metropolitan areas including Cleveland. If you look at development trends in 

Ohio, much of that development happens on the borders of those metropolitan areas. 

Coincidentally, the metropolitan borders are located in extremely fertile and productive prime farmland. Once farmland is developed, you will never get back those 

prime soils which is why the Farm and Ranchland Protection Program (FRPP) was 

created. As noted in Ohio’s ‘‘Farm and Ranchland Protection Program 2012 State 

Plan,’’ there is a challenge to keep agricultural lands in production to provide food 

to our metropolitan areas. If conservation programs such as FRPP are combined 

with other programs that have a focus on wetlands or grasslands, how can we ensure that conservation dollars are targeted towards these areas that border metropolitan areas to ensure that prime farmland stays in production and not development? 

Answer. NACD supports the purpose of FRPP and keeping prime lands in production. In many circumstances, once prime acres leave farm production, it is unlikely 

that those valuable acres will return to farmlands. Once the land use changes from 

production or habitat, it is likely that those lands will be replaced. 

Though it is important to protect prime acres, if FRPP were to be consolidated, 

I am confident that these urban fringe lands would still find protection. The land 

use change of these prime acres is a well know risk and accounted for in many other 

conservation programs. Prime farmland should qualify for the same protection as 

wetlands or grasslands. Federal agencies with responsibilities for developing mitigation plans should adopt policies recognizing the value of prime farmland for agricultural production. I trust that, through the rule making process that such lands 

would have a safe harbor and continue to be a priority for the U.S. Department of 

Agriculture.

Question 3. The public is concerned about what it feels is too much government 

and red tape, and in this next version of the farm bill, we need to look at what conservation programs work efficiently and effectively. Congress can authorize programs to address conservation needs on farms, but those programs won’t be widely 

utilized if the paperwork and other requirements created by the USDA are too much 

for farmers. How can we improve the efficiency of programs like the Wetlands Reserve Program so that farmers are not overwhelmed by all of the forms and paperwork requirements? Is there any value in having an outside audit to find ways to 

streamline conservation programs and improve efficiency? 

Answer. NACD supports all efforts to streamline the conservation program administration process. These efforts should reduce program and paperwork duplication 

and result in a simple application process for landowners. A streamlined process 

would ensure that landowners have a full range of program options to meet their 

conservation and resource needs, without the burden of a complex application. Convenience and efficiency are important to producers and landowners in order to implement conservation practices. 

Another improvement to program efficiency is conservation planning. By creating 

a plan for your farm or back yard, the landowner knows exactly what their options 

are. This also helps in applying the right practice for the right acre. Conservation 

plans not only assist the landowner in implementation, but serves as a record for 

districts offices and shows how program funds are applied. 

I applaud the steps taken by the Natural Resources Conservation Service (NRCS) 

in its streamlining initiative. Chief White recently initiated USDA field services 

that increase the use of technology and ultimately result in a more complete planning process and delivery system. The Conservation Delivery Streamlining Initiative 

allows producers and private landowners to use fewer dollars, while ensuring greater accountability and scientific, merit-based systems for the Federal investment. 

The language approved by the Senate Agriculture Committee in the Agriculture 

Reform, Food and Jobs Act of 2012, addresses streamlining by eliminating the request of information that may already be on file. The bill requires the Secretary of 

Agriculture to establish a single, simplified application where the applicant is not 

required to provide information that is duplicative of information already available 

to USDA. I applaud these efforts as it is important that we do not further complicate the application process. 

Conservation districts work very closely with landowners and can see firsthand 

the complexity of the application process. I do not feel that it is necessary to have 

an outside audit evaluate a process with flaws that are very evident. I fear that 

such a venture may detract from the job at hand, implementing conservation practices on the ground. 

1787

Response from Jon Scholl, President, American Farmland Trust 

Questions Submitted By Hon. Glenn Thompson, a Representative in Congress from 

Pennsylvania 

Question 1. During your testimony, you state: ‘‘one of the most important functions the conservation title plays is to protect farm and ranch land from development and ensure that it is available for productive agriculture.’’ You later mention 

that currently 6–7 million acres of highly productive land is enrolled in CRP mostly 

as a result of the practice of enrolling whole fields. Has American Farmland Trust 

considered any changes to the CRP program like preventing enrollment of class I 

and class II lands? 

Answer. American Farmland Trust (AFT) believes that our productive farmland 

should be farmed in a responsible manner, not converted to development or unnecessarily set aside if it is not environmentally sensitive. Together, the Farm and 

Ranch Land Protection Program (FRPP) and the Conservation Reserve Program 

(CRP) can help achieve these two aims. FRPP is the primary tool for protecting 

farmland from development, and it must be remain robust and well-funded in order 

to safeguard the future of agricultural economies that face development pressure. 

CRP, by protecting vulnerable land, can be an integral partner in ensuring that our 

working landscape remains productive and healthy, but some changes in the program’s operations are warranted in the face of rising demand for farm products. 

Currently, CRP includes 6 to 7 million acres of cropland with an erodibility index 

less than eight. These lands could be responsibly farmed rather than being retired. 

AFT believes that CRP should be focused on marginal cropland and other environmentally sensitive lands that are generally unsuitable for being farmed without serious environmental degradation, lands used for high value buffer practices under 

the continuous signup, and the most important lands for wildlife habitat. AFT recommends that the enrollment process for CRP be tightened to ensure that only the 

most environmentally sensitive lands are enrolled in the future, including by splitting whole-farm parcels into environmentally sensitive land and farmable land. This 

could be accomplished by tightening the Environmental Benefits Index (EBI) that 

is used to rank and select applications in the general signups. We do not believe 

that it is appropriate to enroll whole farms unless each field and tract meets the 

eligibility requirements and satisfies the EBI score established as the threshold for 

acceptance. This change would maximize the program’s environmental benefits per 

dollar while keeping productive land in agriculture. 

In addition, CRP can be made more producer-friendly while still generating significant environmental benefits. For example, grazing can control invasive species 

while providing an economic gain for the producer. We recommend that sensitive 

grasslands be made eligible for enrollment, providing significant benefits for wildlife, and that appropriate lands be made available for harvesting or grazing, consistent with the conservation of soil, water quality, and wildlife habitat, such as protection of habitat for birds during the nesting season. Statutory protections would 

be needed to preserve conservation benefits while offering greater flexibility to producers. These protections, such as vegetative management requirements, grazing 

periods, and stocking rates, would be written into the CRP plan for the affected 

acres. Some adjustment in rental rate for harvesting and grazing should be made 

to account for the producer’s economic gain under a flexible contract. 

To be clear, we do not recommend preventing enrollment of Class I and II lands 

outright, since some of these lands may be incidental to otherwise appropriate enrollments of sensitive lands, some may be needed for high-value buffer practices 

under the continuous signup, and some may be of the highest value for wildlife protection in a particular region. However, the changes proposed above would greatly 

reduce the enrollment of Class I and II lands, maintaining the best land for agriculture while continuing to protect sensitive land.

Question 2. Several farmers have expressed a frustration with the Conservation 

Stewardship Program (CSP). I understand that this is a voluntary program, but it 

has been express that some of the practices do not make sense and that money 

could be used for a wide range of other practices that would be more beneficial to 

conservation. Some examples of questionable practices include: cutting hay fields in 

reverse, putting ramps in water troughs, and killing trees for woodpeckers to nest 

in. Do you feel this is a wise expenditure of taxpayer dollars and if so why? If not, 

how should we modify CSP to stop these practices? 

We share the goal of maximizing the environmental benefits per dollar expended 

through the Conservation Stewardship Program (CSP). In general, we do not question the technical determinations of the Natural Resources Conservation Service. 

Presumably, the practices mentioned in the question above have been shown to improve ground-nesting bird survival, reduce mortalities of birds and small mammals 

1788

* There was no response from the witness by the time this hearing went to press. 

in water troughs, and promote woodpecker populations. (Of course, if technical reviews indicate that these practices or others in fact do not generate the intended 

benefits, we would support revising the program to remove them.) However, it is 

clear that the importance and effectiveness of these practices varies based on the 

conditions on individual farms, in small watersheds, and in sub-state regions. For 

instance, if a farm is located in a region with declining woodpecker populations and 

the surrounding area does not contain sufficient dead trees for nesting, then killing 

trees for woodpeckers may provide significant environmental benefits. Likewise if 

members of important species are being lost in water troughs or ground-nesting 

birds are declining, practices to abate these losses make sense. However, in many 

areas there are ample woodlots, few losses in water troughs, and extensive pastures 

supporting ground-nesting bird populations. 

Our proposal for improving CSP directly addresses this variability in farm context 

and helps ensure that practices like those listed are only scored highly where they 

are truly a high priority. Specifically, we propose that the program ranking criteria 

be modified to strengthen the focus on local conservation priorities. Currently, 

NRCS state conservationists select 3-5 priority macro-resource concerns, out of a 

total of 8, to focus on in the different regions of their state. These macro-resource 

concerns are relatively blunt instruments: Soil Erosion, Soil Quality, Water Quantity, Water Quality, Air Quality, Plants, Animals, and Energy. We recommend that 

state conservationists instead be required to select 5-6 priority micro-resource concerns out of a total of 28. Micro-resource concerns are much more detailed. Examples include gully erosion, soil salinity, insufficient water, nutrient loss, airborne soil 

particulates, and terrestrial wildlife. Prioritizing at this finer level would allow program managers to capture the differences in farms and regions, so that, for example, ground-nesting bird practices are not given extra points where they are not 

truly a priority. In general, this change would sharpen CSP’s focus on the highest 

value conservation activities, significantly improving its cost-effectiveness, without 

undermining the whole-farm nature of the program. 

Response from David D. Petty, cattle producer, Iowa River Ranch; Member, 

National Cattlemen’s Beef Association, Environmental Working Group * 

Questions Submitted By Hon. Martha Roby, a Representative in Congress from Alabama 

Question 1. Mr. Petty, in your prepared remarks, you state that ‘‘EQIP is the best 

tool cattlemen on the ground have to implement conservation practices that allow 

them to be in compliance with environmental regulations.’’

Can you please describe some of the environmental regulations that you face on 

your operation?

Question 1a. How has EQIP helped you comply with these environmental regulations?

Question 1b. Without cost-share programs like EQIP, would you be to afford the 

improvements that are necessary to be in compliance?

Question 2. EQIP is a very popular program for livestock producers, but what are 

some of the other conservation programs that benefit livestock producers?

Question 3. Given the diversity of climate and landscape, should the government 

take a one-size-fits-all approach to conservation programs just like taxes? Please explain the need for diversified conservation programs like the Grasslands Reserve 

Program and the Wetlands Reserve Program.

Question 4. The widespread wildfires of 2011 and continuing historic drought of 

the South and West have caused a tremendous decrease in the cattle herd. Without 

adequate feedstock, many producers were forced to liquidate their herds or relocate 

their herds to other areas. Do you believe that in the future, livestock producers 

should have greater access to emergency haying and grazing of land enrolled in 

Conservation Reserve Program (CRP)? Can you explain the importance of haying 

and grazing in conservation programs like CRP?

Question 5. Several farmers have expressed a frustration with the Conservation 

Stewardship Program (CSP). I understand that this is a voluntary program, but it 

has been express that some of the practices do not make sense and that money 

could be used for a wide range of other practices that would be more beneficial to 

conservation. Some examples of questionable practices include: cutting hay fields in 

reverse, putting ramps in water troughs, and killing trees for woodpeckers to nest 

in. Do you feel this is a wise expenditure of taxpayer dollars and if so why? If not, 

how should we modify CSP to stop these practices? 

1789

SUPPLEMENTARY MATERIAL SUBMITTED BY UNITED STATES DEPARTMENT OF

AGRICULTURE

During the April 26, 2012 hearing entitled, Formulation of the 2012 Farm Bill 

(Conservation Programs), a request for information was made to USDA. The following is their information submission for the record. 

Insert 

Mr. PETTY. Yes. Now into the 25 percent, I am quite certain the 25 percent 

is a limit per county, any land within a county, so that—those numbers would 

be very accessible within a county office. You know, they have to keep track of 

that and not go above it, so those numbers could be put together pretty easily 

on a county basis. You know, we just believe that the most sensitive grounds 

should be qualified under EBI, and then—and not the other ground. 

Mr. GIBBS. Mr. Chairman, I am out of time. Just to finish up, I just want 

to request of the Committee or request of the USDA or NRCS those numbers. 

I think that would be helpful when we do the bill. Thank you. 

The CHAIRMAN. Without objection.

1790

Conservation Reserve Program 25% Cropland Compliance Report 

As of 3/7/2012

County 

Name 

Maximum Cropland Enrollment FY 2012 Compliance Status FY 2013 Projected Compliance Status (on 10/1/2012) 

General Signup 

Limit Compliance 

Status 

Cropland 

Acres 

Waiver 

to

exceed 

25%

Maximum 

cropland 

available to 

enroll in 

CRP/WRP 

Active 

Gen. 

Signup 

cropland 

acres 

Active 

Cont. 

Signup 

cropland 

acres 

Active 

WRP 

cropland 

acres 

Total 

cropland 

enrolled 

in CRP/

WRP 

% cropland enrolled in 

CRP/

WRP 

CRP 

Expiring on 

9/30/2012

Gen. 

Signup 

starting 

on 10/1/

2012

Cont. 

Signup 

starting 

on 10/1/

2012

% Cropland enrolled in 

CRP/

WRP on 

10/1/2012

Maximum 

additional 

CRP enrollment to be 

active in FY 

2013

Gen. 

Signup 

limit 

Max add. 

General 

Signup to 

be enrolled in 

FY 2012

Alaska

Delta 66,698.6 25.0% 16,674.7 18,020.9 0.0 0.0 18,020.9 27.0% 990.1 0.0 0.0 25.5% ¥356.1 25.0% ¥356.1

Colorado

Baca 906,826.6 35.0% 317,389.3 276,134.6 waiver 0.0 276,134.6 30.5% 70,452.0 0.0 waiver 22.7% 111,706.7 35.0% 111,706.7Crowley 73,841.6 35.0% 25,844.6 23,202.3 0.0 0.0 23,202.3 31.4% 2,273.2 0.0 0.0 28.3% 4,915.5 35.0% 4,915.5Kiowa 690,869.3 30.0% 207,260.8 182,789.0 waiver 0.0 182,789.0 26.5% 103,357.2 0.0 waiver 11.5% 127,829.0 30.0% 127,829.0Prowers 580,225.9 30.0% 174,067.8 157,897.8 5,240.6 97.5 163,235.9 28.1% 51,310.8 0.0 0.0 19.3% 62,142.7 30.0% 62,142.7Pueblo 107,284.4 35.0% 37,549.5 33,288.9 0.0 0.0 33,288.9 31.0% 8,489.7 0.0 0.0 23.1% 12,750.3 35.0% 12,750.3

Florida

Brevard 56,395.4 25.0% 14,098.9 0.0 0.0 13,072.0 13,072.0 23.2% 0.0 0.0 0.0 23.2% 1,026.9 25.0% 1,026.9

Idaho

Bannock 200,329.4 25.0% 50,082.4 51,251.2 waiver 0.0 51,251.2 25.6% 15,461.9 0.0 waiver 17.9% 14,293.1 25.0% 14,293.1Power 343,042.6 25.0% 85,760.7 85,130.6 waiver 0.0 85,130.6 24.8% 53,806.8 0.0 waiver 9.1% 54,436.9 25.0% 54,436.9

Kansas

Hamilton 451,441.7 30.0% 135,432.5 111,108.1 waiver 0.0 111,108.1 24.6% 62,661.1 0.0 waiver 10.7% 86,985.5 30.0% 86,985.5Morton 321,029.7 32.0% 102,729.5 75,265.7 waiver 0.0 75,265.7 23.4% 4,903.3 0.0 waiver 21.9% 32,367.1 32.0% 32,367.1

Louisiana

Catahoula 207,928.7 25.0% 51,982.2 13,255.3 12,959.1 23,981.0 50,195.4 24.1% 1,178.8 0.0 0.0 23.6% 2,965.6 25.0% 2,965.6Concordia 237,558.8 25.0% 59,389.7 20,598.5 16,257.4 16,400.9 53,256.8 22.4% 766.9 0.0 0.0 22.1% 6,899.8 25.0% 6,899.8

Minnesota

Roseau 532,365.7 25.0% 133,091.4 107,211.0 18,017.2 91.0 125,319.2 23.5% 6,728.4 0.0 0.0 22.3% 14,500.6 25.0% 14,500.6

Mississippi

Adams 29,531.7 25.0% 7,382.9 4,884.2 35.4 4,032.4 8,952.0 30.3% 1,782.6 0.0 0.0 24.3% 213.5 25.0% 213.5

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Grenada 48,849.7 25.0% 12,212.4 7,809.6 2,050.8 3,905.0 13,765.4 28.2% 1,742.5 0.0 0.0 24.6% 189.5 25.0% 189.5Jefferson 33,712.4 25.0% 8,428.1 4,250.9 0.0 5,067.0 9,317.9 27.6% 1,412.5 0.0 0.0 23.4% 522.7 25.0% 522.7Oktibbeha 47,447.4 25.0% 11,861.9 9,466.8 2,597.1 0.0 12,063.9 25.4% 4,445.3 0.0 0.0 16.1% 4,243.3 25.0% 4,243.3Panola 169,739.1 25.0% 42,434.8 33,249.9 9,126.7 102.1 42,478.7 25.0% 7,997.4 0.0 0.0 20.3% 7,953.5 25.0% 7,953.5Wilkinson 43,155.6 25.0% 10,788.9 7,366.7 0.0 4,832.0 12,198.7 28.3% 2,539.0 0.0 0.0 22.4% 1,129.2 25.0% 1,129.2

Montana

Lincoln 3,287.5 25.0% 821.9 0.0 0.0 785.6 785.6 23.9% 0.0 0.0 0.0 23.9% 36.3 22.0% ¥62.4

New Mexico

Guadalupe 6,110.5 25.0% 1,527.6 1,543.4 0.0 0.0 1,543.4 25.3% 0.0 0.0 0.0 25.3% ¥15.8 25.0% ¥15.8Quay 313,555.6 25.0% 78,388.9 78,964.9 0.0 0.0 78,964.9 25.2% 41,217.4 0.0 0.0 12.0% 40,641.4 25.0% 40,641.4Roosevelt 525,242.6 25.0% 131,310.7 130,943.2 0.0 0.0 130,943.2 24.9% 12,739.8 0.0 0.0 22.5% 13,107.3 25.0% 13,107.3

North Carolina

Dare 4,781.8 25.0% 1,195.5 0.0 1,413.6 0.0 1,413.6 29.6% 0.0 0.0 0.0 29.6% ¥218.2 25.0% ¥218.2

Texas

Andrews 104,562.3 25.0% 26,140.6 28,056.8 waiver 0.0 28,056.8 26.8% 6,300.5 0.0 waiver 20.8% 4,384.3 25.0% 4,384.3Bailey 367,635.8 25.0% 91,909.0 84,420.2 waiver 0.0 84,420.2 23.0% 34,805.9 0.0 waiver 13.5% 42,294.7 25.0% 42,294.7Cochran 302,929.5 25.0% 75,732.4 74,213.0 waiver 0.0 74,213.0 24.5% 32,811.8 0.0 waiver 13.7% 34,331.2 25.0% 34,331.2Deaf 

Smith 

629,274.9 25.0% 157,318.7 157,145.0 waiver 0.0 157,145.0 25.0% 55,855.6 0.0 waiver 16.1% 56,029.3 25.0% 56,029.3

Freestone 2,001.1 25.0% 500.3 111.3 0.0 417.0 528.3 26.4% 111.3 0.0 0.0 20.8% 83.3 25.0% 83.3Kenedy 3,767.4 25.0% 941.9 863.9 0.0 0.0 863.9 22.9% 0.0 0.0 0.0 22.9% 78.0 25.0% 78.0Randall 293,222.5 25.0% 73,305.6 72,977.2 waiver 0.0 72,977.2 24.9% 21,449.6 0.0 waiver 17.6% 21,778.0 25.0% 21,778.0

Utah

San Juan 137,113.2 25.0% 34,278.3 34,205.5 14.0 0.0 34,219.5 25.0% 2,280.5 0.0 0.0 23.3% 2,339.3 25.0% 2,339.3

Washington

Douglas 566,620.1 25.0% 141,655.0 139,312.4 waiver 0.0 139,312.4 24.6% 64,937.0 0.0 waiver 13.1% 67,279.6 25.0% 67,279.6Walla Walla 

616,643.5 25.0% 154,160.9 145,810.5 3,146.8 0.0 148,957.3 24.2% 12,247.3 0.0 0.0 22.2% 17,450.9 24.5% 14,367.7

1792

SUPPLEMENTARY MATERIAL SUBMITTED BY RANDALL C. GORDON, ACTING PRESIDENT, NATIONAL GRAIN AND FEED ASSOCIATION

During the April 26, 2012 hearing entitled, Formulation of the 2012 Farm Bill 

(Conservation Programs), a request for information was made to Randall C. Gordon. 

The following is his information submission for the record. 

Insert 

Mr. PETERSON. . . . But one of the issues I had that I was wondering about, Mr. Gordon, is in 

your report here you are talking about this Land Capability Class I and II, 

which is kind of a broad category that was created back in the 1950s or 1960s, 

from what I understand, and I don’t know if it is applicable to what we are trying to do with CRP or not. But NRCS doesn’t use this anymore. I mean, I don’t 

know anybody using this classification, so I guess I am curious. Why are you 

using that when nobody—when everybody else has moved away from it? 

Mr. GORDON. Thank you, Mr. Peterson. We do understand that there are—

and I would like to expand in my comments for the record, if I could on that 

to do a little more research on that, but our understanding is that they are still 

trying to keep some data based along those lines. They haven’t been publicizing 

those, as you note, but it clearly was a way that Soil Conservation Service and 

others used at that time to look at where is—what is the best quality farmland 

we have in the United States. 

And so the reason we are trying to use that is to focus again on the productive farmland that we think if the CRP is to be downsized in the matter which 

it apparently will occur, that that is maybe one approach to take to looking at 

making sure we get the right acres. But we will provide more for the record 

on that, and I appreciate the question.

NGFA did a huge study that they sent out earlier this month that addresses this 

question and more. Here it is. 

ATTACHMENT

ReGaining Ground: A Conservation Reserve Program Right-Sized for the 

Times 

Prepared for 

National Grain and Feed Foundation 

By 

Strategic Conservation Solutions 

Bruce Knight, Principal 

June 2012

Overview 

Strategic Conservation Solutions (SCS) LLC was contracted by the National Grain 

and Feed Foundation to identify and validate conservation policy options for the industry, particularly with respect to the Conservation Reserve Program (CRP). 

Market forces are demanding additional sources for grains and oilseeds for food, 

feed, biofuels and exports. Additional capacity to respond to these market needs is 

directly correlated with decisions about future enrollments of acreage in the CRP. 

The National Grain and Feed Association has long advocated for CRP reform. Current budgetary pressures, combined with market signals for additional production, 

make the grain, feed and processing industry’s calls for reform uniquely positioned 

to capitalize on acreage from expiring CRP enrollments. This can be accomplished 

while still preserving—and even enhancing—the program’s environmental benefits 

and protect truly environmentally sensitive lands. If better-quality land currently 

enrolled in CRP is released from the program, there will be significant opportunities 

for increased acreage available for cropping in the Midwest, Northern, Central and 

Southern Great Plains, as well as the Pacific Northwest. 

In this analysis, SCS examined activity in the 30 largest CRP enrollment states. 

Most data sets are compiled from generally available USDA sources from the period 

2006–2011 to focus on the most recent trends. Data on expiring CRP contracts run 

from the period 2011–2017. 

About Strategic Conservation Solutions 

Strategic Conservation Solutions, LLC (SCS) is a specialized consulting firm providing visioning and strategic positioning to firms and associations in the areas of 

1793

agriculture, conservation, environment and technology. SCS offers common sense 

conservation solutions where conservation doesn’t cost money, but pays. Bruce 

Knight is a principal and founder of Strategic Conservation Solutions. 

Knight is a nationally recognized expert on conservation, agriculture and the environment. From 2002 to 2006, Knight served as Chief of Natural Resources Conservation Service, the lead U.S. Department of Agriculture (USDA) agency for conservation on private working agricultural lands. Knight was the Under Secretary for 

Marketing and Regulatory Programs at the USDA from 2006–2009. Drawing on his 

experience as a former association executive, lobbyist, regulator and Capitol Hill 

staffer, Knight has a broad understanding of how Washington works. But he also 

brings firsthand knowledge of farming to his national policymaking credentials. A 

third-generation rancher and farmer and lifelong conservationist, Knight operates a 

diversified grain and cattle operation in South Dakota using no-till and rest rotation 

grazing systems. His farming and ranching background gives him the opportunity 

to practice stewardship and husbandry, providing firsthand knowledge of the interdependency of animal, plant and human health with the environment. 

About National Grain and Feed Foundation 

The National Grain and Feed Foundation, established in 1965, is the research and 

education arm of the National Grain and Feed Association (NGFA). A 501(c)(3) notfor-profit charitable organization, the Foundation is financed entirely by voluntary 

industry contributions to support public education and research projects that benefit 

U.S. agriculture and the industry as a whole. All contributed funds are used for research and education, with administrative support and management donated by the 

NGFA. 

The NGFA, established in 1896, consists of more than 1,000 grain, feed, processing, exporting and other grain-related companies that operate more than 7,000 

facilities and handle more than 70 percent of all U.S. grains and oilseeds. Its membership includes grain elevators, feed and feed ingredient manufacturers, biofuels 

companies, grain and oilseed processors and millers, exporters, livestock and poultry 

integrators, and associated firms that provide goods and services to the nation’s 

grain, feed, processing and export industry. The NGFA also consists of 26 affiliated 

State and Regional Grain and Feed Associations, and has strategic alliances with 

the North American Export Grain Association and Pet Food Institute. 

Contents 

Executive Summary

Legislative Recommendations

Administrative Recommendations

Introduction

Worldwide Food Security

Conservation Reserve Program (CRP) History

Current CRP Status

Eligibility

Environmental Benefits Index

Current Status of CRP Enrollment

Expiring CRP Acreage

Technological Advances in Conservation

Battling for Acres

CRP General Sign-ups

Continuous CRP Enrollments

Conservation Reserve Enhancement Program

State Acres for Wildlife Enhancement (SAFE)

Transition Incentives Program

Recommendations for Changes to CRP

Legislative Recommendations

Administrative Recommendations

Conclusion

Appendix A: Environmental Benefits Index and Soil Classification System

Appendix B: Conservation Reserve Enhancement Program (CREP)

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Appendix B (part II): CREP/CRP Acreage and Rental Rates

Appendix C: CRP State Acres for Wildlife Enhancement (SAFE)

Appendix D: Erodibility Index Data Tables 

ReGaining Ground: A Conservation Reserve Program Right-Sized for the 

Times 

Executive Summary 

Expanding world demand for food, feed, biofuels and exports—both today and tomorrow—calls for additional acreage in the United States to be planted to boost production of feed and food grains. At the same time, budget pressure to decrease the 

cost of farm programs in the 2012 Farm Bill supports releasing high-quality acreage 

from the Conservation Reserve Program (CRP) and reducing the current acreage cap 

of 32 million acres. Strengthening demand for grains, oilseeds and their derivative 

products, combined with ongoing pressure to reduce farm program costs, can lead 

to opportunities to plant on prime farmland currently sidelined in CRP, to use lessproductive land for haying and grazing, and to designate highly erodible land for 

protection through CRP. 

Originally established by the 1985 Farm Bill, CRP was capped at 40 million to 

45 million acres in 1990, declining to 36.4 million acres with the 1996 Farm Bill 

and then rising to 39.2 million acres with the 2002 bill. The 2008 Farm Bill limited 

CRP to 32 million acres, but only about 30 million acres are currently enrolled in 

the program. Based upon most recent publicly available data, almost 8.7 million 

CRP acres are considered ‘‘prime farmland,’’ and almost all of it (8.5 million acres) 

is in the 30 states covered by this analysis. With CRP contracts that include more 

than 70 percent of the acreage in the program—21.2 million acres—expiring over 

the next 5 years, there is an urgent need to manage the program so that the most 

productive land from the reserve is returned to production. CRP land is more likely 

to return to productive use if USDA manages the program to reduce idling of productive farmland and the acreage cap decreases. 

Strategic Conservation Solutions recommends both legislative and administrative strategies for managing the CRP program. 

Legislative Recommendations 

Based upon the analysis presented in this study, the following legislative changes 

in the 2012 Farm Bill should be considered to reform the CRP and encourage the 

return of productive idled land to farming in an environmentally sustainable way:

1. First and foremost, SCS recommends that the current 32 million acre CRP 

cap be reduced significantly. At a minimum, Congress should mandate acres 

designated as ‘‘prime farmland’’ (which amounted to approximately 8.7 million 

acres in 2007, the most recent data publicly available) not be eligible for future 

enrollment or reenrollment. This would include approximately 7.1 million acres 

considered to be Land Capability Classes I and II. This land can be farmed in 

an environmentally sustainable way to meet growing food demand. In the 30 

states with the greatest CRP enrollments, approximately 8.5 million acres were 

considered prime farmland, much of it highly concentrated in several major 

grain-production states.

2. Second, USDA should be directed to conduct a comprehensive analysis of how 

best to manage the transition to crop production or grazing land of Class III 

land from the reserve that is not considered prime farmland. This portion of the 

reserve likely will need to be tapped over the next 10 to 15 years to address 

the demands caused by world population growth and farmland lost to urban development. Restricting enrollments of prime farmland and Class III lands, combined with the immediately preceding recommendation, would equate to a CRP 

of approximately 21 million acres.

3. Third, Congress should frontload the acreage reductions to best match the 

acreage with CRP contract expirations. Current production needs are causing 

the conversion of fragile native grasslands to crop production, in part because 

higher-quality land in those same communities is tied up in the CRP. The transition to a smaller CRP mandated by Congress will be easier in the early years 

of the next farm bill due to contract expirations than it will be in later years.

4. Fourth, Congress should include legislative language that would limit wholefield and whole-farm enrollments in the CRP by requiring such land to meet 

a more stringent Environmental Benefits Index (EBI) scoring threshold than 

partial-field enrollments. During the early years of CRP, whole farms and whole 

fields were enrolled, which resulted in enrolling high-quality land suited to agricultural production.

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5. Fifth, Congress should direct that USDA offer CRP contract holders an earlyout (without penalty) as a means of reducing acreage within the CRP that is 

‘‘prime farmland,’’ most of which should not have been enrolled in the reserve. 

In addition, penalty-free early outs should be offered in counties that meet or 

exceed the 25 percent county acreage cap, as well as anytime national enrollment levels preclude a general sign-up. In managing this transition, it is suggested that USDA be required to offer penalty-free early outs for Land Capability Classes I, II and III enrolled in CRP, and require producers who accept 

early-outs to implement prudent conservation practices on such lands.

6. Sixth, Congress should allocate sufficient monies to at least triple—to $75 

million—the size of the Transition Incentives Program, currently authorized at 

$25 million, for transitioning expired CRP acreage from a retired or retiring 

landowner to beginning or socially disadvantaged farmers. This program quickly 

reached its capacity after being authorized as part of the 2008 Farm Bill and 

needs additional resources, which could be financed through savings garnered 

from a right-sized CRP. TIP is an important step toward addressing land access 

for beginning farmers and ranchers. In addition, it is recommended that retired 

or retiring landowners be allowed to transition such CRP acreage within three 

years of contract expiration (rather than the current one year), with no change 

in the current incentive payment (two years of annual CRP rental payments).

7. Seventh, Congress should consider whether to provide a specific percentageor acreage-based figure within the CRP for future enrollment of the most environmentally sensitive lands. As of April 2011, the CRP included 5 million acres 

enrolled under continuous sign-up procedures. Some conservation leaders have 

expressed concern that adequate CRP acreage should be reserved each year to 

ensure that such environmentally sensitive lands can be enrolled, with some 

suggesting that as many as 8 million acres of the CRP should be reserved for 

such high-priority enrollments. Recent USDA press releases imply that the 

Agency is reserving 1.75 million acres for future continuous enrollments. This 

is an issue that warrants Congress’s attention as it considers the future of the 

CRP. With a right-sized CRP, it will be crucial that sufficient acreage be reserved for future enrollment of the most important and environmentally fragile 

lands.

8. Eighth, restrict the discretion for USDA to exceed the 25 percent acreage 

limit on CRP enrollments in individual counties because of the adverse economic impacts such enrollments have had on rural communities. Further, it is 

recommended that USDA be required to reserve within the 25 percent county 

limit at least a 5 percent allowance for acres enrolled in the wetlands reserve 

and continuous sign-up process.

9. Ninth, USDA should provide the appropriate Congressional committees of jurisdiction with a written explanation of the rationale used to determine the Environmental Benefits Index (EBI) that applies for general CRP sign-ups. Added 

justification should be provided in years when the EBI changes from one signup to the next.

10. Tenth, Congress should direct that USDA conduct and complete within two 

years of enactment a comprehensive economic impact study that evaluates the 

impact of the CRP on rural communities. 

Administrative Recommendations 

USDA should modify several policies in implementing and administering the CRP 

in the future.

• First, USDA’s Farm Service Agency and Natural Resources Conservation Service should compile a report of acreage enrolled in CRP by Land Capability Class 

and Erodibility Index, and submit it to Congress within one year after the new 

farm bill is enacted and every three years thereafter. As part of such a report, 

USDA should be required to compile Land Capability Class and Erodibility 

Index acreage by county.

• Second, identify, and make public on the FSA website, counties that are at or 

near the 25 percent enrollment cap. These data will increase transparency and 

enable USDA and stakeholders to better analyze the prudent management of 

CRP.

• Third, implement a percentage-based limit on rental rates paid for CRP land 

compared to average county rental rates so as not to outbid the market for productive acres.

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• Fourth, review the EBI to discourage enrollment of high-quality land in the 

CRP. For example, negative or no points should be awarded for Non-Highly 

Erodible Land as part of the EBI scoring mechanism.

• Fifth, place sideboards [parameters] on program provisions, rental rates and incentive payments to ensure that neither rates nor program administration work 

to bring non-environmentally sensitive, highly productive land into the various 

continuous and special sign-up programs. Examples are outlined below:

» Consider restricting buffer, filter and riparian strips to no more than 30 to 

50 feet in width, as at least one state has used this provision to enroll small, 

full fields in the higher-cost continuous program rather than the lower-cost 

general program.

» Consider restricting SAFE acres to endangered, or candidate, wildlife species—prohibiting these acres from being targeted to game species. It appears 

that a few states may be using SAFE to increase rental payments on highquality land to support commercial hunting enterprises. Under no conditions 

should SAFE acres be allowed to be used for fee-based or commercial hunting 

enterprises.

» Consider placing greater emphasis on wetlands protection in the CRP continuous sign-up programs and encourage the transition of wetlands enrolled in 

the CRP to the appropriate easement program for permanent wetlands protections.

» Limit uplands enrolled under CRP and easement wetlands to 10 percent of 

the surrounding area rather than 25 percent, if located on prime farmland. 

Introduction 

Several challenges, long in the making, have arisen simultaneously today in 

American agriculture. It makes sense to address them together when reforming the 

Conservation Reserve Program (CRP). 

The world-wide demand for more and higher quality food will only expand as 

more than 2 billion people are added to the world population in the next few decades. The United States has the prime farmland, production and technology, and 

sound environmental practices to produce food to help feed people here in America 

and around the globe. 

Many farmers are nearing retirement or even beyond traditional retirement age, 

while young, beginning and socially disadvantaged farmers are searching for land 

to put into production. Highly productive cropland currently enrolled in CRP potentially could be made available to these farmers if CRP policies were modified. 

Based on the most recent publically available data, more than 8.5 million acres 

of prime farmland are lying fallow across America rather than being put to their 

highest and best use because they are unnecessarily idled in the CRP. More acreage 

would be available for crop production if CRP focused primarily on highly erodible 

land, wetlands, and land critical to protecting endangered and at-risk wildlife. 

The U.S. budget deficit and budget pressures have increased greatly, and farm 

and conservation programs will have to bear their share of cuts in future Federal 

spending. Cutting CRP funding by reducing prime farmland included in the program is an option that produces many benefits beyond saving taxpayers’ funds. 

This study—ReGaining Ground—offers an analysis of the CRP; how it came 

about, where it stands in the 30 states with the largest acreage, and most importantly how to reform it. Development of a new farm bill offers an opportunity to revise CRP to both protect the environment and promote the best use of one of America’s greatest natural resources—prime farmland. Reducing acreage under CRP 

through a managed approach that releases prime farmland for production is a sensible and cost-effective strategy that helps feed the hungry, increase U.S. exports, 

create jobs, and reduce the U.S. debt, while still protecting natural resources. 

Worldwide Food Security 

As the future of the CRP program is considered, we also need to look beyond our 

own shores at the growing food needs around the world. We need to develop a program in the next farm bill that considers both the opportunities and obligations to 

produce more food to feed an expanding world population, while at the same time 

protecting the most environmentally sensitive land. We must not restrict the use of 

prime farmland unnecessarily when it could be cultivated responsibly to produce 

much-needed food and fiber. 

America is blessed with abundant fields and forests. Year after year, American 

farmers provide a plentiful supply of high-quality, affordable food. In fact, Agriculture Secretary Tom Vilsack points out that Americans spend only 6¢ or 7¢ out 

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1 Agriculture Secretary Tom Vilsack, remarks as prepared for delivery before the Senate Committee on Agriculture, Nutrition and Forestry, 26 May 2011, Washington, D.C. 2The Global Poverty Project. ‘‘1.4 billion reasons.’’ Accessed 24 June 2011. 

(www.globalpovertyproject.com) 3Food and Agriculture Organization of the United Nations. ‘‘Global hunger declining but still 

unacceptably high.’’ Accessed 24 June 2011. (www.fao.org) 4World Bank. ‘‘Put Food First’’ video. Accessed 24 June 2011. (www.worldbank.org) 5Simmons, Jeff. ‘‘Technology’s role in the 21st Century: Making safe, affordable and abundant 

food a global reality.’’ 2011, Elanco Animal Health. 6Dan Glickman, co-chair of The Chicago Council on Global Affairs’ Global Agricultural Development Initiative, remarks as prepared for delivery before the Senate Committee on Agriculture, 

Nutrition, and Forestry, 26 May 2011, Washington, D.C. 7 American Farm Bureau Federation. ‘‘Your Agriculture’’ video. Accessed 24 June 2011. 

(www.fb.org) 8 Economic Research Service, U.S. Department of Agriculture. Database accessed 15 May 

2012. (www.ers.usda.gov) 9Dan Glickman, co-chair of The Chicago Council on Global Affairs’ Global Agricultural Development Initiative, remarks as prepared for delivery before the Senate Committee on Agriculture, 

Nutrition, and Forestry, 26 May 2011, Washington, D.C. 10 Agriculture Secretary Tom Vilsack, remarks as prepared for delivery before the Senate 

Committee on Agriculture, Nutrition, and Forestry, 26 May 2011, Washington, D.C. 11 Economic Research Service and Foreign Agricultural Service, U.S. Department of Agriculture. ‘‘Outlook for U.S. Agricultural Trade,’’ 11 May 2011. 

of every dollar to pay for the food they eat.1 On the other hand, there are 1.4 billion 

people who share the planet who live on less than $1.25 per day.2 Food represents 

their major expense. For them, the slightest increase in food prices means foregoing 

education, reducing healthcare and cutting back on vital nutrients. 

Today, the world’s population stands at 7 billion. More than 925 million people 

around the globe—13 percent—are considered undernourished by the United Nation’s Food and Agriculture Organization.3 Those who live in extreme poverty spend 

85¢—or nearly 70 percent of their income—on food.4 Further, an estimated 12 children die every minute from hunger.5

By 2050, another 2 billion people will be added to the planet. Increasing population along with an expanding middle class around the world seeking more and better food mean food production needs to double. Former Agriculture Secretary Dan 

Glickman has said in essence, ‘‘the world’s farmers, ranchers, and fishers will be expected to produce more food in the next 40 years than they have had to in the last 

8,000 years combined.’’ 6

The U.S. has experienced phenomenal increases in productivity, thanks to advances in technology—including the development of hardier, more productive varieties, improved farming practices and increased use of herbicides and pesticides. In 

1940, less than a century ago, each American farmer fed 19 people; today each farmer produces food for 155.7 That’s because yields have increased greatly. Corn production jumped from 24.5 bushels per acre in 1931 to a projected 166 bushels per acre 

in 2012, more than a six-fold increase. Grain sorghum is up from 16.2 bushels per 

acre in 1931 to 75.4 bushels per acre in 2012. And wheat production has risen from 

14 bushels per acre in 1930 to 45.7 bushels per acre projected for 2012.8

Unfortunately, production has not risen as greatly on other continents. For example, in Africa, yields are, on average, seven times lower than those in America. Further, only about 20 percent of the arable land in Africa is under cultivation.9 So, 

production in Africa, and in other food-challenged areas, need to increase significantly and increased production in the U.S. will be necessary to bridge the gap. 

The U.S. continues to be a major food exporter, with record agricultural exports 

projected for 2011.10 In Fiscal Year 2011, the U.S. exported more than 750.36 million bushels of wheat, over 4 million metric tons of rice, nearly 37 million metric 

tons of soybeans and over 2.1 billion bushels of corn.11 To maintain America’s export 

customer base, farmers must produce commodities demanded by foreign buyers, and 

the U.S. must be seen as a reliable supplier. 

Based on the USDA’s April 2012 World Supply and Demand Estimates, the 

United States is expected to plant 95.9 million acres of corn, 73.9 million acres of 

soybeans, 55.9 million acres of wheat, 13.2 million acres of cotton, 6 million acres 

of sorghum and 2.62 million acres of rice this year. The current CRP is idling about 

30 million acres of land. That makes CRP the fourth largest crop in acreage terms—

equaling all the cotton, rice, and sorghum planted on an annual basis. 

However, even as American productivity must continue to increase, productivity 

across the globe will need to grow substantially, as well. Meeting the food needs of 

the future will take everything American farmers can produce combined with all 

that farmers on every other continent can raise. The U.S. has a role and obligation 

to responsibly and sustainably grow all it can and maintain its reputation as a reliVerDate 0ct 09 2002 12:54 Dec 11, 2012 Jkt 041481 PO 00000 Frm 00209 Fmt 6621 Sfmt 6621 I:\DOCS\112-30\74372.TXT BRIAN
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12 ‘‘Conservation Reserve Program (CRP) Benefits: Water Quality, Soil Productivity and Wildlife Estimates,’’ Farm Service Agency fact sheet, March 2008. Accessed 8 September 2011. 

(www.fsa.usda.gov/Internet/FSAlFile/factsheetlcrplbennies.pdf) 13 ‘‘Conservation Reserve Program Final Programmatic Environmental Impact Statement,’’ 

Farm Service Agency, January 2003. Accessed 8 September 2011. (www.fsa.usda.gov/Internet/

FSAlFile/chapter3.pdf) 14O’Brien, Douglas, ‘‘Summary and Evolution of U.S. Farm Bill Conservation Titles—Expanded Discussions,’’ National Agricultural Law Center. Accessed 7 September 2011. 

(www.nationalaglawcenter.org/assets/farmbills/conservation-expanded.html) 15 Ibid.

able source of high-quality food and feed. While the U.S. cannot meet the projected 

demand for food and feed alone, it can contribute to the solution significantly. 

In that regard, restricting technology adoption, idling land through the CRP or 

limiting farmers’ planting options sends the wrong message to customers. Markets 

are important, but restraining production primarily to maximize prices raises supply concerns among potential purchasers. Helping farmers do well financially is critical, but making sure that hungry men, women and children have the food they 

need for good health is equally vital. The challenge no longer is about managing 

production to meet targets; job one is how to responsibly and sustainably maximize 

production. 

Reforming CRP to release high-quality acreage could help bridge the gap between 

production limitations around the world and the current and future need for more 

food. Restoring prime farmland to productive use can stabilize grain prices globally 

and boost exports and farmers’ bottom lines, while meeting demand abroad and 

strengthening the U.S. balance of trade. 

Conservation Reserve Program (CRP) History 

Created by the Food Security Act of 1985, the CRP is a voluntary conservation 

program that provides rental payments under 10 to 15 year contracts to farmers 

and ranchers who establish long-term vegetative cover to safeguard environmentally 

sensitive land.12 The Farm Service Agency (FSA) administers CRP, making rental 

payments through the Commodity Credit Corporation and paying up to half the producer’s cost to establish approved conservation practices. The Natural Resources 

Conservation Service (NRCS) and the Forest Service, as well as state and local private and public organizations, provide technical assistance for conservation practices 

installed under CRP. 

Since the 1930s the U.S. has been concerned with helping farmers and ranchers 

prevent soil erosion and safeguard natural resources. In an effort to avoid a future 

Dust Bowl, through the Agricultural Act of 1956, Congress created the Soil Bank, 

the predecessor of CRP.13 Over 10 years, the Soil Bank idled 28.7 million acres of 

land on 306,000 farms to help bring supply and demand into balance for surplus 

commodities. Set-asides and long-term cropland retirement continued through the 

Food and Agriculture Act of 1965. The Water Bank Act of 1970 offered annual 

payments and cost-shares under 10 year contracts to farmers to help preserve existing wetlands in nesting, breeding and feeding areas for migratory waterfowl. 

In the Food Security Act of 1985, Congress established the CRP to prevent erosion and control grain production by removing farmland from production. Modified 

with each succeeding farm bill, CRP has evolved from a program focused on reducing soil erosion and controlling grain supplies to one addressing a broader array of 

environmental concerns. The program began by enrolling up to 5 million acres of 

‘‘highly erodible’’ land in 1986. Participating farmers were not allowed to harvest 

or graze the land. Under the 1985 bill, payments to an owner were limited to 

$50,000 per year.14 The program was modeled after the reserve policies popular at 

the time to reduce or store production in a ‘‘reserve’’ until prices for the grain or 

commodity reached a specified level. 

The Food, Agriculture, Conservation and Trade Act of 1990 expanded the 

list of eligible land beyond highly erodible cropland to add marginal pasturelands, 

land suitable for grass waterways or filter strips, land located near wildlife habitat 

and several other narrow inclusions. It also named the Chesapeake Bay, the Great 

Lakes Region and the Long Island Sound Region as priority areas for enrollment 

in CRP. Under the 1990 bill, farmers could use CRP land for limited haying and 

grazing with a corresponding reduction in rental payment. Land previously in CRP 

under vegetative cover could be converted to other conservation measures, such as 

trees, wildlife corridors or wetlands. In 1990, Congress increased the CRP acreage 

limit to 40 million to 45 million acres, but only 33.9 million acres actually were enrolled.15

With the Federal Agriculture Improvement and Reform Act of 1996, CRP 

lease-holders were eligible to terminate contracts after just 5 years, except for highVerDate 0ct 09 2002 12:54 Dec 11, 2012 Jkt 041481 PO 00000 Frm 00210 Fmt 6621 Sfmt 6621 I:\DOCS\112-30\74372.TXT BRIAN
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16 Ibid. 17 ‘‘2008 Farm Bill Side-by-Side, Title 2: Conservation,’’ Economic Research Service website. 

Accessed 7 September 2011. (www.ers.usda.gov/farmbill/2008/titles/titleIIConservation.htm) 18 ‘‘The Conservation Reserve Program: 41st Sign-up Results,’’ Farm Service Agency, June 

2011. Accessed 7 September 2011. (www.fsa.usda.gov/Internet/FSAlFile/crpsign-upresults.pdf) 19 ‘‘USDA Announces CRP General Sign-Up,’’ Farm Service Agency website, February 1, 2012. 

Accessed 9 April 2012. (www.fsa.usda.gov/FSA/

printapp?fileName=nrl20120201lrell0037.html&newsType=newsrel) 20 ‘‘Conservation Reserve Program, General Sign-Up 43,’’ Farm Service Agency, February 

2012. (http://www.fsa.usda.gov/Internet/FSAlFile/gs43factsheet.pdf) 

ly sensitive environmental lands, including those with an erodibility index over 15 

and lands in filterstrips, waterways and strips adjacent to riparian areas. Enrollment was capped at 36.4 million acres through 2002. Producers could offer any land 

that had been cropped in two of the previous 5 years and met certain additional 

environmental criteria. 

Under the Farm Security and Rural Investment Act of 2002, the maximum 

enrollment cap was increased to 39.2 million acres, with a requirement that eligible 

land must have been cropped four out of the previous six years. Land under expiring 

contracts was automatically considered for re-enrollment and existing covers were 

to be retained on re-enrolled land if feasible.16

The Food, Conservation, and Energy Act of 2008 reduced the CRP acreage 

cap to 32 million acres.17 The legislation specifically identified alfalfa and other 

multi-year grasses and legumes cropped in a rotation practice as agricultural commodities, making land that had been planted to these crops four of the prior six 

years eligible for CRP enrollment. In addition, the law granted new authority for 

routine grazing on CRP land, as determined by local resource conditions. The 2008 

bill set forth special provisions for treating CRP land transitioning from a retiring 

producer to a beginning or socially disadvantaged farmer. 

Current CRP Status 

Data from the 2012 (43rd) sign-up show that the trend of fewer acres offered and 

fewer acres accepted continues. In this sign-up, USDA’s Farm Service Agency (FSA) 

received 47,934 offers to enroll 4.54 million acres. Of the nearly 48,000 offers, the 

FSA enrolled 87.6 percent of contracts offered for a total of 42,010 contracts accepted. About 3.87 million of the 4.54 million, or 85 percent, of the offered acres were 

accepted. Accepted offers will be enrolled in CRP effective October 1, 2012.20 The 

CRP is funded in FY 2012 at $2.07 billion. According to Congressional Budget Office 

estimates, the recent action in the Senate to reduce the acreage cap on the reserve 

from 32 million to 25 million acres results in $3.795 billion in budgetary savings 

from 2013–2022, with $1.316 billion in savings from 2013–2017. 


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21 Ibid. 22 ‘‘Conservation Reserve Program,’’ Farm Service Agency website. Accessed 9 April 2012. 

(www.fsa.usda.gov/FSA/webapp?area=home&subject=prod&topic=crp) 23 Ibid.

General CRP Sign-up Results for 2010–2012

Under the present CRP procedures, producers can offer acreage for CRP enrollment during FSA’s general sign-up periods, which occur periodically. Competitiveness of land is based on the Environmental Benefits Index (EBI), which FSA uses 

to assess the quality of proposed CRP enrollments. Rental payments under CRP are 

based on local dryland cash rental rates, but producers may offer their land at lower 

rates—competitive bidding—to increase their chances of being accepted.21

Eligibility 

To be eligible for enrollment in CRP, land must be:

• Cropland planted to an agricultural commodity four of six years between 2002 

and 2007; AND

• Physically and legally capable of being planted to an agricultural commodity.

Land proposed for CRP enrollment must also:

• Have a weighted average Erosion Index of 8 or greater;

• Be expiring CRP land; OR

• Be located in a national or state conservation priority area.

To participate in CRP, a producer must have: 22

• Owned or operated the land for at least 12 months before submitting the offer; 

OR

• The producer must:

» Have acquired the land upon the death of the previous owner; or

» Have exercised a right of redemption during foreclosure proceedings; or

» Have assured FSA that he or she did not acquire the land for the purpose 

of placing it in CRP. 

Environmental Benefits Index 

FSA ranks enrollment offers through the Environmental Benefits Index (EBI). 

Highest-ranked offers receive contracts. EBI factors 23 include: 

• Wildlife habitat benefits—from vegetative covers on contract acreage.

• Water quality benefits—from reduced erosion, runoff and leaching.

• On-farm benefits—from reduced erosion.

• Benefits likely to last beyond the contract period.

• Air quality benefits—from reduced wind erosion.

• Cost.

See Appendix A (Environmental Benefits Index and Soil Classification System). 

Current Status of CRP Enrollment 

Based upon generally available data, producer interest has shifted from general 

sign-ups and whole-field enrollments to targeted use of CRP as grain, forage and 


112301165.eps
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24 United States Department of Agriculture, Farm Service Agency. Monthly report from February, 2012. (http://www.fsa.usda.gov/FSA/webapp?area=home&subject=copr&topic=rns-css) 25 ‘‘Conservation—Compatible Practices and Programs: Who Participates?’’ Economic Research 

Service, iv, Economic Research Report Number 14, February 2006. 

fiber prices have strengthened. In addition, individual farms tend to hold multiple 

contracts, probably because of the use of filter strips and other targeted participations in CRP. Twelve states in the Corn Belt and Great Plains EACH have more 

than 1 million acres of farmland enrolled in the reserve program. Since a significant 

portion of this acreage is prime farmland, if the land were no longer under CRP contract, much of it could be accessed for food production while minimizing adverse environmental impacts.

Summary of CRP Contract Data for 30 Largest CRP States as of February, 2012 24

Total CRP 

Acres 

Number of 

CRP

Contracts 

Number of 

Farms 

Annual

Payments 

(in dollars) 

CRP Rental 

Rate ($/acre) 

Alabama 395,389 8,515 6,051 16,664 46.22 

Arkansas 248,501 6,052 3,350 15,542 61.72 

Colorado 2,226,572 12,413 6,081 73,173 33.50 

Georgia 319,533 9,110 6,406 15,401 48.57 

Idaho 668,643 5,029 2,845 30,792 47.29 

Illinois 1,037,675 82,542 45,032 123,596 119.91 

Indiana 285,739 37,887 21,163 31,950 113.87 

Iowa 1,663,570 106,326 53,318 217,898 131.56 

Kansas 2,735,014 45,156 25,663 102,716 40.57 

Kentucky 358,113 16,834 8,956 38,901 116.18 

Louisiana 327,088 5,056 3,219 20,505 63.03 

Michigan 228,357 14,884 8,485 20,066 90.31 

Minnesota 1,633,911 62,241 32,712 109,437 69.84 

Mississippi 851,161 19,419 12,156 42,145 50.79 

Missouri 1,361,105 35,509 20,524 102,550 79.33 

Montana 2,857,954 13,439 5,538 79,727 31.88 

Nebraska 1,076,194 27,166 15,315 62,689 62.44 

New Mexico 455,695 1,903 1,210 14,915 35.56 

N. Dakota 2,646,747 32,210 15,958 90,038 37.54 

Ohio 343,821 37,872 21,138 41,132 121.73 

Oklahoma 860,202 7,181 4,859 27,991 33.82 

Oregon 550,972 4,356 2,284 29,831 54.53 

Pennsylvania 220,039 11,614 7,405 21,454 104.20 

S. Dakota 1,159,971 31,433 14,690 66,336 59.72 

Tennessee 204,801 7,101 4,717 13,747 71.79 

Texas 3,454,151 21,713 15,880 123,055 36.55 

Utah 163,082 876 541 5,752 32.21 

Washington 1,458,495 12,758 5,307 83,745 56.17 

Wisconsin 398,521 23,438 14,370 31,030 83.39 

Wyoming 226,044 904 617 5,788 26.84 

30 Largest 30,417,060 700,879 385,790 1,658,566 65.37 

U.S. 29,658,013 734,996 407,801 1,699,810 57.31

An Economic Research Service analysis showed that ‘‘working lands’’ conservation 

programs, such as the Environmental Quality Incentives Program (EQIP) tend to 

be used more by ‘‘full-time’’ farmers while ‘‘idled-land’’ conservation programs appear to be utilized to a greater extent by retired farm operators. Intensive use of 

land-retirement programs is most common among smaller ‘‘retired’’ and ‘‘lifestyle’’ 

farms. Smaller farms whose operators are focused on nonfarm activities also are 

more likely to take land out of production. ‘‘Whole farm’’ enrollees (those who effectively replace income from farm production with CRP payments) generally are older 

than other farm operators, are more reliant upon nonfarm sources of income, and 

account for roughly half the farms enrolled in the CRP. Most of the remaining participants use CRP to retire selected fields or portions of fields from production. 

These ‘‘partial-farm’’ enrollees tend to be operators of larger farms who consider 

farming their ‘‘primary occupation.’’ 25 These differences in operators will need to be 

considered in the transition to a smaller CRP. 

In addition, the reserve program has drawn criticism in some quarters for restricting access to land for beginning farmers and ranchers. The reliability and security of renting the farm operation to USDA has in the past been a factor in decisions 

made by farm operators upon retirement. This is one of the reasons why policy makers have looked for ways to bring together beginning farmers and retired farmers 

with existing CRP contracts to ease the transition for both the land and the farmers. 

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26 United States Department of Agriculture, Farm Service Agency. CRP contract expirations 

by state, 2001–2017. (http://www.fsa.usda.gov/FSA/

webapp?area=home&subject=copr&topic=rns-css) 

Expiring CRP Acreage 

Nationwide, more than 2⁄3 of the current acreage enrolled under CRP contracts 

will be expiring over the next 5 years. About 6.5 million acres will expire in 2012; 

14.7 million acres will expire from 2012 to 2016; and 10.4 million acres will expire 

from 2017 to 2021. In fact, within the 30 largest enrollment states, about 21.2 million acres under CRP will expire between 2011 and 2017. Data generally are not 

available on the use of land exiting from expired CRP contracts; however, FSA officials state that they assume that 50 percent of land leaving CRP remains as grassland for grazing or recreation, while the remainder is returned to annual cropping. 

It may be reasonable to assume that from 2006 to 2011, tightening grain stocks 

would have been more severe had not land formerly enrolled in CRP been brought 

back into grain, forage and grass production. 

As Congress continues to develop the 2012 Farm Bill, there should be a significant policy discussion on the size and future of the CRP. The current program is 

capped at 32 million acres. As of October 1, 2011, there were 29.6 million acres enrolled in the program. The expiration chart on the following page shows that an orderly transition could be accomplished through changes in policies for reenrollment 

of expiring CRP acres. Further, the greatest opportunity for increased production of 

grains and oilseeds will be concentrated in the Great Plains states that have a large 

volume of CRP acres expiring in the 2012 to 2014 time period. Of course, 2012 crop 

acreage decisions will be made under current rules, influenced by the 2012 CRP 

general sign-up.

Expiring CRP Acres for 30 Largest CRP Enrollment States 26

2011 2012 2013 2014 2015 2016 2017 TOTAL 

Alabama 80,901 78,820 35,549 34,783 27,982 14,151 33,409 305,595 

Arkansas 12,676 33,655 15,217 11,166 17,838 12,144 16,545 119,241

Colorado 345,664 571,908 222,517 93,480 94,378 86,770 29,385 1,444,102 

Georgia 23,506 33,759 15,524 63,464 42,565 3,568 14,868 197,254 

Idaho 117,198 165,536 68,492 42,999 23,502 14,278 27,182 459,187 

Illinois 68,732 111,481 186,779 98,149 118,324 84,430 100,811 768,706 

Indiana 22,188 36,556 48,454 19,477 27,171 19,313 32,452 205,611 

Iowa 72,013 231,672 185,926 92,558 113,924 98,228 226,566 1,020,887 

Kansas 532,633 519,729 212,366 119,412 113,849 98,600 143,379 1,739,968 

Kentucky 37,182 46,635 35,354 20,698 26,190 12,788 26,128 204,975 

Louisiana 11,862 38,119 23,712 49,859 28,455 3,396 8,918 164,321 

Michigan 11,081 18,988 45,166 7,612 26,326 39,210 20,699 169,082 

Minnesota 127,535 292,429 130,246 207,841 101,634 90,803 103,982 1,054,470

Mississippi 101,126 166,762 65,500 45,976 64,838 41,192 127,424 612,818 

Missouri 196,064 377,136 184,774 57,430 79,009 68,245 135,391 1098,049 

Montana 496,808 696,877 367,753 251,419 114,745 36,191 417,937 2,381,730 

Nebraska 150,895 201,982 98,449 71,628 65,757 51,030 72,058 711,799 

New Mexico 164,790 121,194 9,643 6,508 1,795 2,363 123,485 429,778 

N. Dakota 386,955 839,965 258,764 148,535 53,619 39,239 362,176 2,089,253 

Ohio 13,361 26,744 56,197 13,360 27,869 20,831 43,115 201,477 

Oklahoma 191,880 191,681 76,028 21,025 25,160 27,308 72,142 605,224 

Oregon 104,602 90,001 56,370 32,982 35,018 30,211 80,675 429,859 

Pennsylvania 21,411 27,335 13,806 13,998 16,259 9,925 19,643 122,377 

S. Dakota 125,185 226,911 107,088 71,874 45,739 58,037 16,952 651,786 

Tennessee 34,323 29,016 51,470 9,497 13,881 9,199 13,610 160,996 

Texas 684,440 825,817 362,815 170,352 140,394 60,962 138,489 2383,269 

Utah 18,174 27,693 3,795 396 3,484 3,278 102 56,922 

Washington 88,767 275,491 254,229 141,388 131,322 103,112 10,987 1,005,296 

Wisconsin 44,353 69,748 73,867 26,763 32,217 17,134 46,481 310,563 

Wyoming 50,116 61,082 5,660 6,145 3,881 969 1,580 129,433

Top 30 Total 4,336,421 6,434,722 3,271,510 1,950,774 1,617,125 1,156,905 2,466,571 21,234,028

U.S. Total 4,414,792 6,542,552 3,329,006 2,002,742 1,685,899 1,203,986 2,677,402 21,856,379

The strong demand for additional grain, oilseed and fiber production for food, 

feed, biofuels and exports likely will influence the size of CRP specified in the final 

2012 Farm Bill, as will the pressure to cut Federal costs to reduce deficit spending. 

The recently completed markup of the Senate version of the farm bill set a 25 million acre maximum cap for CRP with a slow drawdown schedule to that lower level. 

The Senate package, as passed by the Senate Agriculture Committee, gradually 

would reduce the CRP cap to 32 million acres in 2012; 30 million acres in 2013; 27.5 

million acres in 2014; 26.5 million acres in 2015; 25.5 million acres in 2016 and 25 

million acres in 2015. This sliding scale apparently is designed more to hit needed 

budget scores than to respond to market demand or pending CRP contract expiration dates—both of which indicate that the transition to a smaller CRP should begin 

1803

27MSD FOIA/PA Request 2012–FSA–02018–F. 

in 2012 and be tied to annual CRP acreage expirations. It is clear that a transition 

to a ‘‘right-sized’’ CRP will be easier to manage if it is coordinated closely with expirations of contracts that contain high-quality land that should return to production. 

Another policy option is to permit a penalty-free ‘‘early out’’ for existing CRP contracts so that quality land controlled by landowners that wish voluntarily to exit 

the CRP may do so more quickly, with the idled land returned to cropping. A penalty-free early out can be designed to ease the transition to a smaller CRP, as well 

as to surgically select the quality land best suited to return to production. 

Further, shifting priorities toward enrollment of priority lands in the form of buffers and wetlands may make an early-out desirable in specific counties. Still another 

option would be to permit ‘‘transition’’ activities to occur on CRP lands during the 

last year of the contract, if that land may be transitioning to cropping, haying, grazing or biomass systems. 

Nevertheless, the expirations over the next several years clearly are making lowering the CRP acreage cap an attractive budget-reduction strategy, although delays 

in timing of the farm bill and the current CRP enrollment may make these savings 

elusive. 

Another consideration is the distribution of CRP land across states and counties. 

In some areas, enrollment exceeds 25 percent of the agricultural land in a county. 

Permitting whole-farm and whole-field enrollments both increases CRP acreage unnecessarily and encourages enrollment of high-quality, rather than marginal, land. 

As the table on the following page indicates, 25 counties nationwide currently exceed the maximum acreage cap on enrollments of CRP and WRP acreage, with nearly 225,000 acres exceeding the limitation imposed by Congress.

Summary of CRP Acres Exceeding the 25% County Cropland Limit as of February 

2012 27

State County 

FSA 

Cropland 

Acres 

25% 

Cropland 

Acres 

Active 

CRP 

Acres 1

WRP 

Acres 1

CRP + 

WRP 

Acres 

(CRP + 

WRP) / 

Cropland 

Acres 

Over 

25%

Alaska Delta 66,698.6 16,674.7 18,020.9 0.0 18,020.9 27.0% 1,346.2 

Colorado Baca 906,826.6 226,706.7 278,012.7 0.0 278,012.7 30.7% 51,306.0 

Colorado Crowley 73,841.6 18,460.4 23,202.3 0.0 23,202.3 31.4% 4,741.9 

Colorado Kiowa 690,869.3 172,717.3 185,774.1 0.0 185,774.1 26.9% 13,056.8 

Colorado Prowers 580,225.9 145,056.5 163,138.4 97.5 163,235.9 28.1% 18,179.4 

Colorado Pueblo 107,284.4 26,821.1 33,288.9 0.0 33,288.9 31.0% 6,467.8 

Idaho Bannock 200,329.4 50,082.4 58,856.0 0.0 58,856.0 29.4% 8,773.6 

Idaho Power 343,042.6 85,760.7 100,103.5 0.0 100,103.5 29.2% 14,342.8 

Kansas Hamilton 451,441.7 112,860.4 113,528.8 0.0 113,528.8 25.1% 668.4 

Mississippi Adams 29,531.7 7,382.9 4,919.6 4,032.4 8,952.0 30.3% 1,569.1 

Mississippi Grenada 48,849.7 12,212.4 9,860.4 3,905.0 13,765.4 28.2% 1,553.0 

Mississippi Jefferson 33,712.4 8,428.1 4,250.9 5,067.0 9,317.9 27.6% 889.8 

Mississippi Oktibbeha 47,447.4 11,861.9 12,063.9 0.0 12,063.9 25.4% 202.0 

Mississippi Panola 169,739.1 42,434.8 42,376.6 102.1 42,478.7 25.0% 43.9 

Mississippi Wilkinson 43,155.6 10,788.9 7,366.7 4,832.0 12,198.7 28.3% 1,409.8 

New Mexico Guadalupe 6,110.5 1,527.6 1,543.4 0.0 1,543.4 25.3% 15.8 

New Mexico Quay 313,555.6 78,388.9 78,964.9 0.0 78,964.9 25.2% 576.0 

North Carolina Dare 4,781.8 1,195.5 1,413.6 0.0 1,413.6 29.6% 218.1 

Texas Andrews 104,562.3 26,140.6 28,056.8 0.0 28,056.8 26.8% 1,916.2 

Texas Bailey 367,635.8 91,909.0 129,017.6 0.0 129,017.6 35.1% 37,108.6 

Texas Cochran 302,929.5 75,732.4 85,719.3 0.0 85,719.3 28.3% 9,986.9 

Texas Deaf Smith 629,274.9 157,318.7 157,928.5 0.0 157,928.5 25.1% 609.8 

Texas Freestone 2,001.1 500.3 111.3 417.0 528.3 26.4% 28.0 

Texas Randall 293,222.5 73,305.6 74,316.7 0.0 74,316.7 25.3% 1,011.1 

Washington Douglas 566,620.1 141,655.0 190,137.9 0.0 190,137.9 33.6% 48,482.9

Total 25 Counties 6,383,690.1 1,595,922.5 1,801,973.7 18,453.0 1,820,426.7 224,503.9

The transition to a smaller, right-sized CRP will be easier for producers and more 

cost-effective for taxpayers if better land can quickly exit the CRP, highly erodible 

land remains in the program and CRP continues to attract additional, highly environmentally sensitive acres into the program. The large number of contracts expiring in 2012–2014 provides an opportunity to manage such a transition successfully. 

CRP Land Quality 

In theory, land currently enrolled in the CRP is all marginal land susceptible to 

wind or water erosion. However, during the early years of CRP enrollments, whole 

farms and whole fields were enrolled, which brought in non-highly erodible land and 

high-quality land. The most recent assessment of the capability and classification 

of this property is included in the 2007 Natural Resources Inventory (NRI) conducted by USDA’s Natural Resources Conservation Service (NRCS). The assessment 

1804

28 National Soil Survey Handbook Part 622, Natural Resources Conservation Service website. 

Accessed 17 September 2011. ( http://soils.usda.gov/technicalhandbook/contents/part622.html) 29 United States Department of Agriculture, Natural Resources Conservation Services, National Resources Inventory, 2007. 

provides an inventory of ‘‘prime farmland’’ (land capability class I or II and some 

III) by land use. (See the definitions in Appendix A.) NRI data sets are estimates, 

and with recent trends on CRP expirations and reenrollments, the number of acres 

of high-quality land enrolled in the program likely has decreased since this data was 

compiled. 

The CRP originally was designed as a dual-purpose program—to remove acreage 

from production, reducing oversupplies of commodities at that time, and to encourage conservation practices that would reduce erosion on marginal land. Toward 

those ends, higher priority for participation in CRP is given to land classified as 

highly erodible on USDA’s Erodibility Index, which is defined in NRCS policy as EI 

= [(R)ainfall factor × (K) Soil Erodibility factor × (LS) Length-Slope factor] ÷ by T. 

This is somewhat comparable to the eight land classes identified by NRCS. The first 

four classes categorize arable land, while the remaining four identify land suitable 

for pasture, range, woodland, grazing, wildlife, recreation and aesthetic purposes. 

(See Appendix A for details on land classifications.) 

The best soils are identified as ‘‘prime farmland,’’ which NRCS defines as ‘‘land 

that has the best combination of physical and chemical characteristics for producing 

food feed, forage, fiber, and oilseed crops and that is available for these uses. It has 

the combination of soil properties, growing season and moisture supply needed to 

produce sustained high yields of crops in an economic manner if it is treated and 

managed according to acceptable farming methods. Generally, prime farmland has 

an adequate and dependable water supply from precipitation or irrigation, a favorable temperature and growing season, an acceptable level of acidity or alkalinity, an 

acceptable content of salt or sodium, and few or no rocks. Its soils are permeable to 

water and air. Prime farmland is not excessively eroded or saturated with water for 

long periods of time, and it either does not flood frequently during the growing season or is protected from flooding.’’ Other considerations in determining prime farmland include land use, frequency of flooding, irrigation, depth to the water table and 

wind erodibility.28

The chart that follows aggregates the land capability classes by current land use 

from the NRI. The vast majority of the nation’s most productive, quality farmland 

consists of Land Capability Class I, II or III soils. A similar majority of CRP land 

is also in one of these three land capability classes, implying that it could be 

brought from the reserve, since market conditions are calling for it, and returned 

to working lands crop production while utilizing the appropriate conservation tools 

and techniques.

National Land Use by Soils Capability Class (Acres) 29

Class Cropland CRP 

Land Pastureland Rangeland Forest Land 

Other 

Rural 

Land 

Total 

Rural 

Land 

I 25,264,700 194,900 1,832,600 515,800 1,933,400 732,200 30,473,600 

II c 14,013,100 980,900 568,200 2,536,400 142,000 396,900 18,637,500 

II e 79,603,600 4,163,800 19,016,100 9,812,500 26,909,400 4,227,100 143,732,500 

II s 14,612,600 248,200 1,671,500 909,500 3,640,900 500,100 21,582,800 

II w 58,611,500 1,514,700 10,474,800 4,123,700 18,804,100 1,982,700 95,511,500

Total II 166,840,800 6,907,600 31,730,600 17,382,100 49,496,400 7,106,800 279,464,300

III c 2,827,300 783,200 297,100 1,863,000 46,200 121,400 5,938,200 

III e 68,451,800 11,862,400 26,881,700 40,344,600 34,198,800 3,451,200 185,190,500 

III s 9,228,400 745,800 3,030,900 1,908,300 8,684,200 767,800 24,365,400 

III w 27,311,900 839,600 7,308,200 3,324,600 20,583,600 1,857,800 61,225,700

Total III 107,819,400 14,231,000 37,517,900 47,440,500 63,512,800 6,198,200 276,719,800

IV c 286,600 25,900 64,600 1,661,700 258,200 69,200 2,366,200 

IV e 26,871,600 6,988,700 14,348,900 48,553,100 33,351,500 2,092,000 132,205,800 

IV s 5,581,200 514,100 3,443,500 4,163,800 11,043,200 775,200 25,521,000 

IV w 5,776,400 277,100 3,929,100 3,476,000 16,219,100 972,200 30,649,900

Total IV 38,515,800 7,805,800 21,786,100 57,854,600 60,872,000 3,908,600 190,742,900

V s 50,200 4,300 21,600 106,800 177,600 37,900 398,400 

V w 2,530,200 131,200 3,508,400 5,187,400 18,751,500 1,652,700 31,761,400

Total V 2,580,400 135,500 3,530,000 5,294,200 18,929,100 1,690,600 32,159,800

1805

30 United States Department of Agriculture, Natural Resources Conservation Services, National Resources Inventory, 2007. 

The 2007 NRI indicates that in some states, significant acreage of prime farmland 

was in the CRP at that time, along with pastureland and rangeland. This is land 

that could be responsibly farmed using current technologies, and agronomic and environmental practices (such as no-till) to control erosion or address other limitations, 

such as water availability. Nationally, 202,425,600 acres of prime farmland are 

being cropped. In addition, 8,768,000 prime farmland acres were enrolled in CRP 

as of the 2007 NRI report; 37,237,400 acres were in pastureland; and 20,126,700 

acres of prime farmland were considered rangeland. 

In the 30 states with the largest CRP enrollments, some 169.9 million acres of 

prime land were actively being farmed. In addition, there were more than 8.5 million acres in the CRP in these 30 states, 34.2 million acres in pastureland, and 20 

million acres in rangeland. Current prices for grains, fiber, feed and forage likely 

will incentivize more intensive production from all these acres. In fact, the 2007 NRI 

data indicate that two states—Texas and Kansas—each had more than 1 million 

acres of prime farmland enrolled in CRP. Surprisingly, of the 8.7 million acres of 

prime farmland idled in the CRP nationwide as of the 2007 NRI, more than 8.5 million acres were in the 30 largest CRP enrollment states. Good-quality land currently 

in CRP is highly concentrated in seven states: Kansas, Minnesota, Mississippi, Missouri, North Dakota, Oklahoma and Texas. 

The 2012 Farm Bill offers the opportunity to reexamine the CRP and determine 

ways to target it more directly to meet conservation objectives. Modifying the program to increase the emphasis on environmental protection of the most sensitive 

acres can serve both budgetary and conservation objectives, while freeing prime 

farmland to meet increased production needs.

Prime Farmland Cover Use by State for 30 Largest CRP States (Acres) 30

Cropland CRP 

Land Pastureland Rangeland Forest Land 

Other 

Rural 

Land 

Total 

Rural 

Land 

Alabama 1,499,200 253,900 1,528,200 2,000 3,510,000 150,300 6,943,600 

Arkansas 6,176,900 87,000 2,109,500 6,300 4,362,100 165,100 12,961,800 

Colorado 1,495,200 13,800 108,500 18,000 — 7,100 1,642,600 

Georgia 2,376,300 165,700 1,098,100 — 3,538,700 135,400 7,314,200 

Idaho 2,688,400 133,800 210,300 62,400 26,800 27,600 3,149,300 

Illinois 1,853,600 292,500 795,500 — 796,700 345,600 20,753,900 

Indiana 10,742,500 105,000 823,700 — 838,000 282,300 12,791,500 

Iowa 16,421,600 294,900 900,000 — 398,700 469,100 18,484,300 

Kansas 16,144,500 1,080,100 1,395,400 3,964,100 505,500 319,000 23,408,600 

Kentucky 3,076,000 148,200 1,461,100 — 684,400 160,800 5,530,500 

Louisiana 4,603,800 160,500 1,731,700 20,100 5,184,600 190,400 11,891,100 

Michigan 4,994,100 95,000 691,400 — 1,469,800 272,300 7,522,600 

Minnesota 15,100,000 596,700 1,324,600 — 2,992,900 581,200 20,595,400 

Mississippi 3,620,700 487,300 1,528,400 — 4,247,000 145,400 10,028,800 

Missouri 8,964,700 493,300 2,898,400 40,900 1,477,100 197,900 14,072,300 

Montana 795,300 — 104,500 56,200 1,100 20,000 977,100 

Nebraska 10,549,100 222,500 438,100 715,100 102,200 350,000 12,377,000 

New Mexico 109,000 11,000 16,600 — — 1,100 137,700 

N. Dakota 9,780,700 875,600 141,600 515,800 72,800 301,300 11,687,800 

Ohio 8,751,500 162,300 794,700 — 1,300,600 270,000 11,281,100 

Oklahoma 6,292,000 416,500 3,779,500 2,750,100 858,900 160,400 14,257,400 

Oregon 2,096,500 181,500 436,000 312,500 272,000 128,200 3,426,700 

Pennsylvania 1,731,100 10,100 428,100 — 1,394,300 149,300 3,712,900 

S. Dakota 5,202,600 277,300 290,500 488,800 16,700 222,200 6,498,100 

Tennessee 2,480,000 105,100 1,691,400 — 1,357,000 192,100 5,825,600 

Texas 14,699,200 1,540,200 6,180,700 11,004,300 2,205,800 510,500 36,140,700 

Utah 589,500 44,300 111,800 3,400 300 4,100 753,400 

Washington 1,297,000 87,100 243,800 42,800 470,000 94,500 2,237,200 

Wisconsin 5,501,300 157,800 944,000 — 1,794,400 279,400 8,676,900 

Wyoming 309,200 4,400 3,200 12,000 — 400 329,200 

Top 30 169,941,500 8,503,400 34,209,300 20,014,800 39,878,400 6,133,000 295,409,300 

U.S. 202,425,600 8,768,000 37,237,400 20,126,700 50,170,500 6,930,600 325,658,800

As stated earlier, much of the prime land contained within CRP is concentrated 

in the Corn Belt, and Plains States. It appears that significant acreage of Cass I, 

II and III land needs to be rotated out of the program, to be replaced by highly erodible land from Class IV through VIII There is clearly a need to continue with a vibrant CRP; however, it needs to be better targeted and to be enrolling the most 

highly erodible land and protecting wetlands.

1806

31Graph provided upon request by Natural Resource Inventory. According to USDA the farming regions are as follows. The Appalachian states include North Carolina, Tennessee, Kentucky, 

Virginia and West Virginia. The Corn Belt includes Iowa Missouri, Indiana, Illinois and Ohio. 

The Delta States are Louisiana, Mississippi and Arkansas. The Lake States are Minnesota, Wisconsin, and Michigan. Mountain Region includes Idaho, Montana, Wyoming, Nevada, Colorado, 

Utah, Arizona and New Mexico. The Northeast region includes all states North and East of 

Pennsylvania and Maryland. The Northern Plains are North Dakota, South Dakota, Nebraska 

and Kansas. Pacific is Washington, Oregon and California. Southeast is Florida, Georgia, Alabama and South Carolina. The Southeastern Plains is Texas and Oklahoma. 

Land Capability Class by Farm Production Region for Highly Erodible and NonHighly Erodible Land in CRP 31

Farm Production Region 

Land Capability Class, NonHighly Erodible Land (EI<8) Land Capability Class, Highly 

Erodible Land (EI≥8) 

Total 

CRP 

I, II & III 

IV, V, VI, 

VII & 

VIII 

Total I, II & III 

IV, V, VI, 

VII & 

VIII 

Total 

Appalachian 163,900 — 175,400 297,000 197,300 494,300 669,700 

Corn Belt 1,157,100 87,500 1,244,600 1,897,400 848,400 2,745,800 3,990,400 

Delta States 586,000 123,000 709,000 313,500 140,400 453,900 1,162,900 

Lake States 1,180,800 225,400 1,406,200 295,300 485,200 780,500 2,186,700 

Mountain 1,335,900 651,700 1,987,600 2,387,000 3,256,300 5,643,300 7,630,900 

Northeast 42,000 — 48,900 62,700 — 92,200 141,100 

Northern Plains 4,242,300 598,200 4,840,500 2,053,900 2,022,400 4,076,300 8,916,800 

Pacific 663,600 436,800 1,100,400 375,900 584,800 960,700 2,061,100 

Southeast 603,300 84,500 687,800 218,300 104,200 322,500 1,010,300 

Southern Plains 1,608,800 — 1,689,200 1,848,800 1,542,300 3,391,100 5,080,300

Total 11,583,700 2,305,900 13,889,600 9,749,800 9,210,800 18,960,600 32,850,200

Another way to analyze the land quality question in CRP is to examine the quantity of non- highly erodible land (an erodibility index of less than 8) and the amount 

of highly erodible land (an erodibility index of 8 or greater) enrolled in the reserve 

program. The total number of acres of Non-Highly erodible land enrolled in CRP 

from state-to-state varies significantly, and is best analyzed over the past 5 years 

for which data is available. As the data table on the following page indicates, the 

amount of non-highly erodible land enrolled by state ranges from as low as 0.1 percent to 70 percent. While it should be noted that filter strips and other continuous 

enrollments will contain non-highly erodible property, it is unlikely that accounts 

for the quantity of acreage in states where non-highly-erodible land exceeds 10 percent of the total state enrollments. Additional data tables on CRP Erodibility Index 

from recent signups can be found in Appendix D.

1807

CRP Acres with an Erodibility Index (EI) Rating of Less Than Eight in the Top 30 States Compared to Percentage of States’ Total CRP Acres 

2006 2007 2008 2009 2010

Acres Percent of Total Acres Percent of Total Acres Percent of Total Acres Percent of Total Acres Percent of Total 

Alabama 84,795 17.2% 84,593 17.1% 102,204 22% 101,954 22.8% 60,165 14.4% Arkansas 77,216 35% 80,443 33.8% 139,592 59.7% 154,314 62% 54,358 21.8% Colorado 70,196 2.9% 74,407 3% 107,888 4.4% 113,800 4.7% 55,029 2.7% Georgia 146,075 47.6% 146,948 47% 190,256 57.6% 198,828 59.4% 128,921 40.1% Idaho 266,227 33.2% 266,480 32.3% 277,845 36% 273,943 36.2% 221,692 30.9% Illinois 325,276 30.9% 324,902 29.8% 412,487 38.8% 416,550 40% 42,025 4.1% Indiana 104,208 33.8% 105,945 33.4% 136,813 46.3% 145,327 49.9% 43,450 15.1% Iowa 390,996 19.9% 387,316 19.6% 523,918 28.9% 550,633 32.3% 68,068 4.1% Kansas 615,195 19.9% 682,228 20.9% 804,102 25.7% 807,153 26% 574,927 20.6% Kentucky 37,099 10.4% 36,981 10.3% 62,866 16.3% 70,990 18.2% 3,063 0.8% Louisiana 138,809 48.1% 138,206 44.6% 196,445 64.5% 198,193 64.6% 127,320 40% Michigan 187,899 69.1% 187,807 68% 200,756 77.3% 187,183 77.9% 98,649 42.3% Minnesota 1,416,344 78.8% 1434,056 78.3% 1,493,019 84% 1,441,395 85% 976,401 59.4% Mississippi 266,499 28% 261,777 27.4% 340,309 38% 344,573 38.9% 158,523 18.4% Missouri 102,237 6.4% 101,267 6.3% 148,926 10.2% 158,361 11.1% 49,934 3.5% Montana 164,962 4.7% 165,795 4.7% 210,045 6.3% 217,289 6.7% 135,842 4.4% Nebraska 117,855 9.1% 124,571 9.2% 196,652 75.9% 214,937 17.8% 71,999 6.5% New Mexico 1,003 0.1% 1,003 0.1% 6,463 1.1% 7,249 1.2% 1,968 0.3% N. Dakota 1,819,440 53.9% 1,829,484 53.9% 1,664,141 55.9% 1,607,860 56.3% 1,287,426 47.3% Ohio 118,713 36% 123,300 34% 211,420 60% 215,554 62% 66,454 19.3% Oklahoma 127,180 12% 144,643 13.4% 141,049 14.3% 137,413 14.3% 116,075 13.4% Oregon 37,189 6.8% 40,157 7% 71,043 12% 70,353 12.5% 27,318 4.9% Pennsylvania 6,340 2.8% 6,194 2.6% 29,870 13% 30,626 13.7% 169 <.1% S. Dakota 1,030,812 68% 1,046,222 67% 923,723 70.9% 881,448 70.5% 528,591 47.4% Tennessee 17,220 6.2% 17,156 6.1% 25,847 11% 26,406 11.7% 5,374 2.4% Texas 971,047 24% 990,895 24.3% 1,015,263 25.7% 1,013,832 26.3% 740,132 22.3% Utah 137,026 66.6% 139,899 67% 132,446 66.5% 129,958 66.7% 96,761 66.5% Washington 667,610 45.3% 673,341 43.2% 693,420 45% 663,641 43.8% 569,222 39.4% Wisconsin 148,886 24.1% 143,318 23.6% 149,489 28.4% 136,182 29.6% 73,134 17% Wyoming 3,828 1.3% 3,775 1.3% 7,218 2.6% 7,149 2.6% 182 <.1%Top 30 Total 9,598,182 9,763,109 10,615,515 10,523,094 6,383,172U.S. Total 9,877,054 27.4% 1,0039,743 27.3% 10,982,134 31.7 10,890,636 32.2% 6,498,629 20.7%

1808

32Sexton, Steven and Zilberman, David. 2010. Agricultural Biotechnology Can Help Mitigate 

Climate Change. Agricultural and Resource Economics Update. Giannini Foundation of Agricultural Economics, University of California, 14 (Nov/Dec), no. 2:1. 33Fawcett, Richard and Towery, Dan. No date given. Conservation Tillage and Plant Biotechnology: How New Technologies Can Improve the Environment by Reducing the Need to Plow,

11. Conservation Technology Information Center at Purdue University. Accessed 29 June 2011. 

(www.ctic.purdue.edu) 34 Ibid., 2.

It is clear that greater scrutiny is needed by policy makers and conservationists 

on the matter of quality lands in the CRP program. Neither a land classification 

system nor an Erodibility Index fully addresses the questions of land quality; however, they are information points that allow for informed decisions. A new philosophy of a vibrant CRP that minimizes unnecessary idling of quality land is needed; 

the existing tools of land classifications, soils mapping and the EI can work together 

to properly inform that system. 

The Senate Committee-passed version has furthered the debate on land quality 

and use by merging the old rental aspects of the Grassland Reserve Program into 

the CRP. The current farm bill process is leaning toward a CRP that is friendlier 

to livestock production. The Senate package has eased restrictions on haying and 

grazing of CRP—importantly, penalties for incidental grazing of filter and buffer 

strips when gazing crop aftermath have been eased. 

The Senate version of the farm bill also calls for 1.5 million acres of CRP or CRPeligible grassland to be enrolled in a new sub-program that will fully allow haying 

and grazing on an annual basis. (The contract payment will be about 75 percent of 

the normal CRP payment rate.) Details on this offering remain vague at this time, 

although USDA would be expected to offer an annual signup. While existing CRP 

land expiring from the program would be a priority, all grassland would be eligible. 

This may prove to be an important program for preservation of existing grassland 

resources, but will greatly complicate the management challenge of CRP. Most significantly, this marks the continued transition of the CRP from a strict land-idling 

program to one that supports working lands conservation. 

Technological Advances in Conservation 

Conservation technology also must be factored into the mix. By and large, technological advances that have benefited production agriculture over the past 10 to 15 

years have been interwoven and interlinked. For example, with increasing use of insect-resistant and herbicide-tolerant seed varieties comes a corresponding increase 

in the use of conservation tillage, particularly no-till. No-till acres more than doubled around the world from 1999 to 2009, rising particularly in Brazil and Argentina, which fall next in line behind the U.S. in use of no-till.32 In addition, no-till 

cuts fuel consumption by as much as 5.7 gallons per cultivated acre.33 The positive 

water-quality benefits of this technological advancement rarely are recognized. In 

addition, reduced tillage—and no-till in particular—helps prevent soil erosion, improves moisture and nutrient content in the soil and decreases the likelihood of 

flooding. The ongoing practice of no-till leaves more crop residue on the land to 

eventually help return the soil to near-native condition.34 In fact, technological improvements now make it possible to manage lands to increase soil quality and reduce erosion, improve water quality and sequester carbon while producing food and 

feed. The net result of modern agriculture techniques combine to make U.S. production more sustainable than it was two and half decades ago when CRP was established. 

TABLE 1

Estimated planted acreage with no tillage operations for eight U.S. crops 

Crop 

No tillage

operations 

(most recent 

crop survey 

year) 

No tillage

operations, 

2009

(estimate) 1

Planted acres, 

2009

Estimated 

planted acres 

with no tillage 

operations, 

2009 (column 2 

or 3 × column 

4) 

—Percent of crop acres— —Million acres—

Barley 27.6

(2003) 

36.6 3.6 1.0–1.3

1809

TABLE 1—CONTINUED

Estimated planted acreage with no tillage operations for eight U.S. crops 

Crop 

No tillage

operations 

(most recent 

crop survey 

year) 

No tillage

operations, 

2009

(estimate) 1

Planted acres, 

2009

Estimated 

planted acres 

with no tillage 

operations, 

2009 (column 2 

or 3 × column 

4) 

Corn 23.5

(2005) 

29.5 86.5 20.3–25.5

Cotton 20.7

(2007) 

23.7 9.1 1.9–2.2

Oats 13.8

(2005) 

19.8 3.4 0.5–0.7

Rice 11.8

(2006) 

16.3 3.1 0.4–0.5

Sorghum 25.0

(2003) 

34.0 6.6 1.6–2.3

Soybeans 45.3

(2006) 

49.8 77.4 35.1–38.5

Wheat 21.9

(2004) 

29.4 59.1 12.9–17.4

Total all eight crops 35.52 248.9 73.7–88.3

1 Assuming 1.5 percentage-point growth per year. 

2 Average, weighted by 2009 acres. 

Note: See figure 1 for no-tillage definition. 

Source: USDA, Economic Research Service analysis of Agricultural Resource Management 

Survey data. Crop acreage data obtained from USDA, National Agricultural Statistics Service, 

at: http://www.nass.usda.gov/DatalandlStatistics/QuicklStats/index.asp/. 

As the above table shows, an ERS analysis of no-till and conservation tillage indicates that steady, annual increases in reduced tillage are occurring nationally, with 

significant acreages of all crops now devoted to either no-till or some version of reduced tillage. In fact, the ARMS data may understate the extent of residue management. What analysts are observing from the CEAP survey data was that farmers 

will report conservation tillage as conventional tillage because it is conventionally 

used. NRCS discovered this when it looked at the rotations and the operations used 

in production, which also was provided by the farmer. In essence, to many farmers, 

conservation tillage is the new conventional tillage. 

Battling for Acres 

As the world’s food needs increase, the battle for acres translates quickly into increasing rental rates for the land base on which a producer can plant crops. The 

decisions made by Congress on CRP and other land-use policies, compounded by decisions made by USDA policymakers, will determine the average CRP rental rate 

at the county, state and national level. A rough estimate of potential CRP rental 

rates can be made by comparing a state’s NASS average cropland rental rates to 

the average CRP rental rate of the FSA. 

Obviously, productivity and rainfall lead to rather dramatic differences in rental 

rates within crop-producing regions. However, analysis of the data shows that some 

states historically have operated the CRP with a statewide rental rate very close 

to the NASS average, while other states have operated with a rate only a few dollars less than the NASS average. Recent escalation of rental rates has widened the 

gap between NASS-observed rental levels and general CRP rates. However, analysis 

shows that some states have attempted to increase CRP rental rates through the 

general sign-up process, and that many states are using the continuous-enrollment 

process to routinely meet or exceed county average rental rates. This suggests that 

these determinations are influenced strongly by decisions by state FSA offices and 

committees. 

Except for the most environmentally sensitive acreage, it is important to avoid a 

situation where government attempts to outbid the market for quality farmland. 

Limiting CRP rental rate increases and reducing CRP acreage could help prevent 

this problem. 

1810

35 United States Department of Agriculture (USDA) Farm Service Agency, CRP enrollments 

and rental payments by state, 1986–2011. http://www.fsa.usda.gov/FSA/

webapp?area=home&subject=copr&topic=rns-css;

USDA National Agricultural Statistics Service, Quick Stats 2.0. http://

quickstats.nass.usda.gov/. Accessed February 2012. Under Program: select Survey, under Sector: select Cropland—Expense, measured in $/Acre. 

Percentage Increases in CRP Rental Rates for the 5 Highest-Paying CRP 

States Compared to NASS Survey Data

Examining the CRP rental rates for the five highest-paying CRP rental rate states 

shows the extent to which rental rates are increasing rapidly. Further, in the case 

of two of the five states shown above with the highest rental rates during the period 

2007–2011, CRP rate increases were actually greater than the statewide NASS 

trend.

Average Rental Rates for the 30 Largest CRP States for ALL CRP and Cropland ($/Acre) 35

2007 2008 2009 2010 2011

CRP NASS CRP NASS CRP NASS CRP NASS CRP NASS 

Alabama 45.12 43.00 45.21 43.00 45.25 48.00 45.33 48.00 46.18 51.00 

Arkansas 50.57 74.00 51.91 79.50 53.37 82.50 54.78 86.00 61.43 87.50 

Colorado 31.34 37.50 32.01 41.00 32.19 62.50 32.21 62.50 33.49 65.00 

Georgia 39.89 60.00 40.23 65.00 42.81 76.50 43.49 80.00 48.53 86.50 

Idaho 39.1 93.00 41.12 98.50 41.75 130.00 41.6 132.00 47.25 138.00 

Illinois 102.33 141.00 103.36 163.00 105.94 163.00 107.74 169.00 119.37 183.00

Indiana 91.26 120.00 92.34 135.00 97.16 139.00 101.82 141.00 113.36 152.00 

Iowa 105.34 150.00 106.16 170.00 110.87 175.00 115.8 176.00 131.41 196.00 

Kansas 39.07 45.00 39.26 47.50 39.35 48.00 39.54 50.00 40.55 50.50 

Kentucky 75.12 82.00 76.3 78.50 97.82 93.50 103.63 103.00 116.08 105.00 

Louisiana 50.53 69.00 52.35 73.00 53.15 73.50 53.69 74.50 62.99 74.00 

Michigan 74.35 73.00 75.88 78.00 79.16 81.00 82.92 80.50 90.11 90.00 

Minnesota 59.56 94.00 60.28 109.00 61.74 113.00 64.23 121.00 69.81 135.00 

Mississippi 42.12 71.50 42.65 80.50 44.37 82.50 44.8 87.50 50.65 94.00 

Missouri 66.49 N/A 66.97 83.00 69.21 94.50 70.09 98.50 79.32 106.00 

Montana 33.66 23.00 33.62 24.50 32.9 28.50 32.71 31.00 31.87 30.00 

Nebraska 56.99 103.00 56.94 121.00 56.98 128.00 57.55 135.00 62.42 150.00 

New Mexico 31.45 N/A 31.46 48.00 32.7 40.50 32.76 50.00 35.57 67.00 

N. Dakota 33.15 41.00 33.25 42.50 33.72 45.50 34.07 46.50 37.34 51.50 

Ohio 96.41 91.00 102.08 100.00 109.16 101.00 112.78 101.00 121.45 110.00 

Oklahoma 32.58 N/A 32.81 29.50 32.97 29.50 32.94 29.50 33.83 29.50 

Oregon 49.07 97.00 49.41 107.00 49.35 141.00 49.45 137.00 54.53 134.00 

Pennsylvania 87.27 39.00 88.6 55.00 96.84 55.00 100.45 56.50 104.33 58.50 

S. Dakota 41.76 N/A 42.26 65.00 44.41 72.50 45.98 72.50 59.4 79.00 

Tennessee 58.84 67.00 59.33 68.50 61.32 73.00 62.18 78.00 71.75 79.50 

Texas 35.28 29.00 35.31 31.50 35.4 34.50 35.39 36.00 36.54 38.00

Utah 30.34 N/A 30.36 42.00 30.44 52.00 30.43 49.50 32.18 58.50 

Washington 53.03 N/A 53.73 111.00 53.82 171.00 54.39 176.00 56.17 176.00 

Wisconsin 69.62 72.00 70.37 85.00 73.23 87.00 75.59 92.00 83.22 99.00 

Wyoming 27.59 N/A 27.62 34.50 27.65 53.50 27.7 47.00 26.84 58.00

Top 30 Avg. 54.97 73.75 55.77 76.98 58.17 85.83 59.53 88.23 65.27 94.40

U.S. Average 48.95 77.50 49.47 85.50 50.76 99.00 51.5 102.00 57.21 111.00


112301166.eps
1811

36 United States Department of Agriculture (USDA) Farm Service Agency, CRP enrollments 

and rental payments by state, 1986–2011. http://www.fsa.usda.gov/FSA/

webapp?area=home&subject=copr&topic=rns-css;

USDA National Agricultural Statistics Service, Quick Stats 2.0. http://

quickstats.nass.usda.gov/. Accessed February 2012. Under Program: select Survey, under Sector: select Cropland—Expense, measured in $/Acre. 

Average Rental Rates for the 30 Largest CRP States for GENERAL CRP Sign-Up and Cropland ($/

acre) 36

2007 2008 2009 2010 2011 2012

NASS CRP NASS CRP NASS CRP NASS CRP NASS CRP NASS CRP 

Alabama 43.00 44.84 43.00 44.75 48.00 44.77 48.00 45.28 51.00 45.52 — 45.57 

Arkansas 74.00 43.61 79.50 44.31 82.50 44.31 86.00 47.85 87.50 49.33 — 49.32 

Colorado 37.50 31.46 41.00 31.50 62.50 31.47 62.50 31.98 65.00 32.61 — 32.62 

Georgia 60.00 39.95 65.00 40.46 76.50 40.56 80.00 42.35 86.50 44.09 — 44.09 

Idaho 93.00 38.99 98.50 39.24 130.00 39.31 132.00 41.60 138.00 44.48 — 44.45 

Illinois 141.00 80.35 163.00 81.50 163.00 82.01 169.00 86.91 183.00 90.08 — 90.09 

Indiana 120.00 75.82 135.00 78.51 139.00 79.69 141.00 83.41 152.00 85.96 — 86.00 

Iowa 150.00 91.47 170.00 95.61 175.00 98.54 176.00 108.28 196.00 111.06 — 110.97 

Kansas 45.00 38.69 47.50 38.72 48.00 38.69 50.00 39.10 50.50 39.44 — 39.43 

Kentucky 82.00 69.20 78.50 70.27 93.50 70.51 103.00 75.75 105.00 80.19 — 80.10 

Louisiana 69.00 45.66 73.00 46.18 73.50 46.27 74.50 47.28 74.00 47.98 — 48.00 

Michigan 73.00 57.98 78.00 59.75 81.00 61.61 80.50 64.42 90.00 66.21 — 66.21 

Minnesota 94.00 51.98 109.00 52.54 113.00 53.85 121.00 55.25 135.00 56.86 — 56.78 

Mississippi 71.50 38.52 80.50 39.82 82.50 39.94 87.50 42.08 94.00 44.37 — 44.38 

Missouri N/A 65.27 83.00 66.96 94.50 67.24 98.50 71.08 106.00 76.69 — 76.63 

Montana 23.00 33.27 24.50 32.82 28.50 32.62 31.00 31.98 30.00 31.75 — 31.76 

Nebraska 103.00 52.66 121.00 52.23 128.00 51.82 135.00 54.21 150.00 55.22 — 55.09 

New Mexico N/A 31.35 48.00 32.60 40.50 32.66 50.00 33.45 67.00 35.46 — 35.42 

N. Dakota 41.00 32.77 42.50 33.08 45.50 33.10 46.50 33.68 51.50 34.24 — 34.24 

Ohio 91.00 73.39 100.00 75.70 101.00 76.19 101.00 77.56 110.00 78.33 — 78.29 

Oklahoma N/A 32.67 29.50 32.87 29.50 32.84 29.50 33.44 29.50 33.68 — 33.67 

Oregon 97.00 47.23 107.00 46.88 141.00 46.93 137.00 49.29 134.00 51.85 — 51.85 

Pennsylvania 39.00 40.37 55.00 44.19 55.00 46.20 56.50 47.84 58.50 48.36 — 48.37 

S. Dakota N/A 38.51 65.00 39.26 72.50 39.00 72.50 42.93 79.00 44.52 — 44.43 

Tennessee 67.00 57.31 68.50 58.90 73.00 59.31 78.00 63.76 79.50 68.60 — 68.61 

Texas 29.00 35.28 31.50 35.36 34.50 35.36 36.00 35.89 38.00 36.32 — 36.33 

Utah N/A 30.30 42.00 30.34 52.00 30.33 49.50 31.02 58.50 32.17 — 32.18 

Washington N/A 51.67 111.00 51.72 171.00 52.30 176.00 53.53 176.00 53.94 — 53.94 

Wisconsin 72.00 65.85 85.00 68.07 87.00 69.44 92.00 72.99 99.00 75.89 — 75.83 

Wyoming N/A 27.16 34.50 27.14 53.50 27.18 47.00 26.58 58.00 26.30 — 26.30

Top 30 Total 73.75 48.79 76.98 49.71 85.83 50.12 88.23 52.36 94.40 54.05 — 54.03

U.S. Total 77.50 43.81 85.50 44.07 99.00 44.00 102.00 45.93 111.00 47.33 — 47.31

CRP General Sign-ups 

There is a downward trend in CRP enrollments and reenrollments because of 

market incentives for increased production. There is a clear need for CRP policy and 

management strategies that will encourage good, high-quality land to exit CRP. 

USDA will need to closely monitor state and local decisions to facilitate this transition. 

As witnessed in the prior section on rental rates, state efforts by FSA or other 

groups will influence CRP rental rates greatly. By statute, FSA is directed not to 

exceed local rental rates because of concerns raised in the CRP’s early years about 

competition for land. However, until recently, Texas still was offering CRP rates 

higher than the state average rental rate. The market clearly will work and govern 

which land comes back into production, unless it is outbid by the government. In 

some states, FSA management scrutiny may be warranted to ensure that bonus incentive payments and continuous enrollments are not used to escalate CRP rental 

rates on high- quality farmland that should stay in production. Clear USDA policy 

direction to discourage enrollment of high-quality land or restrictions on such enrollments appears to be necessary. 

Parties interested in general sign-up management in the future should track decisions on several key issues:

• Rental rates.

• National and county caps on CRP enrollments.

• Limitations on use of CRP land (haying, grazing and biomass).

• State enhancements for the Conservation Reserve Enhancement Program 

(CREP).

• Re-enrollment policy on existing CRP contracts.

Most of these factors are determined by management decisions at USDA rather 

than legislative direction provided by Congress.

1812

37 United States Department of Agriculture, Farm Service Agency, 2007, 2008 and 2009 come 

from the annual summaries and 2010 and 2011 come from the December monthly summaries 

for each year and 2012 comes from the April monthly summary. http://www.fsa.usda.gov/FSA/

webapp?area=home&subject=copr&topic=rns-css. 38 United States Department of Agriculture, Farm Service Agency, 2007, 2008 and 2009 come 

from the annual summaries and 2010 and 2011 come from the December monthly summaries 

for each year and 2012 comes from the April monthly summary. http://www.fsa.usda.gov/FSA/

webapp?area=home&subject=copr&topic=rns-css. 

General Sign-up CRP Acres for 30 Largest CRP States 37

2007 2008 2009 2010 2011 2012

Alabama 456,215 421,476 402,247 349,445 311,227 310,284 

Arkansas 156,252 144,929 142,619 123,377 116,215 115,632 

Colorado 2,446,256 2,408,444 2,386,172 2,053,180 2,133,123 2,130,490 

Georgia 300,210 276,796 270,201 227,464 219,470 219,208 

Idaho 797,221 740,461 724,928 615,139 571,421 571,789 

Illinois 664,822 626,853 595,394 575,598 558,151 556,503 

Indiana 212,809 188,725 173,387 164,209 155,430 154,969 

Iowa 1,427,122 1,262,873 1,132,364 1,065,806 1,042,087 1,036,018 

Kansas 3,166,748 3,027,315 2,989,950 2,638,732 2,371,656 2,362,233 

Kentucky 284,934 242,731 226,646 197,998 172,096 170,811 

Louisiana 226,651 218,459 216,535 198,219 191,833 191,505 

Michigan 191,660 172,530 150,319 134,492 126,611 125,903 

Minnesota 1,453,624 1,383,290 1,281,017 1,189,519 1,091,009 1,085,964 

Mississippi 780,437 712,364 696,643 639,166 607,635 605,712 

Missouri 1,463,885 1,303,880 1,256,536 1,192,806 1,117,757 1,113,130 

Montana 3,316,018 3,173,339 3,083,687 2,762,928 2,375,820 2,366,399 

Nebraska 1,197,999 1,089,976 1,042,080 919,714 828,630 823,083 

New Mexico 585,320 564,771 561,250 448,542 414,457 412,018 

N. Dakota 3,211,448 2,792,402 2,646,407 2,347,868 2,053,462 2,047,423 

Ohio 222,392 199,104 188,062 170,631 162,380 161,294 

Oklahoma 1,059,471 972,780 950,499 859,552 814,130 812,029 

Oregon 526,538 517,287 512,893 501,479 494,671 494,441 

Pennsylvania 51,445 29,791 19,529 13,828 12,719 12,656 

S. Dakota 1,342,533 1,076,715 999,684 778,912 674,999 675,573 

Tennessee 255,000 210,713 199,935 177,782 162,299 160,967 

Texas 4,019,472 3,882,469 3,794,317 3,390,273 3,240,869 3,228,260 

Utah 208,376 198,663 194,518 174,663 178,631 178,172 

Washington 166,727 1,424,667 1,402,849 1,324,449 1,322,143 1,321,276 

Wisconsin 540,826 459,466 391,052 333,089 301,412 299,456 

Wyoming 277,829 269,519 264,133 219,075 199,285 199,230

Top 30 Total 31,010,240 29,992,788 28,895,853 25,787,935 24,021,628 23,942,428

U.S. Total 32,924,523 30,541,941 29,413,441 26,229,936 24,413,074 24,335,005

Average CRP Rental Rates for General Sign-up for 30 Largest CRP States ($/acre) 38

2007 2008 2009 2010 2011 2012

Alabama 44.84 44.75 44.77 45.28 45.52 45.57 

Arkansas 43.61 44.31 44.31 47.85 49.33 49.32 

Colorado 31.46 31.50 31.47 31.98 32.61 32.62 

Georgia 39.95 40.46 40.56 42.35 44.09 44.09 

Idaho 38.99 39.24 39.31 41.60 44.48 44.45 

Illinois 80.35 81.50 82.01 86.91 90.08 90.09 

Indiana 75.82 78.51 79.69 83.41 85.96 86.00

Iowa 91.47 95.61 98.54 108.28 111.06 110.97

Kansas 38.69 38.72 38.69 39.10 39.44 39.43 

Kentucky 69.20 70.27 70.51 75.75 80.19 80.10 

Louisiana 45.66 46.18 46.27 47.28 47.98 48.00 

Michigan 57.98 59.75 61.61 64.42 66.21 66.21 

Minnesota 51.98 52.54 53.85 55.25 56.86 56.78 

Mississippi 38.52 39.82 39.94 42.08 44.37 44.38 

Missouri 65.27 66.96 67.24 71.08 76.69 76.63 

Montana 33.27 32.82 32.62 31.98 31.75 31.76 

Nebraska 52.66 52.23 51.82 54.21 55.22 55.09 

New Mexico 31.35 32.60 32.66 33.45 35.46 35.42 

N. Dakota 32.77 33.08 33.10 33.68 34.24 34.24 

Ohio 73.39 75.70 76.19 77.56 78.33 78.29 

Oklahoma 32.67 32.87 32.84 33.44 33.68 33.67 

Oregon 47.23 46.88 46.93 49.29 51.85 51.85 

Pennsylvania 40.37 44.19 46.20 47.84 48.36 48.37 

S. Dakota 38.51 39.26 39.00 42.93 44.52 44.43

Tennessee 57.31 58.90 59.31 63.76 68.60 68.61 

Texas 35.28 35.36 35.36 35.89 36.32 36.33 

Utah 30.30 30.34 30.33 31.02 32.17 32.18 

Washington 51.67 51.72 52.30 53.53 53.94 53.94 

Wisconsin 65.85 68.07 69.44 72.99 75.89 75.83 

Wyoming 27.16 27.14 27.18 26.58 26.30 26.30

Top 30 Total 48.79 49.71 50.12 52.36 54.05 54.03

1813

39 ‘‘Conservation Reserve Program Continuous Sign-up,’’ Farm Service Agency fact sheet, June 

2006. Accessed 14 September 2011. (www.fsa.usda.gov/FSA/

newsReleases?=newsroom&subject=landing&topic=pfs&newstype=detail&item=pfl20060601l

consvlenlcrpcsup06.html) 40 ‘‘The Conservation Reserve Program: 41st Signup Results,’’ Farm Service Agency, June 

2011. Accessed 7 September 2011. (www.fsa.usda.gov/Internet/FSAlFile/crpsignupresults.pdf) 41 United States Department of Agriculture, Farm Service Agency, 2007, 2008 and 2009 come 

from the annual summaries and 2010 and 2011 come from the December monthly summaries 

for each year. (http://www.fsa.usda.gov/FSA/webapp?area=home&subject=copr&topic=rns-css) 

Average CRP Rental Rates for General Sign-up for 30 Largest CRP States ($/acre) 38—

Continued

2007 2008 2009 2010 2011 2012

U.S. Total 43.81 44.07 44.00 45.93 47.33 47.31

Continuous CRP Enrollments 

In addition to periodic general sign-ups, the CRP provides for continuous sign-up 

for farmers to enroll in specific conservation practices, including Conservation Reserve Enhancement Program (CREP) and State Acres for Wildlife Enhancement 

(SAFE). Generally, these programs are targeted more at specific conservation needs. 

But their impacts need to be considered as part of overarching CRP policy for the 

future. 

Competitive bidding is not involved for Continuous CRP Enrollments, and offers 

under continuous sign-up automatically are accepted for 10 to 15 year contracts, 

provided the land and the producer meet eligibility requirements specified for CRP. 

This aspect of the program has not been directly authorized by Congress, but was 

created using administrative discretionary authorities to strategically protect highly 

valuable ecosystem services. 

Payments under continuous sign-up include rental payments, up to 50 percent 

cost-share assistance for installing conservation practices, additional financial incentives for priority conservation practices and, in some cases, signing incentive payments and conservation practice incentive payments. 

Practices eligible for continuous sign-up include: 39

• Riparian buffers.

• Wildlife habitat buffers.

• Filter strips.

• Wetland restoration.

• Grass waterways.

• Shelterbelts.

• Living snow fences.

• Contour grass strips.

• Salt tolerant vegetation.

• Shallow water areas for wildlife.

As of April 2011, CRP included 5 million acres that have been enrolled under continuous sign-up.40 Many conservation leaders have expressed concerns that adequate CRP acreage should be reserved each year to ensure that high-value, continuous enrollments can be accepted. As the continuous enrollments now are poised to 

exceed 5 million acres, it has been suggested that as much as 8 million acres may 

need to be reserved for high-priority enrollments. This will be of increased import 

as high-quality land transitions out of CRP and as a right-sized CRP attracts the 

fragile acres that will need to be retained in the program, including filter strips, 

grassed waterways and wetland filters. 

Continuous CRP Acres for the 30 Largest CRP States 41

2007 2008 2009 2010 2011

Alabama 36,333 42,235 43,606 48,980 50,006 

Arkansas 81,609 88,878 104,358 125,664 134,075 

Colorado 25,838 29,456 33,441 47,463 49,633 

Georgia 12,295 53,166 64,030 87,511 96,726 

Idaho 26,881 29,277 29,988 49,292 75,830 

Illinois 421,551 435,528 441,213 455,519 470,957 

Indiana 102,904 106,251 117,299 122,242 124,534 

Iowa 471,122 546,750 571,556 614,934 615,937 

1814

42 United States Department of Agriculture, Farm Service Agency, 2007, 2008 and 2009 come 

from the annual summaries and 2010 and 2011 come from the December monthly summaries 

for each year. (http://www.fsa.usda.gov/FSA/webapp?area=home&subject=copr&topic=rns-css) 

Continuous CRP Acres for the 30 Largest CRP States 41—Continued

2007 2008 2009 2010 2011

Kansas 91,456 97,502 108,230 129,777 164,910 

Kentucky 73,417 142,235 163,193 165,762 162,892 

Louisiana 83,197 85,935 89,966 127,525 133,483 

Michigan 84,453 86,949 89,878 93,990 95,879 

Minnesota 339,116 390,699 413,771 456,106 475,648 

Mississippi 174,682 182,550 187,914 208,025 221,790 

Missouri 129,019 149,149 163,811 173,521 176,011 

Montana 164,688 117,859 118,663 131,225 131,595 

Nebraska 139,499 143,677 162,036 174,613 177,343 

New Mexico 5,079 5,375 5,280 5,280 6,104 

N. Dakota 160,792 183,977 206,079 309,849 339,261 

Ohio 139,785 153,129 159,444 171,296 175,309 

Oklahoma 14,570 8,856 8,478 9,678 14,608 

Oregon 41,027 46,040 47,403 49,913 52,417 

Pennsylvania 178,774 199,199 203,094 207,399 191,696 

S. Dakota 181,318 225,004 249,210 374,850 428,114 

Tennessee 23,029 23,892 25,352 28,328 29,356 

Texas 54,598 55,805 52,491 72,347 126,823 

Utah 288 288 288 292 314 

Washington 112,485 112,928 111,188 108,128 166,383 

Wisconsin 65,886 66,410 68,527 70,419 70,956 

Wyoming 6,458 6,718 6,626 7,004 16,444

Top 30 Total 3,442,149 3,815,717 4,046,413 4,626,932 4,975,034

U.S. Total 3,679,667 4,070,750 4,307,811 4,893,732 5,238,823

Average Rental Rates for Continuous CRP in 30 Largest CRP States ($/acre) 42

2007 2008 2009 2010 2011

Alabama 50.07 50.35 50.58 50.28 50.29 

Arkansas 67.86 68.19 69.11 70.82 72.04 

Colorado 86.08 89.90 85.63 72.78 71.37 

Georgia 47.40 55.09 55.88 58.06 58.68 

Idaho 103.98 106.66 98.49 77.27 67.98 

Illinois 139.62 141.13 142.49 147.19 154.48 

Indiana 126.23 130.31 134.57 142.15 148.07 

Iowa 141.71 146.13 150.04 161.18 166.11 

Kansas 58.66 58.91 63.07 61.00 56.50 

Kentucky 103.93 144.89 149.67 152.75 154.03 

Louisiana 70.51 70.78 71.47 82.59 84.64 

Michigan 116.53 117.71 118.60 121.15 121.99 

Minnesota 91.42 94.36 96.44 98.99 99.55 

Mississippi 61.05 62.10 62.78 65.41 68.16 

Missouri 86.28 88.97 92.01 94.85 96.08 

Montana 40.92 35.50 35.02 34.11 34.17 

Nebraska 93.81 93.53 94.95 95.70 96.24 

New Mexico 42.08 42.13 42.32 42.32 42.95 

N. Dakota 40.94 43.22 46.13 53.30 56.69 

Ohio 147.68 152.65 155.93 159.69 161.65 

Oklahoma 43.48 43.81 43.50 43.25 42.07 

Oregon 78.32 77.91 77.51 79.14 79.88 

Pennsylvania 102.48 104.72 105.67 106.49 108.05 

S. Dakota 62.28 68.72 73.67 79.77 83.27 

Tennessee 82.11 83.08 85.13 87.47 89.19 

Texas 38.08 38.29 38.05 39.79 42.13 

Utah 46.54 46.54 46.72 46.65 46.33 

Washington 80.31 80.52 80.98 80.92 73.98 

Wisconsin 107.25 108.88 110.59 113.05 114.74 

Wyoming 44.03 44.87 45.25 45.24 33.33

Top 30 Total 80.05 83.00 84.08 85.45 85.82

U.S. Average 97.01 100.91 102.68 103.69 103.55

In addition to the general sign-ups and the ongoing continuous sign-up programs, 

FSA this year announced two special CRP initiatives. On February 21, 2012, the 

1815

43 ‘‘USDA Announces New Highly Erodible Cropland Initiative for Conservation Reserve Program,’’ Farm Service Agency, February 21, 2012. Accessed 9 April 2012. (www.fsa.usda.gov/

FSA/printapp?fileName=nrl20120221lrell0062.html&newsType=newsrel) 44 ‘‘Agriculture Secretary Vilsack Announces New Conservation Reserve Program Initiative to 

Restore Grasslands, Wetlands and Wildlife,’’ Farm Service Agency, March 2, 2012. Accessed 9 

April 2012. (www.fsa.usda.gov/FSA/

printapp?fileName+nrl20120302lrel0076.html&newsType=newsrel) 45 ‘‘Conservation Reserve Enhancement Program,’’ Farm Service Agency website. Accessed 9 

April 2012. (www.fsa.usda.gov/FSA/webapp?area=home&subject=copr&topic=cep) 46 Ibid. 47 ‘‘Conservation Programs, State Updates, CREP State Updates,’’ Farm Service Agency 

website. Accessed 9 April 2012. (www.fsa.usda.gov/FSA/

webapp?area=home&subject=copr&topic=cep-su) 

agency called for protection of up to 750,000 acres of the most highly erodible cropland. This includes land with an erodibility index of 20 or greater, which can be 

planted to wildlife-friendly, long-term cover. Participants can enroll through a continuous sign-up under this initiative.43

On March 2, 2012, FSA announced a second ongoing initiative, an effort to restore 

grasslands, wetlands and wildlife on up to 1 million acres, also targeting highly 

erodible cropland. For this initiative, FSA offered Signing Incentive Payments (SIPs) 

of $150 per acre, an increase of $50 over the usual $100 per acre incentive for the 

continuous sign-up program. Target practices and acreage goals include the following: 44

• New continuous pollinator practice: 100,000 additional acres

• Increased acreage for wetland restoration: 200,000 additional acres

• Restoration of critical grassland ecosystems:

» Increased acreage for SAFE (wildlife program): 400,000 additional acres

» Increased acreage for duck nesting habitat: 150,000 additional acres

» Increased acreage for upland bird habitat 

buffers: 

150,000 additional acres 

Targeted, continuous enrollments have become an effective means of combining 

the erosion-control objectives of land-idling conservation programs with the agricultural production demand needed for a growing population. A mix of land idling and 

working lands creates a level of biodiversity that benefits both humans and wildlife. 

Conservation Reserve Enhancement Program 

The Conservation Reserve Enhancement Program (CREP) is a voluntary land retirement program designed to protect environmentally sensitive land administered 

by FSA in partnership with producers, states, tribes and private organizations.45 An 

outgrowth of the CRP, CREP seeks to marshal local and Federal resources to address high-priority conservation concerns, such as ‘‘impacts to water supplies, loss 

of critical habitat for threatened and endangered wildlife species, soil erosion, and 

reduced habitat for fish populations such as salmon.’’ 46

CREP projects under the program are community- rather than farm-based (as 

CRP projects are). States, Indian tribes, local governments or nongovernment organizations identify environmental issues and work with FSA to develop strategies to 

address them. Like CRP, the goal is to remove agricultural lands from production 

through 10 to 15 year contracts involving specific practices that focus on the identified environmental concern. 

Eligibility requirements for CREP are similar to CRP and enrollment may be continuous, depending upon the project. Farmers who participate in CREP projects receive rental payments, along with a maintenance incentive payment determined by 

the FSA state committee, and cost-share payments of up to 50 percent of the expense of installing the conservation practice. Often, producers also will receive a 

sign-up incentive for specific practices. Funding comes from CRP allocations, as well 

as states; tribes and other partner organizations pay the remainder. States and 

other organizations also may provide technical support or other in-kind services. 

Currently there are 46 CREP projects across 33 states.47 (Additional information on 

CREP is in Appendix B.) 

The CREP has become an important means of making CRP more targeted and 

surgical in its approach, and it has assisted in ensuring that the program aligns 

with state and local priorities. However, CREP, as with all of the continuous-enrollVerDate 0ct 09 2002 12:54 Dec 11, 2012 Jkt 041481 PO 00000 Frm 00227 Fmt 6621 Sfmt 6621 I:\DOCS\112-30\74372.TXT BRIAN
1816

48 ‘‘Conservation Reserve Program (CRP)—Transition Incentives Program (TIP),’’ Farm Service 

Agency fact sheet, May 2010. Accessed 10 April 2012.

ment programs, will need management structures to limit the unnecessary enrollment of high-quality farmland. 

State Acres for Wildlife Enhancement (SAFE) 

The 2008 Farm Bill added the State Acres for Wildlife Enhancement (SAFE) to 

CRP in an effort to address state and regional high-priority wildlife objectives 

through a continuous sign-up. Each SAFE project identifies specific conservation 

practices and land requirements to benefit target species of concern; hunting and 

fishing are permitted on acres included in SAFE. SAFE also offers additional incentives to encourage participation, including a Signing Incentive Payment of $100 per 

acre and a Practice Incentive Payment that equals 40 percent of the cost of installing the conservation practice required under the contract. 

Currently there are 89 SAFE projects across 34 states with 732,840 acres allocated. Every major CRP state has at least one SAFE project; among the 30 states, 

there are 77 SAFE projects potentially covering slightly more than 710,000 acres. 

(See Appendix C for details.) It appears that in some states, SAFE may be being 

utilized to ‘‘bid-up’’ the rental rates on quality land on whole-field enrollments. 

Therefore, management scrutiny may be necessary to limit high-quality land enrollments. 

Transition Incentives Program 

To assist beginning and socially disadvantaged farmers and ranchers, the 2008 

Farm Bill provided $25 million for the Transition Incentives Program (TIP). As of 

January 2012, about $18 million of that funding had been obligated by FSA. Subsequently, USDA ceased taking applications for the remainder of 2012 due to producer 

interest potentially exceeding the funding limitation. 

TIP offers retired or retiring owners or operators up to two additional annual CRP 

rental payments if they transition land that has been under CRP contract to beginning or socially disadvantaged farmers for sustainable grazing or crop production. 

The land must be sold or leased long-term (5 years or more). Further, the TIP enrollment must occur during the final year before the scheduled date of CRP contract 

expiration. (Or it had to occur no later than September 30, 2010 for contracts that 

expired before that date.) 

The goal of TIP is to help beginning and socially disadvantaged farmers and 

ranchers return land from expiring CRP contracts to productive use through sustainable practices. To participate, CRP contract holders must have land that is in 

the last year of the contract and agree to allow the producers who are buying or 

renting the land to make conservation and land improvements. Family members of 

the retiring or retired farmers and ranchers are not eligible to participate in the 

program as beginning or socially disadvantaged farmers. 

Enrollment in TIP is continuous, but must occur during the final year of the CRP 

contract. The farmers buying or renting the land may reenroll some or all of the 

land under CRP’s continuous sign-up provisions, including the CREP. In addition, 

these farmers may be eligible to enroll in the Conservation Stewardship Program 

(CSP) or the Environmental Quality Incentives Program (EQIP) if they meet the eligibility requirements. Importantly, in any case, purchasing or leasing farmers must 

develop a conservation plan for land enrolled in TIP. 

The following definitions outline qualifications for TIP participants: 48

• Retired or retiring owner or operator: An owner or operator of land enrolled in a CRP contract who has ended active labor in farming operations as 

a producer of agricultural crops or expects to do so within 5 years of the CRP 

contract modification.

• Beginning farmer or rancher: A person or entity who has not been a farm 

or ranch operator for more than 10 years; materially and substantially participates in the operation of the farm or ranch involved in CRP contract modification; and, if an entity, is an entity in which 50 percent of the members or stockholders of the entity meet the first two criteria.

• Socially disadvantaged farmer or rancher: A farmer or rancher who is a 

member of a socially disadvantaged group whose members have been subjected 

to racial or ethnic prejudice because of their identity as members of a group 

without regard to their individual qualities. Gender is not included. (Examples 

of disadvantaged groups include American Indians or Alaskan Natives, Asians 

1817

49 ‘‘Conservation Reserve Program (CRP) Transition Incentives Program,’’ Farm Service Agency slide presentation, undated. Accessed 10 April 2012.

or Asian-Americans, Blacks or African Americans, Hispanics and Native Hawaiians or other Pacific Islanders.) 49

TIP can be a smart, valuable means of transitioning quality land from CRP while 

assisting beginning farmers and ranchers. The Senate version of the 2012 farm bill 

reauthorizes TIP and doubles funding to $50 million. 

Recommendations for Changes to CRP 

The goals of protecting environmentally sensitive land and enhancing the ability 

of U.S. farmers and ranchers to produce to meet the world’s growing demand for 

food, feed, biofuels and exports are mutually compatible. But to accomplish those 

twin goals, SCS believes it is necessary for Congress to reboot the CRP to make it 

more responsive and consistent with emerging public and private needs for both 

food production and conservation. The program needs to be administered in a manner that targets sensitive lands and discourages enrollment of high-quality, fertile 

soils that are suited for producing food. 

Legislative Recommendations 

Based upon the analysis presented in this study, the following legislative changes 

in the 2012 Farm Bill should be considered to reform the CRP and encourage the 

return of productive idled land to farming in an environmentally sustainable way:

1. First and foremost, SCS recommends that the current 32 million acre CRP 

cap be reduced significantly. At a minimum, Congress should mandate acres 

designated as ‘‘prime farmland’’ (which amounted to approximately 8.7 million 

acres in 2007, the most recent data publicly available) not be eligible for future 

enrollment or reenrollment. This would include approximately 7.1 million acres 

considered to be Land Capability Classes I and II. This land can be farmed in 

an environmentally sustainable way to meet growing food demand. In the 30 

states with the greatest CRP enrollments, approximately 8.5 million acres were 

considered prime farmland, much of it highly concentrated in several major 

grain-production states.

2. Second, USDA should be directed to conduct a comprehensive analysis of how 

best to manage the transition to crop production or grazing land of Class III 

land from the reserve that is not considered prime farmland. This portion of the 

reserve likely will need to be tapped over the next 10 to 15 years to address 

the demands caused by world population growth and farmland lost to urban development. Restricting enrollments of prime farmland and Class III lands, combined with the immediately preceding recommendation, would equate to a CRP 

of approximately 21 million acres.

3. Third, Congress should frontload the acreage reductions to best match the 

acreage with CRP contract expirations. Current production needs are causing 

the conversion of fragile native grasslands to crop production, in part because 

higher-quality land in those same communities is tied up in the CRP. The transition to a smaller CRP mandated by Congress will be easier in the early years 

of the next farm bill due to contract expirations than it will be in later years.

4. Fourth, Congress should include legislative language that would limit wholefield and whole-farm enrollments in the CRP by requiring such land to meet 

a more stringent Environmental Benefits Index (EBI) scoring threshold than 

partial-field enrollments. During the early years of CRP, whole farms and whole 

fields were enrolled, which resulted in enrolling high-quality land suited to agricultural production.

5. Fifth, Congress should direct that USDA offer CRP contract holders an earlyout (without penalty) as a means of reducing acreage within the CRP that is 

‘‘prime farmland,’’ most of which should not have been enrolled in the reserve. 

In addition, penalty-free early outs should be offered in counties that meet or 

exceed the 25 percent county acreage cap, as well as anytime national enrollment levels preclude a general sign-up. In managing this transition, it is suggested that USDA be required to offer penalty-free early outs for Land Capability Classes I, II and III enrolled in CRP, and require producers who accept 

early-outs to implement prudent conservation practices on such lands.

6. Sixth, Congress should allocate sufficient monies to at least triple—to $75 

million—the size of the Transition Incentives Program, currently authorized at 

$25 million, for transitioning expired CRP acreage from a retired or retiring 

landowner to beginning or socially disadvantaged farmers. This program quickly 

1818

reached its capacity after being authorized as part of the 2008 Farm Bill and 

needs additional resources, which could be financed through savings garnered 

from a right-sized CRP. TIP is an important step toward addressing land access 

for beginning farmers and ranchers. In addition, it is recommended that retired 

or retiring landowners be allowed to transition such CRP acreage within three 

years of contract expiration (rather than the current one year), with no change 

in the current incentive payment (two years of annual CRP rental payments).

7. Seventh, Congress should consider whether to provide a specific percentageor acreage-based figure within the CRP for future enrollment of the most environmentally sensitive lands. As of April 2011, the CRP included 5 million acres 

enrolled under continuous sign-up procedures. Some conservation leaders have 

expressed concern that adequate CRP acreage should be reserved each year to 

ensure that such environmentally sensitive lands can be enrolled, with some 

suggesting that as many as 8 million acres of the CRP should be reserved for 

such high-priority enrollments. Recent USDA press releases imply that the 

Agency is reserving 1.75 million acres for future continuous enrollments. This 

is an issue that warrants Congress’s attention as it considers the future of the 

CRP. With a right-sized CRP, it will be crucial that sufficient acreage be reserved for future enrollment of the most important and environmentally fragile 

lands.

8. Eighth, restrict the discretion for USDA to exceed the 25 percent acreage 

limit on CRP enrollments in individual counties because of the adverse economic impacts such enrollments have had on rural communities. Further, it is 

recommended that USDA be required to reserve within the 25 percent county 

limit at least a 5 percent allowance for acres enrolled in the wetlands reserve 

and continuous sign-up process.

9. Ninth, USDA should provide the appropriate Congressional committees of jurisdiction with a written explanation of the rationale used to determine the Environmental Benefits Index (EBI) that applies for general CRP sign-ups. Added 

justification should be provided in years when the EBI changes from one signup to the next.

10. Tenth, Congress should direct that USDA conduct and complete within two 

years of enactment a comprehensive economic impact study that evaluates the 

impact of the CRP on rural communities. 

Administrative Recommendations 

USDA should modify several policies in implementing and administering the CRP 

in the future.

• First, USDA’s Farm Service Agency and Natural Resources Conservation Service should compile a report of acreage enrolled in CRP by Land Capability Class 

and Erodibility Index, and submit it to Congress within one year after the new 

farm bill is enacted and every three years thereafter. As part of such a report, 

USDA should be required to compile Land Capability Class and Erodibility 

Index acreage by county.

• Second, identify, and make public on the FSA website, counties that are at or 

near the 25 percent enrollment cap. These data will increase transparency and 

enable USDA and stakeholders to better analyze the prudent management of 

CRP.

• Third, implement a percentage-based limit on rental rates paid for CRP land 

compared to average county rental rates so as not to outbid the market for productive acres.

• Fourth, review the EBI to discourage enrollment of high-quality land in the 

CRP. For example, negative or no points should be awarded for Non-Highly 

Erodible Land as part of the EBI scoring mechanism.

• Fifth, place sideboards [parameters] on program provisions, rental rates and incentive payments to ensure that neither rates nor program administration work 

to bring non-environmentally sensitive, highly productive land into the various 

continuous and special sign-up programs. Examples are outlined below:

» Consider restricting buffer, filter and riparian strips to no more than 30 to 

50 feet in width, as at least one state has used this provision to enroll small, 

full fields in the higher-cost continuous program rather than the lower-cost 

general program.

» Consider restricting SAFE acres to endangered, or candidate, wildlife species—prohibiting these acres from being targeted to game species. It appears 

that a few states may be using SAFE to increase rental payments on highVerDate 0ct 09 2002 12:54 Dec 11, 2012 Jkt 041481 PO 00000 Frm 00230 Fmt 6621 Sfmt 6621 I:\DOCS\112-30\74372.TXT BRIAN
1819

quality land to support commercial hunting enterprises. Under no conditions 

should SAFE acres be allowed to be used for fee-based or commercial hunting 

enterprises.

» Consider placing greater emphasis on wetlands protection in the CRP continuous sign-up programs and encourage the transition of wetlands enrolled in 

the CRP to the appropriate easement program for permanent wetlands protections.

» Limit uplands enrolled under CRP and easement wetlands to 10 percent of 

the surrounding area rather than 25 percent, if located on prime farmland. 

Conclusion 

It is highly likely that the U.S. Congress will reduce the CRP acreage cap in the 

2012 Farm Bill for primarily budget reasons. However, the degree to which this will 

increase potential cropping acreage largely will be determined by USDA operational 

decisions at the national and state level. It is reasonable to assume that some decision-makers within USDA, plus certain partners in the wildlife and conservation 

community, will support implementing CRP so as to maximize new enrollments as 

well as reenrollments of existing CRP acreage. Feed, forage, biomass and livestock 

interests will need to build the case for access to those acres. Building that case will 

be somewhat controversial in some agriculture arenas, as existing CRP contract 

holders likely will advocate increases in CRP rental rates, which would reduce the 

likelihood that those acres would return to cropping. 

An important consideration, as mentioned earlier in this study, is that significant 

acreage of ‘‘prime farmland’’ is currently in pasture and rangeland. This may provide some small, localized opportunities to increase grain and oilseed acreage because of escalating returns to farmland and decreased numbers of beef cattle. In 

many areas of the country, CRP enrollments may have accelerated the conversion 

of previously uncropped grassland to cropland. At present returns on investment, 

this trend is likely to continue, with additional range and pastureland being broken 

out and converted to crop production due to spot shortages of available farmland 

as a result of CRP enrollments. Some contend that relaxing the haying and grazing 

provisions in CRP to allow annual use of less-productive CRP land for these purposes at a reduced payment rate may serve to slow the conversion of non-CRP land 

to farm ground. 

To fully evaluate the market opportunities and options for NGFF, it is important 

to look at the policy implications that may result from the 2012 Farm Bill debate 

regarding the future of CRP. CRP has a long and successful history in decreasing 

soil erosion and increasing wildlife benefits. As such, it has been popular with participating landowners and with society in general that has benefitted from cleaner 

air and water, and an abundance of wildlife. However, current commodity prices, 

advances in conservation technology, concerns about the national budget deficit, and 

burgeoning demand for food, feed and biofuels are causing policymakers to reconsider the size and scope of the program and have eliminated its original marketstabilization role. 

The program currently is authorized at 32 million acres, but in reality is operating below that cap at approximately 30 million acres. Further, based upon 2007 

NASS data—the most recent available—the CRP at that time contained up to nearly 8 million acres of prime farmland and even more high-quality acreage. Contracts 

with over 25 million acres enrolled in CRP will expire in the next 10 years, providing an opportunity to continue to enroll highly environmentally sensitive acres 

in the program while releasing prime farmland for productive use. The 2008 farm 

bill reduced the CRP acreage cap, and further modifications to the cap are being 

considered for budget and market reasons for the 2012 Farm Bill. Existing enrollments in the CRP are highly concentrated in the Midwest, Great Plains and the Pacific Northwest, providing opportunities for future expansion of grains and oilseeds 

acreage. 

While the budget deficit debate will cause Congress to consider lowering the CRP 

acreage cap for 2013, other programmatic decisions may be considered in 2012. Concerns about adequacy of feed and forage supplies, as well as budget concerns for the 

Grassland Reserve Program (GRP), may lead some to consider allowing annual 

haying and grazing of less-productive CRP acres at a reduced payment level. Further, the Senate Agriculture Committee-passed farm bill contains provisions to 

allow GRP-style activities oriented toward grassland preservation to become part of 

the CRP program. 

Beyond the farm bill, USDA will have annual decisions to make on how aggressively to pursue new CRP sign-ups and re-enrollments of existing acres. Key factors 

will be rental rates, permitted uses of the land, public access programs, whole-farm 

and whole-field enrollments, rankings under the Environmental Benefits Index, as 

1820

50 Ibid. 51 ‘‘Conservation Reserve Program Sign-Up 42 Environmental Benefits Index (EBI),’’ February 

2012, Farm Service Agency. Accessed 21 February 2012. (www.fsa.usda.gov/Internet/

FSAlFile/crpl441lebi.pdf)

well as partnerships with states through the Conservation Reserve Enhancement 

Program. As evidenced by the variability in rental rates in the major CRP states, 

these decisions will be heavily influenced by state-level policy in USDA’s Farm Service Agency and the adequacy of state budgets to partner in CREP offerings. 

Congressional and USDA decisions on CRP enrollments and reenrollments significantly will affect the opportunity to increase planted acreage for grains, forage, oilseeds and fiber. The market currently is causing many landowners to consider options other than their current CRP contracts; this may present a unique time to look 

at future CRP policy. 

In short, the confluence of many factors makes this an ideal time to regain ground 

by right-sizing the CRP and refocusing it on truly environmentally sensitive acres. 

Appendix A: Environmental Benefits Index and Soil Classification System 

1. Environmental Benefits Index: FSA ranks enrollment offers through the Environmental Benefits Index (EBI). Highest-ranked offers receive contracts. EBI 

factors 50 include: 

• Wildlife habitat benefits—from vegetative covers on contract acreage

• Water quality benefits—from reduced erosion, runoff and leaching

• On-farm benefits—from reduced erosion

• Benefits likely to last beyond the contract period

• Air quality benefits—from reduced wind erosion

• Cost

For Sign-up 42, FSA provided the following specific considerations and potential 

points under the EBI: 51

• N1 Wildlife (0–100 points)

» N1a Wildlife habitat cover benefits (0–50 points)

fi Permanent introduced grasses and legumes (10 or 40 points)

fi Establishment of new permanent native grasses and legumes (20 or 50 

points)

fi Tree planting (10 or 50 points)

• Hardwood tree planting (10, 20, 30 or 50 points)

• Permanent wildlife habitat (corridors), noneasement (40 or 50 points)

• Permanent wildlife habitat, noneasement (40 or 50 points)

fi Wildlife food plots (no separate points)

fi Rare and declining habitat restoration (50 points)

fi Pollinator habitat (50 points)

» N1b Wildlife enhancement (0, 5 or 20 points)

fi Converting at least 51 percent of a monoculture stand to a mix of native 

species that provides wildlife benefits (20 points)

fi Establishment of pollinator habitat (if the CRP parcel is less than 10 

acres, at least one acre of pollinator habitat with each area at least 0.5 acre; 

if the CRP parcel is more than 10 acres, at least 10 percent of the parcel in 

pollinator habitat, with each habitat area at least 0.5 acre) (20 points

fi Annual or permanent food plot (5)

» N1c Wildlife priority zones (0 or 30 points)

• N2 Water quality benefits from reduced erosion, runoff and leaching (0–100 

points)

» N2a Location (0 or 30 points)

» N2b Groundwater quality (0 to 25 points)

» N2c Surface water quality (0 to 45 points)

• N3 Erosion factor point score, based on Erodibility Index (EI) (0 to 100 

points)

1821

52 Ibid. 53 ‘‘The Conservation Reserve Program: 41st Signup Results,’’ Farm Service Agency, June 

2011. Accessed 7 September 2011. (www.fsa.usda.gov/Internet/FSAlFile/crpsignupresults.pdf)

» EI 4 1 point

» EI 5 2 points

» EI 6 4 points

» EI 7 7 points

» EI 8 11 points

» EI 9 16 points

» EI 10 22 points

» EI 11 29 points

» EI 12 37 points

» EI 13 46 points

» EI 14 56 points

» EI 15 67 points

» EI 16 79 points

» EI 17 92 points

» EI 18 97 points

» EI 19 98 points

» EI 20 99 points

» EI 21+ 100 points

• N4 Enduring benefits factor (0 to 50 points)

• N5 Air quality benefits from reduced wind erosion (0 to 45 points)

» N5a Wind erosion impacts (0–25 points)

» N5b Wind erosion soils list (0 or 5 points)

» N5c Air quality zones (0 or 5 points)

» N5d Carbon sequestration (3 to 10 points)

fi Tree planting (10 points)

fi Rare and declining habitat restoration (5 points)

fi Permanent wildlife habitat (4 points)

fi Permanent introduced grasses and legumes or native grasses (3 points)

• N6 Cost

» N6a Cost (point value determined after end of sign-up based on actual 

offer data)

» N6b Offer less than maximum payment rate (0 to 25 points)

FSA has advised producers that the following strategies represent the best approach for making their CRP offers competitive: 52

• Plant or establish the highest scoring cover mixture on the acreage offered.

• Offer only the most environmentally sensitive land.

• Consider accepting a lower payment rate that the FSA maximum.

2. Erodibility Index: To evaluate the on-farm benefits from reduced erosion, FSA 

uses an erodibility index. Points range from 1 for land classified as EI 4 on the 

index up to 100 points for land classified as EI 21 or higher.53 In determining 

potential for wind or water erosion, FSA considers the land capability classification of the acreage. 

3. Land Capability Classification: The NRCS’s Land Capability Classification 

(LCC) system sets out eight land classes, which indicate how suitable land is 

for growing crops. Classes I–IV are for arable land, while V–VIII are suitable 

1822

54 Helms, Douglas. ‘‘The Development of the Land Capability Classification,’’ NRCS History 

Articles, Natural Resources Conservation Service website. Accessed 8 September 2011. 

(www.nrcs.usda.gov/wps/portal/nrcs/detail?ss=16&navtype=SUBNAVIGATION&cid= 

nrcs143l021436&navid=210160000000000&pnavid=210000000000000&position= 

Not%20Yet%20Determined.Html 

&Hype=detail&pname=Land%20Capability%20Classification%20⎢%20NRCS) 55 National Soil Survey Handbook Part 622, Natural Resources Conservation Service website. 

Accessed 17 September 2011. (http://soils.usda.gov/technicalhandbook/contents/part622.html) 56 Ibid. 57 ‘‘Conservation Reserve Enhancement Program,’’ Farm Service Agency website. Accessed 9 

April 2012. (www.fsa.usda.gov/FSA/webapp?area=home&subject=copr&topic=cep) 

for pasture, range, woodland, grazing, wildlife, recreation and esthetic purposes.54 Specifically, as defined by NRCS, the eight classes include: 55

Class I: Soils have slight limitations that restrict their use. 

Class II: Soils have moderate limitations that reduce the choice of 

plants or require moderate conservation practices. 

Class III: Soils have severe limitations that reduce the choice of 

plants or require special conservation practices, or both. 

Class IV: Soils have very severe limitations that restrict the choice 

of plants or require very careful management, or both. 

Class V: Soils have little or no hazard of erosion but have other 

limitations, impractical to remove, that limit their use 

mainly to pasture, range, forestland or wildlife food and 

cover. 

Class VI: Soils have severe limitations that make them generally 

unsuited to cultivation and that limit their use mainly to 

pasture, range, forestland or wildlife food and cover. 

Class VII: Soils have very severe limitations that make them unsuited to cultivation and that restrict their use mainly to 

grazing, forestland or wildlife. 

Class VIII: Soils and miscellaneous areas have limitations that preclude their use for commercial plant production and limit 

their use to recreation, wildlife or water supply or for esthetic purposes. 

Within the broad classes, there are four subclasses, defined by NRCS as follows: 56

Subclass e: Made up of soils for which the susceptibility to erosion is 

the dominant problem or hazard affecting their use. Erosion susceptibility and past erosion damage are the major 

soil factors that affect soils in this subclass. 

Subclass w: Comprised of soils for which excess water is the dominant hazard or limitation affecting their use. Poor soil 

drainage, wetness, a high water table and overflow are the 

factors that affect soils in this subclass. 

Subclass s: Made up of soils that have soil limitations within the 

rooting zone, such as shallowness of the rooting zone, 

stones, low moisture-holding capacity, low fertility that is 

difficult to correct, and salinity or sodium content. 

Subclass c: Comprised of soils for which the climate (the temperature or lack of moisture) is the major hazard or limitation 

affecting their use. 

FSA specifically considers whether or not land is classified in subclasses e or w in determining the erodibility of the soil. 

Appendix B: Conservation Reserve Enhancement Program (CREP) 

The Conservation Reserve Enhancement Program (CREP) is a voluntary land retirement program of the Farm Service Agency—in partnership with producers, 

states, tribes and private organizations—designed to protect environmentally sensitive land.57 An outgrowth of the CRP, CREP seeks to marshal local and Federal 

1823

58 Ibid. 59 ‘‘Conservation Programs, State Updates, CREP State Updates,’’ Farm Service Agency 

website. Accessed 9 April 2012. (www.fsa.usda.gov/FSA/

webapp?area=home&subject=copr&topic=cep-su)

resources to address high priority conservation concerns such as ‘‘impacts to water 

supplies, loss of critical habitat for threatened and endangered wildlife species, soil 

erosion, and reduced habitat for fish populations such as salmon.’’ 58

CREP projects under the program are community- rather than farm-based as CRP 

projects are. States, Indian tribes, local governments or nongovernment organizations identify environmental issues, and work with FSA to develop strategies to address them. Like CRP, the goal is to remove agricultural lands from production 

through 10 to 15 year contracts involving specific practices that focus on the identified environmental concern. 

Eligibility requirements for CREP are similar to CRP, and enrollment may be continuous, depending upon the project. Farmers who participate in CREP projects receive rental payments, as well as a maintenance incentive payment determined by 

the FSA state committee, and cost-share payments of up to 50 percent of the expense of installing the conservation practice. Frequently, producers also will receive 

a sign-up incentive for specific practices. Funding is derived from CRP allocations, 

as well as states; tribes and other partner organizations pay the remainder. States 

and other organizations also may provide technical support or other in-kind services. 

Currently there are 46 CREP projects across 33 states.59 CREP projects in the 

30 major CRP states include the following: 

Alabama: None

Arkansas: 3 projects $9.4 million to restore 6,000 acres of hardwood 

forests and wetlands in the Cache River/

Bayou Deview watersheds (2007) 

$10 million to improve drinking water by planting trees on up to 4,700 acres to reduce sediment in the Bayou Meto watershed in five 

central Arkansas counties (2001) 

$25 million to enhance wildlife habitat and improve water quality by filtering agricultural 

runoff on up to 15,000 acres in the Illinois 

River watershed (2009)

Colorado: 2 projects $66.3 million to conserve water and reduce agricultural chemicals and sediments entering 

the Republican River Basin and Ogallala Aquifer from up to 35,000 acres (2006) 

$25.3 million to reduce soil erosion and agricultural chemicals, improving water quality, and 

also to increase habitat for ring-necked 

pheasant and other ground-nesting birds by 

planting vegetative cover and food plots on 

up to 30,000 acres in the High Plains area in 

Colorado (2006)

Georgia: None

Idaho: 2 projects $258 million to reduce irrigation water use, increase water quality, reduce soil erosion and 

sedimentation and increase wildlife populations on up to 100,000 acres in 22 counties 

(2006)

1824

Illinois: 1 project $700 million to reduce soil erosion and enhance 

wildlife habitat on up to 232,000 acres in the 

Illinois and Kaskaskia River basins (2010 expanded to Kaskaskia River basin)

Indiana: 2 projects $84.8 million to reduce sediment, nutrients, 

pesticides and herbicides in 11 watersheds 

spanning 65 counties involving up to 26,250 

acres (2010 expanded from three watersheds 

to 11)

Iowa: 2 projects $38 million to address water quality issues related to excess nitrogen impacting water 

quality on up to 9,000 acres in 37 counties in 

north central Iowa (2007)

Kansas: 2 projects $22.7 million to improve water quality and supplies in the Upper Arkansas River by enrolling up to 28,950 acres in CREP (2011 expanded)

Kentucky: 1 project $105 million to improve water quality, enhance 

wildlife habitat, restore riparian habitat and 

address 1,000 sinkholes on up to 99,500 acres 

in the Green River watershed in south central Kentucky

Louisiana: 2 projects $121 million to improve water quality in the 

Lower Ouachita River Basin by enrolling up 

to 50,000 acres in the Bayou Macon and 

Boeuf River watersheds in CREP (2005) 

To improve water quality and restore or enhance wildlife habitat in the Louisiana 

Coastal Prairie Region through conservation 

practices on up to 15,050 acres in the 

Mermentau River Basin (2011—no dollar 

value specified)

Michigan: 1 project $177 million to improve water quality of 

Macatawa, River Raisin and Saginaw Bay 

watershed (2000)

Minnesota: 1 project $250 million to convert environmentally sensitive cropland to native vegetation to improve water quality, reduce soil erosion, increase flood water storage and provide for 

fish and wildlife habitat in the Lower Mississippi Watershed in southeastern Minnesota, the Red River Watershed in northwestern Minnesota and the Missouri and Des 

Moines Watersheds in southwestern Minnesota (1998, renewed in 2005)

Mississippi: None

1825

Missouri: 1 project $85 million to improve drinking water in Missouri by removing from agricultural production up to 50,000 acres, thus reducing pollution of streams and reservoirs that supply 

water to more than 375,000 Missouri residents (2000)

Montana: 1 project $57 million to enroll up to 26,000 acres to improve water quality and enhance wildlife in 

nine counties along the Missouri and Madison Rivers (2003, updated 2012)

Nebraska: 2 projects $158 million to reduce ground and surface 

water used for irrigation, conserving water 

from the Republican and Platte Rivers and 

their tributaries through enrolling up to 

100,000 acres in CREP (2011 expanded)

New Mexico: None

North Dakota: 1 project $43 million to protect 160,000 acres of fragile 

farm land by maintaining grass cover and 

improve water quality in six watersheds

Ohio: 3 projects $201 million to improve water quality of Lake 

Erie and 5,000 miles of Ohio streams (2000) 

$13.2 million to safeguard the Hoover Reservoir, primary drinking water source for Columbus, Ohio, through buffers installed on up 

to 3,500 acres and 450 miles of watercourses; 

additional incentive payments available from 

local Soil and Water Conservation Districts, 

city of Columbus and Ducks Unlimited 

$207 million to protect drinking water in Columbus by reducing agricultural pollution, 

soil erosion and downstream flooding from 

70,000 acres in 31 counties in the Scioto 

River Watershed (2004)

Oklahoma: 1 project $20.6 million to create up to 9,000 acres of riparian buffers and filter strips to reduce pollution in the Spavinaw Lake and the Illinois 

River/Lake Tenkiller watersheds (2007)

Oregon: 1 project $250 million to restore streams and save endangered salmon and trout by enrolling up to 

100,000 acres in CRP (1998)

Pennsylvania: 1 project $410 million to protect the Chesapeake Bay by 

reducing erosion and sedimentation on up to 

200,000 acres in 43 counties; expanded to 

cover up to 65,000 acres in 16 counties in the 

Ohio River Basin (2000, expanded in 2003, 

expanded to Ohio River in 2004)

South Dakota: 1 project $161.4 million to improve James River water 

quality and enhance wildlife habitat by enrolling up to 100,000 acres in CREP (2009)

1826

Tennessee: None

Texas: None

Utah: None

Washington: 1 project $250 million to restore streams and save endangered salmon species by enrolling in CRP 

up to 100,000 acres of riparian buffers planted to trees (1998)

Wisconsin: 1 project $243 million to protect water quality and wildlife habitat by enrolling 100,000 acres in CRP 

and installing 3,700 miles of riparian buffers

Wyoming: None 

Appendix B (part II): CREP/CRP Acreage and Rental Rates

CREP Acres for 30 Largest CRP States 

2007 2008 2009 2010 2011

Alabama 0 0 0 0 0 

Arkansas 6,441 6,525 6,614 6,923 0 

Colorado 16,801 20,682 21,355 22,039 6,964 

Georgia 0 0 0 0 22,265 

Idaho 16,885 19,442 17,036 17,446 0 

Illinois 124,947 126,929 126,601 126,552 17,403 

Indiana 1,929 3,434 4,482 6,260 138,506 

Iowa 1,038 1,186 1,394 1,975 7,196 

Kansas 0 739 8,164 10,768 2,128 

Kentucky 13,993 81,663 98,505 100,862 11,514 

Louisiana 48,358 49,875 49,792 49,721 100,652 

Michigan 60,946 63,954 66,494 71,460 49,559 

Minnesota 86,006 90,135 90,337 90,305 72,802 

Mississippi 0 0 0 0 90,194 

Missouri 20,984 36,584 39,581 39,377 38,281 

Montana 10,350 10,653 10,663 10,638 11,449 

Nebraska 68,465 68,378 70,655 72,511 72,553 

New Mexico 0 0 0 0 0 

N. Dakota 1,532 1,670 1,672 1,708 1,616 

Ohio 79,825 92,686 99,644 108,099 112,200 

Oklahoma 0 62 133 412 555 

Oregon 28,243 33,443 35,354 38,090 40,167 

Pennsylvania 177,627 197,977 202,006 206,449 190,859 

S. Dakota 0 0 0 36,540 59,741 

Tennessee 0 0 0 0 0 

Texas 0 0 0 0 0 

Utah 0 0 0 0 0 

Washington 11,193 11,532 11,802 12,472 12,914 

Wisconsin 37,336 38,999 39804 40,895 41,287 

Wyoming 0 0000

Top 30 Total 812,899 956,548 1,002,088 1,071,502 1,100,805

U.S. Total 962,857 1,113,934 1,160,765 1,233,669 1,265,103

Average CREP Rental Rates for 30 Largest CRP States ($/acre) 

2007 2008 2009 2010 2011

Alabama — — — — — 

Arkansas 100.38 100.53 101.39 101.62 101.49 

Colorado 110.59 110.71 110.52 109.87 109.41 

Georgia — — — — — 

Idaho 133.11 132.98 132.85 132.85 132.81 

Illinois 159.62 161.36 161.38 161.58 170.46 

Indiana 174.20 186.64 197.36 206.96 208.68 

Iowa 210.97 212.45 215.50 228.96 232.13 

Kansas — 118.83 115.73 115.05 115.69 

Kentucky 129.35 178.81 181.61 182.54 182.58 

1827

Average CREP Rental Rates for 30 Largest CRP States ($/acre)—Continued

2007 2008 2009 2010 2011

Louisiana 79.17 79.16 79.17 79.17 79.18 

Michigan 123.94 124.75 125.47 127.96 128.88 

Minnesota 112.37 114.61 114.70 114.71 114.70 

Mississippi — — — — — 

Missouri 86.86 94.85 96.34 96.35 96.51 

Montana 91.73 91.12 91.16 89.86 86.63 

Nebraska 110.58 110.57 111.35 112.16 112.41 

New Mexico — — — — — 

N. Dakota 35.62 35.57 35.59 36.45 35.54 

Ohio 178.03 181.66 183.94 187.78 189.05 

Oklahoma — 63.43 63.96 62.99 62.37 

Oregon 86.48 84.64 83.57 84.94 85.74 

Pennsylvania 102.81 105.02 105.94 106.73 108.29 

S. Dakota — — — 105.17 105.51 

Tennessee — — — — — 

Texas — — — — — 

Utah — — — — — 

Washington 166.26 168.25 169.22 174.62 179.76

Wisconsin 115.67 116.99 119.25 121.70 123.57 

Wyoming —————

Top 30 Total 121.46 122.52 123.52 124.55 125.52

U.S. Average 121.72 127.10 128.78 129.72 131.72

Non-CREP Acres for 30 Largest CRP States 

2007 2008 2009 2010 2011

Alabama 36,333 42,235 43,606 48,962 49,988 

Arkansas 75,168 82,353 79,743 118,741 125,303 

Colorado 9,036 8,774 12,086 25,267 27,212 

Georgia 12,295 53,144 64,030 87,511 96,726 

Idaho 9,996 9,835 12,952 31,840 58,421 

Illinois 296,605 308,278 314,262 328,424 331,846 

Indiana 100,974 101,887 111,873 114,983 116,323 

Iowa 470,084 472,467 495,788 534,414 533,749 

Kansas 91,456 95,768 98,917 117,286 151,457 

Kentucky 59,423 60,572 64,688 64,900 62,240 

Louisiana 34,839 36,060 40,174 75,155 80,585 

Michigan 23,507 22,944 23,333 22,459 23,003 

Minnesota 253,110 261,097 282,196 321,879 340,927 

Mississippi 174,682 182,550 187,317 201,729 211,879 

Missouri 108,035 112,556 124,221 133,929 137,515 

Montana 154,338 107,067 107,860 120,448 120,006 

Nebraska 70,984 71,437 87,341 97,975 100,594 

New Mexico 5,079 5,375 5,280 5,280 6,104 

N. Dakota 159,260 164,025 185,121 257,878 260,961 

Ohio 59,960 60,246 59,581 62,940 62,844 

Oklahoma 14,570 8,794 8,344 9,236 14,023 

Oregon 12,785 12,596 12,048 11,823 12,250 

Pennsylvania 1,147 1,142 1,087 950 837 

S. Dakota 181,318 181,220 202,586 268,068 288,186 

Tennessee 23,029 23,892 25,352 28,328 29,356 

Texas 54,598 55,805 52,491 72,347 126,823 

Utah 288 288 288 292 314 

Washington 101,292 101,395 99,387 95,656 153,469 

Wisconsin 28,550 27,368 28,666 29,450 29,619 

Wyoming 6,458 6,718 6,626 7,004 16,444

Top 30 Total 2,629,199 2,677,888 2,837,244 3,295,154 3,569,004

U.S. Total 2,716,810 2,775,634 2,957,965 3,399,785 3,668,427

Farmable Wetland Program Acres for 30 Largest CRP States 

2007 2008 2009 2010 2011

Alabama 0 0 0 18 18 

Arkansas 0 0 0 0 1,808 

Colorado 0 0 0 157 157 

1828

Farmable Wetland Program Acres for 30 Largest CRP States—Continued

2007 2008 2009 2010 2011

Georgia 0 0 0 0 0 

Idaho 0 0 0 6 6 

Illinois 322 320 350 543 605 

Indiana 887 930 943 999 1,015 

Iowa 72,241 73,097 74,373 78,544 80,060 

Kansas 784 995 1,149 1,723 1,939 

Kentucky 0 0 0 0 0 

Louisiana 0 0 0 2,648 3,339 

Michigan 38 51 51 71 74 

Minnesota 36,688 39,467 41,237 43,921 44,527 

Mississippi 0 0 597 6,297 9,911 

Missouri 9 9 9 215 215 

Montana 145 140 140 140 140 

Nebraska 3,769 3,862 4,041 4,127 4,195 

New Mexico 0 0 0 0 0 

N. Dakota 16,234 18,282 19,286 50,263 76,683 

Ohio 134 196 219 257 265 

Oklahoma 0 0 0 30 30 

Oregon 0 0 0 0 0 

Pennsylvania 0 0 0 0 0 

S. Dakota 35,493 43,784 46,624 70,241 80,187 

Tennessee 0 0 0 0 0 

Texas 0 0 0 0 0 

Utah 0 0 0 0 0 

Washington 0 0 0 0 0 

Wisconsin 43 43 57 73 59 

Wyoming 0 0000

Top 30 Total 166,787 181,176 189,076 260,273 305,233

U.S. Total 166,793 181,182 189,081 260,278 305,293

Farmable Wetland Program Average Rental Rates for 30 Largest CRP States ($/acre) 

2007 2008 2009 2010 2011

Alabama — — — 33.47 33.47 

Arkansas — — — 83.72 

Colorado — — — 52.45 52.45 

Georgia — — — — — 

Idaho — — — 78.55 78.55 

Illinois 154.46 154.45 157.27 181.79 187.82 

Indiana 130.22 132.65 133.50 138.82 139.45 

Iowa 164.11 164.22 165.19 168.16 170.19 

Kansas 51.36 49.85 50.20 51.11 53.37 

Kentucky — — — — — 

Louisiana — — — 93.00 95.81 

Michigan 94.73 99.71 99.76 107.57 107.96 

Minnesota 101.25 102.33 104.49 107.56 109.15 

Mississippi — — 102.01 92.22 95.94 

Missouri 76.04 76.04 76.04 108.73 108.73 

Montana 34.63 33.80 33.80 33.80 34.82 

Nebraska 82.71 82.67 82.72 83.42 84.96 

New Mexico — — — — — 

N. Dakota 47.28 51.19 53.17 73.03 76.80 

Ohio 117.33 122.22 124.98 134.32 138.56 

Oklahoma — — — 44.68 44.68 

Oregon — — — — — 

Pennsylvania — — — — — 

S. Dakota 81.18 83.23 84.46 90.89 93.22 

Tennessee — — — — — 

Texas — — — — — 

Utah — — — — — 

Washington — — — — — 

Wisconsin 122.16 121.84 141.61 153.43 159.77 

Wyoming —————

Top 30 Total 96.73 98.02 100.66 98.53 98.37

U.S. Average 118.71 117.04 117.61 113.63 111.65

1829

60 ‘‘Conservation Reserve Program—State Acres for Wildlife Enhancement (SAFE),’’ Farm 

Service Agency fact sheet, February 2010. Accessed 11 April 2012. 61 ‘‘Conservation Reserve Program—State Acres for Wildlife Enhancement (SAFE),’’ Farm 

Service Agency fact sheet, March 2011. Accessed 11 April 2012. 62 Ibid.

Appendix C: CRP State Acres for Wildlife Enhancement (SAFE) 

State Acres for Wildlife Enhancement (SAFE) is part of the CRP’s continuous 

sign-up program, designed to address state and regional high-priority wildlife objectives. 

Contracts under SAFE run 10 to 15 years. They are administered by USDA’s 

Farm Service Agency (FSA) on behalf of the Commodity Credit Corporation (CCC). 

Through SAFE, landowners receive annual rental payments, incentives and costshare assistance to establish, improve, connect or create higher quality wildlife habitat.60

Currently there are 89 SAFE projects across 34 states with 732,840 acres allocated.61

Eligibility 

• Land planted to crops, or considered planted to an agricultural commodity, during four of the six years from 1996 to 2001.

• Site located within a SAFE project area, appropriate for the practices identified 

by that project. 

Management Practices 

• Specific practices are established by each SAFE project to benefit the target 

high-priority wildlife.

• Practices must be managed during the life of the contract.

• Fishing and hunting are permitted on CRP-enrolled land. 

Payments 

• Annual rental payments are based on the average value of dryland cash rent 

or cash rent equivalent for the past three years.

• FSA service centers can provide rental rates.

• CCC will pay up to 50 percent of the cost of establishing a permanent cover 

on the land.

• Other benefits may include:

» Upfront, one-time CRP Signing Incentive Payment of $100 per acre, made 

after the contract is approved.

» Practice Incentive Payment—one-time payment equal to 40 percent of eligible 

installation costs, paid after the practice is installed, eligible costs verified 

and other payment eligible criteria are met. 

High-Priority Species for SAFE 

• Species listed as threatened, endangered or candidates for designation by the 

U.S. Fish and Wildlife Service.

• Species that have suffered significant population declines, such as the lesser 

prairie chicken, sharp-tailed grouse or northern bobwhite quail.

• Socially or economically valuable species or those that provide significant social 

or economic value to the community, such as salmon, steelhead, pollinators or 

game birds.

SAFE projects in the 30 largest CRP states include the following: 62

Alabama 

Alabama Black Belt Prairie Restoration SAFE—Goal to enroll 3,800 acres in 

CRP to improve native grassland habitats for rare, threatened, endangered and declining species dependent on native prairie communities found within Black Belt 

Prairie region of Alabama. 

Arkansas 

Arkansas Wetlands SAFE—Goal to enroll 3,500 acres in CRP to benefited targeted species, including bald eagle, American black bear, American black duck and 

Mississippi kite; other species, including ivory-billed woodpecker, will also benefit. 

Arkansas Grass SAFE—Goal to enroll 5,700 acres in CRP to restore early successional habitat to benefit bobwhite quail; 53 other species of concern will also benefit. 

1830

Arkansas Trees SAFE—Goal to enroll 5,000 acres in CRP to restore trees, primarily hardwoods, to create habitat to benefit American woodcock, swallow-tailed 

kite, bald eagle and American black bear. 

Colorado 

Colorado Lesser Prairie Chicken SAFE—Goal to enroll 9,900 acres of short 

and midgrass sand sagebrush prairie in CRP to maintain and enhance lesser prairie 

chicken populations in Colorado. 

Colorado Plains Sharp-tailed Grouse SAFE—Goal to re-enroll in CRP and enhance 1,475 acres of existing grassland habitat critical to improve nesting and 

brood-rearing cover for plains sharp-tailed grouse populations in northern Colorado. 

Colorado Shortgrass Prairie SAFE—Goal to enroll 1,475 acres in CRP to preserve the integrity and expand the extent of shortgrass prairie managed for wildlife 

species in eastern Colorado. 

Colorado Western Slope Grouse SAFE—Goal to enroll 5,850 acres in CRP to 

restore and enhance habitat for the Columbian sharp-tailed grouse, greater sage 

grouse and Gunnison sage grouse. 

Georgia 

Georgia Restoring Native Pine Savanna SAFE—Goal to enroll 8,800 acres of 

pine savanna in CRP to establish and maintain habitat for northern bobwhite and 

other species that depend on native groundcover. 

Idaho 

Idaho Columbian Sharp-tailed Grouse SAFE—Goal to enroll 64,300 acres in 

CRP to increase quality grassland, shrub steppe, mountain brush and riparian habitat for the Columbian sharp-tailed grouse. 

Illinois 

Illinois Mercer County SAFE—Goal to enroll 800 acres in CRP to increase 

pheasant habitat through establishing permanent native grasses and forbs, which 

will also benefit other upland wildlife species. 

Illinois Prairie Habitat SAFE—Goal to enroll 20,600 acres in CRP to restore 

grassland and wetland habitats to benefit the Massassauga rattlesnake and other 

wetland prairie species such as Kirtland’s water snake and the northern crawfish 

frog. 

Illinois Spoon River SAFE—Goal to enroll 3,600 acres in CRP to enhance habitat for pheasants; other upland game and song bird species will also benefit. 

Illinois Sangamon SAFE—Goal to enroll 2,000 acres in CRP to benefit northern 

bobwhite quail and many other grassland species, including the northern harrier, 

Franklin’s ground squirrel, Kirtland’s water snake and the lined snake. 

Indiana 

Indiana Bat SAFE—Goal to enroll 2,100 acres in CRP to restore forest habitat 

and forested riparian habitat for the Indiana Bat. 

Indiana Northern Bobwhite SAFE—Goal to enroll 5,875 acres in CRP to restore grassland and shrub-land habitats for the northern bobwhite quail. 

Indiana Henslow’s Sparrow SAFE—Goal to enroll 3,075 acres in CRP to restore grassland habitat for the Henslow’s sparrow and other grassland songbirds. 

Indiana Sedge Wren/Grasshopper Sparrow SAFE—Goal to enroll 2,050 acres 

in CRP to restore wetland and grassland complexes as migratory habitat for 

shorebirds and nesting habitat for the sedge wren and grasshopper sparrow. 

Iowa 

Iowa Early Successional/Neotropical Birds SAFE—Goal to enroll 3,500 acres 

in CRP to develop habitat required by numerous bird species declining nationwide. 

Iowa Gaining Ground SAFE—Goal to enroll 31,650 acres in CRP to increase 

populations of ring-necked pheasant, dickcissel, bobolink and eastern meadowlark 

by enhancing native plant communities and buffers around and near existing remnants of native prairie. 

Iowa Grand River SAFE—Goal to enroll 4,500 acres of cropland or other acreage in CRP to create higher quality native grasslands for native habitat for five 

grassland-dependent bird species. 

Kansas 

Kansas Upland Game Birds SAFE—Goal to enroll/maintain 30,100 acres of diverse native grass and forb cover in CRP to improve populations of bobwhite quail 

and other grassland-associated wildlife. 

1831

Kansas Lesser Prairie Chicken Habitat SAFE—Goal to enroll 30,000 acres in 

CRP to restore mixed-grass prairies to maintain and enhance lesser prairie chicken 

populations. 

Kentucky 

Kentucky Early Successional and Bottomland Hardwood Restoration 

SAFE—Goal to enroll 8,600 acres in CRP to benefit the northern bobwhite quail. 

Louisiana 

Louisiana Gulf Coast Prairies SAFE—Goal to enroll 3,500 acres in CRP to restore grassland and shallow water habitats. 

Louisiana Bayou Bartholomew SAFE—Goal to enroll 1,700 acres in CRP to 

identify, protect and restore critical mussel and bald eagle habitat, including bottomland hardwood, native grasses and riparian buffers. 

Michigan 

Michigan Diverse Grassland SAFE—Goal to enroll 7,500 acres of diverse native grassland in CRP to benefit a variety of rare or declining species in the lower 

peninsula of Michigan. 

Michigan Native Pollinators SAFE—Goal to enroll 2,500 acres in CRP to benefit native pollinators, including bees, butterflies and moths. 

Minnesota 

Minnesota Back Forty SAFE—Goal to enroll 33,900 acres in CRP to restore and 

enhance habitat for ring-necked pheasants, building upon existing habitats established for waterfowl, greater prairie chicken and grassland bird populations. 

Mississippi 

Mississippi Black Bear SAFE—Goal to enroll 4,950 acres in CRP to restore native bottomland hardwood forests to increase habitat for the Louisiana black bear 

and the American black bear. 

Mississippi Black Belt SAFE—Goal to enroll 2,500 acres in CRP to increase native grassland habitats for rare, threatened, endangered and declining species. 

Mississippi Bobwhite Quail SAFE—Goal to enroll 9,450 acres in CRP to increase native grassland habitats for northern bobwhite quail. 

Missouri 

Missouri Bobwhite Quail SAFE—Goal to enroll 14,650 acres in CRP to provide 

nesting and brood-rearing habitat for bobwhite quail. 

Missouri Sand Grassland SAFE—Goal to enroll 3,250 acres in CRP to restore 

sand prairie, sand woodland and sand savannas to benefit such species as the Illinois chorus frog, eastern spadefoot toad and northern bobwhite. 

Missouri Nesting Habitat SAFE—Goal to enroll 3,700 acres in CRP to significantly increase available nesting habitat for greater prairie chickens and other 

grassland-dependent birds. 

Montana 

Montana Pheasant Winter Cover SAFE—Goal to enroll 10,000 acres in CRP 

to provide blocks of grass or shrub cover for ring-necked pheasant and other upland 

birds near existing permanent winter cover. 

Montana Prairie Pothole SAFE—Goal to enroll 7,700 acres in CRP to expand 

habitat for ducks, ring-necked pheasant, Hungarian (gray) partridge, native sharptailed grouse and neotropical birds by seeding herbaceous vegetation in areas of 

high wetland densities or areas that are adjacent to semi-permanent wetlands. 

Montana Sagebrush SAFE—Goal to enroll 1,000 acres in CRP to restore cropland to sagebrush habitat suitable for wildlife such as sage grouse, sage sparrow 

and sage thrasher. 

Nebraska 

Nebraska Tallgrass SAFE—Goal to enroll 11,450 acres in CRP to expand habitat for greater prairie chickens in the tallgrass prairie region. 

Nebraska Upland Birds SAFE—Goal to enroll 15,950 acres in CRP to enhance 

habitat for upland wildlife such as game birds including northern bobwhite quail 

and ring-necked pheasant. 

New Mexico 

New Mexico Lesser Prairie Chicken SAFE—Goal to enroll 2,600 acres in CRP 

to benefit the lesser prairie chicken by restoring native grasslands for breeding and 

brood-rearing. 

1832

North Dakota 

North Dakota Coteau-Drift SAFE—Goal to enroll 20,000 acres in CRP to maintain and increase habitat for priority species of waterfowl, water birds, shorebirds 

and terrestrial birds. 

North Dakota Sagebrush SAFE—Goal to enroll 1,000 acres in CRP to increase 

sage grouse populations by restoring cropland to sagebrush habitat; will also benefit 

sage sparrow, sage thrasher, sharp-tailed grouse, gray partridge and mule deer. 

North Dakota Tallgrass SAFE—Goal to enroll 6,090 acres in CRP to restore 

cropland to native tallgrass prairie to maintain and increase greater prairie chicken 

and sharp-tailed grouse populations. 

North Dakota Habitat for Pheasants SAFE—Goal to enroll 18,000 acres in 

CRP of habitat for economically significant species such as ring-necked pheasant, 

sharp-tailed grouse, Hungarian partridge, waterfowl and big game. 

Ohio 

Ohio Big Island/Killdeer SAFE—Goal to enroll 925 acres in CRP to restore native grasslands, prairies and wetlands to benefit pollinators and grassland-dependent and migratory bird species. 

Ohio Grand River/Mosquito SAFE—Goal to enroll 100 acres in CRP to restore 

native grasslands, prairies and wetlands to benefit pollinators and grassland-dependent and migratory bird species. 

Ohio Killbuck SAFE—Goal to enroll 100 acres in CRP to restore native grasslands, prairies and wetlands to benefit pollinators and grassland-dependent and migratory bird species. 

Ohio Kitty Todd SAFE—Goal to enroll 250 acres in CRP to restore native grasslands, prairies and wetlands to benefit pollinators, including Karner blue butterfly, 

and grassland-dependent and migratory bird species. 

Ohio LaSuAn Grasslands SAFE—Goal to enroll 2,500 acres in CRP to restore 

native grasslands, prairies and wetlands to benefit pollinators, waterfowl and grassland-dependent and migratory bird species. 

Ohio Paint Creek SAFE—Goal to enroll 875 acres in CRP to restore native 

grasslands, prairies and wetlands to benefit pollinators and grassland-dependent 

bird species. 

Ohio Western Lake Erie Marshes SAFE—Goal to enroll 400 acres in CRP to 

restore native grasslands, prairies and wetlands to benefit pollinators, waterfowl 

and grassland-dependent bird species. 

Ohio Grassland Bird SAFE—Goal to enroll 850 acres in CRP to restore native 

grasslands, prairies and wetlands to benefit pollinators and grassland-dependent 

bird species. 

Ohio Grasslands for Pheasants SAFE—Goal to enroll 5,600 acres in CRP to 

create high quality pheasant habitat or rehabilitate habitat for pheasants as well 

as other grassland birds. 

Oklahoma 

Oklahoma Mixed Grass Prairie SAFE—Goal to enroll 15,100 acres in CRP to 

restore mixed-grass prairie to benefit northern bobwhite, Cassin’s sparrow and other 

grassland birds. 

Oregon 

Oregon Heppner Mule Deer SAFE—Goal to enroll 5,500 acres of high quality 

mule deer forage in CRP to benefit mule deer and also Rocky Mountain elk, pheasants, Hungarian partridge, chukar and other grassland birds. 

Pennsylvania 

Pennsylvania Seasonal Pools/Early Successional/Grass SAFE—Goal to enroll 5,200 acres in CRP to improve habitat and increase populations of sensitive 

wildlife. 

South Dakota 

South Dakota Sagebrush SAFE—Goal to enroll 500 acres in CRP to benefit the 

sage grouse population by restoring cropland to sagebrush habitat; will also benefit 

sage sparrows and sage thrashers. 

South Dakota Pheasants SAFE—Goal to enroll 50,200 acres in CRP to provide 

block grass acreages for ring-necked pheasant and other upland birds; will also benefit sharp-tailed grouse, prairie chickens and upland nesting ducks. 

South Dakota Western SD Grassland Wildlife Habitat SAFE—Goal to enroll 

in CRP 18,000 acres of habitat critical to declining grassland birds, including shorteared owl, grasshopper sparrow, dickcissel, bobolink, sharp-tailed grouse, long-billed 

curlew and upland nesting waterfowl. 

1833

Tennessee 

Tennessee Wetlands SAFE—Goal to enroll 500 acres in CRP to restore high 

quality wetlands habitat for wildlife. 

Tennessee Trees SAFE—Goal to enroll 600 acres in CRP to establish high quality bottomland hardwoods on wetlands important to wildlife. 

Tennessee Grass SAFE—Goal to enroll 6,000 acres in CRP to develop critical 

habitats for bobwhite quail and other declining wildlife species. 

Texas 

Texas Gulf Coast Prairies SAFE—Goal to enroll 14,400 acres in CRP to restore 

grassland and shallow water habitats to benefit a variety of bird species. 

Texas Lower Rio Grande Thornscrub SAFE—Goal to enroll 5,000 acres in 

CRP to restore Tamaulipan thornscrub habitat for ocelot and other wildlife. 

Texas Mixed Grass SAFE—Goal to enroll 45,000 acres in CRP to reconnect geographically and reproductively isolated populations of lesser prairie chickens by creating native mixed grass prairie and travel corridors. 

Washington 

Washington Coastal Roosevelt Elk SAFE—Goal to enroll 500 acres in CRP to 

increase habitat for elk herds on the Olympic Peninsula. 

Washington Columbia Basin SAFE—Goal to enroll 500 acres in CRP to benefit 

ring-necked pheasant and California quail; will also benefit burrowing owl and 

Washington ground squirrel. 

Washington Palouse Prairie SAFE—Goal to enroll 2,000 acres in CRP to improve and increase habitat for a variety of wildlife species, including grassland- and 

shrub-land-nesting birds and native pollinators by re-establishing diverse stands of 

grasses, forbs and shrubs. 

Washington Shrub-steppe SAFE—Goal to enroll 5,200 acres in CRP to benefit 

shrub-steppe bird species, including sharp-tailed grouse, sage grouse, sage sparrow, 

sage thrasher, loggerhead shrike, grasshopper sparrow, savannah sparrow and 

Brewer’s sparrow. 

Washington Sage and Sharp-tailed Grouse SAFE—Goal to enroll 63,000 

acres in CRP to benefit native prairie grouse and other birds, including sharp-tailed 

grouse, sage grouse, sage sparrow, sage thrasher, loggerhead shrike, grasshopper 

sparrow, savannah sparrow and Brewer’s sparrow. 

Wisconsin 

Wisconsin Glacial SAFE—Goal to enroll 2,250 acres in CRP to establish a mosaic of grasslands and wetlands in a predominantly agricultural landscape to help 

sustain populations of waterfowl, pheasants and grassland songbirds. 

Wisconsin Shortgrass SAFE—Goal to enroll 2,000 acres of shortgrass prairie in 

CRP to increase Karner Blue butterfly habitat. 

Wisconsin Southwest Grassland SAFE—Goal to enroll 4,000 acres in CRP to 

restore and maintain grassland and prairie habitat for 14 bird species. 

Wisconsin Central Grassland SAFE—Goal to enroll 2,000 acres in CRP to restore native mid-shortgrass and wetland habitats for neotropical migrant songbirds, 

including Henslow’s sparrow, grasshopper sparrow, sedge wren and bobolink. 

Wisconsin Western Prairie SAFE—Goal to enroll 2,500 acres in CRP to maintain current grassland and establish new acres of native and introduced grasses to 

benefit grassland-dependent species. 

Wyoming 

Wyoming Northeast Habitat Restoration Area SAFE—Goal to enroll 10,000 

acres in CRP to create, enhance or restore critical habitat for sage grouse, sharptailed grouse, gray partridge, ducks, geese, mule deer, pronghorn antelope, wild turkeys and small mammals.

1834

Appendix D: Erodibility Index Data Tables 

CRP Acres with an Erodibility Index between 8 and 15 and Their Percent of the State’s Total CRP Acres 

2006 2007 2008 2009 2010

Acres % of Total Acres % of Total Acres % of Total Acres % of Total Acres % of Total 

Alabama 214,379 43.6 214,526 43.5 199,399 43 187,854 42.1 146,142 35 Arkansas 60,103 27.2 60,353 25.3 55,733 23.8 54,640 22.1 41,476 16.6 Colorado 1,671,982 70.4 1,734,214 70.1 1,693,143 69.4 1,674,517 69.2 940,930 46.5 Georgia 121,206 39.5 117,736 37.6 106,790 32.3 103,771 31 79,329 24.7 Idaho 403,706 50.4 401,907 48.7 345,848 44.9 337,518 44.7 334,649 46.7 Illinois 188,731 17.9 193,083 17.7 205,393 19.3 199,654 19.2 119,256 11.6 Indiana 75,135 24.3 74,831 23.6 68,574 23.2 64,031 22 41,949 14.5 Iowa 144,725 7.3 147,192 7.4 157,814 8.7 152,759 8.9 74,064 4.5 Kansas 2,038,215 66 2,130,499 65.3 1,951,764 62.4 1,926,381 62.1 1,652,749 59.3 Kentucky 23,551 6.6 23,774 6.6 31,891 8.2 32,795 8.4 11,070 2.8 Louisiana 71,943 24.9 72,126 23.2 86,224 28.3 87,098 28.4 60,682 19 Michigan 56,729 20.8 65,402 20.4 49,517 19 43,520 18.1 31,978 13.7 Minnesota 237,951 13.2 239,600 13 217,305 12.2 199,928 11.7 185,129 11.2 Mississippi 154,537 16.2 152,382 15.9 142,137 15.8 139,917 15.8 98,743 11.4 Missouri 201,663 12.8 199,683 12.5 191,973 13.2 181,164 12.7 125,636 9 Montana 2,458,934 70.6 1,463,576 70.7 2,309,367 70.1 2,252,246 70.3 1,955,569 63.5 Nebraska 691,027 53.5 722,317 53.8 686,232 55.6 663,077 55 486,988 44.5 New Mexico 200,216 33.5 199,808 33.8 202,983 35.6 202,471 3.9 160,112 29.5 N. Dakota 1,419,389 42 1,412,818 41.8 1,195,849 40.1 1,133,483 39.7 1,040,002 38.2 Ohio 90,686 27.5 90,855 25 88,729 25.1 83,324 23.9 61,717 17.9 Oklahoma 653,952 61.9 657,123 61.1 602,306 61.3 584,636 60.9 458,893 53.3 Oregon 333,883 61.6 348,816 61.4 291,088 51.6 289,243 51.6 298,187 54.4 Pennsylvania 29,798 13.4 29,137 12.6 62,045 27.1 62,699 28.1 1,487 0.6 S. Dakota 397,816 26.2 408,387 26.1 351,377 26.9 341,842 27.3 247,064 22.1 Tennessee 46,424 16.7 46,025 16.5 39,718 16.9 38,071 16.8 25,515 11.7 Texas 1,853,650 45.8 1,862,385 45.7 1,791,201 45.4 1,721,396 44.7 1,296,973 39.2 Utah 63,709 30.9 63,909 30.6 61,961 31.1 60,827 31.2 42,494 29.2 Washington 586,086 39.8 602,728 38.7 594,193 38.6 537,516 35.5 478,803 33.1 Wisconsin 100,949 16.3 99,975 16.4 85,296 16.2 68,583 14.9 51,763 12 Wyoming 171,977 60.2 170,866 60.1 164,540 59.5 163,909 60.5 84,792 40.6

Top 30 14,763,052 34.7 14,006,033 34.17 14,030,390 34.16 13,588,870 32.69 10,634,141 27.21

U.S. Total 15,045,942 41.7 15,277,038 41.5 14,285,524 41.2 13,830,824 41 10,797,892 34.4

1835

CRP Acres with an Erodibility Index (EI) Rating of Greater Than 15 and Their Percent of the State’s Total CRP Acres 

2006 2007 2008 2009 2010

Acres % of Total Acres % of Total Acres % of Total Acres % of Total Acres % of Total 

Alabama 178,995 36.4 177,789 36 162,168 34.9 156,044 34.9 164,426 39.3 Arkansas 43,657 19.8 44,096 18.5 38,482 16.4 38,024 15.3 39,220 15.7 Colorado 627,635 26.4 643,112 26 636,869 26.1 631,296 26 984,899 48.7 Georgia 37,142 12.1 37,049 11.8 32,894 9.9 31,632 9.4 36,944 11.5 Idaho 129,009 16.1 136,402 16.5 146,045 18.9 143,455 19 122,845 17.1 Illinois 472,227 44.9 475,857 43.7 444,500 41.8 420,402 40.5 408,525 39.9 Indiana 99,244 32.2 100,218 31.6 89,589 30.3 81,328 27.9 79,651 27.6 Iowa 1,294,524 66 1,284,604 65.1 1,127,891 62.3 1,000,527 58.7 897,206 54.8 Kansas 390,396 12.6 395,724 12.1 368,951 11.8 364,646 11.7 431,559 15.5 Kentucky 271,653 76.7 270,234 75.4 290,209 75.3 286,055 73.3 201,755 52.7 Louisiana 22,086 7.6 21,724 7 21,724 7.1 21,210 6.9 21,071 6.6 Michigan 11,595 4.2 11,276 4 9,206 3.5 9,494 3.9 8,865 3.8 Minnesota 66,357 3.6 67,021 3.6 63,665 3.5 53,465 3.1 50,781 3 Mississippi 471,257 49.5 465,923 48.7 412,467 46 400,066 45.2 406,125 47.1 Missouri 233,334 78.2 1,237,509 77.6 1,112,130 76.5 1,098,821 77.3 1,046,563 75.1 Montana 847,106 24.3 840,849 24.1 771,787 23.4 732,814 22.8 854,029 27.7 Nebraska 410,377 31.7 415,011 30.9 350,769 28.4 326,102 27 361,759 33.1 New Mexico 393,129 65.7 387,109 65.5 360,699 63.2 356,809 62.9 374,447 69.1 N. Dakota 105,779 3.1 108,367 3.1 116,389 3.9 111,144 3.8 123,954 17.2 Ohio 61,414 18.6 60,629 16.7 52,084 14.7 48,627 13.9 49,562 14.4 Oklahoma 273,249 25.8 269,868 25.1 238,281 24.2 236,928 24.7 275,828 32 Oregon 148,708 27.4 152,253 26.8 201,196 35.7 200,699 35.8 173,454 31.6 Pennsylvania 91,057 41.4 88,727 38.5 136,999 59.8 129,297 58 13,196 5.9 S. Dakota 31,106 2 31,346 2 26,618 2 25,604 2 29,940 2.6 Tennessee 203,192 73.4 203,798 73.3 169,040 72 16,809 71.3 159,237 73.2 Texas 199,097 29.6 1,194,982 29.3 1,131,837 28.7 1,111,581 28.8 1,210,038 36.6 Utah 4,663 2.2 4,722 2.2 4,544 2.2 4,021 2 5,801 3.9 Washington 201,885 13.7 259,804 16.6 249,981 16.2 312,881 20.6 283,151 19.6 Wisconsin 352,616 57.1 347,257 57.2 291,090 55.3 254,814 55.4 234,244 54.7 Wyoming 106,687 37.4 106,302 37.3 104,479 37.8 99,700 36.8 116,819 55.9

Top 30 7,779,176 31.3 9,839,562 30.8 9,162,583 31 8,704,295 30.6 9,165,894 31.1

U.S. Total 10,029,605 27.8 10,090,480 27.4 9,345,034 26.9 8,999,792 26.6 9,367,488 29.9

(1837)

FORMULATION OF THE 2012 FARM BILL 

(DAIRY PROGRAMS) 

THURSDAY, APRIL 26, 2012

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON LIVESTOCK, DAIRY, AND POULTRY, COMMITTEE ON AGRICULTURE, Washington, D.C. 

The Subcommittee met, pursuant to call, at 2:30 p.m., in Room 

1300 of the Longworth House Office Building, Hon. Thomas J. Rooney [Chairman of the Subcommittee] presiding. 

Members present: Representatives Rooney, Goodlatte, King, 

Neugebauer, Conaway, Huelskamp, DesJarlais, Gibson, Ribble, 

Noem, Cardoza, Scott, Courtney, Boswell, Baca, Schrader, Peterson 

(ex officio), Welch, and Costa. 

Staff present: John Goldberg, Tamara Hinton, Lauren Sturgeon, 

Suzanne Watson, Michelle Weber, Nathaniel B. Fretz, Liz Friedlander, Robert L. Larew, John Konya, Merrick Munday, Jamie 

Mitchell, and Caleb Crosswhite. 

OPENING STATEMENT OF HON. THOMAS J. ROONEY, A 

REPRESENTATIVE IN CONGRESS FROM FLORIDA 

The CHAIRMAN. The hearing of the Subcommittee on Livestock, 

Dairy, and Poultry to discuss dairy programs in advance of the 

2012 Farm Bill, will come to order. 

Good afternoon. I would like to welcome all of you to the hearing 

on the 2012 Farm Bill. I would like to extend my thanks to the 

Ranking Member, Mr. Cardoza of California, for his help in preparing for this hearing and to all the witnesses for their willingness to participate in this process. 

Today’s hearing, which will focus primarily on the dairy title of 

the next farm bill, is part of a series of hearings that the House 

Agriculture Committee has convened both in Washington and 

around the country to receive input from the agricultural community on the future of U.S. farm policy. 

As many of you are aware, last summer’s deficit reduction legislation led to an effort by the leaders of the House and the Senate 

Agriculture Committees to develop a plan to achieve significant 

budgetary savings while still maintaining a viable producer safety 

net. Although the Super Committee was ultimately unsuccessful, 

the process of developing those recommendations did result in a 

great deal of dialogue and to a certain extent a framework by 

which we might be able to begin the debate on the next farm bill. 

This was particularly significant for the dairy sector. This comprehensive reform legislation had been introduced prior to the defVerDate 0ct 09 2002 12:54 Dec 11, 2012 Jkt 041481 PO 00000 Frm 00249 Fmt 6601 Sfmt 6601 I:\DOCS\112-30\74372.TXT BRIAN
1838

icit reduction process and has been under discussion and further 

development ever since. 

To be clear, we are not considering specific legislation at today’s 

hearing. That said, it is important to recognize that a tremendous 

amount of work has already been done within the dairy industry 

and will be extremely helpful as we move forward. 

I commend those who have come to the table in a productive and 

cooperative manner to work towards solutions. At our dairy audit 

hearing last fall, we got a sense for the inadequacy of some of our 

current dairy programs. We know that innovative ideas are needed 

in order to ensure our program support for our producers, facilitate 

product and market development, and continue to maintain the 

availability of safe, abundant and affordable product for our consumers. 

While consensus is certainly developing, we recognize that there 

remain important areas of disagreement that still must be addressed. To facilitate this dialogue, we have asked Dr. Scott Brown 

of the Food and Agricultural Policy Research Institute to evaluate 

some of the key concepts that have been under consideration and 

report back to this Committee on the economic impacts of these 

policy options. We are pleased that Dr. Brown has completed his 

review and has made himself available this afternoon to present 

his work. Among the concepts that Dr. Brown has had under review are, first, repeal of the Dairy Product Price Support Program, 

Milk Income Loss Contract Program, and Dairy Export Incentives 

Program; second, establishment of a margin protection program 

that includes both a basic level of protection and a tiered, supplemental, premium-based insurance package; and third, establishment of a supply management program that would be linked to voluntary participation in the margin protection program. 

While we are aware that the first two points have a great deal 

of support within the industry, we understand that the third item 

remains controversial. As such, it is important to understand how 

this program would work and what its impact would be. We understand that there are strong feelings on both sides of this issue and 

recognize that this is unlikely to be fully resolved with today’s 

hearing. We would, however, encourage that the conversation today 

be respectful of the various points of view and seek, if possible, to 

provide common ground on which we can develop into the next 

farm bill. 

[The prepared statement of Mr. Rooney follows:]

PREPARED STATEMENT OF HON. THOMAS J. ROONEY, A REPRESENTATIVE IN

CONGRESS FROM FLORIDA

Good afternoon. I would like to welcome you all to this hearing on the 2012 Farm 

Bill. I’d like to extend my thanks to Ranking Member Cardoza for his help in preparing for this hearing and to all of the witnesses for their willingness to participate 

in this process. Today’s hearing, which will focus primarily on the dairy title of the 

next farm bill, is part of a series of hearings that the House Agriculture Committee 

has convened both in Washington and around the country to receive input from the 

agricultural community on the future of U.S. farm policy. 

As many of you are aware, last summer’s deficit reduction legislation led to an 

effort by the leaders of the House and Senate Agriculture Committees to develop 

a plan to achieve significant budgetary savings while still maintaining a viable producer safety net. Although the Super-Committee was ultimately unsuccessful, the 

process of developing those recommendations did result in a great deal of dialogue 

1839

and, to a certain extent, a framework by which we might begin debate on the next 

farm bill. 

This was particularly significant for the dairy sector, as comprehensive reform 

legislation had been introduced prior to the deficit reduction process and has been 

under discussion and further development ever since. 

To be clear, we are not considering specific legislation at today’s hearing. That 

said, it is important to recognize that a tremendous amount of work has already 

been done within the dairy industry and will be extremely helpful as we move forward. 

I commend those who have come to the table in a productive and cooperative 

manner to work toward solutions. At our dairy audit hearing last fall, we got a 

sense for the inadequacy of some of our current dairy programs. We know that innovative ideas are needed in order to ensure our programs support our producers, facilitate product and market development, and continue to maintain the availability 

of safe, abundant, and affordable product for our consumers. While consensus is certainly developing, we recognize that there remain important areas of disagreement 

that must still be addressed. 

To facilitate this dialogue, we have asked Dr. Scott Brown of the Food and Agricultural Policy Research Institute to evaluate some of the key concepts that have 

been under consideration and report back to this Committee on the economic impacts of these policy options. We are pleased that Dr. Brown has completed his review and has made himself available this afternoon to present his work. 

Among the concepts that Dr. Brown has had under review are:

• ONE, Repeal of the Dairy Product Price Support Program; Milk Income Loss 

Contract program; and Dairy Export Incentives Program;

• TWO, Establishment of a margin protection program that includes both a basic 

level of protection and a tiered, supplemental, premium-based insurance package; and

• THREE, Establishment of a supply management program that would be linked 

to voluntary participation in the margin protection program.

While we are aware that the first two points have a great deal of support within 

the industry, we understand that the third item remains controversial. As such, it 

is important to understand how this program would work and what its impact 

would be. 

We understand that there are strong feelings on both sides of this issue and recognize that this is unlikely to be fully resolved with today’s hearing. We would however encourage that the conversation today be respectful of the various points of 

view and seek if possible to provide common ground on which we can develop the 

next farm bill. 

With that, I would yield to my Ranking Member, Mr. Cardoza, for any comments 

he would like to make.

The CHAIRMAN. With that, I would like to now yield to my friend 

and Ranking Member, Mr. Cardoza, for any comments he would 

like to make. Mr. Cardoza. 

OPENING STATEMENT OF HON. DENNIS A. CARDOZA, A 

REPRESENTATIVE IN CONGRESS FROM CALIFORNIA 

Mr. CARDOZA. Well, thank you, Chairman Rooney, and I truly do 

want to thank my friend, the Chairman, for holding this hearing 

today. He and I have worked together on the Subcommittee to address the most pressing issues facing the livestock, dairy and poultry industries, and I look forward to working with him as we move 

forward to what I hope will be a successful farm bill. I would also 

like to thank our witnesses here who have graciously agreed to give 

up their time and energy to testify before us today. As the farm bill 

process moves forward, it is input like yours from folks like you 

that will color both our understanding of the issues and our pathways to solutions. 

As everyone knows, dairy policy is fraught with obstacles. Since 

the first day when I was Agriculture Committee Chair at the State 

Legislature in California, the one issue area that has always been 

1840

the most treacherous for the Agriculture Committee seems to be 

dairy policy, and I think that this year it won’t be any different. 

There are significant and divergent opinions between different 

states and different regions of the country. Each area faces its own 

challenges that are different and must be handled differently from 

one another. We as policymakers must be sensitive to these different geographical challenges and work to craft a consensus package that meets the needs of most, if not all, and that is not an easy 

feat. I am happy that the process is finally moving. Frankly, we 

should have probably been doing this much earlier but I am glad 

we are at this point now. 

In 2009, we saw a tremendous drop in milk produces coupled 

with a crushing increase in feed and other input costs. This drove 

a number of my dairymen from my area and from the State of California out of business. These kinds of fluctuations are very unacceptable and more than anything else I want a solution that will 

help even out the highs and lows and keeps my constituents from 

being thrown out of business sort of haphazardly. 

Dairy farming as we all know is not a business for the faint of 

heart, but my goal is to smooth out the roller coaster as best we 

possibly can. While engaged in this process, however, it is extremely important that we have the facts and data that drive the 

discussion and not just base our decisions on rhetoric. The economic analysis that we will hear about today is a step in the right 

direction. Let me clear when I say that delay tactics, false information and hyperbole will not be tolerated. It is time for us all to 

buckle down and find a consensus that we can live with so that we 

do not inadvertently throw away our vital domestic dairy industry. 

With that, Mr. Chairman, thank you very much for doing this. 

I look forward to the testimony of the witnesses and I look forward 

to being successful as we move forward. 

[The prepared statement of Mr. Cardoza follows:]

PREPARED STATEMENT OF HON. DENNIS A. CARDOZA, A REPRESENTATIVE IN

CONGRESS FROM CALIFORNIA

Good afternoon. 

I’d like to thank our Chairman, Mr. Rooney, for holding this hearing today. He 

and I have worked together on the Subcommittee to address the most pressing 

issues facing the livestock, dairy, and poultry industries and I look forward to working with him further as we write a farm bill. 

I’d also like to thank our witnesses who have graciously given their time and energy to testify before us today. As the farm bill process moves forward, it is input 

from folks like these that color both our understanding of the issues and the pathway to a solution. 

As everyone knows, dairy policy is wrought with obstacles. There are significant 

and divergent opinions between different states and regions throughout the country. 

Each area faces its own challenges that are different and must be handled differently than other areas. We, as policy makers, must be sensitive to the different 

geographical challenges and work to craft a consensus package that meets the needs 

of most. This is no small feat. 

I am happy that the process is finally moving forward. Frankly, we should have 

been working on this earlier, but I’m glad we are at this point now. In 2009, we 

saw a tremendous drop in milk prices coupled with a crushing increase in feed and 

other input costs. This crisis drove dairymen in my district and in the State of California out of business. 

This is unacceptable and I, more than anything, want a solution that will help 

even-out the highs and lows and keeps my constituents in business. Dairy farming 

is not a business for the faint of heart, but my goal is to smooth out the roller coaster as best as I can. 

1841

While engaged in this process, however, it is extremely important that have facts 

and data drive the discussion, and not extreme rhetoric. The economic analysis that 

we will hear about today is a step in the right direction. 

Let me be clear when I say that delay tactics, false information, and hyperbole 

will not be tolerated. It’s time to buckle down and find a consensus that we can live 

with so that we do not inadvertently throw away our vital domestic dairy industry. 

Thank you.

The CHAIRMAN. The chair thanks the Ranking Member for his 

statement and would request that other Members submit their 

opening statements for the record so the witnesses may begin their 

testimony and ensure that there is ample time for questions. 

I would like to now welcome our panel of witnesses to the table. 

As mentioned before, Dr. Scott Brown, Assistant Research Professor, Integrated Policy Group, Division of Applied Social Sciences, 

College of Agriculture, Food and Natural Resources from the University of Missouri, Food and Agricultural Policy Research Institute, Columbia Missouri; Mr. Joe Wright, V&W Farms, Inc., on behalf of Southeast Milk in Avon Park Florida; Mr. Thomas 

Barcellos, Board President, Western United Dairymen, Porterville, 

California; Mr. Jerry Kozak, President and Chief Executive Officer, 

National Milk Producers Federation of Arlington, Virginia; and finally, I would like to turn to my colleague, Mrs. Noem of South Dakota, to introduce our fourth witness. 

Mrs. NOEM. Thank you, Mr. Chairman. I appreciate the opportunity to introduce Mr. Jon Davis to the Committee Members 

today. 

Jon Davis is the CEO of Davisco Foods International, which is 

an international cheese and food ingredient company 

headquartered in Le Sueur, Minnesota. They also own the Lake 

Norden cheese plant, which is not too far from my home as well. 

They have a number of cheese companies across the Midwest, and 

they employ almost 200 employees at the Lake Norden plant, 

which is in my home county. That plant alone produces over 

300,000 pounds of cheese a day. So I look forward to hearing from 

Jon, hearing his testimony and how dairy policy will impact his 

business and his employees. 

So thank you, Mr. Chairman, and with that, I will yield back. 

The CHAIRMAN. Thank you, Mrs. Noem. 

While we normally limit oral testimony from witnesses to 5 minutes, and we will do that today, I would like to offer Dr. Brown a 

little additional latitude as we have invited him here to provide 

testimony on the economic analysis he completed at the request of 

the Committee. As we have a full panel and a limited amount of 

time, I would request that all the other witnesses please keep their 

remarks within the allotted time frame so that we have plenty of 

time for questions from Members. So Dr. Brown, if you are ready, 

please proceed. 

STATEMENT OF SCOTT BROWN, PH.D., ASSISTANT RESEARCH 

PROFESSOR, INTEGRATED POLICY GROUP, DIVISION OF

APPLIED SOCIAL SCIENCES, COLLEGE OF AGRICULTURE, 

FOOD AND NATURAL RESOURCES, UNIVERSITY OF

MISSOURI, COLUMBIA, MO 

Dr. BROWN. Chairman Rooney, Ranking Member Cardoza, and 

Members of the Subcommittee, thank you for the opportunity to apVerDate 0ct 09 2002 12:54 Dec 11, 2012 Jkt 041481 PO 00000 Frm 00253 Fmt 6601 Sfmt 6601 I:\DOCS\112-30\74372.TXT BRIAN
1842

pear today to discuss dairy program alternatives for the 2012 Farm 

Bill. 

The concept of providing dairy producer margin protection gained 

substantial interest due to the combination of extremely high feed 

costs and low milk prices the industry experienced in 2009. The annual decline in 2009 in U.S. milk receipts of $10.5 billion set a 

record. Even in percentage terms, the 43 percent reduction in 2009 

milk receipts had never been experienced by the industry before. 

The 2009 record event is just another of the cyclical lows that the 

industry has experienced on a more regular basis over the last decade. 

This recent cycle of record high and low milk receipt changes has 

left the industry searching for mechanisms to help stabilize producer finances. The volatility dairy producers have experienced in 

the last few years often made what appeared to be good financial 

decisions turn into tough financial results when the markets for 

feed and milk products moved so quickly. This led to the policy development process undertaken by the National Milk Producers Federation that resulted in the original concept of Foundation for the 

Future. Many of these original concepts were first introduced in 

Congress by House Agriculture Committee Ranking Member Colin 

Peterson and Representative Mike Simpson as the Dairy Security 

Act of 2011. The major features of the DSA 2011 program as modified in this analysis that must be discussed to interpret how the 

program will operate are the base program and the supplemental 

program under the Dairy Producer Margin Protection Program and 

the Dairy Market Stabilization Program. 

It remains important to highlight the MDSA 2011 program is a 

voluntary producer program. A producer who chooses margin protection under DPMPP is subject to the provisions of DMSP and is 

eligible for payments under the base and supplemental programs. 

The particular assumptions used for my analysis of the program 

are contained in the full report that is attached to my testimony. 

Every component of the proposed dairy program hinges on the margin defined by the program. 

It is important to understand the construction of the MDSA 2011 

margin and how it has moved historically. The margin calculation 

used here is the same margin in the recently released Senate Agriculture, Nutrition, and Forestry Committee farm bill language. One 

way to look at the construction of the margin is to compare the 

milk price used in the margin calculation relative to the feed components of corn, soybean meal and alfalfa. The relative movements 

in these two parts of the margin calculation are critical. The tendencies for these components to move together can be seen in the 

current graph. The correlation between the milk price and feed cost 

is a .64 over the 1980 to 2011 period. Of course, the measure of the 

correlation between these data series is sensitive to the time period 

chosen. Eliminating 2011 from the calculation reduces the correlation to near .5. Higher correlation reduces government outlays and 

operation of the program features. 

The next figure shows the historical margin using actual observations of the milk and feed price components. It is important to 

understand that these margin outcomes would have changed had 

MDSA 2011 program been in operation. The figure highlights the 

1843

abrupt change that occurred in the margin from late 2007 to mid2009. Over the 1980 to 2011 period, the MDSA 2011 margin averaged $8.30 per hundredweight while over the 2000 to 2011 period 

it averaged $8.60 per hundredweight. Analysis of MDSA 2011 program depends on the level of participation in the program. To move 

beyond a simple assumption of producer participation in the program or a range of participation levels, the representative farm 

model maintained at Texas A&M University by the Agricultural 

and Food Policy Center was used to determine which of the AFPC 

dairy farms would participate and at what level of supplemental 

coverage to maximize their net cash income. Their report, also attached to my testimony, given the results from the representative 

farms models, the aggregate model was calibrated to assume that 

70 percent of the milk produced in the country would be from operations participating in the program and that participating milk 

would purchase supplemental coverage at $6.50 at a 90 percent 

supplemental coverage level. 

My analysis of the MDSA 2011 scenario hinges on a forwardlooking baseline that allows for a point of comparison for this analysis. This baseline is very similar to the long-term baselines constructed by USDA and the Congressional Budget Office. On average, the MDSA 2011 baseline margin averages $9.50 per hundredweight. The baseline uses a stochastic approach so that the effects 

of the policy proposal can be evaluated over different market conditions. The results show that milk supplies are on average only .1 

percent below baseline levels under the MDSA 2011 scenario. My 

report shows only a very modest impact on milk output from operation of the program. 

Dairy product export levels are also down slightly under the scenario. The next graph shows that nonfat dry milk exports have an 

average decline of 4 million pounds, which is a decline of .3 percent 

under the scenario. There has been much industry discussion on 

the effects of DMSP on U.S. dairy exports. Two factors drive the 

small impact shown here. First, the stochastic output from the 

analysis shows DMSP operation does not occur often and only 

about 71⁄2 percent of the months across all 500 stochastic alternatives is the program operational. 

Second, when DMSP operates, it lasts a very short period of time 

because of the world price triggers built into the language. None 

of the 500 outcomes show long-term multi-year operation of DMSP. 

The largest single year decline in nonfat dry milk exports is about 

25 million pounds in any of the 500 outcomes. This decline is in 

comparison to 1.3 billion pounds of nonfat dry milk exports occurring under the baseline and is less than a two percent decline. 

The next figure provides an indication of the probability of a base program and a $6.50 supplemental program payment in the first 

year and midway through the analysis period. There is an 18 percent chance of a base program payment being made in 2012 and 

that probability decreases to a seven percent chance of a baseline 

program payment in 2017. The probability of receiving a $6.50 supplemental program payment in 2012 is 61 percent and declines to 

30 percent in 2017. The higher probabilities associated with the 

supplemental program highlights the important choices producers 

will make each year regarding supplemental coverage. This is likeVerDate 0ct 09 2002 12:54 Dec 11, 2012 Jkt 041481 PO 00000 Frm 00255 Fmt 6601 Sfmt 6601 I:\DOCS\112-30\74372.TXT BRIAN
1844

ly the most important feature that allows producers to reduce their 

risk of experiencing low margins. 

Another way to measure the reduction in volatility from the operation of the program is to look at the variance in the baseline margin versus margin under MDSA 2011. This figure shows that program results in about a 75¢ reduction in margin variance under 

the program’s operation. It is primarily the lift in low margin outcomes provided by the program that results in the reduction margin variance shown in the figure. 

In summary, the analysis of the program shows that the combination of program features, DMSP and DPMPP reduces margin 

volatility in the dairy industry. There are only small milk supply 

effects on average, producer margins increase on average with most 

lift in producer margins occurring in low margin environment outcomes. Dairy product trade is only slightly lower on average as a 

result of the DMSP triggers for U.S. to world dairy product price 

differences. Milk and dairy prices have small increases as a result 

of smaller milk supplies and there are no long periods of program 

operation for either DPMPP or DMSP. 

Thank you for the opportunity to discuss the quantitative effects 

of the MDSA 2011 program. I look forward to providing further 

clarification on my analysis and answer any questions you have 

about the program. 

[The prepared statement of Dr. Brown follows:]

PREPARED STATEMENT OF SCOTT BROWN, PH.D., ASSISTANT RESEARCH

PROFESSOR, INTEGRATED POLICY GROUP, DIVISION OF APPLIED SOCIAL SCIENCES, COLLEGE OF AGRICULTURE, FOOD AND NATURAL RESOURCES, UNIVERSITY OF

MISSOURI, COLUMBIA, MO 

Chairman Rooney, Ranking Member Cardoza, and Members of the Subcommittee, 

thank you for the opportunity to appear today to discuss dairy program alternatives 

for the 2012 Farm Bill. The concept of protecting dairy producer margins gained 

substantial interest due to the combination of extremely high feed costs and low 

milk prices the industry experienced in 2009. The annual decline in 2009 U.S. milk 

receipts of $10.5 billion set a record for data going back to the early 1920s. Even 

in percentage terms, the 43 percent reduction in 2009 milk receipts had never been 

experienced by the dairy industry before. The 2009 record event is just another cyclical low that the industry has experienced on a more regular basis over the last 

decade. This recent cycle of record high and low milk receipt changes has left the 

industry searching for mechanisms to help stabilize producer finances. The volatility 

dairy producers have experienced in the last few years often made what appeared 

to be good financial decisions turn into tough financial results when the markets 

for feed and milk products moved so quickly. 

This led to the policy development process undertaken by the National Milk Producers Federation that resulted in the original concept of Foundation for the Future.

Many of these original concepts were first introduced in Congress by House Agriculture Committee Ranking Member Collin Peterson, D-Minnesota, and Representative Mike Simpson, R-Idaho, as the Dairy Security Act of 2011 (DSA2011). 

The major features of the DSA2011 program as modified in this analysis that 

must be discussed to interpret how the program will operate are the base program 

and the supplemental program under the Dairy Producer Margin Protection Program and the Dairy Market Stabilization Program. It remains important to highlight the MDSA2011 program is a voluntary program and that producers can choose 

whether to participate in the program. A dairy producer who chooses margin protection under DPMPP is subject to the provisions of DMSP and is eligible for payments 

under the base and/or supplemental programs. The particular assumptions used for 

my analysis of the program are contained in the full report that is attached to my 

testimony. 

Every component of the proposed dairy program hinges on the margin defined by 

the program. It is important to understand the construction of the MDSA2011 margin and how it has moved historically. The margin calculation used here is the same 

1845

as the margin in the recently released Senate Agriculture Committee farm bill language. One way to look at the construction of the margin is to compare the milk 

price used in the margin calculation relative to the feed components of corn, soybean 

meal and alfalfa. The relative movements in these two parts of the margin calculation are critical. The tendency for these components to move together can be seen 

in the current graph. The correlation between the milk price and feed cost is 0.64 

over the 1980 to 2011 period. The measure of the correlation between these data 

series is sensitive to the time period chosen. Eliminating 2011 from the calculation 

reduces the correlation to near 0.50. Higher correlation reduces government outlays 

and operation of the program features. 

The next figure shows the historical MDSA2011 margin using actual observations 

of the milk and feed price components. It is important to understand that these 

margin outcomes would have changed had the MDSA2011 program been in operation. The figure highlights the abrupt change that occurred in the margin from late 

2007 to mid-2009. Over the 1980 to 2011 period, the MDSA2011 margin averaged 

$8.30 per hundredweight and over the 2000 to 2011 period it averaged $8.60 per 

hundredweight. 

Analysis of the MDSA2011 program depends on the level of participation in the 

program. To move beyond a simple assumption on producer participation in the program or a range of participation levels, the representative farm model maintained 

at Texas A&M University by the Agricultural and Food Policy Center (AFPC) was 

used to determine which of the AFPC dairy farms would participate and at what 

level of supplemental coverage to maximize their net cash income. Their report is 

attached to my testimony. Given the results from the representative farms model, 

the aggregate model was calibrated to assume that 70 percent of the milk produced 

in the country would be from operations participating in the MDSA2011 program 

and that participating milk would purchase supplemental coverage at $6.50 at a 90 

percent supplemental program base coverage level. 

My analysis of the MDSA2011 scenario hinges on a forward-looking baseline that 

allows for a point of comparison for this analysis. This baseline is very similar to 

the long-term baselines constructed by USDA and the Congressional Budget Office. 

On average the MDSA2011 baseline margin averages $9.50 per hundredweight. The 

baseline uses a stochastic approach so that the effects of the policy proposal can be 

evaluated over different market conditions. 

The MDSA2001 results show that milk supplies are on average only 0.1 percent 

below baseline levels under the MDSA2011 scenario. My report shows only a very 

modest impact on milk output from operation of the MDSA2011 program. 

Dairy product export levels are also down slightly under the scenario. The next 

graph shows that nonfat dry milk exports have an average decline of 4 million 

pounds, which is a decline of 0.3 percent under the MDSA2011 scenario. There has 

been much industry discussion on the effects of DMSP on U.S. dairy exports. Two 

factors drive the small impacts shown here. First, the stochastic output from the 

analysis shows DMSP operation does not occur often. In only about 7.5 percent of 

the months across all 500 stochastic alternatives is the program operational. Second, when the DMSP operates, it lasts a very short period of time because of the 

world price triggers built into the MDSA2011 language. None of the 500 outcomes 

show long-term multi-year operation of DMSP. The largest single-year decline in 

nonfat dry milk exports is about 25 million pounds in any of the 500 outcomes. This 

decline is in comparison to 1.3 billion pounds of nonfat dry milk exports occurring 

under the baseline and is a less than two percent decline. 

The next figure provides an indication of the probability of a base program and 

$6.50 supplemental program payment in the first year and midway through the 

analysis period. There is an 18 percent chance of a base program payment being 

made in 2012 and that probability decreases to a seven percent chance of a base 

program payment in 2017. The probability of receiving a $6.50 supplemental program payment in 2012 is 61 percent and declines to 30 percent in 2017. The higher 

probabilities associated with the supplemental program highlights the important 

choices producers will make each year regarding supplemental coverage. This is 

likely the most important feature that allows producers to reduce their risk of experiencing low margins. 

Another way to measure the reduction in volatility from operation of the 

MDSA2011 program is to look at the variance in the baseline margin versus the 

margin under MDSA2011. This figure shows that the program results in about a 

$0.75 reduction in margin variance under the program’s operation. It is primarily 

the lift in low margin outcomes provided by the MDSA2011 program that results 

in the reduction in margin variance shown in the figure. 

In summary, the analysis of the MDSA2011 program shows that:

1846

(1) The combination of program features, DMSP and DPMPP, reduces margin 

volatility in the dairy industry;

(2) There are only small milk supply effects on average;

(3) Producer margins increase on average with the most lift in producer margins occurring in low margin environment outcomes;

(4) Dairy product trade is only slightly lower on average as a result of the 

DMSP triggers for U.S. to world dairy product price differences;

(5) Milk and dairy product prices have small increases as a result of smaller 

milk supplies; and

(6) There are not long periods of program operation for either DPMPP or DMSP.

Thank you for the opportunity to discuss the quantitative effects of the 

MDSA2011 program. I look forward to providing further clarification on my analysis 

and answer any questions you have about the MDSA2011 program. 

CHARTS

Modified Dairy Security Act Provisions

The Correlation Between Feed and Milk Prices is Important


11230103.eps 11230104.eps
1847

Modified DSA2011 Margin

U.S. Milk Production


11230105.eps 11230106.eps

16 

14 

12 

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~~ 

.. 

~ w 

• • 

.. 

0 

Q 

8 «J 

6 If N 

4 

2 

o 

80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 

230 ,-----,----,--,-----,---,--,---,---,----,----,-, 

225 +--f---+-+-+--f---+-+-+--+-==+ 

220 +--f---+-+-+--f---+-+=:-+ ~ 215 +--+--+--+-+-+= + c 5210 +--+--+-+-+ .. 

. § 20S +--+--+ ~ 200 +-:= +-

195 

190 

185 

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 

• Baseline _ MDSA2011 
1848

U.S. Nonfat Dry Milk Exports

Probability of DPMPP Payments


11230107.eps 11230108.eps
1849

Margin Variance Declines Under MDSA2011, Program Lifts Low Margins

ATTACHMENT 1

The Effects of a Modified Dairy Security Act of 2011 on Dairy Markets 

April 2012

Dr. Scott Brown is Assistant Research Professor, Integrated Policy Group (IPGr), 

Division of Applied Social Sciences, College of Agriculture, Food and Natural Resources (CAFNR), University of Missouri. Dr. Brown has had a long-term affiliation 

with the Food and Agricultural Policy Research Institute (FAPRI). 

This report is published in the Integrated Policy Group (IPGr), Division of Applied 

Social Sciences, College of Agriculture, Food and Natural Resources (CAFNR), University of Missouri.

http://web.missouri.edu/∼browndo

Contact authors for the report are Scott Brown (brownsc@missouri.edu) and Daniel Madison (madisondc@missouri.edu). 

Introduction 

The concept of protecting dairy producer margins gained substantial interest due 

to the combination of extremely high feed costs and low milk prices the industry 

experienced in 2009. The annual decline in 2009 U.S. milk receipts of $10.5 billion 

set a record for data going back to the early 1920s. Even in percentage terms, the 

43 percent reduction in 2009 milk receipts had never been experienced by the dairy 

industry before. The 2009 record event is just another cyclical low that the industry 

has experienced on a more regular basis over the last decade. This recent cycle of 

record high and low milk receipt changes has left the industry searching for mechanisms to help stabilize producer finances. 

At the same time that milk receipts made record movements, feed costs skyrocketed. The season average price of corn in 2005 was $2.00 per bushel. The current USDA estimate for the 2011 corn price is $6.20 per bushel, a threefold increase. 

Over the same timeframe, soybean meal and alfalfa prices have doubled. Weather, 

strong domestic demand for crops including the demand by the biofuels sector and 

strong international demand for U.S.-produced crops have all provided the recipe for 

the record-feed costs the dairy industry faces today. 

The combination of low milk prices and high feed costs has taken a large bite out 

of dairy producer equity and substantially lowered dairy producers’ balance sheets 

in the past few years. It will take years to recoup this lost equity. The increase in 

equity many dairy producers experienced in 2007 helped blunt the severe events of 

2009 but by no means provided an offset for the 2009 downturn. 

The volatility dairy producers have experienced in the last few years often made 

what appeared to be good financial decisions turn into tough financial results when 


11230109.eps
1850

the markets for feed and milk products moved so quickly. This has led to discussion 

and evolution of dairy policy alternatives that provide dairy producers with margin 

protection. 

The National Milk Producers Federation (NMPF) went through a policy discussion 

process that resulted in the release of the Foundation for the Future (FFTF) program in late 2010. FFTF reframes the current set of Federal dairy support policies 

into two major new policy pieces. The Dairy Producer Margin Protection Program 

(DPMPP) provides payments to dairy producers when the defined margin of milk 

price less feed costs falls below a specified level. The Dairy Market Stabilization 

Program (DMSP) is a program that manages milk supplies when dairy producer 

margins fall below a specified level. 

The DPMPP provides a firmer floor than current dairy programs for producers in 

periods of low margins and allows some flexibility in the level of protection by allowing producers to buy higher margin coverage levels for additional premiums paid. 

The DMSP works in conjunction with the DPMPP through a managed supply approach and allows a low margin environment to be corrected more quickly than 

would otherwise occur, resulting in higher milk prices for producers and reducing 

government outlays for the DPMPP. 

Legislation was introduced in the House of Representatives by House Agriculture 

Committee Ranking Member Collin Peterson, D-Minnesota, and Representative 

Mike Simpson, R-Idaho, in mid-2011 that incorporated many of the components 

found in the FFTF program. The Dairy Security Act of 2011 (DSA2011) has received 

much discussion regarding its potential effects on dairy markets. 

Further developments to the original DSA2011 language have occurred as House 

and Senate Agriculture Committees work on the next farm bill. This paper examines a set of modifications to the original DSA2011 language that incorporate 

changes that have been discussed by House and Senate Agriculture Committees as 

they draft new farm bill language. This analysis will refer to a modified DSA2011 

(MDSA2011) proposal as it incorporates the changes discussed by Agriculture Committees. Many of the modifications in this analysis are similar to those found in the 

recently released Senate Farm Bill Committee Print. 

Margin Calculation Is Critical To Program Operation 

Every component of the proposed dairy program hinges on the margin defined by 

the program. It is important to understand the construction of the MDSA2011 margin and how it has moved historically. The original margin was developed through 

NMPF’s FFTF policy process and is meant to reflect both the revenue and feed cost 

of milk production. The MDSA2011 margin is defined as:

Margin = U.S. all milk price (USDA/NASS) 

¥1.0728 × U.S. corn price (USDA/NASS) 

¥0.00735 × soybean meal price (USDA/AMS, Central IL) 

¥0.0137 × U.S. alfalfa price (USDA/NASS).

The margin is calculated on a monthly basis with program triggers based on combinations of these monthly margins. 

One way to look at the construction of the margin is to compare the milk price 

used in the margin calculation relative to the feed components of corn, soybean meal 

and alfalfa. Figure 1 provides a comparison of feed costs to the milk price for the 

last 3 decades. There are many important points to focus on in this graph. 

First, both milk prices and feed costs have increased in volatility in the past several years. The volatility in milk prices began to occur in the mid-1990s with feed 

costs showing much of their rise in just the past 6 years. 

Second, the relative movements in these two parts of the margin calculation are 

critical. The tendency for these components to move together can be seen in figure 

1, which reduces volatility in the margin itself. When both milk prices and feed 

costs are either low or high at the same time there is less movement in the margin 

than if the margin was only based on milk prices or feed costs. 

Correlation measures provide a way to quantitatively assess the extent to which 

variables move together without requiring a linear relationship in the variables. 

Correlation coefficients vary from positive one (a perfect relationship between the 

variables) to negative one (a completely inverse relationship). A zero correlation implies no relationship between the variables. 

1851

Figure 1. Components of the MDSA2011 Margin

In the case of figure 1, the correlation between the milk price and feed cost is 0.64 

over the 1980 to 2011 period. The measure of the correlation between these data 

series is sensitive to the time period chosen. Eliminating 2011 from the calculation 

reduces the correlation to near 0.50. Regardless of the chosen timeframe, the correlation remains near 0.50 or higher. This level of correlation corresponds to the 

portion of the cost in producing 100 pounds of milk that is attributed to feed costs. 

The stochastic analysis used in this report has a correlation of about 0.45 between 

milk prices and feed costs. 

It is important to reiterate that this level of correlation does not imply a perfect 

direct relationship between feed costs and milk prices. That is, there are times 

where movements in one of the variables are not mimicked by the movement in the 

other. However, the measure of correlation suggests that often these series do tend 

to move together. 

Knowledge of the correlation between the two profitability components is imperative as background information for industry discussion regarding the effects of 

MDSA2011. If the correlation between the two components of the margin calculation 

is ignored, the effects of the program will be overstated. This margin discussion is 

not meant to suggest that the industry cannot experience very low or very high margins, but that the probability of these events occurring are reduced when the correlation between milk price and feed costs are factored into analysis of the program. 

Figure 2 shows the historical MDSA2011 margin using actual observations of the 

milk and feed price components. It is important to understand that these margin 

outcomes would have changed had the MDSA2011 program been in operation. Figure 2 highlights the abrupt change that occurred in the margin from late 2007 to 

mid-2009. Over the 1980 to 2011 period, the MDSA2011 margin averaged $8.30 per 

hundredweight and over the 2000 to 2011 period it averaged $8.60 per hundredweight. 


11230110.eps
1852

Figure 2. MDSA2011 Historical Margin

Analysis of the MDSA2011 Provisions 

This report provides analysis of a MDSA2011 program that was constructed based 

on discussion with Agriculture Committees. This portion of the report will focus on 

the baseline used to measure the quantitative effects of the MDSA2011 program, 

assumptions about the modified program features of MDSA2011 and the empirical 

results found from enacting the MDSA2011 program. 

The Baseline 

The baseline used in this analysis is a 10 year forward-looking baseline that is 

conditioned on factors such as feed costs, other dairy input costs, real U.S. income 

growth and global dairy markets. The baseline was constructed in January 2012 

and does not incorporate market information available since the first of the year. 

The policy assumptions used in the baseline are a continuation of current dairy programs and include the reduced MILC program parameters that begin in September, 

2012.


11230111.eps
1853

Table 1. Stochastic Dairy Baseline 

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Dairy Cows (thou.) 9,240 9,237 9,259 9,276 9,287 9,298 9,306 9,315 9,329 9,344 9,361 Milk Yield (pounds) 21,550 21,903 22,194 22,459 22,724 22,986 23,234 23,491 23,730 23,983 24,214

(Million pounds)

Milk Production 199,125 202,316 205,492 208,329 211,050 213,719 216,215 218,832 221,380 224,089 226,659 Dairy Product Production 

Cheese 10,779 11,034 11,263 11,474 11,687 11,889 12,088 12,293 12,494 12,710 12,917 Butter 1,891 1,932 1,966 1,987 2,006 2,026 2,043 2,062 2,079 2,096 2,116 Nonfat Dry Milk 1,868 1,963 2,076 2,169 2,240 2,311 2,372 2,436 2,502 2,566 2,638 

Dairy Exports 

Cheese 340 360 379 392 404 414 425 434 444 454 475 Butter 108 116 123 123 119 121 120 120 119 121 121 Nonfat Dry Milk 1,005 1,088 1,182 1,249 1,295 1,331 1,369 1,404 1,435 1,468 1,506

Milk Prices (Dollars per cwt)

U.S. All Milk 18.91 19.10 18.97 18.92 19.07 19.07 19.19 19.24 19.32 19.32 19.57 Class III 17.26 17.42 17.13 17.00 17.12 17.14 17.29 17.37 17.43 17.52 17.73 Class IV 16.89 17.08 17.15 17.23 17.36 17.42 17.48 17.50 17.53 17.46 17.74

MDSA2011 Margin 7.88 9.48 9.78 9.71 9.70 9.62 9.64 9.64 9.81 9.88 10.22Wholesale Dairy Product 

Prices 

(Cents per pound)

Cheese 165.9 169.5 168.5 168.9 170.0 170.3 171.8 172.6 173.2 174.3 176.2 Butter 171.4 163.2 158.3 159.5 159.7 161.0 162.2 163.0 164.5 163.0 167.1 Nonfat Dry Milk 142.4 148.7 151.9 152.2 153.6 153.6 153.7 153.6 153.2 153.1 154.4

These numbers represent the averages of the 500 outcomes. 

1854

This baseline uses a stochastic approach in determining the forward-looking path for the dairy variables shown in table 1. The stochastic 

approach draws 500 alternatives for the conditioning variables in determining the dairy baseline. The draws incorporate historical distributions of the conditioning factors to make certain any historical correlation in these conditioning factors is included. The averages presented in table 1 show a much smoother path than the dairy industry has experienced the last several years. However, any of the 500 individual outcomes that determine the average shown in the table will show volatility similar to what the industry has recently experienced. 

The baseline outlook for the dairy industry shows that milk prices rise on average over the period. With growing international demand 

for U.S. dairy products in the baseline, exports of U.S. dairy products grow. Feed costs remain above long-term historical averages. The baseline shown here is similar to the recent long term forecasts released by USDA and the Congressional Budget Office. 

To highlight that this stochastic baseline has a wide range of dairy outcomes, table 2 shows the distribution of U.S. all milk prices in the 

baseline. For example, table 2 shows that in 2012 there is a five percent chance the all milk price will be below $15.60 or above $22.35 per cwt. Further, the table shows that there is a ten percent chance that the all milk price falls below $16.23 or above $21.42 per cwt in 2012. The stochastic approach taken in the baseline and subsequent analysis is important in determining the effects of a policy alternative across a range of market outcomes. 

Table 2. Distribution of U.S. All Milk Prices 

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

(Dollars per cwt)

Stochastic Average 18.91 19.10 18.97 18.92 19.07 19.07 19.19 19.24 19.32 19.32 19.57Percentiles 

5% 15.60 15.80 15.83 15.53 15.73 15.86 15.77 15.62 15.72 15.80 15.9510% 16.23 16.39 16.45 16.30 16.34 16.54 16.46 16.50 16.36 16.39 16.7220% 17.25 17.31 17.20 17.05 17.15 17.36 17.29 17.40 17.29 17.38 17.6530% 17.81 17.93 17.83 17.66 17.82 18.01 17.90 18.04 18.08 18.26 18.3040% 18.34 18.48 18.28 18.22 18.54 18.37 18.51 18.67 18.56 18.76 18.9550% 18.86 18.97 18.82 18.76 18.94 18.93 19.09 19.16 19.15 19.30 19.5360% 19.38 19.57 19.43 19.20 19.54 19.45 19.65 19.72 19.75 19.79 20.0670% 19.97 20.17 19.91 20.00 20.17 20.08 20.33 20.29 20.37 20.41 20.5780% 20.55 20.77 20.70 20.76 20.95 20.86 21.13 20.96 21.16 21.10 21.3290% 21.42 21.78 21.65 21.86 21.93 21.80 22.10 21.94 22.32 22.10 22.4395% 22.35 22.55 22.52 22.81 22.72 22.58 23.10 22.86 23.68 23.02 23.50

1855

MDSA2011 Assumptions 

There are three main features of the MDSA2011 program that must be discussed 

to interpret how the program will operate: the Base Program, the Supplemental 

Program and the Dairy Market Stabilization Program. It remains important to highlight the MDSA2011 program is a voluntary program and that producers can choose 

whether to participate in the program. 

A dairy producer who chooses margin protection under DPMPP is subject to the 

provisions of DMSP and is eligible for payments under the base and/or supplemental programs. Program participation also carries an annual administrative fee 

that depends on the quantity of milk marketed by the operation. 

The base program provides a payment to a dairy producer based on the calculated 

margin for a 2 month period as stipulated in the legislative language. Any time this 

margin calculation falls below $4 per cwt, the producer receives a payment equal 

to the difference between the reported margin and $4, up to a payment rate cap 

of $4. The payment rate cap does not allow a larger payment if the calculated margin falls below zero. The payment rate is applied to a producer’s base program quantity which is calculated as 80 percent of their historical base (historical base defined 

as the largest of the previous 3 year’s milk marketings). The base for base program 

payments does not grow over time. There are options for new producers to obtain 

base for base program purposes in the language. 

The supplemental program provides dairy producers the opportunity to buy-up to 

higher levels of margin coverage in return for the dairy producer paying a premium 

for that additional coverage. A dairy producer has the option each year to participate in the supplemental program. That is, they can opt in and out of the supplemental program on an annual basis. A dairy producer can also choose the level of 

their supplemental program base they wish to cover in the range of 25 to 90 percent. 

A difference in the supplemental base quantity from the base program base quantity is that it will adjust based on a dairy producer’s annual production from the 

previous year. This will have the effect of allowing dairy producers who are growing 

to obtain additional supplemental coverage on their growing milk supplies. The premium required to be paid by producers for supplemental program coverage depends 

on their level of milk production and is show in table 3. There are lower premiums 

available for a producer’s first 4 million pounds of milk marketings.

Table 3. Supplemental Premium Levels Based on Milk Marketings 

Coverage Level 

Supplemental Premium Rate 

First 4 million lbs Above 4 million lbs 

$4.50 $0.010 $0.015

$5.00 $0.025 $0.036

$5.50 $0.040 $0.081

$6.00 $0.065 $0.155

$6.50 $0.100 $0.230

$7.00 $0.434 $0.434

$7.50 $0.590 $0.590

$8.00 $0.922 $0.922

The DMSP is the remaining important feature of the MDSA2011 provisions. If the 

margin is less than $6 for 2 consecutive months or less than $4 for 1 month, the 

DMSP will then operate a month after notification by USDA to dairy producers. A 

producer must annually choose whether to have his/her DMSP production base calculated as the average of the previous 3 months of milk marketings prior to notification of DMSP operation or milk marketings from the same month in the previous 

year. Individual growth plans will affect that choice as will the producer’s seasonal 

production pattern. 

The program has three levels of market stabilization targets that producers will 

face when the program operates. If the margin is between $5 and $6, a producer 

will be paid on 98 percent of his/her DMSP base, with the maximum payment cut 

capped at six percent of total marketings. A margin between $4 and $5 results in 

only 97 percent of his/her DMSP base receiving payments with a maximum cut of 

seven percent of total marketings, while a margin below $4 results in only 96 percent of the DMSP base receiving payments with a maximum cut equal to eight percent of total marketings. 

A producer can choose to deliver milk above his/her allowed level (percentage of 

DMSP base) but the producer will not be paid for any milk delivered above the alVerDate 0ct 09 2002 12:54 Dec 11, 2012 Jkt 041481 PO 00000 Frm 00267 Fmt 6601 Sfmt 6621 I:\DOCS\112-30\74372.TXT BRIAN
1856

lowed level. Handlers will remit the monies collected on milk delivered above allowed levels to USDA to fund dairy commodity donations. 

The DMSP operation ceases when the margin is above $6 for 2 consecutive 

months, or when the margin is between $5 and $6 for 2 consecutive months and 

either the U.S. cheddar or skim milk powder price exceeds the world equivalent 

price, or the margin is between $4 and $5 for 2 consecutive months and the U.S. 

cheddar or skim milk powder price exceeds the world equivalent price by more than 

five percent, or if the margin is below $4 and either the U.S. cheddar or skim milk 

powder price exceeds world prices by more than seven percent for 2 consecutive 

months. 

Producer Participation in the MDSA2011 Program 

The development of this dairy safety net alternative has raised many questions 

about how producers choose to participate in the program. Important tradeoffs exist 

between potential DMSP operation, which could reduce the quantity of milk producers receive payments for, and the margin protection offered by the DPMPP. 

Under DPMPP, producers face the additional choice of whether to add supplemental 

margin coverage to their program. These choices provide producers a lot of flexibility 

in how they choose to participate in the MDSA2011 program. The range of choices 

goes from no program participation to full supplemental coverage on top of the base 

program option. Figuring out program participation under this flexible scheme can 

prove challenging. Most of the analysis done to date has made educated assumptions about producer participation given the economic incentives that are available. 

This can lead to generalizations that sometimes do not hold well when the program 

is actually implemented. 

To move beyond a simple assumption on producer participation in the program 

or a range of participation levels, the representative farm model maintained at 

Texas A&M University by the Agricultural and Food Policy Center (AFPC) was used 

to determine which of the AFPC dairy farms would participate and at what level 

of supplemental coverage to maximize their net cash income. This approach may 

allow for a better estimate of program participation in the MDSA2011 program. 

The structural aggregate model was simulated with the representative farms 

model until program participation was in agreement between the farm-level and aggregate level structures. Given the results (see the April 2012 Texas A&M study, 

http://www.afpc.tamu.edu) from the representative farms model, the aggregate 

model was calibrated to assume that 70 percent of the milk produced in the country 

would be from operations participating in the MDSA2011 program and that participating milk would purchase supplemental coverage at $6.50 at a 90 percent supplemental program base coverage level. 

The participation outcome will affect how the MDSA2011 program will operate, 

but from the representative farms model and contact with the dairy producers that 

constructed these AFPC panel farms, it appears participation will be an attractive 

economic choice for many producers. These results mimic closely the participation 

levels found by CBO in their analysis of DSA2011 proposals. 

Aggregate Results from the MDSA2011 Program 

The analysis of the MDSA2011 language assumes the program to be in effect over 

the 2012 to 2022 period. Appendix tables A.1 and A.2 at the end of this report provide the average effects of operation of the MDSA2011 program on dairy markets. 

There are several interesting model outcomes from the analysis of the program. In 

general, these appendix tables show very small changes in average outcomes of all 

variables. Figure 3 shows that milk supplies are on average only 0.1 percent below 

baseline levels under the MDSA2011 scenario. 

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Figure 3. U.S. Milk Production

As a result of the small changes in milk supplies, dairy product output is little 

changed under the scenario as well. All three major dairy products have declines 

of 0.2 percent or less throughout the analysis. 

Dairy product export levels are also down slightly under the scenario. Figure 4

shows that nonfat dry milk exports have an average decline of 4 million pounds, 

which is a decline of 0.3 percent under the MDSA2011 scenario. There has been 

much information presented on the effects of DMSP on U.S. dairy exports. Two factors drive the small impacts shown here. First, the stochastic output from the analysis shows DMSP operation occurs only about 7.5 percent of the time. Second, when 

the DMSP operates, it lasts a very short period of time because of the world price 

triggers built into the MDSA2011 language. None of the 500 outcomes show longterm multi-year operation of DMSP. The largest single-year decline in nonfat dry 

milk exports is about 25 million pounds in any of the 500 outcomes. 

Figure 4. U.S. Nonfat Dry Milk Exports


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Milk and dairy prices shown in APPENDIX table 2 are slightly above baseline levels 

in the MDSA2011 scenario from the reduced milk supplies found in the analysis. 

U.S. all milk prices are $0.05 per cwt higher on average over the analysis period. 

All other milk and dairy product prices show similar movements as seen in the U.S. 

all milk price. Figure 5 shows that retail cheese prices are little changed on average 

under the MDSA2011 scenario. 

There has been interest in the effects on milk prices when the margin protection 

program is making payments. This analysis shows that the combination of DMSP 

and DPMPP work together 

Figure 5. U.S. Retail Cheese Prices

in a way that reduces the downward pressure on milk prices during times of payments under DPMPP. In fact, the largest single-year decline in the U.S. all milk 

price relative to the baseline over the 500 outcomes was only $0.23 in this analysis. 

This decline in the all milk price is associated with a period where margin payments 

occurred. 

Figure 6 provides an indication of the probability of a base program and $6.50 

supplemental program payment in the first year and midway through the analysis 

period. According to figure 6 there is an 18 percent chance of a base program payment being made in 2012 and that probability decreases to a seven percent chance 

of a base program payment in 2017. Figure 6 shows that the probability of receiving 

a $6.50 supplemental program payment in 2012 is 61 percent and declines to 30 

percent in 2017. 

Although base program coverage comes with only an administrative cost to producers, the probability of receiving a large payment from the base program is small. 

Buying additional coverage increases the probability of receiving a payment from 

the supplemental program. Again, this analysis assumes that 70 percent of milk has 

supplemental coverage at the 90 percent supplemental base coverage level. The cost 

of this coverage, i.e., the premium, is $0.23 per cwt for producer marketings above 

4 million pounds. In 2012, the average supplemental program payout is $0.41 per 

cwt while in 2017 it is $0.15 per cwt. 

Figure 7 provides a summary of how the MDSA2011 affects margins. This graph 

represents U.S. average effects and the graph does depend on program participation. 

This is an aggregate outcome 


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Figure 6. Probability of Receiving a Payment from DPMPP, 2012 and 2017

Figure 7. Average U.S. 2012 Margin Level, Baseline versus the 

MDSA2011Program

and individual producer outcomes will depend on their program participation choice. 

The baseline margin outcomes are found on the horizontal axis while the 

MDSA2011 margin outcomes are plotted on the vertical axis. The DSA2011 margin 

outcomes include market, premiums and program payments. When an outcome falls 

to the left of the 45° line shown on the graph, the MDSA2011program has raised 

that margin outcome relative to the baseline. When the outcome falls to the right 

of the 45° line, the baseline outcome exceeds the scenario margin outcome. 

The graph shows that in low margin outcomes, the combination of DMSP and 

DPMPP raises the margin outcome relative to the baseline. The lowest outcome on 

the graph shows the MDSA2011 program raised the margin by nearly $3 per cwt. 

On the upper end of baseline margins, producers are paying premiums for the supVerDate 0ct 09 2002 12:54 Dec 11, 2012 Jkt 041481 PO 00000 Frm 00271 Fmt 6601 Sfmt 6621 I:\DOCS\112-30\74372.TXT BRIAN

11230115.eps 11230116.eps
1860

plemental coverage and do not see DPMPP payments so the margin under the 

MDSA2011 program is below the baseline margin outcomes by the cost of the premium they pay. From a margin perspective, the MDSA2011 increases low margin 

outcomes through payments and market stabilization. Supplemental program premiums paid in high margin periods provides slightly lower margin outcomes. The 

combination implies less volatility in margins than occurs with a continuation of 

current programs. 

Another way to measure the reduction in volatility from operation of the 

MDSA2011 program is to look at the variance in the baseline margin versus the 

margin under MDSA2011. Figure 8 shows that the program results in about a $0.75 

reduction in margin variance under the program’s operation. This figure shows the 

lift in low margin outcomes provided by the MDSA2011 program results in the reduction in variance. 

Figure 8. Producer Margin Variance

Summary 

In summary, the analysis of the MDSA2011 program shows that:

(1) The combination of program features, DMSP and DPMPP, reduces margin 

volatility in the dairy industry;

(2) There are only small milk supply effects on average;

(3) Producer margins increase on average with the most lift in producer margins occurring in low margin environment outcomes;

(4) Dairy product trade is only slightly lower on average as a result of the 

DMSP triggers for U.S. to world dairy product price differences;

(5) Milk and dairy product prices have small increases as a result of smaller 

milk supplies; and

(6) There are not long periods of program operation for either DPMPP or DMSP.

The analysis shown here provides a robust look at how the program operates 

across both low and high market price environments. This approach is important 

to gain a full understanding of how the program interacts with various market outcomes. Any time a program is keyed off of a margin that includes input and output 

prices, the analysis needs to carefully incorporate the correlation that occurs between these different prices. If the analysis incorporates correlation that is too high, 

it will understate the level of program operation while if the analysis incorporates 

correlation that is too low, it will overstate the level of program operation. Although 

this analysis takes a stochastic approach to provide a more robust outcome, if the 

average outcomes are too high or too low it will cause the analysis to understate/

overstate the program effects.


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APPENDIX

Table A1. Effect of the MDSA2011 on Dairy Markets 

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Dairy Cows (Thousand Head)

Baseline 9,240 9,237 9,259 9,276 9,287 9,298 9,306 9,315 9,329 9,344 9,361 MDSA2011 9,240 9,236 9,256 9,272 9,283 9,292 9,300 9,308 9,322 9,336 9,353 Change (0) (1) (3) (4) (5) (6) (6) (7) (7) (8) (8) Percent Change 0.0% 0.0% 0.0% 0.0% ¥0.1% ¥0.1% ¥0.1% ¥0.1% ¥0.1% ¥0.1% ¥0.1%

Milk Production (Million Pounds)

Baseline 199,125 202,316 205,492 208,329 211,050 213,719 216,215 218,832 221,380 224,089 226,659 MDSA2011 199,113 202,249 205,376 208,189 210,889 213,538 216,026 218,634 221,170 223,876 226,436 Change (12) (67) (117) (140) (162) (181) (189) (198) (210) (213) (223) Percent Change 0.0% 0.0% ¥0.1% ¥0.1% ¥0.1% ¥0.1% ¥0.1% ¥0.1% ¥0.1% ¥0.1% ¥0.1%

Cheese Production 

Baseline 10,779 11,034 11,263 11,474 11,687 11,889 12,088 12,293 12,494 12,710 12,917 MDSA2011 10,779 11,030 11,257 11,467 11,679 11,879 12,079 12,283 12,483 12,699 12,906 Change (1) (4) (6) (7) (8) (9) (10) (10) (11) (11) (12) Percent Change 0.0% 0.0% ¥0.1% ¥0.1% ¥0.1% ¥0.1% ¥0.1% ¥0.1% ¥0.1% ¥0.1% ¥0.1%

Butter Production 

Baseline 1,891 1,932 1,966 1,987 2,006 2,026 2,043 2,062 2,079 2,096 2,116 MDSA2011 1,891 1,930 1,964 1,984 2,004 2,023 2,040 2,058 2,076 2,092 2,112 Change (0) (1) (2) (2) (3) (3) (3) (3) (3) (3) (4) Percent Change 0.0% ¥0.1% ¥0.1% ¥0.1% ¥0.1% ¥0.1% ¥0.2% ¥0.2% ¥0.2% ¥0.2% ¥0.2%

Nonfat Dry Milk Production 

Baseline 1,868 1,963 2,076 2,169 2,240 2,311 2,372 2,436 2,502 2,566 2,638 MDSA2011 1,868 1,962 2,073 2,165 2,236 2,307 2,367 2,431 2,496 2,561 2,632 Change (0) (2) (3) (4) (4) (5) (5) (5) (5) (5) (6) Percent Change 0.0% ¥0.1% ¥0.1% ¥0.2% ¥0.2% ¥0.2% ¥0.2% ¥0.2% ¥0.2% ¥0.2% ¥0.2%

Cheese Exports 

Baseline 340 360 379 392 404 414 425 434 444 454 475 MDSA2011 339 359 378 391 402 413 423 432 443 452 473 Change (0) (1) (1) (1) (1) (2) (2) (2) (2) (2) (2) Percent Change 0.0% ¥0.2% ¥0.3% ¥0.3% ¥0.3% ¥0.4% ¥0.4% ¥0.4% ¥0.4% ¥0.4% ¥0.4%

Butter Exports 

Baseline 108 116 123 123 119 121 120 120 119 121 121 MDSA2011 108 116 123 122 118 119 119 119 118 120 120 Change (0) (0) (1) (1) (1) (1) (1) (1) (1) (1) (1) Percent Change ¥0.1% ¥0.3% ¥0.6% ¥0.7% ¥0.8% ¥0.9% ¥0.9% ¥0.9% ¥0.9% ¥1.0% ¥1.0%

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Table A1. Effect of the MDSA2011 on Dairy Markets—Continued

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Nonfat Dry Milk Exports 

Baseline 1,005 1,088 1,182 1,249 1,295 1,331 1,369 1,404 1,435 1,468 1,506 MDSA2011 1,005 1,087 1,179 1,246 1,291 1,327 1,365 1,400 1,430 1,463 1,501 Change (0) (1) (3) (3) (4) (4) (4) (4) (5) (5) (5) Percent Change 0.0% ¥0.1% ¥0.2% ¥0.3% ¥0.3% ¥0.3% ¥0.3% ¥0.3% ¥0.3% ¥0.3% ¥0.3%

Table A2. Effect of the MDSA2011 on Dairy Prices 

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

U.S. All Milk Price (Dollars per Cwt)

Baseline 18.91 19.10 18.97 18.92 19.07 19.07 19.19 19.24 19.32 19.32 19.57 MDSA2011 18.92 19.13 19.01 18.97 19.13 19.13 19.25 19.31 19.39 19.40 19.64 Change 0.01 0.02 0.04 0.05 0.06 0.06 0.07 0.07 0.07 0.07 0.08 Percent Change 0.0% 0.1% 0.2% 0.3% 0.3% 0.3% 0.3% 0.4% 0.4% 0.4% 0.4%

Class III Milk Price 

Baseline 17.26 17.42 17.13 17.00 17.12 17.14 17.29 17.37 17.43 17.52 17.73 MDSA2011 17.27 17.44 17.17 17.05 17.18 17.21 17.36 17.44 17.51 17.60 17.82 Change 0.01 0.03 0.04 0.05 0.06 0.07 0.07 0.08 0.08 0.08 0.08 Percent Change 0.0% 0.1% 0.3% 0.3% 0.4% 0.4% 0.4% 0.4% 0.5% 0.5% 0.5%

Class IV Milk Price 

Baseline 16.89 17.08 17.15 17.23 17.36 17.42 17.48 17.50 17.53 17.46 17.74 MDSA2011 16.90 17.10 17.19 17.27 17.41 17.47 17.53 17.56 17.59 17.52 17.80 Change 0.01 0.02 0.03 0.04 0.05 0.05 0.05 0.06 0.06 0.06 0.06 Percent Change 0.0% 0.1% 0.2% 0.2% 0.3% 0.3% 0.3% 0.3% 0.3% 0.3% 0.4%

Wholesale Cheese Price (Cents per Pound)

Baseline 165.9 169.5 168.5 168.9 170.0 170.3 171.8 172.6 173.2 174.3 176.2 MDSA2011166.0 169.7 168.9 169.4 170.6 170.9 172.5 173.3 173.9 175.1 177.0 Change 0.1 0.2 0.4 0.5 0.6 0.6 0.7 0.7 0.7 0.7 0.8 Percent Change 0.0% 0.1% 0.2% 0.3% 0.3% 0.4% 0.4% 0.4% 0.4% 0.4% 0.4%

Wholesale Butter Price 

Baseline 171.4 163.2 158.3 159.5 159.7 161.0 162.2 163.0 164.5 163.0 167.1 MDSA2011 171.5 163.5 158.8 160.2 160.5 161.9 163.1 163.9 165.5 164.0 168.1 Change 0.1 0.3 0.5 0.7 0.8 0.9 0.9 0.9 1.0 1.0 1.1 Percent Change 0.1% 0.2% 0.3% 0.4% 0.5% 0.5% 0.6% 0.6% 0.6% 0.6% 0.6%

Wholesale Nonfat Dry Milk 

Price Baseline 142.4 148.7 151.9 152.2 153.6 153.6 153.7 153.6 153.2 153.1 154.4 

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MDSA2011 142.4 148.7 152.0 152.3 153.7 153.8 153.9 153.8 153.4 153.3 154.6 Change 0.0 0.1 0.1 0.1 0.2 0.2 0.2 0.2 0.2 0.2 0.2 Percent Change 0.0% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1%

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ATTACHMENT 2

Farm Level Impacts of Effects of a Modified Dairy Security Act of 2011

Any opinion, findings, conclusions, or recommendations expressed in this publication are those of the authors and do not necessarily reflect the view of the funding 

source. 

Mention of a trademark or a proprietary product does not constitute a guarantee 

or a warranty of the product by Texas Agri-Life Research or Texas Agri-Life Extension Service and does not imply its approval to the exclusion of other products that 

also may be suitable. All programs and information of Texas Agri-Life Research or 

Texas Agri-Life Extension Service are available to everyone without regard to race, 

color, religion, sex, age, handicap, or national origin.

©2012 by the Agricultural and Food Policy Center

Research Report 12–1

Agricultural and Food Policy Center 

Department of Agricultural Economics 

2124 TAMU 

College Station, TX 77843–2124

Website: www.afpc.tamu.edu

Farm Level Impacts of Effects of a Modified Dairy Security Act of 2011

JOE L. OUTLAW

JAMES W. RICHARDSON

BRIAN K. HERBST

GEORGE M. KNAPEK

DAVID P. ANDERSON

Agricultural & Food Policy Center, 

Department of Agricultural Economics, 

Texas AgriLife Research, 

Texas AgriLife Extension Service, 

Texas A&M University.

AFPC Research Report 12–1

April 2012

College Station, Texas 77843–2124

Telephone: 979.845.5913

Fax: 979.845.3140

Web site: http://www.afpc.tamu.edu/

Farm Level Impacts of Effects of a Modified Dairy Security Act of 2011

Executive Summary 

The report analyzed the effect of the modified Dairy Security Act of 2011 

(MDSA2011) provisions that was discussed in late 2011 on individual dairy farms 

using data on 22 actual representative dairy farms developed and maintained by 

AFPC. These representative dairy farms vary significantly in size and are distributed throughout the United States. 

The following are the some of the key conclusions of the study:

(1) The overwhelming majority (19 out of 22) of the representative farms would 

have higher net cash farm income over the study period under the MDSA2011 

proposed policy relative to current policy. Eleven dairies would choose the $6.50 

buy-up level and eight would choose $5.00 buy-up level as their most preferred 

option. The remaining three would choose non-participation as their preferred 

option.

(2) In general, the current policy alternative (option 1) was among the least preferred across the representative dairies.

(3) Sector level analysis from Brown indicates that MDSA2011 will result in 

very minor changes in milk prices and milk production, compared with current 

dairy policy.

(4) Although the analysis formally assumes that the milking herd sizes of the 

representative farms remains constant throughout the analysis period (2009–

2016), it was determined that the results would not change under a more general assumption of herd size growth. 

1865

Farm Level Impacts of Effects of a Modified Dairy Security Act of 2011

This report provides the results of farm level analyses of the modified Dairy Security Act of 2011 provisions that was discussed in late 2011. This analysis is a companion to the sector level analysis of these provisions developed by Brown. The sector level results were utilized in this analysis and imposed on the representative 

dairy farms maintained by the Agricultural and Food Policy Center at Texas A&M 

University. Detailed descriptions of the sector results are contained in the report, 

The Effects of a Modified Dairy Security Act of 2011 on Dairy Markets.

AFPC Panel Process 

AFPC has developed and maintains data to simulate 22 representative dairy 

farms in the major production areas across the United States (Figure 1). Characteristics for each of the operations in terms of location, size, and crop mix are summarized in Appendix A. More detailed information on the farms are contained in Richardson, et al., 2012. 

The locations of these farms are primarily the result of past discussions with staff 

Members of the U.S. House and Senate Agriculture Committees. Information necessary to simulate the economic activity on these representative farms is developed 

from panels of producers using a consensus-building interview process. Often, two 

farms are developed in each region using separate panels of producers: one is representative of moderate size full-time farm operations, and the second panel usually 

represents farms two to three times larger. 

The data collected from the panel farms are analyzed using the whole farm simulation model (FLIPSIM) developed by AFPC. The producer panels are provided pro 

forma financial statements for their representative farm and are asked to verify the 

accuracy of simulated results for the past year and the reasonableness of a multiFigure 1. Location and Size of AFPC Representative Dairies 

year projection. Each panel must approve the model’s ability to reasonably reflect 

the economic activity on their representative farm prior to using the farm for policy 

analyses. 

Initial debt levels for dairy farms were set at 30 percent. The debt levels the 

farms have at the outset of 2009 are based on a stratified tabulation of the ERS–

USDA Farm Cost and Returns Survey (using the survey data for moderate to large 

size farms in states where AFPC has representative farms) and panel member 

input. 

Panel Member Input 

AFPC often gets asked to analyze policy changes on our representative farms and 

the results often hinge on the assumptions made for the analysis. We often fact 

check our assumptions with our panel members or at least try to get a feel from 

them for how they might react to a policy change. The significance of the changes 

being analyzed in this report prompted us to seek our panel member input via an 


11230119.eps
1866

1Several farms were analyzed to determine whether their preferences would change under a 

herd growth scenario. The preferred choice for these farms did not change from the constant 

herd size analysis.

e-mail survey. These e-mail surveys are not meant to represent a scientific sample, 

but rather provide anecdotal information and raise issues for both policy makers 

and modelers to address. The dairy producers were asked whether they would participate in the potential program laid out under the Modified Dairy Security Act. 

In general, the responses were pretty evenly split between intending to participate 

and not participating. It was clear that many producers were not fully aware of the 

dairy provisions of the bill presented to the Super Committee. There was a clear 

indication that producers needed more information about the details of the provision 

to make an informed decision. Some reasons listed for potential lack of participation 

in the program were: too complicated, potential to hurt export markets, and doubting the market stabilization portion of the program would work if not full participation. On the question of what information the producers need to make a decision 

on whether to buy-up coverage and at what level, the most mentioned responses included: futures prices for both milk and feed, their operations cost of production, 

and premium costs. The results of our ad hoc survey suggested that more analysis, 

such as this study were indeed needed to help producers more fully understand the 

economic implications of the modified Dairy Security Act. 

Brief descriptions of assumptions that apply to all alternatives are as follows:

(1) The study period runs from 2009 to 2016. Several years of history are included to ensure the results are tracking what actually occurred in the industry 

appropriately. Several common financial condition measures are reported for 

each representative dairy as of the end of 2016.

(2) The milking herd size remains constant throughout the study period.1

(3) Milk production is expected to increase at 1.5% annually.

Brief descriptions of alternatives analyzed in this report are as follows:

1. Current Policy. Assumes that a new farm bill reauthorizes MILC and other 

farm programs included in baseline projections by the Congressional Budget Office (CBO) without changing program provisions. This means that MILC payments are limited to 2.4 million pounds of milk, the feed cost adjustor is raised 

to $9.50, and payments are made on 34% of the difference between the $16.94 

base price and the class I Boston price.

2. Non-Participant. Assumes that a new farm bill puts in place the provisions 

of the Dairy Security Act, but that individual representative dairies choose not 

to participate in the margin protection and market stabilization.

3. Participant Base Coverage. Assumes that each representative dairy chooses to participate in margin protection, but only at the basic level (no buy-up). 

Applicable reductions in dairy payments occur when the margin has been $6.00/

cwt or less for the immediately preceding 2 months or $4.00/cwt or less for the 

immediately preceding month.

Table 1. Premium Schedule for First 4 Million Pounds of Production

Coverage Level Premium per Cwt. 

$4.50 $0.010

$5.00 $0.025

$5.50 $0.040

$6.00 $0.065

$6.50 $0.100

$7.00 $0.434

$7.50 $0.590

$8.00 $0.922

Table 2. Premium Schedule for Production in Excess of 4 Million Pounds

Coverage Level Premium per Cwt. 

$4.50 $0.015

$5.00 $0.036

$5.50 $0.081

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Table 2. Premium Schedule for Production in Excess of 4 Million Pounds—

Continued

Coverage Level Premium per Cwt. 

$6.00 $0.155

$6.50 $0.230

$7.00 $0.434

$7.50 $0.590

$8.00 $0.922

4. Participant Buy-up $4.50 Coverage. Individual representative dairies are 

simulated at the $4.50 margin buy-up covering 90% of their annual production 

history. Premium payments correspond to rates found in Tables 1 and 2. Applicable reductions in dairy payments occur when the margin has been $6.00/cwt 

or less for the immediately preceding 2 months or $4.00/cwt or less for the immediately preceding month.

5. Participant Buy-up $5.00 Coverage. Individual representative dairies are 

simulated at the $5.00 margin buy-up covering 90% of their annual production 

history. Premium payments correspond to rates found in Tables 1 and 2. Applicable reductions in dairy payments occur when the margin has been $6.00/cwt 

or less for the immediately preceding 2 months or $4.00/cwt or less for the immediately preceding month.

6. Participant Buy-up $5.50 Coverage. Individual representative dairies are 

simulated at the $5.50 margin buy-up covering 90% of their annual production 

history. Premium payments correspond to rates found in Tables 1 and 2. Applicable reductions in dairy payments occur when the margin has been $6.00/cwt 

or less for the immediately preceding 2 months or $4.00/cwt or less for the immediately preceding month.

7. Participant Buy-up $6.00 Coverage. Individual representative dairies are 

simulated at the $6.00 margin buy-up covering 90% of their annual production 

history. Premium payments correspond to rates found in Tables 1 and 2. Applicable reductions in dairy payments occur when the margin has been $6.00/cwt 

or less for the immediately preceding 2 months or $4.00/cwt or less for the immediately preceding month.

8. Participant Buy-up $6.50 Coverage. Individual representative dairies are 

simulated at the $6.50 margin buy-up covering 90% of their annual production 

history. Premium payments correspond to rates found in Tables 1 and 2. Applicable reductions in dairy payments occur when the margin has been $6.00/cwt 

or less for the immediately preceding 2 months or $4.00/cwt or less for the immediately preceding month.

9. Participant Buy-up $7.00 Coverage. Individual representative dairies are 

simulated at the $7.00 margin buy-up covering 90% of their annual production 

history. Premium payments correspond to rates found in Tables 1 and 2. Applicable reductions in dairy payments occur when the margin has been $6.00/cwt 

or less for the immediately preceding 2 months or $4.00/cwt or less for the immediately preceding month.

10. Participant Buy-up $7.50 Coverage. Individual representative dairies are 

simulated at the $7.50 margin buy-up covering 90% of their annual production 

history. Premium payments correspond to rates found in

Table 3. Ranking of the 11 Alternatives for Each Representative Farm Using the Highest Net Cash 

Farm Income Criteria

Current 

Policy Non-participant 

Participant 

Base Coverage 4.5 5 5.5 6 6.5 7 7.5 8

CAD1710 8 7 4 3 1 2 6 5 9 10 11

WAD250 7 8 6 5 4 3 2 1 9 10 11

WAD850 8 7 4 3 1 2 6 5 9 10 11

IDD3000 8 7 3 2 1 4 5 6 9 10 11

NVD500 8 7 6 5 3 2 4 1 9 10 11

TXCD550 8 2 7 6 5 3 4 1 9 10 11

TXCD1300 8 5 4 3 1 2 7 6 9 10 11

TXED400 8 7 6 5 4 3 2 1 9 10 11

TXED1000 8 7 5 3 1 2 6 4 9 10 11

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Table 3. Ranking of the 11 Alternatives for Each Representative Farm Using the Highest Net Cash 

Farm Income Criteria—Continued

Current 

Policy Non-participant 

Participant 

Base

Coverage 4.5 5 5.5 6 6.5 7 7.5 8

TXND3000 8 5 4 2 1 3 6 7 9 10 11

WID145 8 7 6 5 4 3 2 1 9 10 11

WID1000 8 7 4 3 1 2 6 5 9 10 11

NYWD600 8 7 6 5 3 2 4 1 9 10 11

NYWD1200 8 7 4 3 1 2 6 5 9 10 11

NYCD110 7 8 6 5 4 3 2 1 9 10 11

NYCD550 8 7 6 5 3 2 4 1 9 10 11

VTD140 5 8 7 6 4 3 2 1 9 10 11

VTD400 8 7 6 5 4 3 2 1 9 10 11

MOGD180 4 2 8 7 6 5 3 1 9 10 11

MOGD550 2 1 8 7 6 5 4 3 9 10 11

FLND550 8 1 7 6 5 3 4 2 9 10 11

FLND1500 8 1 5 4 2 3 7 6 9 10 11

Tables 1 and 2. Applicable reductions in dairy payments occur when the margin has been $6.00/cwt or less for the immediately preceding 2 months or $4.00/cwt 

or less for the immediately preceding month.

11. Participant Buy-up $8.00 Coverage. Individual representative dairies are simulated at the $8.00 margin buy-up covering 90% of their annual production 

history. Premium payments correspond to rates found in Tables 1 and 2. Appli- cable reductions in dairy payments occur when the margin has been $6.00/cwt 

or less for the immediately preceding 2 months or $4.00/cwt or less for the immediately preceding month. 

Results 

AFPC applied the sector level results developed in Brown’s analysis for the set 

of 22 representative dairy farms located across the United States, using AFPC’s 

farm level simulation model for this analysis. 

The farm level results reflect actual dairy data developed in our representative 

farm process. The representative dairies are all analyzed under each of the alternative scenarios described above. The sector level results provided by Brown reflect 

sector level supply response analyzing current policy as the baseline alternatives 

based on analysis of the provisions of the DSA. 

Table 3 contains the rankings of the 11 alternatives (defined above) for each of 

the representative dairies. The rankings are based on average Net Cash Farm Income (NCFI) from 2012 to 2016 for each alternative. The alternative with the highest NCFI was given the highest ranking of one. The next highest NCFI was given 

a ranking of two and so forth, all the way to 11. Table 3 reveals that 11 of the 22 

dairies have the highest average NCFI under the $6.50 buy-up alternative (option 

8 described above) followed closely with eight dairies having the highest average 

NCFI under the $5.00 buy-up alternative (option 5). The large Missouri grazing 

dairy (MOGD550) and both Florida dairies received the largest average NCFI under 

the Non-Participant alternative. 

In order to convey the magnitude between alternatives, the difference between the 

highest NCFI option and the next best alternative is presented in Figure 2. The 

color code in Figure 2 relates to the next best option. The results indicate the average difference per year over the 2012 to 2016 study period. The large Florida dairy 

shows the largest difference between its highest NCFI alternative (Non-Participation) and its next best option ($6.50 buy-up) at $13,600/year. Conversely, there are 

ten dairies that show less than a $1,000/year difference. 

Figures 3 and 4 also show magnitude of differences between alternatives. Figure 

3 shows the annual average difference in NCFI between the Preferred option and 

Non-Participation. Three dairies (the large MOGD and both Florida dairies) indicate 

$0 difference because their preferred option was Non-Participation. Idaho has the 

largest average annual NCFI difference at $53,500. In general, given the analysis 

of margin volatility and the ability of the policy options to provide a safety net for 

that volatility combined with the affects of market stabilization, the analysis suggests that the costs of non-participation for a dairy would be significant especially 

for the larger dairies. 

Figure 4 shows the differences for each dairy between their Preferred option and 

Current Policy alternatives. These results are similar as those in Figure 3, as most 

dairies have Non-Participation and Current Policy ranked closely in their order of 

preference. For example, the large Wisconsin dairy has a $14,600 difference between 

1869

the non-participation ($18,300) and the current policy baseline option ($32,900). The 

smaller Wisconsin dairy has a very small difference between these same options. 

Non-participation tends to have the smaller NCFI difference from either of the preferred buy-up options ($6.50 or $5.00) than does the current program. That implies 

that non-participants in the new program would experience higher NCFI’s than otherwise achieved under the current program. 

Table 4 contains the average annual premium, lost marketings, and indemnity 

payments during the 2012 to 2016 study period. This table is a complement to Table 

3 as it gives detail to the representatives dairies highest NCFI

Figure 2. Differences in $1,000 in Average Annual NCFI between Preferred 

Option and Next Best Option 

Note: The numbers are the difference in $1,000 for each farm. Names were 

omitted due to space considerations. In states with more than one dairy, 

the moderate size farm is always listed first then the result for the large 

farm.

Figure 3. Difference in $1,000s in Average Annual NCFI between the Preferred Option and Non-Participation


11230120.eps 11230121.eps
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Figure 4. Difference in $1,000s in Average Annual NCFI between the Preferred Option and Current Policy

Table 4. Average Premiums, Lost Revenues and Government Indemnities 

for DSA at the $6.50 Buy-Up Option (in $1,000) 

Premium Income Lost Indemnity 

CA1710 85.2 21.5 88.4

WA250 8.4 3.8 13.0

WA850 42.9 13.4 46.0

ID3000 157.2 42.4 154.9

NV500 20.6 8.2 25.0

TXC550 139.0 58.2 139.3

TXC1300 18.6 9.8 23.0

TXE400 51.7 24.0 55.0

TXE1000 10.2 5.9 14.8

TXN3000 42.9 19.5 46.0

WI145 3.5 0.3 7.7

WI1000 52.2 0.5 71.3

NYW600 25.1 0.8 29.5

NYW1200 56.8 1.5 60.4

NYC110 2.5 0.2 10.2

NYC550 25.1 0.7 29.5

VT140 2.9 1.9 6.4

VT400 15.9 5.9 20.5

MOG180 2.1 2.8 4.7

MOG550 9.1 23.2 13.5

FLN550 17.9 12.5 22.3

FLN1500 59.1 39.0 61.8

for each alternative. For most dairies, the expected average annual indemnity payments outweigh, or exceed, the lost income triggered by the market stabilization and 

premium payments combined. 

Table 5 contains the average annual milk prices for states where representative 

dairies are located assuming continuation of current policies. Table 6 contains the 

average annual milk prices for the same states assuming that the modified DSA is 

in effect for the 2012 to 2016 study period. The annual average milk prices in Tables 

5 and 6 are averages from a risk-based analysis which simulated 500 different possible future paths for demand and production of crops, livestock, and milk; and thus 

500 different paths of annual prices for feed and milk. The 500 sector level price 

paths were developed by Brown for the current farm program and DSA program 

both used the same risk so the only differences in prices is attributable to the policy 


11230122.eps
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change. The 500 possible price paths for dairy feed prices and milk prices simulated 

by Brown are appropriately correlated based on historical correlation among these 

variables. The farm level analyses used Brown’s 500 price paths so the DSA premiums and indemnities were calculated using a wide range of possible projections 

for milk and feed prices, that were correlated based on historical relationships. By 

using the 500 draws of prices, the results of the farm level analysis are more robust 

than if the policies were simply analyzed using only the average prices. 

Table 7 is related to the previous two tables as it shows the difference in prices 

between the DSA and current policy for each state (DSA prices minus Current policy). Current Policy (Baseline) milk prices and those projected under the DSA are 

projected by Brown. 

Summary and Conclusions 

AFPC analyzed the modified Dairy Security Act of 2011 provisions that was discussed in late 2011 utilizing our set of 22 representative dairy farms located in ten 

states across the U.S. Each farm was simulated 500 times each year in AFPC’s farm 

level simulation model (FLIPSIM) to incorporate risk in commodity prices and crop 

and milk yields into the analysis. Each farm was analyzed under 11 options from 

current policy (MILC) (option 1), to the modified DSA scenario as a non-participant 

(option 2), to participation at the base level of margin coverage (option 3), to eight 

buy-up alternatives (options 4–11).

Table 5. Base Milk Price ($/cwt) 

2009 2010 2011 2012 2013 2014 2015 2016

California 11.49 14.69 18.47 16.83 17.08 17.04 17.06 17.21

Florida 16.90 20.70 24.24 23.22 23.40 23.32 23.25 23.49

Idaho 11.80 14.90 18.47 17.20 17.36 17.21 17.13 17.30

Missouri 13.00 16.60 20.71 19.57 19.74 19.62 19.55 19.75

New York 13.60 17.40 21.45 20.14 20.31 20.21 20.16 20.34

Texas 13.30 17.10 20.85 19.65 19.82 19.69 19.61 19.81

Vermont 13.80 17.70 21.63 20.31 20.47 20.38 20.33 20.52

Washington 12.30 16.10 20.68 19.32 19.48 19.36 19.30 19.46

Wisconsin 13.10 16.10 20.29 19.15 19.31 19.06 18.95 19.09

U.S. 12.93 16.26 20.14 18.91 19.09 18.96 18.89 19.06

Table 6. DSA Milk Price ($/cwt) 

2009 2010 2011 2012 2013 2014 2015 2016

California 11.49 14.69 18.47 16.84 17.11 17.09 17.13 17.28

Florida 16.90 20.70 24.24 23.24 23.46 23.39 23.34 23.59

Idaho 11.80 14.90 18.47 17.21 17.41 17.27 17.22 17.39

Missouri 13.00 16.60 20.71 19.59 19.80 19.69 19.64 19.85

New York 13.60 17.40 21.45 20.15 20.36 20.28 20.24 20.43

Texas 13.30 17.10 20.85 19.67 19.87 19.76 19.70 19.90

Vermont 13.80 17.70 21.63 20.32 20.52 20.44 20.41 20.60

Washington 12.30 16.10 20.68 19.33 19.53 19.42 19.38 19.55

Wisconsin 13.10 16.10 20.29 19.18 19.36 19.13 19.03 19.17

U.S. 12.93 16.26 20.14 18.93 19.14 19.02 18.98 19.14

Table 7. Difference between Current Policy and DSA Milk Price ($/cwt) 

2012 2013 2014 2015 2016

California 0.01 0.04 0.05 0.07 0.07

Florida 0.02 0.06 0.07 0.10 0.11

Idaho 0.02 0.05 0.06 0.08 0.09

Missouri 0.02 0.05 0.07 0.09 0.10

New York 0.01 0.05 0.06 0.09 0.09

Texas 0.02 0.05 0.07 0.09 0.09

Vermont 0.01 0.05 0.06 0.09 0.09

Washington 0.01 0.04 0.06 0.08 0.08

Wisconsin 0.03 0.05 0.07 0.08 0.08

U.S. 0.02 0.05 0.06 0.08 0.08

The options were ranked for each farm based on average Net Cash Farm Income 

(NCFI) from 2012 to 2016 for each alternative. Eleven of the 22 dairies have the 

highest average NCFI under the $6.50 buy-up alternative (option 8) with eight additional dairies having the highest NCFI under the $5.00 buy-up alternative (option 

5). Only the large Missouri grazing dairy and both Florida dairies received the largest average NCFI under a different alternative (option 2—Non-Participation). For 

1872

most of the farms, the second best option was a slightly lower buy-up level. In general, the current policy alternative (option 1) was among the least preferred. 

References 

Brown, Scott. The Effects of a Modified Dairy Security Act of 2011 on Dairy Markets. Columbia, MO: Department of Agricultural and Applied Economics, University 

of Missouri-Columbia, April 2012. 

Richardson, James W., Joe L. Outlaw, George M. Knapek, J. Marc Raulston, 

Brian K. Herbst, David P. Anderson, Henry L. Bryant, Steven L. Klose, and Peter 

Zimmel. Representative Farms Economic Outlook for the January 2012 FAPRI/

AFPC Baseline. Texas AgriLife Research, Texas AgriLife Extension Service, Texas 

A&M University, Department of Agricultural Economics, Agricultural and Food Policy Center Working Paper 12–1, March 2012.

APPENDIX A. 2011 CHARACTERISTICS OF PANEL FARMS PRODUCING MILK

CAD1710 A 1,710 cow, large-sized central California (Tulare County) dairy, the farm plants 1,200 acres of 

hay/silage for which it employs custom harvesting. Milk sales generated 94 percent of 2011 

total receipts. 

WAD250 A 250 cow, moderate-sized northern Washington (Whatcom County) dairy. This farm plants 200 

acres of silage and generated 92 percent of its 2011 gross receipts from milk sales. 

WAD850 An 850 cow, large-sized northern Washington (Whatcom County) dairy. This farm plants 605 

acres for silage annually. During 2011, 95 percent of this farm’s gross receipts came from milk. 

IDD3000 A 3,000 cow, large-sized dairy located in the Magic Valley of Idaho (Twin Falls County). This 

farm plants 1,250 acres of corn silage annually. Milk sales account for 94 percent of 2011 gross 

receipts. 

NVD500 A 500 cow, moderate-sized Nevada (Churchill County) dairy. This farm plants 150 acres of hay 

and 100 acres of corn silage annually. Milk sales accounted for 93 percent of NVD500’s gross 

receipts for 2011. 

TXND3000 A 3,000 cow, large-sized dairy located in the South Plains of Texas (Bailey County). This farm 

plants 1,440 acres of corn silage annually. Milk sales account for 93 percent of 2011 gross receipts. 

TXCD550 A 550 cow, moderate-sized central Texas (Erath County) dairy, TXCD550 plants 1,100 acres of 

hay each year. Milk sales represented 93 percent of this farm’s 2011 gross receipts. 

TXCD1300 A 1,300 cow, large-sized central Texas (Erath County) dairy, TXCD1300 plants 680 acres of silage 

and 440 acres of hay annually. During 2011, milk sales accounted for 93 percent of receipts. 

TXED400 A 400 cow, moderate-sized northeast Texas (Hopkins County) dairy. This farm has 400 acres of 

silage and 125 acres of hay. During 2011, milk sales represented 87 percent of annual receipts. 

TXED1000 A 1,000 cow, large-sized northeast Texas (Hopkins County) dairy. This farm plants 1,025 acres of 

hay/silage. This farm generated 95 percent of 2011 receipts from milk sales. 

WID145 A 145 cow, moderate-sized eastern Wisconsin (Winnebago County) dairy, the farm plants 180 

acres of silage, 90 acres for hay, 150 acres of corn, and 130 acres of soybeans. Milk constituted 

84 percent of this farm’s 2011 receipts. 

WID1000 A 1,000 cow, large-sized eastern Wisconsin (Winnebago County) dairy, the farm plants 600 acres 

of hay, 600 acres of silage, 600 acres of corn and 100 acres of soybeans each year. Milk sales 

comprised 92 percent of the farm’s 2011 receipts. 

NYWD600 A 600 cow, moderate-sized western New York (Wyoming County) dairy. This farm plants 600 

acres of silage, 450 acres of haylage, 100 acres of corn, and 50 acres of hay annually. Milk sales 

accounted for 91 percent of the gross receipts for this farm in 2011. 

NYWD1200 A 1,200 cow, large-sized western New York (Wyoming County) dairy. This farm plants 1,900 

acres of silage and 200 acres of corn annually. Milk sales accounted for 93 percent of the gross 

receipts for this farm in 2011. 

NYCD110 A 110 cow, moderate-sized central New York (Cayuga County) dairy, the farm plants 30 acres for 

hay, 90 acres for corn, and 185 acres for silage annually. Milk accounted for 92 percent of the 

gross receipts for 2011 on this dairy. 

NYCD550 A 550 cow, large-sized central New York (Cayuga County) dairy, this farm plants 625 acres of hay 

and haylage and 475 acres of silage. Milk sales make up 93 percent of the 2011 total receipts 

for this dairy. 

VTD140 A 140 cow, moderate-sized Vermont (Washington County) dairy. VTD140 plants 60 acres of hay 

and 160 acres of silage annually. Milk accounted for 91 percent of the 2011 receipts for this 

farm. 

VTD400 A 400 cow, large-sized Vermont (Washington County) dairy. This farm plants 100 acres of hay 

and 850 acres of silage annually. Milk sales represent 93 percent of VTD400’s gross receipts in 

2011. 

MOGD180 A 180 cow, grazing dairy in southwest Missouri (Dade County), the farm grazes cows on 265 

acres of improved pasture. Milk accounted for 91 percent of gross farm receipts for 2011. 

MOGD550 A 550 cow, grazing dairy in southwest Missouri (Dade County), the farm grazes cows on 520 

acres of improved pasture. Milk accounted for 91 percent of gross farm receipts for 2011. 

FLND550 A 550 cow, moderate-sized north Florida (Lafayette County) dairy. The dairy grows 130 acres of 

hay each year. All other feed requirements are purchased in a pre-mixed ration. Milk sales accounted for 93 percent of the farm receipts. 

FLSD1500 A 1,500 cow, large-sized south central Florida (Okeechobee County) dairy, FLSD1500 plants 100 

acres of hay and 400 acres of silage annually. Milk sales represent 94 percent of 2011 total receipts. 

1873

A policy research report presents the final results of a research project undertaken by AFPC faculty. At least a portion of the contents of this report may have 

been published previously as an AFPC issue paper or working paper. Since issue 

and working papers are preliminary reports, the final results contained in a research paper may differ—but, hopefully, in only marginal terms. Research reports 

are viewed by faculty of AFPC and the Department of Agricultural Economics, 

Texas A&M University. AFPC welcomes comments and discussions of these results 

and their implications. Address such comments to the author(s) at:

Agricultural and Food Policy Center 

Department of Agricultural Economics 

Texas A&M University 

College Station, Texas 77843–2124

or call (979) 845–5913.

Copies of this publication have been deposited with the Texas State Library in 

compliance with the State Depository Law. 

Mention of a trademark or a proprietary product does not constitute a guarantee 

or a warranty of the product by Texas AgriLife Research or Texas AgriLife Extension Service and does not imply its approval to the exclusion of other products that 

also may be suitable. 

All programs and information of Texas AgriLife Research or Texas AgriLife Extension Service are available to everyone without regard to race, color, religion, sex, 

age, handicap, or national origin.

The CHAIRMAN. Thank you, Dr. Brown. 

Mr. Wright. 

STATEMENT OF PATRICK JOSEPH ‘‘JOE’’ WRIGHT, V&W 

FARMS, INC.; PRESIDENT, SOUTHEAST MILK INC., AVON 

PARK, FL 

Mr. WRIGHT. Good afternoon. I would like to start by thanking 

Chairman Lucas, Chairman Rooney, and Ranking Members Peterson and Cardoza for this opportunity to come before this Committee and offer comments on the formulation of the dairy title of 

the 2012 Farm Bill. 

My name is Joe Wright. I am a third-generation dairy farmer 

from Avon Park, Florida. My family-owned dairy farm consists of 

1,200 cows on a pasture-based grazing operation. I am also the 

President of the Florida-based cooperative, Southeast Milk Incorporated. Last year, Hoards Dairyman listed Southeast Milk as the 

15th largest dairy cooperative in the country. We market milk for 

230 family-owned dairy farms located in nine southeastern states. 

My comments will be from both a southeastern perspective, and 

particularly, a Florida perspective. 

We support Federal Milk Marketing Orders. Federal Orders promote a level playing field among processors and a level playing 

field among producers and producer cooperatives, especially in a 

fluid milk market like the southeastern United States. My written 

comments list the many benefits of Federal Orders. If I may name 

the single biggest benefit to the dairy farmer, Federal Orders contain clearly defined and enforceable payment terms for processors 

to pay farmers for their milk. Even free markets need rules to ensure competition and fair dealing. This is particularly true when 

the beneficiaries of those rules are the small rural businesses that 

make up America’s dairy farmers. We ask that any changes to the 

Federal Orders be done through the administrative hearing process 

where all parties can be fairly heard and not through the legislative process. 

1874

We ask for the outright repeal of the Dairy Product Price Support Program, the Milk Income Loss Contract and the Dairy Export 

Incentive Program on the grounds that they are obsolete and ineffective. In this age where livestock producers effectively have to 

compete for grain against a Federal mandate for ethanol production, we do believe that any meaningful dairy farmer safety net 

needs to be based on the concept of margin protection defined as 

the difference between the price of milk and the price of feed. My 

written comments describe both the extensive efforts that National 

Milk Producers Federation took to arrive at its margin protection 

plan proposal as well as my own participation in the USDA’s Livestock Gross Margin Dairy Program. 

Southeast Milk has consistently opposed supply management for 

two reasons. First, the Southeast as a region is deficit in milk production even for fluid milk needs, so the very concept of supply 

management makes no sense to us. Second, our milk production 

pattern in the Southeast is much more seasonal than that of the 

rest of the country due to our heat and high humidity during the 

summer and early fall. If supply management kicks in during that 

time frame, it actually penalizes our producers by restricting production at a time when we do not have enough production anyway. 

We would actually have to buy additional milk from other regions 

of the country to replace the very milk our producers are restricted 

from producing. Southeast Milk has aggressively tried to organize 

industry opposition to completely get rid of the supply management 

concept. We have not been successful. 

We are not endorsing the Dairy Security Act. However, we can 

honestly say that the Dairy Security Act has been well vetted within the industry. With the changes that have been made through 

the legislative process, we can accept the Dairy Security Act as a 

reasonable compromise that is trying to bring a very diverse dairy 

industry together. If the Dairy Security Act passes in its current 

form, it would be a significant improvement over the present dairy 

farm safety net programs. 

Before I close, I do need to express our support for other titles 

of the farm bill, their programs and funding, make a special pitch 

for research. Our land-grant universities have been invaluable to 

American agriculture. Due to time constraints, I provided more details in my written testimony and appreciate your consideration. 

Thank you for the opportunity to testify. I would be happy to answer any questions that you might have. 

[The prepared statement of Mr. Wright follows:]

PREPARED STATEMENT OF PATRICK JOSEPH ‘‘JOE’’ WRIGHT, V&W FARMS, INC.; 

PRESIDENT, SOUTHEAST MILK INC., AVON PARK, FL 

Good afternoon. I would like to start by thanking Chairman Lucas and Chairman 

Rooney and Ranking Members Peterson and Cardoza for this opportunity to come 

before this Committee and offer comments on the formulation of the dairy title of 

the 2012 Farm Bill. My name is Joe Wright. I am a third generation dairy farmer 

from Avon Park, Florida. My family owned dairy farm consists of 1,200 cows in a 

pasture based grazing operation. I am also the President of the Florida based dairy 

cooperative, Southeast Milk, Inc. Last year, Hoards Dairyman listed Southeast Milk 

as the fifteenth largest dairy cooperative in the country. Southeast Milk markets 

milk for 230 family owned dairy farms located in nine southeastern states. 

For months you have heard from the various factions in the dairy industry on 

what should and should not be in any dairy reform proposal. Some of my comments 

1875

will mirror many of these comments, but being from the Southeast and Florida in 

particular, today I will bring a different perspective on several points that probably 

have not yet been fully explained. 

Let me start with a point that I believe has found wide support in the dairy industry and that is the elimination of the Dairy Product Price Support Program. It 

is a counterproductive, obsolete, government program. Simply stated, the price support is on nonfat dry milk while the world market wants whole milk powder or skim 

milk powder. Milk powder manufacturers in the U.S. have too much incentive to 

make nonfat so they can always dump it on the government as a sale of last resort. 

By the U.S. Government subsidizing nonfat, we also set a floor on the world price 

of dairy products. Please stop this insanity and end this program. 

Milk Income Loss Contract (MILC) is another program that most of the industry 

recognizes is a wholly inadequate safety net for dairy producers. Approximately seventy five percent of the milk produced in the U.S. hits the production cap fairly 

quick, so essentially there is no meaningful safety net for most of this nation’s milk 

supply. For example, my farm will use up its MILC cap this spring in less than 2 

months. The present era of Federal Government mandated renewable fuels has the 

unintended consequence of dramatically driving up feed prices for animal agriculture. That means we need to move to a concept of milk margins, which is defined 

as the price of milk minus the price of feed. 

While we are opposed to the continuation of the Dairy Product Price Support Program, MILC, and the Dairy Export Incentive Program (DEIP), we do support fiscally responsible dairy programs such as Federal Milk Marketing Orders and a margin protection program that is both dairy producer and Federal budget friendly. 

We are strong supporters of the Federal Milk Marketing Orders. As a reminder, 

the Federal Order program is a producer program. Federal Orders promote a level 

playing field among processors and a level playing field among producers and producer cooperatives, especially in a fluid milk market like the southeastern United 

States. To be more specific, Federal Orders:

• Act as a check and balance among processors as a base price discovery mechanism.

• Are directly responsible for 90% of our milk price. Over Order premiums comprise the remainder of our milk price. The premium dollars, together with service, quality and source of milk (local or otherwise) are fertile ground for competition.

• Require that all processors report sales by class so processors cannot cheat the 

system by underreporting sales of the highest price class.

• Provide the tools through audit procedures and regulations to keep processors 

honest in their reporting.

• In the event a processor is not playing by the rules, all competitive processors 

know that penalties can be levied against that competitor.

• Act as a balance between processors and producers by providing for fat testing 

to assure each side is treated fairly by the other.

• Act as a clearing house in resolving disputes between processors and individual 

producers regarding fat and weights.

• Contain clearly defined and enforceable payment terms for processors to pay 

producers for their milk.

• Establishes rules to ensure competition and fair dealing which is needed in all 

free markets to benefit the small rural businesses that make up America’s dairy 

farmers.

Federal Milk Marketing Orders is a Federal program that is very cost effective. 

Over the past 10 years, government outlays have only been an average of $5.5 million per year. Please make sure that any dairy reform proposal that may pass Congress does not include any changes to the Federal Milk Marketing Order system. 

Southeast Milk is also a supporter of milk margin protection plans. As part of National Milk Producers Federation’s ‘‘Foundation For The Future’’ process, I sat on 

the task force for margin protection. We met multiple times over the course of a 

year and a half to explore all the permutations associated with such a plan, such 

as; impacts to the Federal budget, whether to use the Farm Service Agency or Risk 

Management Agency to administer the program, whether to use national or regional 

measures for both the milk price and the feed price, and the correct balance between 

basic and supplemental coverage. As a resource, we had the expertise of Dr. Bruce 

Babcock from Iowa State University, one of the foremost experts in the country on 

crop insurance programs. In the era of biofuels and corn ethanol, margin insurance 

makes more sense for a dairy producer safety net than any other single element. 

1876

Before leaving the area of margin protection, I should comment on one of USDA’s 

early efforts to introduce a margin protection program to the dairy industry known 

as Livestock Gross Margin-Dairy (LGM-Dairy). It has just been in the last year or 

so that LGM-Dairy became available to producers in Florida. This is more of a crop 

insurance program with partially subsidized premiums administered through RMA. 

To date, our dairy has purchased three LGM-Dairy contracts. One of those contracts 

has concluded, the other two contracts are still active. A LGM-Dairy contract is a 

more complicated and time consuming program for the producer relative to the margin protection plan contained in the Dairy Security Act. However, we can custom 

tailor the LGM-Dairy contract to cover the needs of our dairy by varying the relative 

emphasis on milk price versus feed price. This concept more accurately tries to capture the great variability among management styles of dairying. The real disadvantage for the LGM-Dairy program is there is simply not enough money in the program. The policies use up the allotted money too rapidly so producers who would 

like to participate are either outright precluded from participating, or the limited 

funding precludes them from using the program in the manner in which would optimize its usefulness to the producer. That comment means that producers often must 

make once a year decisions to buy or not buy LGM-Dairy coverage when funding 

is available, while the program really contemplates, in theory anyway, a producer 

having the ability to make decisions on a monthly basis. 

The last specific dairy program point I want to make is on dairy supply management. Southeast Milk has consistently opposed supply management for two reasons. 

First, the Southeast as a region is milk deficit, so supply management makes no 

sense. Second, milk production in the Southeast has a large seasonal swing compared to the rest of the country, so distortions caused by supply management could 

be exaggerated in the Southeast depending on the time of year restrictions are triggered. As a cooperative, our milk production at Southeast Milk can range from a 

low of 190 million pounds in a month like September to a high of 250 million 

pounds or more in March. This production swing is due to the combination of heat 

and high humidity that we experience in the summer months. Our Class I sales can 

run 240+ pounds of Class I sales per month. We import milk at a net loss to us 

during the deficit months. If supply management were to kick in and restrict production during late summer, producers would not only have their usual annual drop 

due to heat and humidity, but also lower production required by supply management, and the cooperative would have to spend even more money importing milk 

to cover the shortfall between production and sales—the cost of which also comes 

out of producer milk checks. Relative to the rest of the country, the Southeast as 

a region realizes a cost of supply management that other regions of the country will 

simply not bear because the production patterns of other regions do not fluctuate 

nearly as great. 

At Southeast Milk, we tried to organize industry opposition to completely get rid 

of supply management, but our effort was not successful. However, we should acknowledge that as a result of a continuous process to improve the Dairy Security 

Act, there are a couple of changes that have made the legislation more palatable 

to us. First, the supply management provisions are voluntary rather than mandatory, although a producer cannot sign up for the margin protection without also 

signing up for supply management. Second, there are thresholds in place that prohibit the onset of supply management, regardless of dairy margin levels, if the U.S. 

price for milk is high enough relative to the world market to effectively preclude 

the movement of U.S. dairy products overseas due to additional price enhancement 

caused by supply management. These changes to the latest version of the Dairy Security Act related to supply management have made the proposal less onerous. 

I would like to wrap up my comments by relaying our thoughts specifically to the 

latest version of the Dairy Security Act developed as part of the budget negotiations. 

We are pleased this version does not make any changes to the Federal Milk Marketing Orders. Changes to Federal Orders should be done through the administrative hearing process where all parties can be fairly heard, and NOT through the legislative process. The proposal’s elimination of the MILC program is a positive step 

because the program is wholly inadequate as a dairy farmer safety net and should 

be repealed. The margin protection provision is commendable but unfortunately it 

is only available to those agreeing to supply management. The overwhelming majority of our members have told us that making supply management an eligibility requirement for margin protection means they will not participate. 

The supply management provision keeps us from being able to endorse the Dairy 

Security Act because we are philosophically opposed to supply management for the 

Southeast for the above stated reasons. However, we are somewhat persuaded by 

the argument that our producers would benefit from a margin program linked to 

participation to a supply management plan even if we do not sign up. To the extent 

1877

that producers in other regions of the country do participate in supply management, 

the market as a whole should move faster to a market equilibrium price. That 

should moderate, but not eliminate price volatility. Both producers and processors 

would benefit from less volatility. We do view the Dairy Security Act as a whole 

to be a reasonable compromise that is trying to bring a very diverse industry together. If the Dairy Security Act passes as current outlined, it would be a significant 

improvement over the present dairy safety net programs. 

Last, I would like to briefly highlight farm bill titles other than the commodity 

dairy program title that are important to our industry. This is not an all inclusive 

list but these following warrant mention. 

Conservation Title: Dairy farmers like all farmers are stewards of the land. Due 

to the high capital costs for most environmental projects, we truly need the assistance of USDA conservation programs. We see core benefits for programs directed 

to ‘‘working lands’’ and cost-share programs such as Wetland Reserve Program 

(WRP), Environment Quality Incentive Program (EQIP), Grassland Reserve Program (GRP), and Wildlife Habitat Improvement Program (WHIP). In particular, 

EQIP is a great tool for Florida’s dairy industry. 

Nutrition Title: The provisions in this section of the farm bill are critical to both 

the dairy industry and the almost 60 million citizens in need of nutritional assistance. Dairy products are critical to a healthy balanced diet. The programs that 

make up the USDA food assistance programs account for 11% of all U.S. dairy sales. 

Crop Insurance Title: The uncertainties of weather, yields, prices, government 

policies, global markets, and other factors can cause wide swings in farm income. 

Managing risk is an important aspect of the farming business. Particularly in today’s tight credit markets, and at least in Florida credit today is still VERY tight 

for small businesses, USDA risk management tools are an invaluable resource. We 

request more money for LGM-Dairy. 

Research Title: The Research provisions of the farm bill and other Federal research programs are key investments in creating new solutions for tomorrow’s problems and keeping dairy and all of agriculture sustainable, and thus continuing to 

provide consumers with economical, safe and wholesome food. It is imperative, that 

as a nation we are aggressive in seeking the latest technology and knowledge in 

maintenance of herd health/animal welfare, disease prevention/treatment and production of high quality milk. Improvements in technology over the past 60 years 

have led to the ability to produce 50% more milk with only 1⁄3 of the cows and at 

the time reducing the impact of animals on the environment, as the amount of 

waste per gallon of milk declines with greater efficiency. 

This year is the 150th anniversary of the Land-Grant Act which established the 

land-grant universities. We believe in the system so much that SMI farmers have 

donated millions of dollars to the University of Florida to assist them in carrying 

out research on our behalf. We ask Congress to continue and increase its partnership of funding research through our land-grant institutions. 

Again, thank you for this opportunity to address this Committee and I appreciate 

your thoughtful deliberation of this important issue. I will answer any questions you 

may have of me at the appropriate time.

The CHAIRMAN. Thank you, Mr. Wright. 

From Florida, we move to California and Mr. Barcellos. 

STATEMENT OF TOM BARCELLOS, OWNER/OPERATOR, T-BAR 

DAIRY; BOARD PRESIDENT, WESTERN UNITED DAIRYMEN, 

PORTERVILLE, CA 

Mr. BARCELLOS. I would like to thank Chairman Rooney, Ranking Member Cardoza, and the Members of the Subcommittee for inviting me here today to discuss Federal dairy policy. I am Tom 

Barcellos, Owner/Operator of T-Bar Dairy for 23 years. We milk 

800 cows in Tulare County, the number one dairy county in the 

country. For 36 years, I have also owned and operated Barcellos 

Farms, a diversified farming, custom harvesting and trucking business dealing mostly in hay, grain and silage feed for my own and 

other local dairies. I am a third-generation dairy farmer milking on 

the facility built by my grandfather and his sons over 70 years ago. 

My wife Felomena and three daughters have all worked on the 

farm helping with the hay and harvesting when needed. Two sonVerDate 0ct 09 2002 12:54 Dec 11, 2012 Jkt 041481 PO 00000 Frm 00289 Fmt 6601 Sfmt 6601 I:\DOCS\112-30\74372.TXT BRIAN
1878

in-laws have joined the business, and now my grandsons already 

describe to their friends the proper steps in haying. 

We want to thank the Members of this Committee and National 

Milk Producers Federation, my co-op Land O’Lakes, Western 

United Dairymen and others in the dairy industry who have 

worked the better part of the last 2 years developing a safety net 

that recognizes we can no longer rely on milk price alone as a target. To anyone listening today who has been part of that effort, I 

say thank you. 

California’s dairies, family owned and operated, continue to face 

challenges from low, flat and sometimes negative margins on milk 

production. Dairymen everywhere are still trying to recover from 

the devastation of 2009. Equity carried in from previous years was 

all but wiped out in 1 year. The bleeding stopped in late 2010. We 

made up a little ground in 2011, but for 2012, our input costs remain very high and the milk price is headed in the wrong direction. 

While dairy producers face unique challenges, input costs remain 

the most significant barrier to profitability. More profitable crops 

limit acres for corn, hay and forages grown in California so dairymen are subject to the whims of the world oil market and the impact those forces have on what it costs to transport the concentrates to feed our cows. Fuel and energy costs continue to escalate with regulatory costs that impede our road to recovery as well. 

In just the last month alone, 17 local dairies shipping to my co-op 

went out of business and several others sold their dairies ahead of 

bankruptcy. Three filed for bankruptcy protection in just the last 

2 weeks. 

There is a lot to like about the plan that led to the introduction 

of the Dairy Security Act last September. As a dairy farmer, I am 

pleased to have it as the base of discussion going forward for the 

next-generation safety net. The proposal moves from a price-based 

model with volume-limited countercyclical payments to a plan 

based on margin insurance that is available to every farmer on 80 

percent of their milk. There have been several improvements made 

during its development including scaling back government involvement in market stabilization, making the program more responsive 

to the export market and allowing market stabilization to transition from mandatory to voluntary. Later versions eliminated legislative changes to Milk Marketing Orders. Those changes are best 

handled by the regulatory agencies. California producers support 

the current industry practice of dairy farmers everywhere having 

the choice of how to be regulated or whether to be regulated at all. 

The proposal continues to evolve as Congress moves ahead on 

consideration of the next farm bill. I support these changes and 

would like to offer a third option. Feed costs are different where 

most of the milk is produced versus where most of the feed is produced. It would be helpful for dairy farmers everywhere to have the 

option of choosing a market-based margin plan that values feed 

where it is used rather than a production-based plan that prices it 

where it is grown. The way the Dairy Security Act and its later 

versions are written, dairy farmers have two options on a safety 

net: no program or one that uses a national feed cost calculation. 

A third choice could be a margin protection with a feed cost calVerDate 0ct 09 2002 12:54 Dec 11, 2012 Jkt 041481 PO 00000 Frm 00290 Fmt 6601 Sfmt 6601 I:\DOCS\112-30\74372.TXT BRIAN
1879

culation using an average of costs from the ten states with the 

highest milk production volume. With budget constraints in mind, 

this program could be written so that premiums paid by the farmers would cover the cost. 

I do want to raise a concern about payment limits. This program 

was negotiated in the industry to be neutral with regards to operation size. Restrictions on how much a producer can benefit from 

coverage in either the basic or purchased supplemental form, will 

erode political support for legislation and would threaten participation in any program ultimately implemented. Recent voluntary production cutbacks undertaken by cooperatives like mine due to processing capacity constraints must not be held against producers in 

a safety net that uses production history. The basic margin plan allows the highest of the last 3 years production to be the base while 

a supplemental plan relies on the most recent year’s volume only. 

That could be a major barrier to California producers’ participation 

in the program if this goes unaddressed. 

I would like to thank the Committee and the Chairman, and I 

look forward to answering any questions. 

[The prepared statement of Mr. Barcellos follows:]

PREPARED STATEMENT OF TOM BARCELLOS, OWNER/OPERATOR, T-BAR DAIRY; BOARD

PRESIDENT, WESTERN UNITED DAIRYMEN, PORTERVILLE, CA 

I’d like to thank Chairman Rooney, Ranking Member Cardoza, and the Members 

of the Subcommittee for inviting me here today to discuss Federal dairy policy from 

a producer perspective. My name is Tom Barcellos, owner/operator of T-Bar Dairy 

for 23 years. We milk about 800 cows in Tulare County, the number one dairy county in the country. For 36 years I have also owned and operated Barcellos Farms, 

a diversified farming, custom harvesting and trucking business dealing mostly in 

hay, grain and silage feed for my own and other local dairies. I am a third generation dairy farmer milking in the facility built by my grandfather and his sons. My 

wife, Felomena, and three daughters have all worked on the dairy and farm, helping 

with the haying and harvesting when needed. Two sons-in-law joined the business 

and now my grandsons already describe to their friends the proper steps in the 

haying process. 

The pending expiration of the current farm bill on September 30th offers that 

once-in-every-5-years chance to make a change to the Federal economic safety net 

for the nation’s dairy farm families like mine. I add my personal thanks to the 

Members of this Committee and to the hardworking men and women at National 

Milk Producers Federation, my co-op Land O’Lakes, Western United Dairymen and 

others in the dairy industry who have spent the better part of the last 2 years developing a safety net that recognizes that we can no longer rely on milk price alone 

as a target. To anyone listening today who has been a part of that effort, and you 

know who you are, I say thank you. 

California’s dairy families, and I can’t think of a farm in the state that isn’t owned 

and operated by a family, continue to face challenges from low, flat and sometimes 

even negative margins on milk production. Dairymen everywhere are still trying to 

recover from the devastation of 2009. Equity carried in from previous years was all 

but wiped out in 1 year. That equity is no longer there to offset future losses. The 

bleeding stopped in the second half of 2010 and we made up a little ground during 

most of 2011 but here in early 2012 our input costs remain very high and the milk 

price is headed in the wrong direction. 

While it is well known that California dairy producers face some unique challenges, input costs remain the most significant barrier to profitability that can be 

addressed in a farm bill. More profitable crops limit the amount of corn and forages 

grown in California so dairymen in the state are subject to the whims of the international oil market and the impact those forces have on what it costs to transport 

the concentrates we feed our cows. Fuel and energy costs continue to escalate along 

with regulatory costs that impede our road to recovery as well. In just the last 

month alone, 17 local dairies shipping to my co-op went out of business and several 

others sold their dairies ahead of bankruptcy. Three filed for bankruptcy protection 

in just the last 2 weeks. 

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Our industry has been very aggressive in developing and expanding export markets. Nationwide we’re up to 13% of production going to the export market and California will continue to be a leader in supplying customers throughout the Pacific 

Rim. Our ability to continue growing in the future will depend on the export market. But surviving the short term as those markets develop provides another layer 

of risk. We learned that all too well in late 2008 and through 2009 as the worldwide 

financial crisis sent our exports tumbling. In just a few weeks we lost five percent 

of the market for U.S. milk. Not five percent of our exports, five percent of our market. 

The economic disaster that began for dairy farmers late in 2008 unfolded just a 

few short months after the current farm bill was enacted. The dairy safety net in 

that farm bill consisted of a price support program with a target roughly half what 

many farmers need to break even and a discriminatory payment program that 

picked winners and losers and, according to one government study, actually lowered 

farm milk prices. The inside-the-beltway Washington, D.C. political process that led 

to that program failed the industry that year and America’s dairy farm families paid 

the price. The only conclusion possible is that the current dairy economic safety net 

is ineffective and needs to be retired and replaced, not tweaked or adjusted. 

There is a lot to like about the plan that led to the introduction of the Dairy Security Act last September. A considerable amount of work went into that plan and as 

a dairy farmer I’m pleased to have it as the base of discussions going forward for 

the next generation safety net. The proposal moves from a price-based model with 

volume-limited countercyclical payments to a plan based on margin insurance that 

is available to every farmer on 80% of their milk. 

There have been several improvements made to the plan during its development 

including the scaling-back of government involvement in market stabilization, making the program more responsive to the export market and allowing market stabilization to transition from mandatory to voluntary. Later versions of the bill have 

also eliminated legislative changes to Milk Marketing Orders. Those changes are 

best handled by the regulatory agencies. California producers support the current 

industry practice of dairy farmers everywhere having the choice of how to be regulated or whether to be regulated at all. 

The proposal does continue to evolve as the Congress moves ahead on consideration of the next farm bill. I am happy to express my support for those changes and 

would like to offer up another. This change would recognize the fact that feed costs 

are different in the areas of the country where most of the milk is produced than 

in the areas of the country where most of the feed is produced. It would be helpful 

for dairy farmers everywhere to have the option of choosing a market-based margin 

plan that values feed where it is used rather than a production-based plan that 

prices it where it is grown. 

The way the Dairy Security Act and its later versions are written, dairy farmers 

have two options on a safety net: no program or one that uses a national feed cost 

calculation. The proposal that has been developed by Western United Dairymen is 

offered as a third choice that would be available to producers. The proposal is for 

a margin program with a feed cost calculation using an average of the costs from 

the ten states with the highest milk production volume. With budget constraints in 

mind, this program could be written so that premiums paid by farmers would cover 

the costs. 

Recognizing this is a House Agriculture Committee hearing, I do want to raise 

a concern about the elimination of a payment limits exemption for the program in 

H.R. 3062, ‘‘The Dairy Security Act,’’ from the language under consideration in the 

Senate. This program was negotiated in the industry to be neutral with regard to 

operation size. Restrictions on how much a producer can benefit from coverage, in 

either the basic or purchased supplemental form, will erode political support for legislation and would surely reduce participation in any program ultimately implemented. 

Recent events in California raise another issue the must be discussed as the farm 

bill moves forward. Voluntary production cutbacks undertaken by cooperatives like 

mine due to processing capacity constraints must not be held against producers in 

a safety net that uses a production history, as does the DSA. The basic margin plan 

allows the highest of the last 3 years’ production to be the base while the supplemental plan relies on the most recent year’s volume only. That could be a major 

impediment to California producers’ participation in the program if this issue goes 

unaddressed. 

I’d like to take some time now to thank the Committee for its work on other aspects of the farm bill. The conservation title is very important to dairy producers 

everywhere. Many California dairymen have EQIP contracts and I thank the Committee for maintaining the integrity of that program. It’s especially difficult to conVerDate 0ct 09 2002 12:54 Dec 11, 2012 Jkt 041481 PO 00000 Frm 00292 Fmt 6601 Sfmt 6621 I:\DOCS\112-30\74372.TXT BRIAN
1881

tinue programs like this, let alone strengthen them, in a down economy and dairymen appreciate the work you are doing. 

Nutrition title programs are also important to the dairy industry as a whole. 

Those assistance programs provide critical dairy nutrition to millions of people in 

this country, many of them children. Studies show families with kids are more likely 

to need assistance and they account for nearly 1⁄2 of the families currently participating in the Supplemental Nutrition Assistance Program (SNAP), better known as 

the Food Stamp Program. 

This Committee does not have jurisdiction over Immigration Reform, but I want 

to take this opportunity to reinforce the fact that nothing we are talking about here 

today outweighs the need for agriculture to have access to a legal workforce. Please 

encourage your colleagues to find a solution to that need, and be sure that they include a program that offers current experienced workers a chance to be here legally 

and to fill year-round jobs like those on dairies. 

Farmers everywhere are also watching what the Congress does on reform of the 

Estate Tax. This is a critical issue for us as we look to have options for passing 

along the land and the operation that we have built as a family to the next generation. Farm families need certainty on the Estate Tax and I encourage this Committee to be at the table working with your colleagues on our behalf. 

This Committee has been very helpful on trying to limit unnecessary environmental regulation of agriculture by the Federal Government. These regulations are 

often costly and only serve to duplicate what state regulatory agencies are already 

doing. In addition, the EPA must demonstrate that they have the ability to protect 

the privacy of farmers who submit information and to have policies in place to make 

that happen. 

Agriculture trade policy is critical to us as the U.S. dairy industry looks increasingly at offshore markets for growth. My Congressman, Devin Nunes, sits on the 

Trade Subcommittee of the Ways and Means Committee and I want to thank him 

for the active role he takes in working on trade agreements on behalf of dairy farmers. We have supported negotiation and passage of the recent Free Trade Agreements with South Korea, Colombia and Panama and we look forward to working 

with the Congress on future opportunities for growth. We also look to our elected 

officials, however, when it is clear an agreement would put us at a disadvantage. 

Dairy farmers are very concerned that we’re about to be forced into open access to 

our market for New Zealand, a trade competitor with an industry that operates as 

what has been called a functional monopoly. U.S. dairy producers will compete with 

their counterparts anywhere in the world as long as the playing field is level. 

Thank you again for holding this hearing and for the invitation to testify. I look 

forward to answering questions the Members may have.

The CHAIRMAN. Thank you, Mr. Barcellos. 

Now we move to Mr. Davis. Mr. Davis. 

STATEMENT OF JON DAVIS, CHIEF EXECUTIVE OFFICER, 

DAVISCO FOODS INTERNATIONAL, INC., Le SUEUR, MN; ON 

BEHALF OF INTERNATIONAL DAIRY FOODS ASSOCIATION 

Mr. DAVIS. Good afternoon, and thank you, Chairman Rooney, 

Ranking Member Cardoza, and other Members of the Committee. 

Davisco started in 1943 when my grandfather bought the St. 

Peter Creamery in Minnesota. We now have plants in Minnesota, 

Idaho and South Dakota, offices in Minneapolis, Geneva, Shanghai, 

and worldwide strategic partners in the Middle East, Japan and 

Africa. We produce 400 million pounds of cheese annually and are 

one of the largest suppliers to Kraft Foods. In addition, our family 

currently owns and operates two dairy farms in southern Minnesota milking 6,000 cows every day. 

It was President Reagan who said that the nine most terrifying 

words in the English language are ‘‘I’m from the government and 

I’m here to help.’’ President Reagan would roll over in his grave if 

he heard what is being proposed for our dairy industry. I am here 

to tell you that the Dairy Market Stabilization Program is the elephant in the room with the Dairy Security Act. I don’t care what 

1882

you call it—quotas, supply management, production limits—the 

stabilization program will periodically limit milk production and 

will have our government, not the marketplace, determining the 

price of milk. It will hurt both dairy processors and producers. 

Davisco has been successful in becoming a major exporter of dairy 

products, something that has benefited our company and the dairy 

farmers who supply us with milk. The stabilization program will 

limit our ability to increase our sales opportunities all around the 

world. 

The world is looking for quality American dairy products. Over 

the last 5 years, we have gone from importing more than we export 

to now having a trade surplus last year of $2.4 billion. In 2011, 

U.S. dairy exports reached 12 percent of our milk supply. This year 

it will be over 15. 

Davisco has recently invested more than $1 million in our factories, largely because of our growing export business. Many other 

dairy companies have also invested in new processing facilities to 

take advantage of those same markets. While supply management 

legislation is being debated, most, if not all, of the next wave of 

dairy processing investment is on hold. We simply can’t afford to 

commit capital when we don’t know if we will have the milk supply 

to operate those potential new investments. 

We have finally become the supplier of choice among buyers of 

dairy products on the verge of even more growth and now the government is here to help. Supply management will discourage future 

investment for dairy processors, limit our ability to export at a cost 

of processing jobs, and denying dairy farmers opportunities to expand. It will have repercussions we may never be able to repair. 

You can listen to policy wonks on the politics of this issue, but 

here is something from the real world. I recently was in Seoul with 

a potential customer of our cheese who asked me why the U.S. 

dairy industry was so enthusiastically trying to pass a free trade 

agreement with South Korea while at the same time seriously considering supply management as policy. Apparently he hasn’t seen 

the spreadsheet that predicts what his and other foreign buyers’ 

decisions will be faced with when supply management is implemented. That is our reality check of what is going on around the 

world. 

The proposed supply management is not voluntary nor can it be 

altered to make it fangless. I will have no choice but to change my 

business strategy due to the fact that nothing about this program 

will be voluntary for me. 

Davisco processes 4 billion pounds of milk annually. That is 11 

million pounds a day, or 200 tankers that come in and out of our 

factories every day. If any of that milk comes from a farmer who 

is enrolled in margin insurance, I have to track, monitor, deduct 

and make payments to the government in order for the government, not the marketplace, to encourage less milk supply. The marketplace, not the government, should pick the winners and losers 

in the dairy industry. The free market is a very effective supply 

manager as long as the government allows it to work. 

Dairy farmers who want and need margin protection will have no 

choice, even if they disagree. They cannot sign up for margin insurance without being subject to the supply management plan. No 

1883

other USDA insurance program has supply management compliance provisions. Why are we hamstringing our dairy industry, 

farmers and processors with such a policy? 

Although the Committee is being told that dairy producers all 

support the Dairy Security Act, I can assure you there are many 

dairy producers who oppose it. It would be good for the Committee 

to hear from some of them. The nation’s second largest dairy coop, California Dairy, that produces 43 percent of the milk in California, is opposed to the stabilization program. Other progressive 

producer organizations like the Wisconsin Dairy Business Association, Minnesota Milk Producers and the Northeast Dairy Producers 

Association are also opposed. 

It is simply not necessary that programs like margin insurance 

be tied to the supply management program. Such a program can 

easily be offered within the limits of the dairy baseline. Earlier this 

week, Senator Bennett from Colorado introduced an amendment to 

the Senate farm bill that would authorize stand-alone margin insurance funded through modest producer-based premiums just like 

standard crop insurance. IDFA supports such alternative proposals 

and stands ready to work with this Committee to develop a similar 

approach. 

For the record, I have a copy of our legislative proposal for margin insurance without supply management, and I would like to 

share it with all of you. If the Members do not want producers to 

pay for part of these premium costs, the Committee should consider 

that other sectors of agriculture have multiple government-subsidized farm safety net programs yet dairy is lacking even basic 

catastrophic revenue protection. Dairy makes up ten percent of all 

farm receipts yet receives less than one percent of the benefits of 

commodity support programs. 

I have been told over the course of the past few days how 2009 

negatively impacted dairy farmers’ equity. Well, as we all know, 

2009 severely impacted virtually every industry’s equity, and trying to craft a policy based on the 2009 economic crash is only going 

to cause future headaches for the U.S. dairy industry. U.S. Government either has a milk supply management program or we don’t. 

You are going to have to reject this policy outright or adopt it. 

Thank you. I appreciate it. 

[The prepared statement of Mr. Davis follows:]

PREPARED STATEMENT OF JON DAVIS, CHIEF EXECUTIVE OFFICER, DAVISCO FOODS

INTERNATIONAL, INC., LE SUEUR, MN; ON BEHALF OF INTERNATIONAL DAIRY

FOODS ASSOCIATION

Thank you for the invitation to testify today on behalf of the International Dairy 

Foods Association. IDFA has over 230 dairy food company members and represents 

over 85% of the ice cream, cheese and bottled milk that is processed and marketed 

in the United States. IDFA members employ over 120,000 employees at hundreds 

of production plants across the country. IDFA represents large well-known food companies like Nestle ́ and Kraft but also small businesses like the Ice Cream Club located in Boynton Beach, Florida. 

Around the world, governments are making notable changes to domestic and 

trade policies affecting their dairy industries. The European Union is in the final 

phase in its effort to reform dairy policy, which will include phasing out farm-milk 

quotas by the end of 2014. Australia ended Federal dairy-support programs and 

eliminated its classified pricing scheme in 2000. New Zealand became the fastest 

growing dairy exporting country during the past 30 years after eliminating dairy 

supports. 

1884

The combination of these policy reform efforts and increased international demand for dairy products has allowed the United States to become a major dairy exporter. Less than 10 years ago, the United States exported about 5% of U.S. milk 

production in the form of dairy products, mostly the result of government export 

subsidies under the Dairy Export Incentive Program. In recent years, exports have 

grown to be over 13% of U.S. milk production, without significant government export assistance. 

Dairy processors, including Davisco, have invested hundreds of millions of dollars 

in the last few years in order to take advantage of these new markets. This has 

been a remarkable success story and dairy is clearly helping our nation’s economy 

recover from the recent downturn. Last year, we had a dairy trade surplus of $2.4 

billion. According to USDA, every $1 billion of trade surplus creates over 8,000 jobs 

in this country. 

Export demand is growing at a much faster rate than domestic demand for dairy 

products. Last year, total fluid milk sales were down 1.7% as the economic pressure 

on consumers has led them to purchase fewer gallons of milk and move to cheaper 

milk alternatives. In fact, fluid milk sales are facing an extended and unprecedented 

decline in year-over-year sales. This is unfortunate, because milk is one of the few 

beverages containing nine essential nutrients. 

Demand for raw milk has continued to increase over the last few years. But, let’s 

be clear on what is driving that increased demand. Between 2003 and 2011, only 

37% of that increase was due to domestic demand. Increased export sales, due to 

our dairy industry’s successful and somewhat newfound ability to compete in international markets, has been driving the majority of our industry’s growth for dairy 

farmers and processors over the last few years. 

There is general agreement that our current dairy policies need to be reformed. 

The Federal Milk Marketing Order system needs to be phased out. The rigid, complex formulas used to determine minimum milk prices are the source of a long list 

of egregious problems, such as keeping fluid milk prices artificially high and discouraging innovation in dairy ingredients that are not recognized in the government’s price formulas. If our industry was freed from these artificial formulas to respond to consumer demand, we would be more competitive. IDFA has worked diligently to get industry wide consensus on reforming the FMMO system; however the 

FMMO positions proposed in the Dairy Security Act move in the wrong direction. 

The Dairy Product Price Support Program (DPPSP) has also been harmful to the 

industry because when it operates U.S. domestic dairy product prices remain above 

the level necessary for us to be competitive in world markets. The Dairy Export Incentive Program (DEIP) uses government subsidies to underwrite exports sales—a 

policy that is inconsistent with our growing U.S. export platform. Both DPPSP and 

DEIP should be repealed and the available funding put to better use. But before 

we replace them, we need to consider which direction to take, as different policy reforms will lead in different directions. 

We should adopt policies that position us to continue to compete in markets and 

to develop new products for an increasingly competitive marketplace here at home 

and abroad. This path requires less government regulation and new policies that 

will not provide an advantage to our competitors or encourage imports. If we choose 

this path, policy reform must address dairy farmers’ need for risk management tools 

or insurance that allows them to succeed during periods of low net income. 

Another approach would be to adopt policies that call on the Federal Government 

to intervene in dairy markets to balance supply with demand in an attempt to control price volatility. Under this approach, we concede competitiveness and growth 

for status quo and stability. 

The Dairy Security Act offers the illusion of going both directions at once. In reality, it takes us down the second path. The centerpiece of that proposal is called 

the Dairy Market Stabilization program. The stated purpose of the program is the 

‘‘balancing of the supply of milk with demand.’’ 

For anyone who supports and believes in the power of open markets, it is difficult, 

if not impossible, to support a program like Dairy Market Stabilization. The stabilization program is no less than a direct government intervention into commercial 

transactions in dairy markets. The program will periodically impose penalties on 

dairy farmers in order to limit milk supplies. The regulatory and enforcement mechanism will require new government regulations that will impact fundamental market negotiations between buyers and sellers of raw milk. 

Increased input costs for dairy food manufacturers will mean increased prices on 

our grocery shelves for bottled milk and other dairy products. Consumers have a 

price threshold for milk. As prices increase, consumption of milk decreases. Bottled 

milk in particular is in a highly competitive marketplace for beverages. While milk 

offers more nutrient value, price matters and programs that increase prices will 

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hurt milk sales and, in turn, decrease demand for milk production from dairy farmers. This program is an unnecessary and costly intrusion into my business. By periodically raising prices, decoupling them from international prices, it will negatively impact our industry’s ability to compete for international business. It will also impact 

our ability to maintain an adequate milk supply and make us an unreliable supplier. Our international competitors are delighted that we may help them, and undercut our own dairy industry, with a supply management program. They win and 

we lose. 

Instead of making a policy choice between helping dairy farmers manage their 

business or having government manage prices for them, the Dairy Security Act attempts to do both. You can’t have it both ways. On its own, the margin protection 

plan in the bill makes sense, until you look at the details that reveal that the reason 

for the stabilization program is to limit the usefulness of the margin protection program. If the dairy farm prices and margins are less volatile, as the proponents insist 

will be the case with Dairy Market Stabilization, then the need for dairy producers 

to enroll in the margin insurance program will be less or maybe even non-existent. 

And, the programs will often work in opposition to each other with the margin 

protection program subsidizing farmers even as the stabilization program is reducing their milk checks and sending the difference to the government. 

Everyone has heard that the solution is to make the program voluntary so no one 

needs to participate if they do not want to do so. That is incorrect. The stabilization 

program requires dairy processors to be responsible for tracking production and 

withholding payments from dairy farmers. If a dairy farmer participates in the program, the processor’s participation is not voluntary. Dairy processors, who already 

must comply with safety and health regulations, not to mention existing milk pricing regulations, will have an entirely new set of government regulations to learn 

and manage. 

We have also heard that the negative impacts on trade can be fixed by a provision 

that triggers the program off when it starts to impact prices. This provision is a 

frank admission that, contrary to claims of proponents, this program is a real threat 

to the competitiveness of the U.S. dairy industry in global markets. No government 

formula, or trigger adjustment, is going to change the fact that this new enforceable 

government policy on markets increases our business risk exponentially and will 

negatively impact all future decisions to invest into more U.S. facilities. There are 

U.S. capital investment decisions ‘‘on hold’’ because of the looming threat of supply 

management being in the upcoming farm bill. 

Dr. Scott Brown’s economic modeling says that dairy exports will not significantly 

decline under the stabilization program. Yet, how can he effectively model or predict 

how the bill would impact investment decisions by international companies like 

Davisco, Leprino or Hilmar? Triggering the program on and off will not fix the fundamental uncertainty of whether the United States will remain a competitive location for future production of our dairy exports. IDFA wants to export dairy products, 

instead of exporting jobs. 

In the past few years, Dr. Brown has reported on several analyses of the Cooperatives Working Together (CWT) program that has operated without government 

intervention in our markets. A few years ago, Dr. Brown conducted an analysis that 

showed that the voluntary CWT program increased farm milk prices on average 47¢ 

per hundredweight of milk. Why are we talking about a new intrusive government 

program that Dr. Brown’s new analysis shows only increases the price of farm milk 

by 5¢? 

Members of this Committee are also being told that there is not any legitimate 

alternative to government control over milk supplies and government manipulation 

of milk prices. But, margin insurance, also proposed in the Dairy Security Act, can 

easily be provided without imposing a supply management program on the dairy industry. Just this week, Senator Bennet of Colorado proposed such a stand-alone insurance program funded with modest producer premiums like other crop insurance. 

IDFA believes that providing additional risk management tools to dairy farmers 

without supply management should be the goal and we support the Bennet proposal 

as one way to achieve this. 

We are aware of the budgetary pressures on Congress to limit spending, but before imposing a supply management program on my industry, the Committee should 

consider rebalancing the support it provides to each agriculture sector. The dairy 

‘‘baseline’’ averages about $43 million over the next 10 years and this year only $7 

million was allocated to subsidize dairy insurance programs. Yet, crop insurance 

alone is expected to cost taxpayers over $10 billion this year and somehow the agriculture committees are still finding available funds for ‘‘shallow losses’’ and other 

Title I support for feed grains and the rest of agriculture. Dairy producers account 

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for nearly 10% of all farm receipts, yet clearly they are not getting a fair allocation 

of farm safety net resources for catastrophic revenue protection because this Committee has decided to make funding decisions based upon historical precedent instead of need. 

Although programs like stabilization may be new concepts to some of the Members of the Committee, it is an old idea that has been rejected not only around the 

world but in our country as well. Efforts to have government manage milk supplies, 

such as the whole herd buyout and assessments on dairy farmers, were tried in the 

1980s and were quickly abandoned. Acreage set asides were abandoned decades ago 

as were peanut and tobacco quotas. Of the major commodities, only sugar is managed by the government, but our sugar industry is protected by high tariffs and we 

don’t export it. 

There are many producers, and several producer groups, that oppose dairy supply 

management and the stabilization program. They deserve to be heard by this Committee. Dairy supply management would be a major new policy direction for our industry and is highly controversial. Our nation’s second largest dairy co-op, California Dairies, is opposed to the stabilization program. Other progressive producer 

organizations like the Wisconsin Dairy Business Association, Minnesota Milk Producers Association, the Northeast Dairy Producers Association and the Dairy Policy 

Action Coalition are opposed. 

IDFA is constantly told that it is not enough to oppose proposals, but that we 

must develop our own. In fact, we adopted a lengthy policy proposal approximately 

a year ago which has since been widely available on our website. Although it may 

have been advantageous to posture that our government should eliminate all dairy 

programs, we have instead tried to identify and support responsible, middle-ground 

compromise positions that help dairy farmers. IDFA supports the Bennet amendment and will gladly work with Members of this Committee to develop programs 

that help dairy farmers through difficult times. 

Conclusion 

IDFA’s members believe that a healthy and growing U.S. dairy industry benefits 

farmers as well as processors, and does not penalize consumers of dairy products. 

2009 was indeed a bad year for many dairy farmers but it was also a bad year for 

many dairy food companies, and millions of Americans, as well. 

Dairy policy reform should not include a supply management program which purports to help dairy farmers but places a heavy burden on dairy product consumers 

in a year like 2009 when they were also in need. Dairy producers should have catastrophic margin insurance and other risk management tools available to them to be 

ready for the next down turn in milk prices and an increase in feed costs. 

The Dairy Security Act will harm a growing dairy export business and will discourage investment into more domestic processing facilities. It will decrease domestic demand for milk and will ultimately harm dairy farmers as much as it does 

dairy food companies. 

IDFA believes it is time to decrease regulations in a highly regulated industry. 

We support policy initiatives that will help the industry grow, not only through increased consumption and product innovation here in the United States, but by taking advantage of new and growing export opportunities. 

There are clear and better alternatives to the Dairy Security Act that offer a positive path forward for the U.S. dairy industry. Margin protection, without being tied 

to limits on milk production, would help dairy farmers without the negative consequences of supply management. This Committee should offer dairy farmers the 

tools they need to manage volatility but should not attempt to manage that volatility for them.

The CHAIRMAN. Thank you, Mr. Davis. 

Mr. Kozak. 

STATEMENT OF JEROME J. KOZAK, PRESIDENT AND CHIEF 

EXECUTIVE OFFICER, NATIONAL MILK PRODUCERS

FEDERATION, ARLINGTON, VA 

Mr. KOZAK. Good afternoon, Chairman Rooney, Ranking Member 

Cardoza, and other distinguished Members of this Subcommittee. 

Thanks for inviting National Milk Producers Federation to participate today. 

We all know that farming is a cyclical business. We have seen 

significant downturns in 2003, 2006, 2009, and we are now experiVerDate 0ct 09 2002 12:54 Dec 11, 2012 Jkt 041481 PO 00000 Frm 00298 Fmt 6601 Sfmt 6601 I:\DOCS\112-30\74372.TXT BRIAN
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encing one in 2012. Simply put, America dairy farmers cannot afford to keep riding this roller coaster. We need a better safety net 

for dairy farmers that addresses both low milk prices and high 

input costs. Collectively, dairy farmers lost $20 billion in hardearned equity between 2007 and 2009. That is why this process has 

such high stakes not only for our dairy producers but for all of 

those who are financially connected to the dairy farming community. 

I would like to discuss the extensive grassroots process that led 

to the creation of the Dairy Security Act. In 2009, National Milk 

reached out to Members, other dairy organizations, regional and 

national farm groups, all of us collaborating together looking at a 

new safety net. Ultimately, when we had some good ideas on paper, 

we took that proposal and we field-tested it with dairy farmers by 

holding cross-country listening sessions in 12 states last summer. 

Nearly 1,500 dairy farmers gave us their input at those regional 

meetings. These ideas were eventually transformed into the Dairy 

Security Act by Mr. Peterson and Mr. Simpson. This package is 

proactive, it is budget-conscious and it fixes the long-term challenges that our current safety net can’t address. 

The Dairy Security Act is the consensus choice of virtually all 

farm organizations. This is an unprecedented level of support for 

making these needed changes. DSA isn’t a continuation of the 

failed policies of the past. It eliminates the Product Price Support, 

MILC and Dairy Export Incentive programs. Ending these programs saves precious farm baseline dollars to invest in a new and 

relevant safety net. 

The primary focus of DSA is the crucial margin between milk 

prices and feed costs. It isn’t a guarantee of success or profits, and 

it doesn’t raise consumer prices. It merely reduces volatility, and 

frankly, this benefits not only farmers but processors and consumers alike. This is not a Canadian-style quota system. It doesn’t 

insulate our farmers from the real world. It will not diminish the 

availability of milk. Farmer-owned cooperatives operate nearly 200 

dairy processing and manufacturing facilities all across this country. We wouldn’t support a program or they wouldn’t support a program that would hurt their own processing facilities, and this is 

not a mandatory system. It is voluntary. The farmer has a choice 

to either accept the free basic margin insurance as well as a subsidized supplemental insurance in which they share the cost with 

the government, or they can forego government assistance and not 

be subject to the DMSP. It merely sends timely signals to allow 

producers to take the kinds of actions to adjust their production or 

do nothing but contribute to a fund to purchase dairy products for 

direct use by USDA and provide that food to food banks and feeding programs at a time when supply exceeds demand. 

The Market Stabilization Program also contains triggers so that 

it does not activate when the world price and the domestic price 

are out of alignment. It might hurt our ability to export our products. Dairy farmers fund the U.S. Dairy Export Council out of their 

check-off funds. Dairy farmers fund the Cooperatives Working Together Program that National Milk administers through their own 

check-off program, and we have invested nearly $100 million since 

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2003. So why would we support a program that would negatively 

impact all of those producer dollars? 

DSA treats all farmers equally, and it finally eliminates the regional fights of the past and puts all farmers on equal footing. It 

allows farmers to better manage their risk. It is simple, it is affordable and it is convenient. 

So let me close with the summer grassroots tour we conducted 

last year. I was heart struck by one young couple in Wisconsin who 

nearly lost their farm in 2009, and I stood there with their three 

children looking at me and they said, ‘‘Jerry, we need to help 

change the system, we are counting on you. Our present system 

doesn’t work. We enjoy our life on the farm and we are proud to 

produce milk. All we want to do is to be able to take our family 

out for a pizza every once in a while and we will feel blessed.’’ That 

is what is at stake here today: the livelihood and the future of our 

hardworking dairy farm families all across this country who help 

not only feed our people but maintain the strongest dairy production system in the world. 

Teddy Roosevelt once said, ‘‘In any moment of decision, the best 

thing you can do is the right thing,’’ and our dairy producers deserve and need the right thing, and the Dairy Security Act is our 

best chance to get it right. Thank you. 

[The prepared statement of Mr. Kozak follows:]

PREPARED STATEMENT OF JEROME J. KOZAK, PRESIDENT AND CHIEF EXECUTIVE

OFFICER, NATIONAL MILK PRODUCERS FEDERATION, ARLINGTON, VA 

Introduction 

Chairman Rooney, Ranking Member Cardoza, Members of the Committee, I am 

Jerry Kozak, President and CEO of the National Milk Producers Federation 

(NMPF), a trade organization that represents 30 dairy cooperatives with over 30,000 

dairy farmer members who produce and market 60% of America’s milk. I am testifying on their behalf as well as the overwhelming majority of producers all across 

this country. 

The dairy industry has changed a great deal since current dairy policies were initially put in place. Milk price volatility has increased since the early 1980s as the 

government has largely removed itself from supporting the farm-level price of milk. 

The price of feed has become much more volatile as well since the middle of the 

past decade. Growing world demand for dairy products has created both opportunities and new challenges for the U.S. dairy industry as well, especially in the area 

of commodity volatility throughout the food chain. 

These elements have resulted in a much more volatile dairy business environment 

in recent years, which will continue in coming years. They came together in late 

2008 in a perfect storm-like situation, and resulted in the 2009 financial disaster 

that many of America’s dairy farm families experienced. The dairy crisis of 2009 

showed conclusively how inadequate current dairy policies are, not only in dealing 

with the unusual combination of circumstances that occurred in 2009, but in addressing less dramatic financial pressures as well. 

The inadequacy of these policies resulted in National Milk’s membership embarking on an extensive and inclusive grassroots process to determine how to provide 

the best safety net possible for dairy farm families. 

The Creation of ‘‘Foundation for the Future’’

After forming a strategic planning task force in the summer of 2009 that included 

representatives from member and nonmember cooperatives, NMPF’s task force met 

with dairy producer groups from across the country to gather their input on what 

was needed. 

Following this 2 day session, the task force appointed subcommittees to address 

three areas: protecting producer equity, reducing volatility, and assessing the mechanics of how milk is priced. It was out of these producer-driven subcommittees 

(meeting numerous times over a period of 18 months) that the policy package we 

named ‘‘Foundation for the Future’’ evolved. 

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Just as multiple problems contributed to an unprofitable situation for U.S. dairy 

farms recently, multiple solutions are required to achieve a more prosperous future. 

To meet this need, Foundation for the Future offered a multi-faceted approach by: 

(1) replacing existing Federal safety net programs; (2) creating a new Dairy Producer Margin Protection Program to protect against the severe and unsustainable 

loss of margin; and (3) establishing a Dairy Market Stabilization Program to help 

address periodic imbalances in dairy supply and demand. 

The next step in the process was to meet with dairy farmers across the country 

to present the Foundation for the Future program, and obtain their feedback. 

Over a period of 42 days, 13 meetings were held in 12 cities, from Visalia, California to Syracuse, New York, and nine other cities in major dairy areas in between. 

The input received from these sessions resulted in the changes to the Foundation 

for the Future proposal presented to Ranking Member Peterson. 

At the end of last summer, Rep. Peterson and Rep. Simpson formulated the Dairy 

Security Act, H.R. 3062. 

The Need to Replace Current, Inadequate Dairy Programs 

The Dairy Security Act (DSA) calls for three current dairy programs to be terminated and, in their place, a new safety net program to be implemented based on 

the concept of managing dairy producer risk while reducing margin volatility. 

The Dairy Security Act discontinues the Dairy Product Price Support Program 

(DPPSP), the Milk Income Loss Contract (MILC) program, and the Dairy Export Incentive Program (DEIP). Instead, DSA proposes to use the budgetary savings in the 

Federal dairy baseline to establish the Dairy Producer Margin Protection Program, 

as described further in this document. 

Ending the Dairy Product Price Support Program 

The Dairy Price Support Program was created in 1949 as a means to help provide 

government support for farm-level milk prices. During most of its lifespan, the program targeted a set milk price, and then established pricing targets for Federal purchases of key products, such as cheese, butter and non-fat milk powder, that would 

help support that milk price. 

In the 2008 Farm Bill, the program was altered to support specific products, ending its focus on a singular milk price, and targeting specific product price levels. Regardless of its function, however, NMPF believes it is now time to end the DPPSP 

and shift resources toward a new Federal safety net, for the following reasons:

1. It supports dairy farmers all around the world and disadvantages 

U.S. dairy farmers.

The current program helps balance world supplies by encouraging the periodic 

global surplus of milk products to be purchased by U.S. taxpayers. As a result, 

dairy farmers in other countries, particularly the Oceania region, enjoy as much 

price protection from the DPPSP as our own U.S. farmers. Without the USDA’s 

Commodity Credit Corporation (CCC) buying up occasional surpluses of dairy 

proteins in the form of nonfat dry milk, a temporarily lower world price would 

affect America’s competitors, all of whom would be forced to adjust their production downward and ultimately hasten a global recovery in prices.

2. It reduces total demand for U.S. dairy products and dampens our 

ability to export, while encouraging more foreign imports into the U.S.

The price support program effectively reduces U.S. exports, by diverting some 

of the U.S. milk flow into government warehouses, rather than to commercial 

buyers in other nations. It creates a dynamic where it is more difficult for the 

U.S. to be a consistent supplier of many products, since sometimes the domestic 

industry has products to export, and at other times, the domestic industry just 

sells to the government.

3. It disincentivizes product innovation.

The DPPSP distorts what the U.S. produces—for example, too much nonfat dry 

milk, and not enough protein-standardized skim milk powder, as well as specialty milk proteins, such as milk protein concentrates—that are in demand 

both domestically and internationally.

Because the price support program is a blunt instrument that will buy only 

nonfat dry milk (from among the many types of dairy powders made from milk) 

and because some plants have been specifically built to produce only nonfat dry 

milk, it puts the U.S. at a competitive disadvantage with respect to other global 

dairy vendors.

4. It isn’t effectively managed to fulfill its objectives.

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Although the DPPSP has a standing offer to purchase butter, cheese and nonfat 

dry milk, during the past 12 years, only the last of that trio has been sold to 

the USDA in any significant quantity. In essence, the product that the DPPSP 

really supports is nonfat dry milk. Even at times when the cheese price has 

sagged well beneath the price support target, cheese makers have chosen not 

to sell to the government for a variety of logistical and marketing-related reasons. NMPF has tried to address these problems, but the USDA shows no inclination toward facilitating greater purchases of product by recognizing the additional costs required to sell to government specifications such as specific sizes 

and packaging types. Once purchased, nonfat dry milk powder returning back 

to the market from government storage also presents challenges, dampening the 

recovery of prices as evidenced in Chart 1.

Chart 1

U.S. and World Prices—SMP/NFDM

5. It seeks to achieve price levels that are no longer relevant to farmers.

Even though the $9.90 per hundredweight target was eliminated in the last 

farm bill, the individual product price support targets—$1.13 per pound for 

block cheese, $0.85 for powder, and $1.05 for butter—will essentially return 

Class III and IV prices around $10 per hundredweight. In an era of higher costs 

of production, that minimal price isn’t acceptable in any way, shape or form as 

the following chart so clearly demonstrates. As shown on Chart 2, the effective 

price support level has been considerably less than the cost of production for 

many years. The government is not at all likely to raise the support prices 

(which would have negative consequences both for the burgeoning Federal deficit, as well as our trade treaty limitations), and even if it did, the industry 

would likely experience continued delays in the recovery of prices when the program is most needed. 


11230101.eps
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Chart 2

Price Support Level and Costs of Production, 2006–2011

Source: USDA Economic Research Service.

In summary, discontinuing the DPPSP would eventually result in better returns 

for U.S. dairy farmers. By focusing on indemnifying against poor margins, rather 

than on a milk price target that is clearly inadequate, the industry can create a 

more relevant safety net that allows for quicker price adjustments, reduces imports 

and facilitates exports. As a result of the present DPPSP, the U.S. has, in effect, 

become the world’s balancing plant. As time marches on, so, too, must our approach 

to helping U.S. dairy farmers. 

Ending the Milk Income Loss Contract (MILC) Program 

The MILC program is a price-based safety net, which is as ineffective for today’s 

dairy producers as the Dairy Product Price Support Program. In 2008 and 2009, 

MILC proved to be an inconsistent safety net program for dairy farmers facing very 

low, or even negative, operating margins. MILC, despite its feed cost adjustor, does 

not adequately offset high feed costs and its price target does not track national 

farm milk prices. 

The triggering of an MILC payment is dependent on a low milk price. If milk 

prices are at average levels and feed costs are high, farmers can suffer substantial 

losses and still not receive any assistance from MILC. Although a feed cost adjustor 

was added in the 2008 Farm Bill, this program does not go into effect until the price 

of the National Agricultural Statistics Service (NASS) standard feed ration reaches 

$147 per ton (equivalent, for example, to $3.75 per bushel of corn, $9.50 per bushel 

of soybeans, and $130 per ton of alfalfa). It also only covers about 30 percent of the 

feed price increase above this high level. This was clearly inadequate through most 

of 2008, when high feed costs overwhelmed average milk prices and put most farmers into a deep hole without the help of any MILC payments. The current feed ration utilized in the MILC has not been sufficiently updated to reflect today’s current 

dairy farm feeding practices. On the other hand, the Dairy Producer Margin Protection Program recommends utilizing a new feed ration reflective of the entire dairy 

feeding enterprise at the farm level. 

The MILC target price is a Class I price. Class I is currently based on the ‘‘higher 

of’’ Class III or IV prices, so when the Class IV (butter/powder) price or the Class 

III (cheese) price is high, MILC payments can be low or zero, even if producers are 

facing low margins. 

The MILC program is inequitable in its treatment of dairy farmers and, therefore, 

ineffective in its objective of providing economic relief to dairy farmers in their time 

of need. Requiring producers who market more than 2.985 million pounds of milk 

a year to guess in which of the coming twelve months they will most likely need 

economic assistance is why it is ineffective. Limiting the level of protection to a 

maximum of 2.985 million pounds of milk a year provides a safety net for less than 


11230102.eps
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30 percent of the total milk produced in the U.S. A basic principle of the Dairy Security Act is that all farmers should be treated equally regardless of size or region. 

As dairy farmers face growing volatility in both their feed costs and their milk 

prices, the milk price-based dairy producer programs are no longer adequate or efficient. As evidenced significantly in 2009, the MILC program does not provide an effective safety net for dairy producers. It is for these reasons that the DSA recommends discontinuing the Dairy Product Price Support Program (DPPSP) and the 

Milk Income Loss Contract (MILC) program in the next farm bill and using the 

budgetary savings in the Federal dairy baseline to establish the new Dairy Producer 

Margin Protection Program as described next in this document. 

Ending the Dairy Export Incentive Program (DEIP) 

Intended to help expand the sales of U.S. dairy products into world markets, the 

program has been used instead as an adjunct to the dairy price support program. 

As such, it was only made available in a very limited way after the price support 

program began purchasing and storing dairy products. 

Instead of expanding world markets for U.S. dairy products which requires a longterm commitment to serving those markets, the U.S. Government has only used 

DEIP either in response to heavy European subsidization of dairy exports or as an 

alternative to storing products under the price support program. The program generates a baseline cost without providing any consistent, meaningful return to the 

U.S. dairy sector. 

The Need for the Dairy Security Act of 2011

The Dairy Security Act replaces these three ineffective programs with two that 

are designed to work together to prevent the catastrophic loss of a farmer’s hardearned equity. They are the Dairy Producer Margin Protection Program (DPMPP), 

and the Dairy Market Stabilization Program (DMSP). 

1. The Dairy Producer Margin Protection Program (DPMPP) 

The Dairy Security Act’s Dairy Producer Margin Protection Program (DPMPP) is 

intended to support producer margins, not prices. DPMPP is a program that is designed to address both catastrophic conditions, which can result in the severe loss 

of equity for dairy farmers, such as those witnessed in 2009 as well as long periods 

of low margins, such as those experienced in 2002. 

Under this program, ‘‘margin’’ is simply defined as the All-Milk Price minus feed 

costs. Feed costs are determined by using a new feed ration that has been developed 

to more realistically reflect those costs associated with feeding the entire dairy farm 

enterprise including milking cows, heifers, etc. The DPMPP operates on the premise 

of providing a basic level of protection for all producers and a voluntary supplemental coverage. The basic coverage is fully-subsidized by the Federal Government 

(as was the case with the DPPSP and MILC), while the supplemental coverage is 

voluntary and premiums are partially subsidized by the government, but in a manner in which the level of subsidization decreases as the level of coverage per hundredweight increases. 

When the margin falls below $4.00 per 100 pounds of milk for consecutive 2 

month periods, producers who sign up for the program receive the difference between $4.00 and the actual margin. This is paid on their actual milk production for 

the 2 month periods the program is in effect, not to exceed 80% of 1⁄6 of their highest 

annual milk production for the 3 years prior to the program being enacted. 

Producers will have the option of buying additional coverage above the $4.00 catastrophic level of coverage, up to an additional $4.00 per hundredweight on 90% of 

their prior year’s annual milk production. They can also insure the annual growth, 

if any, in their milk output, so that if these farmers choose to expand production, 

they have some downside protection for that growth. 

The program is voluntary. Every producer has a choice: to take advantage of the 

margin protection program, or not. The basic $4.00 catastrophic coverage has no 

premium. A producer signs up once and he/she is covered on 80% of their historic 

milk production for up to $4.00 of margin protection. 

The DPMPP is intended to be a Title I program operated by the Farm Service 

Agency (FSA). 

2. Dairy Market Stabilization Program (DMSP) 

As a voluntary program, the DPMPP has an associated requirement—a condition 

of participation in DPMPP is participating in the Dairy Market Stabilization Program (DMSP). 

The purpose of the DMSP program is to make what occurs naturally in the marketplace occur sooner and faster and reducing price volatility to the benefit of proVerDate 0ct 09 2002 12:54 Dec 11, 2012 Jkt 041481 PO 00000 Frm 00304 Fmt 6601 Sfmt 6621 I:\DOCS\112-30\74372.TXT BRIAN
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ducers, processors and consumers. It also reduces that cost of the margin program 

resulting in savings compared to current dairy programs. 

As with the Dairy Producer Margin Protection Program, the DMSP will be driven 

by margins and calculated in the same way. Under the DMSP, when the national 

average margin on milk drops to certain levels, producers would receive payment 

for the greater of a percentage of their established Base Milk Marketings or their 

current milk marketings. While the milk may still be picked up and processed, payment for the milk above the specified percentage of marketings would go from the 

processor to the USDA, which would use the funds to purchase dairy products for 

food assistance programs. 

Participating producers would choose whether their Base Milk Marketings would 

be the average milk marketed over the 3 months immediately prior to USDA announcing that the program is going into effect, or the milk marketed during the 

same month in the previous year for each month the DMSP is in effect. 

The program triggers in:

• When the national margin is $6.00/cwt. or less for 2 consecutive months, producers would be paid for the greater of 98 percent of their Base Milk Marketings or 94 percent of their current milk marketings.

• When the margin is $5.00/cwt. or less for 2 consecutive months, producers 

would be paid for the greater of 97 percent of their Base Milk Marketings or 

93 percent of their current milk marketings.

• When the national margin is $4.00 or less in a single month, producers will be 

paid the greater of 96 percent of their Base Milk Marketings or 92 percent of 

their current milk marketings.

Once triggered, the program would remain in effect until the national margin exceeds the $6.00/cwt. level for 2 consecutive months. 

The simple fact of the matter is that dairy farmers and the cooperatives they own 

bear the burden of balancing the supply of milk with processor demand for that 

milk. For example, during the Christmas holidays when schools are closed, dairy 

farmer cooperatives are the entities responsible for handling the milk that is being 

produced so it is available when schools start up again. Likewise, when the worldwide recession hit in late 2008, and U.S. exports of dairy products fell by over 30%, 

dairy producers and their cooperatives had to handle the surplus milk that suddenly 

appeared. 

Had the Dairy Security Act been in place in 2009, producer margins would have 

turned around 7 months sooner than actually occurred and saved billions of dollars 

in dairy farmer equity. 

The DMSP program is entirely voluntary and its purpose is the same: to alleviate 

as quickly as possible the financial burden excess milk production puts on dairy 

farmers and dairy cooperatives. 

Yes, the possibility of the DMSP program temporarily impacting dairy farmers 

who want the protection of the DPMPP is a condition tied to the margin protection 

program. And, a producer has the option of reducing milk production under the 

DMSP program, but is not required to do so.

If the farmer chooses not to reduce production should the DMSP program go into 

effect, then the producer is not paid for a small portion of the milk he or she marketed. That money is deducted from producer milk checks and sent to USDA to buy 

dairy products from processors and manufacturers for direct donation to organizations that feed the needy. 

NMPF’s own economists looked back at the period from 2001 to 2010 using the 

same DMSP provisions and found that the program would have only been activated 

twice in 2009. This is hardly the intrusive program opponents claim it would be. 

Those same voices have argued that the U.S. will lose its ability to export under 

this program, and will regress into a globally uncompetitive dairy sector. As a result 

of discussions with trade experts and feedback from companies exporting U.S. dairy 

products, the DMSP incorporated a series of qualifiers that would prevent any reduction in domestic supply of milk if the U.S. and world prices misaligned. The 

DMSP program is suspended not only when margins are above S6.00 for 2 consecutive months, but also when U.S. cheddar or NFDM price is equal to or higher than 

the World price for 2 consecutive months even when margin is less than $6.00. The 

DMSP program is also stopped if the margin is between $5.00 and $4.00 and U.S. 

cheddar or NFDM price is 5% or higher than the world price or when the margin 

is $4.00 or less and U.S. cheddar or NFDM price is 7% or higher than the World 

price for 2 consecutive months. 

Farmers who are spending millions of dollars a year funding both the Cooperatives Working Together (CWT) program and the U.S. Dairy Export Council take umVerDate 0ct 09 2002 12:54 Dec 11, 2012 Jkt 041481 PO 00000 Frm 00305 Fmt 6601 Sfmt 6621 I:\DOCS\112-30\74372.TXT BRIAN
1894

brage at that allegation. In fact, U.S. dairy farmers are aware of the importance of 

global marketing, and were mindful of that importance as the DMSP was developed. 

Some of the key principles that guided the development of the DMSP include:

• Allow for production growth. The program is intended solely to intervene in the 

market to address temporary imbalances between supply and demand. The program will send clear economic signals to producers if there is an imbalance in 

the marketplace, but it will still allow milk production to grow.

• Reduce margin volatility. The program’s ultimate objective is to restore balance 

between supply and demand in the marketplace for milk. By encouraging producers to lower their milk marketings at appropriate times, prices will rise, 

thus improving margins to more reasonable levels.

• Keep government intervention at a minimum. The legislation establishing the 

program will set the parameters that put it into effect. USDA’s role will be limited to determine the actual monthly margin and to collect potential farmers’ 

contributions.

• Not encourage imports or discourage exports. Global and U.S. markets must 

maintain a strong correlation. Such correlation will allow domestic inventories 

to clear faster, encourage exports, discourage imports, and help ensure that 

market downturns are of shorter duration.

Conclusion 

Mr. Chairman, Committee Members, there has never been the level of consensus 

within the U.S. dairy producer community as currently exists in support of the 

Dairy Security Act. In addition to the member cooperatives of NMPF, the following 

organizations support the DSA:

• American Farm Bureau Federation

• National Council of Farmer Cooperatives

• National Farmers Organization

• Holstein Association USA, Inc.

• Milk Producers Council of CA and a majority of other state dairy producer associations

These organizations support the DSA because it is a package that addresses the 

concerns they have had regarding future dairy policy:

• The program is voluntary. Every producer can choose whether they want the 

protection offered by the DPMPP recognizing that they are then subject to the 

provisions for the DMSP program.

• The margin protection program provides participating dairy farmers with a 

basic safety net against catastrophic equity loss and the option of purchasing 

additional margin protection above the basic level.

• The DMSP program signals producers well in advance of declining margins 

reaching catastrophic levels and allows them to choose to adjust production, or 

do nothing and have a small percentage of their milk check fund purchases of 

dairy products for use by the nation’s food banks and feeding programs.

• DMSP contains a number of safeguards to ensure that the program doesn’t trigger in and negatively impact the dairy industry’s ability to export.

DSA also begins transitioning dairy farmers to being better able to manage their 

business risk in a deliberate, planned approach that provides a better safety net 

while reducing government involvement and positioning our industry to better compete in the growing global dairy marketplace. The program also complements private sector risk management tools, such as the use of futures markets and forward 

contracting. Indeed, it will help expose dairy farms of all sizes to the concept of 

using such tools to help better protect them from increased volatility. 

Criticism of the Dairy Security Act from commercial milk buyers alleges that it 

will restrict milk production, raise consumer prices, and negatively impact exports. 

We believe these allegations are clearly ill-founded and based either on insufficiently robust or incomplete economic analysis at best or pure conjecture at worst. 

Additional analysis can be expected to reinforce the fact that these concerns are 

clearly without merit. 

In addition, with respect to fears about a reduction in U.S. dairy exports, it is important to note will not restrict milk production, raise consumer prices, or negatively impact exports. It is important that the Committee be aware that America’s 

dairy farmers have long recognized the importance of export markets. As mentioned 

previously, for 16 years they have funded the U.S. Dairy Export Council through 

1895

the promotion deduction from their milk checks. Dairy farmers producing 70% of the 

nation’s milk have funded the Cooperatives Working Together Export Assistance 

program which has invested nearly $100 million since 2003 helping members sell 

427 million pounds of cheese, butter and milk powders to 30+ countries on four continents. Why would NMPF support a program that would negatively impact the investment of all those producer dollars? 

The DSA changes the status quo by eliminating the current ineffective government dairy programs, and provides participating dairy farmers with a much better 

safety net, while reducing spending on dairy programs by precious millions of dollars in the dairy baseline. 

It treats all farmers in all regions equally. It does not raise consumer prices nor 

negatively impact exports, while addressing the wild price swings that have plagued 

producers and processors in the past. It allows an orderly transition to a new era 

whereby dairy farmers manage their risks and creates a solid safety net for farmers. 

Importantly, we have to remember that protecting against the erosion of dairy 

farms and a domestic milk supply is critical to our nation’s food security. We can’t 

take this for granted. Off-shoring our food production is not in the best interests 

of our national security, but is a real possibility if we don’t have better tools to manage price volatility and prevent the loss of more dairy farms. 

The commodity titles of the farm bill exist to ensure that we always have the ability to feed ourselves. The dairy title should be about giving our dairy farmers the 

tools they need to protect and preserve their business operations so they can weather difficult times and give them a reasonable chance to continue to produce a safe 

and nutritious product for our consumers. 

We respectfully urge you to include the Dairy Security Act in the next farm bill. 

It offers a far more responsive protection for our farmers’ hard-earned equity than 

the system we have today. Our dairy producers deserve and need the right thing, 

and the Dairy Security Act is our best chance to get it right. 

Thank you.

The CHAIRMAN. The chair would like to thank the witnesses for 

their statement, and also would like to remind Members that they 

will be recognized for questioning in the order of seniority for Members who were here at the start of the hearing. After that, Members will be recognized in order of their arrival. I appreciate the 

Members’ understanding. 

Additionally, the gentleman from California, Mr. Costa, who is 

not a Member of this Subcommittee has joined us today, I have 

consulted with the Ranking Member and we are pleased to welcome him to join in the questioning of witnesses. 

I will now recognize myself for 5 minutes to begin the questioning. This question goes to Mr. Wright and Mr. Barcellos. If you 

would, how critical is it to producers in your region that the supply 

management component of this package be voluntary, as Mr. 

Kozak pointed out? Are there producers in your regions whose business models would lend themselves to participation in this program? 

Mr. WRIGHT. Let me respond first. We would be making more 

noise than Mr. Davis if this were mandatory. The the only reason 

we can live with the Dairy Security Act is the voluntary nature of 

supply management. Mr. Kozak mentioned field hearings. When 

National Milk came down to visit, our people were standing up 

shouting at him, ‘‘Jerry, do you really think we ought to do dairy 

supply management in Florida? Are you telling us not to dairy?’’ 

I mean, it is that critical. We don’t think a mandatory supply management can work for the Southeast. We think it would penalize 

us. We think it would expedite the exodus of milk production in the 

Southeast. You know, estimates are hard. I know, I have read economic analysis. Sitting where I am today, if this becomes law, I 

would be surprised if over 25 percent of our milk would sign up for 

1896

the program because of the supply management provisions. I think 

a lot of people—and it would vary. Large producers and rapid 

growth would go to the private market for the margin protection. 

Smaller producers or low-debt producers would say I will basically 

self-insure the down markets. So I do see some highly leveraged 

operations that maybe the only way they can get credit is their 

banks insist on signing up, but I do not think there will be a very 

high participation rate in the Southeast. 

Mr. BARCELLOS. Mr. Chairman, I would echo the concern about 

mandatory versus voluntary. California has quite a variety of dairy 

styles, everywhere from 50 cow pasture herds, some organic and 

others that might extend into the 5,000 or 6,000 cow confined facilities. There are producers that are on rented places, some that 

are on owned places. There is such diversity that one-size-does-notfit-all, and the voluntary aspect of it would be about the only way 

you can get support from California producers. 

The CHAIRMAN. Mr. Davis, do you want to weigh in on that? 

Mr. DAVIS. Certainly. I appreciate in the rules it is voluntary but 

it isn’t voluntary for a processor because if you have one of your 

producers that signs up for it, you are now basically in it because 

you have to manage it and report it and do all those auditing functions. In addition to that, I would think especially after 2009’s equity burn that Jerry described and a few others described and I 

concur with, I really believe it happened, bankers are much more 

of an important part of dairy farmers’ lives than they were before 

that equity burn. Can you imagine a banker lending money to a 

dairy farm business and saying—telling him not to sign up for supply management and the insurance market? They would never take 

that chance of not having some type of safety net. So what you are 

doing is forcing that lender to tell his dairymen you have to sign 

up for the insurance program, and once he does that, he has to sign 

up for supply management, and that just doesn’t make any sense 

to us. 

The CHAIRMAN. Mr. Kozak? 

Mr. KOZAK. Obviously we don’t agree with that. In fact, one of 

the things that we did in this 21⁄2 year process that we have been—

this has been evolving is, we met with the bankers and lenders and 

other types of farm credit institutions about this program. I must 

tell you, we were very favorably received, and the issue still is—

and I understand what Mr. Wright and Mr. Barcellos said—that is, 

it is voluntary. And I don’t find this unique because if you look at 

some of our other government programs, let us just take a look at 

disaster assistance. In order for you to receive ad hoc disaster assistance, you have to sign up for crop insurance, and there are 

many other issues where you have to comply with certain provisions, and in this case, the dairy farmer is actually getting a free 

margin just for signing up provided by the government. Then they 

are getting a supplemental rate that is fairly attractive in order for 

them to manage their market. I don’t think that most dairy farmers object to the fact that if they are going to take that assistance, 

that as citizens they have to have some idea of dealing with the 

rest of the community and the impact of those communities. 

The CHAIRMAN. Thank you. 

1897

I would now like to recognize the Ranking Member, Mr. Cardoza, 

for 5 minutes. 

Mr. CARDOZA. Thank you, Mr. Chairman. 

I would like to ask the witnesses that I am going to ask these 

questions to please keep their answers very concise, and I am going 

to start with Mr. Barcellos from Western United Dairymen. You 

mentioned producers having choices on Milk Marketing Orders. 

What are some of the concerns among farmers about the Federal 

Order for California? Do you believe California producers would be 

better off if they joined the Federal Orders or worse off? 

Mr. BARCELLOS. California has a quota and standards that are 

higher than Federal. We also are concerned about depooling. In 

Federal Orders, they can depool anytime, and California is limited 

to 12 months at a time. If prices were the same, we would have 

to take transportation from California to meet—get it into the Midwest or the East, and we are a manufacturing state so we are looking more to doing export, and the fact that we have California pooling, CDFA managed, we can be very responsive. We had a hearing 

called for in March and we will have a response and a decision by 

August, so we are looking at the fact that it responds quickly. 

Mr. CARDOZA. Mr. Barcellos, can you explain a little more about 

the impact of voluntary reductions currently in place in California 

that they might have if a market stabilization plan is put in place? 

Mr. BARCELLOS. The stabilization payments made on overproduction now are going to—or the stabilization plan as it was written 

previously, the payments would have gone to the Federal deficit reduction, and currently, we are supporting the process where that 

excess overpayment would be used for feeding programs that would 

benefit the communities. 

Mr. CARDOZA. Dr. Brown, there has been a lot of concern about 

the impact of this program on exports. Again, can you talk about 

the impacts of this program and what they would have on exports? 

Do you feel that these concerns about the stabilization program 

damaging the export markets are well founded, given the results 

of your study? 

Dr. BROWN. Certainly. So, number one, when we look at the effects of market stabilization on trade, it is important to understand 

the parameters of market stabilization and how often it operates. 

I go back to look at the analysis that I have done and only roughly 

71⁄2 percent of the time do we see DMSP would be in operation, so 

a pretty small percentage of the time. In addition, given the United 

States-to-world price triggers that are in place, it tends to trip the 

program back out fairly rapidly, so the combination of those things 

certainly doesn’t suggest that we are limiting milk supplies to a 

large extent relative to the baseline that I was using. So in general, 

we are talking about less than a two percent decline in things like 

nonfat dry exports in the most biting phase of the DMSP operations. 

Mr. CARDOZA. So your study finds it won’t really have that much 

of an effect most of the time and at most it will have a one to two 

percent effect? 

Dr. BROWN. Correct, and again, it is because of the trigger levels 

that we have and the fact that we would expect the baseline margins to be well above the trigger points for DMSP. 

1898

Mr. CARDOZA. Thank you. One item in your report that caught 

my attention was that milk price will decline very slightly. Can you 

talk a little bit more about that, and didn’t the same thing happen 

when MILC payments were first made? 

Dr. BROWN. I think certainly any time that you are going to 

make payments to producers in any type of government program, 

you are putting more money into their pocket, in aggregate, we are 

going to get some supply response from that. If you look back to 

the original MILC discussion of the 2003 debate, we certainly 

talked about the fact that we were going to see some lower milk 

prices from the fact you are making payments. I think there is another case where as we make payments under the Dairy Producer 

Margin Protection Program, it will have a slight negative drag on 

milk prices. Again, the triggers are important here. We don’t expect 

margin protection to trigger very often as well so the effects on 

milk prices are pretty small relative to the baseline. 

Mr. CARDOZA. Thank you. 

Mr. Davis, obviously as you mentioned, the stabilization provision is a major concern for you and IDFA. Has IDFA analyzed a 

model of the stabilization program in the current proposal to determine how frequently and for how long it would trigger? 

Mr. DAVIS. They have, and one of the things that it is tough to 

model is, you have to predict that future decisions will be the same 

as past decisions, which is what Dr. Brown did, and future decisions by our dairy buyers, overseas dairy buyers, are going to be 

different if we have a supply management program versus if we 

don’t. 

Mr. CARDOZA. Would you please provide me with that analysis 

and provide it to the Committee for the record? And would you also 

provide how you can justify the last statement that you just made? 

Mr. DAVIS. How I can justify the last statement? 

Mr. CARDOZA. Yes. I mean, you made an assertion that things in 

the past won’t be the same as things in the future because people 

are going to make different decisions. That is a supposition that I 

am not sure is supported, and I would like to see what backs 

up——

Mr. DAVIS. All I can—excuse me. All I can do is through anecdotal conversations I have had with buyers already, and——

Mr. CARDOZA. I know, but we can’t make policy on anecdotal conversations. What we need is some kind of analysis, and Dr. Brown 

has provided that kind of historic analysis, and I am afraid that 

we can’t build policy on that kind of an anecdotal information. If 

you have something that will support your position, we are glad to 

see it. 

Mr. DAVIS. I don’t have a statistical survey that will say the 

buyer will buy elsewhere. I just have what they tell me. 

[The information referred to is located on p. 1922.] 

Mr. CARDOZA. Mr. Kozak, Mr. Davis pointed out that we are currently exporting 13 percent of our milk production. He claims that 

this proposal threatens the export business. You can respond to 

that. 

Mr. KOZAK. First of all, let me offer our economic analysis that 

we did on the market stabilization. We had our staff economists go 

back and look at how many times the market stabilization program 

1899

would have kicked in or triggered in over a 10 year period. It would 

have kicked in twice for 3 months and they would have been in 

2009, and we would be happy to provide that analysis. In fact, it 

may have been part of our written testimony. 

In terms of exports, as you can understand from my remarks, we 

fund both the U.S. Dairy Export Council through producer checkoffs and the CWT program. Last year, 79 percent of all the American-style cheeses were supported by the CWT Export Program, 

and that has a tremendous impact. Dr. Brown’s figures are pretty 

good. They mask the things that we have been looking at, and I 

don’t see in any shape or form that we are going to have some negative impact on exports. Certainly, that is a significant portion of 

why we did this program. 

Mr. CARDOZA. Thank you, sir. 

Thank you, Mr. Chairman. 

The CHAIRMAN. The chair would now like to recognize the former 

Ranking Member of this Committee from Texas, Mr. Neugebauer, 

for 5 minutes. 

Mr. NEUGEBAUER. Thank you, Mr. Chairman, and thanks for 

having this important hearing. 

Dr. Brown, because we are in a pretty tight budget environment 

right here, obviously putting together a farm bill is going to be extremely important, and with dairy, this is a brand-new program. 

You know, one of the things that Congress isn’t is nimble, and so 

it is very important that whatever policy, if we move forward with 

this, that we put in place over the next 5 years that this is a program that will work effectively and, more importantly, work within 

the budget constraints that we will be working under. Are there 

particular formulas or triggers in this program that we need to be 

extremely careful about and cognizant of as we move forward in 

this discussion so that we make sure that we get this right? 

Dr. BROWN. Certainly, when you look ahead, the notion of protecting margins and you are at least accounting now for feed costs 

and milk prices helps make the margin side of this more robust 

than just protecting milk prices as we have done traditionally long 

term in the dairy industry. The levels of those triggers are very important. You set those triggers too high and we could be in a situation where the program operates on a very regular basis and no 

one in the industry might be happy with that outcome, producers 

included. When I look at the triggers that we have right now in the 

work that I have done relative to the baseline, again, we don’t trigger very often margin payments so it seems like we have triggers 

set that don’t make the program operate all the time. I think when 

you look at market stabilization, the United States-to-world price 

triggers have certainly been an addition as this proposals move forward that I think are important to make certain that we don’t disconnect the U.S. sector from the rest of the world. 

Mr. NEUGEBAUER. And in your analysis, you did a look-back. Did 

you do a look-forward analysis as well? 

Dr. BROWN. Yes, absolutely. So the analysis that you see from me 

today is a look forward. It is compared relative to a baseline that 

looks at a number of outcomes, both low market outcomes and high 

market outcomes. Again, doing that allows me to say roughly relative to the baseline base program payments occur 15 percent of 

1900

the time. It provides a more robust analysis looking at it in this 

forward-looking stochastic process relative to continuing current 

programs. 

Mr. NEUGEBAUER. Thank you. 

Mr. Kozak, if I am a really good producer and I have a little better margin than some of my competitors, can I still expand my operation during a market stabilization period? 

Mr. KOZAK. Yes, Congressman. One of the features that was put 

into was the concern about first of all making sure that this program allows new entries, because as you have heard before, we 

need new producers coming in. So those provisions allow for new 

producers to come in, and once it triggers out, you go back to your 

original base production and therefore if you have produced since 

the triggered in, you are now at that same base. So it is a rolling 

type of program because our organization wouldn’t support a program that would eventually stifle milk production. 

Mr. NEUGEBAUER. Thank you. 

Mr. Davis, a lot of folks have painted this as a voluntary program. From your perspective, is this a voluntary program? 

Mr. DAVIS. As I said earlier, the processors have to engage the 

minute one of their producers selects to be in supply management/

the insurance program, but I tell you, and as Jerry alluded to, I 

talk to a lot of bankers too and bankers assure me that if there is 

a safety net out there, they are going to force their clients to be 

in it. If they are in it, they have to be in the supply management 

program as well. 

Mr. NEUGEBAUER. One of the things that you objected to is that 

you are almost becoming an enforcement mechanism because you 

are going to be buying the milk, and if we are in that period, you 

would be collecting the hole back. Did I understand that correctly? 

Mr. DAVIS. Yes, and the way I understand it, if I missed this, I 

don’t think I have, but if I do, I apologize, but we are going to be 

doing all the auditing and accounting for all this for all our direct 

ship producers. 

Mr. NEUGEBAUER. Mr. Kozak, do you have a response to that? 

Mr. KOZAK. Yes. Let us keep in perspective that 85 percent of all 

the milk marketed in the United States is through dairy cooperatives so they will be the first one that will probably handle much 

of this burden on there. If there are independent producers that 

ship to Mr. Davis, of course they would have to do it. But I will 

also point out that processors are currently required to have an accounting function that takes off the 15¢ hundredweight from farmers to USDA, so we don’t see this as some tremendously new system or creating a new bureaucracy. 

Mr. NEUGEBAUER. Quickly, Mr. Davis, did you have a follow-up 

to that? 

Mr. DAVIS. Just two things. Number one, 75 percent of our producers are direct ship. They are not members of co-ops. And number two, we manage the 15¢ for the national promotions board currently, and I would assume we would manage the funds in this as 

well. 

Mr. NEUGEBAUER. Thank you, Mr. Chairman. 

The CHAIRMAN. The chair would now like to recognize the gentleman from Oregon, Mr. Schrader. 

1901

Mr. SCHRADER. Thank you, Mr. Chairman. 

Just a quick comment. So we don’t lose sight at this hearing, the 

good news here is that it seems like there is universal testimony 

that the old system hasn’t been working and we need to go to 

something new, and most of the contention seems to be over the 

stabilization program, so just for everyone’s temperature, I think 

that is important to realize. 

To that effect, I would like to flip the conversation a little bit and 

get Dr. Brown’s opinion on why it is necessary given the nature of 

the program that is going to insurance as opposed to price support, 

why do we need the dairy market stabilization program? 

Dr. BROWN. I think certainly when you look at the package as 

it has been put together, adding market stabilization certainly 

helped from a government outlay standpoint, certainly trying to 

keep a bill that fit within the scoring targets that might be out 

there for the dairy industry. When you start talking about market 

stabilization, you reduce the cost of the lease-based program margin payments and potentially supplemental payments as well. I 

think that is the important feature that has brought market stabilization into the package. 

Mr. SCHRADER. So if you are fiscally responsible, you kind of 

want to have at least something to guarantee government outlays, 

don’t continue to go on ad infinitum.

Dr. BROWN. Without market stabilization, a base program that pays the difference as prices are—sorry—as margin falls below $4, 

you can imagine very low margin outcomes creating very large outlays. 

Mr. SCHRADER. Mr. Kozak, what about from the dairy industry 

perspective? Is there a reason that this program is important at 

all? 

Mr. KOZAK. Well, it is critical for two reasons. When we started 

the process, we looked at the prospects that the dairy baseline was 

going to be reduced. That has happened. Dairy baseline is now 

$433 million. When we helped try to look at what the impacts of 

this program would be, it is somewhere around $250 million that 

has an—of the dairy market stabilization of reducing the cost of 

the supplemental program. Now, in this day and age where we are 

concerned about budgets, this is the dairy producers stepping up to 

the plate and helping keep down the costs of their own program. 

I think that is a win-win for this Congress. 

Mr. SCHRADER. Thank you. 

To Mr. Davis, again, trying to keep things in perspective, this 

program originally wasn’t voluntary. Some of the triggers were not 

in the bill that are now in the latest version, so you have had an 

impact and I appreciate the work that has been done. The thing 

I don’t particularly appreciate is reading in Hoard’s Dairyman

where you essentially impugn the Ranking Member’s knowledge of 

the dairy industry. It strikes me as if the Ranking Member from 

Minnesota doesn’t have the background having helped craft, perhaps been the major crafter of the 2008 Farm Bill and being an expert in dairy policy, we wouldn’t even be here today talking about 

a program that by all accounts just a moment ago everyone agreed 

was a heck of a lot better than what we already had. So if you 

want members on your side, you might want to be careful. You are 

1902

not a Member of Congress, and sometimes we say a lot of things 

we shouldn’t be saying too, so you might be careful of how you talk 

about various Members we hold in high esteem here. 

A lot of the argument that goes into discussion about the market 

stabilization programs seems to be philosophical, and I think that 

resonates with everybody regardless of political party. They don’t 

want the government determining prices. And I think that is the 

reason we went to the voluntary nature of this program. So a question for you, Mr. Davis, would be, on the one hand we are arguing 

free market opportunity whether it is for exports or how we run 

our farm and our business. On the other hand, you are asking for 

a government handout in the form of some sort of subsidized either 

insurance program or price support program. Don’t you find that 

a little contradictory to argue one side and then take the other? 

Mr. DAVIS. Well, I first would like to apologize if some of my 

words were taken—I haven’t read the Hoards Dairyman so I apologize if they were taken out of context. I certainly had an opinion 

on a panel a week or 2 ago and I still have that opinion about dairy 

policy. I don’t know how they took those comments, so I apologize. 

I didn’t mean to impugn anybody. 

But I would tell you that the margin insurance program as presented is something that National Milk and the dairy farm community has presented and we find that acceptable. We certainly would 

also encourage self-funded dairy farming margin insurance as well. 

Mr. SCHRADER. Very good. Thank you. 

I yield back, Mr. Chairman. 

The CHAIRMAN. The gentleman from Vermont, Mr. Welch, is not 

a Member of the Subcommittee but has joined us today. I have consulted with the Ranking Member and we are pleased to welcome 

him to join in the questioning. 

We now move to the gentleman from New York, Mr. Gibson. 

Mr. GIBSON. Well, thanks, Mr. Chairman, and I appreciate the 

panelists being here today. 

I want to begin just by associating myself with the remarks by 

Mr. Wright at the outset. I represent farmers in New York. This 

is a region that is under-supplied, and we are anticipating growth, 

particularly with the advent or the burgeoning of the yogurt industry in New York. So I have concerns about the ability of our family 

farmers to continue to prosper and meet market demand and perhaps we will get back to that. I just want to state that from the 

outside. 

I am interested with Dr. Brown, based on your research, is it 

possible that you could put together an algorithm, an interactive 

one where our farmers could take your information, all your research and they could input their data points, how many points of 

milk they produce, they could sort of look at scenarios of the various levels that they buy up. They could plug that in. It would 

come forward with some probabilities and there would be costs associated with that so that they can rationalize this decision. Because there is a lot of uncertainty about this, and I am wondering 

if your research might be able to help them make a more rational 

decision. 

Dr. BROWN. Certainly, there is a producer education effort that 

would need to go on if we were to see this language be passed, but 

1903

being able to help producers in that decision is certainly something 

that I think the work that has been done from the aggregate level 

can be extended to the producer level. Some of the buy-up coverage 

levels and exactly how that payoff works for different producers is 

important as they get to make choices about their level of participation. 

Mr. GIBSON. Well, I certainly agree, and Mr. Chairman, I recommend that we look at something like that. Certainly, there are 

no guarantees on these things and there would be levels—there 

would be margins of error and there would be probability ratings 

on this but a farmer could take more control of their situation 

when they understand the probabilities based on the research that 

you have done, which we greatly appreciate. 

I wonder if we can get a finer point response from you, and I am 

not talking about the exact dollar but the ballpark in the event 

that the supply management is not accompanying the margin insurance, what kind of price tag we’re talking about and impacting 

the baseline. And you can use parameters if you need to do something like that. 

Dr. BROWN. Certainly, it is not something that I have looked at 

at this point is a program without market stabilization being a part 

of it. I am assuming that the price tag gets into the millions of dollars fairly quickly. When you are in outcomes that are below $4, 

we are going to have costs pretty quickly, and if we don’t have market stabilization to help get that adjustment back, we could spend 

money very quickly. So I am not really ready to narrow it down 

very much other than to say that I think there is a significant difference in cost relative to how the program is currently put together. 

Mr. GIBSON. And then I guess back to my initial point about in 

our situation in New York, and I guess I would just open it up to 

you first, sir, and then anybody else in terms of how you think that 

this proposal can flourish, given the regional challenges that are 

evident throughout our country. 

Dr. BROWN. I am certainly spending a lot of time talking about 

market stabilization, and I always like to make certain that folks 

understand the supplemental buy-up provisions that are in the 

package certainly look attractive. If I am a producer with less than 

4 million pounds of production and I can talk about supplemental 

coverage that costs me 10¢, that is a relatively inexpensive investment relative to potential payout, and so there are a lot of plusses 

to that supplemental side that help regionally and so it may be 

where different producers participate. If you look at the Texas 

A&M representative farms results, there are a couple of things that 

stick out. Number one, there are a couple of Florida farms in those 

panels that are non-participants so I don’t know that those representative farms really differ in terms of the outcome whereas 

others would suggest $6.50 coverage or $5.50 coverage of supplemental is very good. 

Mr. GIBSON. You know, what happens if we don’t—your model is 

based on 70 percent of the volume getting into the program. What 

happens if that doesn’t happen? 

Dr. BROWN. Well, certainly, if we talk about less milk being a 

part of the program, supply management or market stabilization is 

1904

less biting, but likewise, we will make less payments under the 

margin program as well. So there are tradeoffs in both directions 

as you change participation. As we all know, participation is pretty 

tough to call. We can certainly look at the economics of these models, but how producers respond, it is a difficult one to call. 

Mr. GIBSON. I realize I am out of time, Mr. Chairman. Thanks 

for the opportunity. 

The CHAIRMAN. Thank you. 

The chair now recognizes the Ranking Member of the full Committee on Agriculture, Mr. Peterson. 

Mr. PETERSON. Thank you, Mr. Chairman. 

I would also like to announce that the Senate passed the farm 

bill 12–5 including the Dairy Security Act, and the Bennett amendment was pulled. Anyway, Mr. Gibson, the number is $250 million that it would 

cost us if we didn’t have the stabilization, and I am not necessarily 

a big fan of that myself. At one time it was $500 million in one 

of the scores we had. But the reality is, we wouldn’t have a bill if 

it wasn’t in there because we were given the instructions that we 

had to come in with less costs than we currently have. I give Mr. 

Kozak and the other people that have been involved in this a lot 

of credit for having the patience and the thick skin and perseverance to keep working through this. You know, when Jerry came to 

me, what, 2 years ago, 21⁄2 years ago——

Mr. KOZAK. Almost 3. 

Mr. PETERSON. Three, yes, when I was still Chairman of the 

Committee, what I said to him, that this isn’t working, we have to 

have a different dairy policy, and he laid out to me what they were 

thinking about, and I said that sounds like something we can work 

with. So I created a little Subcommittee here that we worked with 

them from day 1, and Jerry came in and briefed us and we had 

a back and forth and our staffs got involved through the whole 

process. Is it perfect? No, nothing is going to be perfect in this 

place. But we can’t live with what we have. And all of this talk 

about exports under the old system, people forget, we had a price 

support system. People were making powder that there was no 

market for and so they were having to assess their members so 

they could export it, or the DEIP program was exporting it. One 

of the things we are going to do with this new program is, we are 

going to make these folks make for the marketplace. If there is no 

market for powder, they are going to make yogurt or they are going 

to make whey or they are going to make for the marketplace. This 

is what mystifies me about IDFA when we have made this so much 

more market oriented, so much more export oriented. You know, 80 

percent of what they have been asking for for the last 10 years is 

in this bill and then they create a war on it. It just mystifies me. 

You know, the other thing that people need to remember about 

all of this is that when you get into this situation where you have 

a price collapse, what a lot of farmers do because they have a cashflow problem is they increase production. And it seems it shouldn’t 

be done but that is what happens in a lot of cases. And so we get 

into an oversupply situation and the dairy farmers actually 

produce more because they have to make their payment to the 

bank. And then we get this volatility. We go way up and we go way 

1905

down, and that is not good for anybody, for the people that are 

processing, for the farmers, for the future of this industry in this 

country. You know, so this takes the volatility out of the system. 

The farmers are going to be the ones that are going to have to pay 

for this. I would say with all due respect to the people from IDFA, 

if they really want to help us, whenever the prices go up, they raise 

their prices, but when they go down, they don’t lower them. And 

milk is kind of inelastic in demand. But if they lowered prices 

when the farmers are getting $10 a hundredweight, we would clear 

the marketplace a lot faster, but that doesn’t happen. It goes up 

but it never seems to go down. So we have to fend for ourselves. 

We have to make a system that is going to work for our producers, 

and that is what we tried to do here, and if you take this stabilization out, you are not going to have a bill, and we can’t afford not 

to have a bill, and that is the bottom line. 

Mr. CARDOZA. Will the gentleman from Minnesota yield? I would 

just like to make the point as well that in the last Congress, it was 

allowed that forward contracting be put into play, and that acts as 

well to take folks voluntarily out of the market. They can forward 

contract and I assume they don’t have to participate in what Mr. 

Davis has been talking about, and I assume that the banks will 

honor that kind of a contract as something that they will lend on, 

so I find your comments to be genuine and the others to be not in 

keeping with my understanding of the market. 

Mr. PETERSON. I yield back. 

The CHAIRMAN. The chair now recognizes the gentleman from 

Kansas, Mr. Huelskamp, for 5 minutes. 

Mr. HUELSKAMP. Thank you, Mr. Chairman. 

A couple questions for Dr. Brown. I think it was mentioned, you 

assume what participation rate in your model? 

Dr. BROWN. Seventy percent of the milk produced participates. 

Mr. HUELSKAMP. And what happens if participation is significantly lower or significantly higher? What happens in general from 

both those perspectives? 

Dr. BROWN. If participation is significantly higher, we will have 

a situation where in aggregate we will reduce the variability in 

margins more as more milk is participating in, either getting supplemental payments or getting base program payments and being 

a part of market stabilization. As participation goes down, the effects will be moderated—less payments under the program in aggregate, less effects on the marketplace as participation is lower. 

Mr. HUELSKAMP. So if participation is lower, you would predict 

significantly higher volatility will remain in the marketplace then? 

Dr. BROWN. Yes, more volatility, and you can pick the extreme 

of no participation means we just have a continuation of current 

programs and the volatility that is inherent in the baseline would 

be the resulting outcome of no participation. 

Mr. HUELSKAMP. What particular producers or regions do you anticipate will be more likely or less likely to participate? 

Dr. BROWN. I think it is hard to say, so there are some regional 

issues to this. How correlated is an individual’s particular margin 

relative to what we are protecting can matter in terms of participation. Grazing dairies, for example, might be one where their margin moves a lot differently than the aggregate, so that correlation 

1906

of an individual producer relative to the national average is important. I do think that you have some issues where regions of the 

country that are milk deficit may be less interested in participating. But those are really the issues. I think it is a producer-byproducer case more than it frankly is a regional one and how that 

individual producer’s margin moves relative to what is being protected. 

Mr. HUELSKAMP. Have you attempted to predict that in your 

model, participation by region? 

Dr. BROWN. I have not at this point, I have only been looking at 

national results. 

Mr. HUELSKAMP. I would hope you could provide that to the 

Committee because I think that would be pretty interesting to me 

in my region versus others as well. 

Dr. BROWN. I will say, if you look at the work by the Ag and 

Food Policy Center at Texas A&M, they do have representative 

farms scattered across the country. You can see the preference of 

those particular farms in terms of their interest in the program. I 

go back and say the Florida farms choose to be non-participants. 

Some of the other farms around the country choose different levels 

of supplemental coverage. 

Mr. HUELSKAMP. Would there be any variability between those 

producers that actively engage using their own risk management 

tools that they would choose not to participate in the program if 

they actually manage their own risk? 

Dr. BROWN. Certainly that is an option. That is the one thing 

that you have the choice of how you want to participate in the program since it’s voluntary. You know, even those that are really 

good risk management operations may still choose to participate in 

the program. It gives them an added risk management strategy to 

use, more risk management tools in the toolbox. 

Mr. HUELSKAMP. And how much variability is there in the industry of those who actually use risk management tools and those that 

are depending simply on government programs? 

Dr. BROWN. Well, we have certainly seen increases in the use of 

these tools over time but still small in the dairy industry relative 

to a lot of other segments of agriculture. I think it is an industry 

that we have had a lot of government support over the long term 

and it has taken the industry a while to embrace some of those risk 

management tools that are out there now. 

Mr. HUELSKAMP. Those in my sector are heavily dependent on 

the fed cattle market and there are swings up and down, and we 

would love to see the comparison of the price volatility. There is obviously no program to deal with that and you try to manage your 

risk in the futures market and with forward contracts on both your 

feed and your product as well, and I am just curious about the distinction, how much difference there is in that industry. 

Dr. BROWN. I would be glad to try to provide that. Certainly, the 

cattle industry is seeing ups and downs. You are correct. I think 

in percentage terms, you look back at 2009 and it is hard to find 

an industry that lost as much equity as we saw in the dairy industry. 

[The information referred to is located on p. 1921.] 

1907

Mr. HUELSKAMP. You can roll back to 1994 and look at 1 month 

in the cattle industry, I believe it was, they saw a 10, 15 percent 

equity loss in a very short period of time in the cattle industry and 

a tremendous crash in the marketplace. I am sure you are aware 

of that, Dr. Brown. 

Dr. BROWN. Cattle feeding is a pretty risk business as well. 

Mr. HUELSKAMP. They say you haven’t been a real cattle feeder 

unless you have been bankrupt twice in my area. So I appreciate 

it. 

I yield back my time, Mr. Rooney. 

The CHAIRMAN. Thank you. 

The chair now recognizes the gentleman from Georgia, Mr. Scott, 

for 5 minutes. 

Mr. SCOTT. Thank you very much, Chairman Rooney, and first 

of all, I want to commend you for having a hearing and for the distinct lack of protesters in cow costumes and uniforms. I wasn’t unfortunately able to do without when I was in your chair, so I commend you for that. 

This is a very interesting hearing, a very important one, and I 

have listened to this discussion, and I want to say a couple of 

things up front from following this issue over a period of time. First 

of all, I certainly recognize that the current system is not functioning well, and I also recognize the importance of protecting our 

nation’s dairy farmers from high price volatility as our Ranking 

Member is so ably doing. But I am also concerned that as we move 

down this road what the impact will be on the processors, those 

people who make the ice cream, who make the end products that 

wind up in the grocery stores. I am particularly concerned that we 

make sure that the processors who themselves, I think we all realize, are operating on very thin margins both domestically and 

internationally, and we need to really closely examine and make 

sure that any disruption in supply or any increase in price, whether or not it will greatly impact their profitability, and they are already operating on these thin margins. Because whatever that is, 

that cost is going to be passed right on to that consumer. It has 

to do that at the end, and then we all hear from our voters, we 

hear from our consumers about the price. 

So I am simply saying that as we move forward with this, and 

I understand from the Ranking Member that the Senate has already moved and incorporated in their markup, but we need to 

make sure that any proposal dealing with this is fair and is responsive to the dairy farmers as well as the processors. I do have a little bit of concern with that, the Dairy Security Act moving in that 

direction, whether or not it fails that test. But I do want us to kind 

of move forward with some understanding of both sides of this, and 

the processors certainly have a point that we need to examine. 

Now, let me start with you, Dr. Brown. You mention in your testimony that your analysis showed only a minor increase in prices 

for milk. It is important to remind everyone, though, that small 

does not mean insignificant, and your report doesn’t mention at all 

what effect this price increase would have on the processors’ margins or consumer demand. So why did you fail to analyze these 

issues as well, how it would affect the margins, how it would affect 

the consumer, and were you simply responding to a request or is 

1908

it your opinion that there will simply be no effect on processors or 

on the customers in the grocery stores? 

Dr. BROWN. First of all, the work that has been done is looking 

at all segments of the dairy industry from producer to consumers, 

so I would look at one of the tables, Table A–2 of my report, and 

suggest that, yes, milk prices for producers are slightly higher, the 

average of about 4⁄10 of a percent higher. I look further down the 

table and I see that wholesale cheese prices, wholesale butter 

prices, wholesale nonfat dry prices are also roughly the same percentage higher would suggest margins aren’t changing very much 

for processors on average as a result. 

Mr. SCOTT. Now, Mr. Davis, you weigh in on this. What do you 

say about what he just said is the issue? 

Mr. DAVIS. About higher prices or——

Mr. SCOTT. Yes. 

Mr. DAVIS. The higher prices as we have seen with fluid milk, 

I am not in the fluid business but certainly the numbers are pretty 

transparent. 

Mr. SCOTT. What I am trying to get at, do you see the same thing 

that Dr. Brown sees? Do you agree with him? 

Mr. DAVIS. In what respect? He said a number of things there. 

Mr. SCOTT. Well, in terms of what he said about there is a very 

slight margin. I think that is what you said. And in essence that 

the impact is not as great as some of your members say they are. 

I represent a lot of processors, so I want to make that clear as well, 

and I want to make sure that their points are made in this as well 

as dairy farmers. I want to make sure that you are okay with what 

he is saying and whether we have a problem here or not. That is 

what I am asking you. 

Mr. DAVIS. I think higher prices will reduce dairy demand domestically and internationally, and it has been proven in the fluid 

market. It is very elastic. Demand is very elastic to price. 

Mr. SCOTT. Can you clarify for me what happens to consumer demand when you all have to start charging more because of higher 

input prices? 

Mr. DAVIS. Consumers look for alternatives, certainly, and especially in the fluid market, there is a lot of liquid alternatives, one 

being water is probably the biggest competitor to milk around, but 

certainly other fluid products that compete with milk. They will 

make a choice to consume those, and that has been proven that 

many times during high prices fluid consumption goes down. Fluid 

per capita consumption has been dropping for 25 years. 

Mr. SCOTT. Now, finally, I just want to ask you this and I will 

be through. Would not an uptick in the price of U.S. dairy products 

coupled with an appreciation of the dollar versus other currency 

also drive down exports as ell? 

Mr. DAVIS. You said a lot there. If the dollar gets stronger, will 

it drive down exports? 

Mr. SCOTT. Right. If there is an uptick in the price of U.S. dairy 

products coupled with an appreciation of the dollar, dollar appreciating, versus other currencies, would that not also drive down exports as well? 

Mr. DAVIS. I think the price increase will drive down exports. 

The dollar strength—most dairy products are traded internationVerDate 0ct 09 2002 12:54 Dec 11, 2012 Jkt 041481 PO 00000 Frm 00320 Fmt 6601 Sfmt 6601 I:\DOCS\112-30\74372.TXT BRIAN
1909

ally and priced off of the dollar. That change doesn’t affect exports. 

In fact, Tom Suber from USDEC did a very good study on what the 

dollar’s impact, strengthening or weakening of the dollar does to 

that demand, and it is generally found that most products are 

priced in dollars so that doesn’t affect demand internationally. 

Mr. SCOTT. Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you. The chair now recognizes the former 

Chairman of the Committee on Agriculture from Virginia, Mr. 

Goodlatte. 

Mr. GOODLATTE. Thank you, Mr. Chairman. 

Dr. Brown, Mr. Wright’s testimony did a good job of illustrating 

a legitimate concern about supply management. To paraphrase, he 

said that because of the large seasonal swings in milk production 

in the Southeast, supply management could be exaggerated in that 

area. Dr. Brown, when you were doing your analysis of this proposal, was there any examination about how Southeast production 

would be affected? 

Dr. BROWN. Certainly in choosing participation levels, the representative farms saw farms from different parts of the country. 

The two from Florida that are in their panel process certainly were 

a couple that chose to be non-participants. That certainly factored 

into the aggregate results in terms of what percentage of total milk 

supplies in this country would participate. 

Mr. GOODLATTE. Very good. 

Mr. Kozak, how do you respond to the significant numbers of my 

dairy farmers that I have heard from on this who have concerns 

that the supply management proposal could be exaggerated in their 

part of the country? 

Mr. KOZAK. Well, actually, I am a little surprised at that time 

because Maryland, Virginia, Land O’Lakes and DFA, which represent a significant portion of the milk in your district, are absolutely complete supporters of the program. 

Mr. GOODLATTE. Let me interrupt you there. I met with a very 

large group of dairy farmers from my district just last week who 

were concerned about the supply management provision in the bill. 

Mr. KOZAK. Okay. Well, obviously, people have differences of 

opinions in different sections but as Mr. Peterson indicated, this 

has been a carefully crafted consensus package. It is not perfect, 

and we are not to have 100 percent, the same way I don’t think 

there is 100 percent of the processors against the proposal either. 

We are going to always have that but I think that when you look 

at the fact that National Milk Producers Federation, the American 

Farm Bureau Federation, the National Council of Farmer Cooperatives and almost all of the major dairy associations support this 

program. That says something as to how far we have come. 

Mr. GOODLATTE. I only represent the ones in the Shenandoah 

Valley of Virginia. 

Mr. KOZAK. You are lucky. I represent them all. 

Mr. GOODLATTE. Mr. Wright, I share your sentiment that supply 

management in a milk deficit area does not make sense. One of the 

amendments that has been offered to the Senate dairy package 

proposes a standalone insurance program funded by modest producer premiums. Is this a proposal that would have support among 

producers? 

1910

Mr. WRIGHT. Congressman, in concept, it might with ours. I 

haven’t actually seen that so I haven’t been able to analyze it and 

see exactly where the break lines are, is it comparably priced insurance and so forth. I actually spent quite a bit of time both within National Milk and outside of National Milk trying to organize 

on the producer side kind of a charge to push for just that, and I 

couldn’t get takers. I also personally reached out to Ms. Tipton to 

get her engaged earlier, and they chose to take a sit and wait. So 

it is not from a lack of trying. Within the producer community, I 

just was unsuccessful. So would our people prefer that? Yes, because we are not in love with supply management. But it is a hard 

sell within the industry. I am a little bit in disbelief that there 

really is a fair amount of supporters in the producer industry as 

a nation for supply management, whether it is because 2009 was 

so painful. I don’t know all the reasons. But I am a little surprised 

there is that much support but it is genuine. It really is. 

Mr. GOODLATTE. Mr. Davis, if this supply management program 

is implemented, your company would be required to withhold 

money from dairy producers when the supply restrictions are in effect but only from those producers who elect to enroll in the margin 

insurance program. Does your company have the necessary information today to determine how much money to withhold from 

which producers? 

Mr. DAVIS. I don’t today. I would expect to receive it and get educated on it but I don’t know the specifics of it today but I don’t see 

that as a reason to oppose it. I just think there is a lot of work 

there. 

Mr. GOODLATTE. Well, how do you get from no to yes? 

Mr. DAVIS. Well, as I assume, and I hope it doesn’t, but if it does 

take shape and become law, the information will be readily available and we will learn what the specifics are in terms of how we 

audit, manage and report that stuff. 

Mr. GOODLATTE. Have you heard from any of your international 

customers about this supply management program and what does 

that mean for your business and for the fact that our dairy exports 

are growing pretty substantially right now and that seems to be a 

good way to handle oversupply. Are we going to face some cutbacks, some difficulty in gaining further market share internationally? 

Mr. DAVIS. Yes, it is my biggest concern. I have already had comments from present customers, potential customers, and in our industry, we actually have some customers that are competitors so 

we sell some European companies products that they don’t make 

and then we also compete with them on some of the products they 

do make. They are jumping for joy that we are considering limiting 

supply in the United States because it reduces their competition. 

Mr. GOODLATTE. Mr. Kozak, do you have anything to say to that? 

Mr. KOZAK. First of all, the fact that we are using the words supply management is a total misnomer. If anybody has really studied 

this program and how it has been structured, this is a market stabilization program, and I know some will say it is still supply management. It is not. It clearly isn’t your classical market supply 

management program. All it does is send timely signals. A farmer 

would have almost 90 days to take behavioral actions at their farm 

1911

if this was going to trigger in, and as we have seen from some of 

the other testimony from Dr. Brown, if it triggers in, it triggers out 

quite easily. And I want to make the point that Mr. Scott left, that 

we are processors too. We have 200 processing facilities all around 

the country. Dairy cooperatives produce almost all of the nonfat 

milk in this country, 70 percent of the butter and nearly 30 percent 

of the cheese, and so we need to reflect back that these are the people who have structured this program. We are not trying to hurt 

ourselves because of that. 

Mr. GOODLATTE. Great. But in an area like mine, which is primarily fluid milk producers, what are you suggesting that small 

dairy farmer do with those 90 days to get ready to make that adjustment? 

Mr. KOZAK. Well, first of all, as you understand, it is voluntary. 

They don’t have to do anything. They don’t have to sign up for the 

free margin program nor for the subsidized supplemental. I have 

had dairy farmers in my face all across the country, some of them 

very angry, just as you have experienced in your own district, and 

they say I don’t want the government in my business. Well, they 

don’t have to be in the business. But if they expect the government 

to provide free margin insurance and some security net, they need 

to participate in the program. It is still a choice, and it is certainly 

not government intrusion to have producers also pay down the cost 

of the program through premiums. I know I should keep this concise, but I would like to make one point if I can, Mr. Chairman. 

The CHAIRMAN. Certainly. 

Mr. KOZAK. In 1996, the price support program was eliminated. 

There was nothing put in its place. It was draconian in its concept, 

and what this is trying to do is to get rid of three longstanding programs, asking farmers to give those up voluntarily, put in place a 

new system and allow them to transition through this process. Instead of just looking at the short term, we have to look at what the 

long-term goals are here, and that is to get everybody to utilize this 

margin program and also to finally manage the risk of their farm 

through supplemental. The only way we can get there in this farm 

bill is to include a market stabilization, as Mr. Wright said, because the sentiment of producers is, they want something to help 

balance those positions. I think that is a reasonable course. 

Mr. GOODLATTE. My time has expired, Mr. Chairman. I wonder 

if Mr. Davis or Mr. Wright might want to respond to that last 

statement. Maybe not. 

Mr. DAVIS. I do. I just fundamentally disagree with supply management, and getting three things right doesn’t give you an excuse 

to get a fourth thing wrong. That is just how I feel. 

Mr. GOODLATTE. That was concise. 

Thank you, Mr. Chairman. 

Mr. WRIGHT. I can make a comment. My views on supply management, they are not only philosophical, they are business, but I 

do want to say one thing that hasn’t been said yet because I have 

had to swallow hard. I mean, I have come up to National Milk 

meetings and then go home and tell our people what the proposal 

is and how it is proceeding, but it is actually some people from 

some of our western dairy interests that have actually at least 

partway convinced me that a voluntary program could actually be 

1912

good for the industry, both producers and processors, and here is 

why. Mr. Davis, even though he is not in the fluid business, talked 

about the fluid business. I would submit two things. First of all, 

part of the problem with fluid is not just price level, it is volatility. 

And I would submit to you that—and I am fairly well convinced 

that enough people out West, because that is where the strongest 

support for supply management is. I do believe that enough producers out West will sign up for a voluntary program that it will 

moderate the volatility, in both directions. I mean, our dairy markets go too high and they go too low. Markets left to themselves 

overcorrect in both directions. So I am somewhat convinced, even 

though I think it is wrong for my region of the country, I would 

love an exemption but that is not what—but I do think if enough 

milk would sign up, it would moderate the volatility that the entire 

industry would benefit, and I am somewhat persuaded by that argument. 

Mr. GOODLATTE. Thank you, Mr. Chairman. 

The CHAIRMAN. The gentleman from California, Mr. Costa, for 5 

minutes. 

Mr. COSTA. Thank you very much, Mr. Chairman. With the exception of Mr. Barcellos, Mr. Kozak, for the other three witnesses, 

let me tell you that my family has been in the dairy business for 

three generations, and if I didn’t have this job, I would get a job 

somewhere milking cows. 

So with that said, Mr. Davis, your opening comments about 

President Reagan turning over in his grave today, for your information, you may be aware of it, but in 1968, then-Governor Reagan 

signed the California Milk Pooling Act that is regulated and that 

affords minimum pricing and is a program that most of the dairymen were very pleased that then-Governor Reagan signed into law. 

Mr. Barcellos, you wear multiple hats, and I was pleased that 

you talked about the efforts that Land O’Lakes is now pursuing 

with your problems of production in your plants not being able to 

handle the capacity of the milk that your producers are offering. 

Your three elements that you have offered for your dairymen are 

to reduce their production by six percent and be eligible for a 30¢ 

premium per hundredweight on their base milk for 3 months, or 

surrender their base and offer their herds to buy out in exchange 

for 30 days of paid milk production or do nothing and be subject 

to a penalty of $10 per hundredweight on milk produced based on 

their value until June 30th. It has been a rocky road you guys have 

been going through here lately, and as you said in your testimony, 

you have lost 17—or 17 producers have chosen to opt out, I guess, 

is a better way to say it. Is this not some sort of milk stabilization 

or supply management that you are performing locally? 

Mr. BARCELLOS. Yes, it is an in-house program. Personally, I 

took option one, which was a six percent reduction, mostly because 

I knew I could achieve it relatively easily, even though we have 

had cows just milking like crazy because of weather, feed and 

things of that nature. 

Mr. COSTA. But still, I mean, we have said it a couple of times 

here by different Members, but I mean, as we say in California, 

what do dairymen do when milk prices are down? They produce 

more milk. Of course, we had a mild winter. What do dairymen do 

1913

when milk prices are up? They produce more milk. The model 

doesn’t seem to work these days in terms of the volatility when we 

are looking at the national challenges that we are dealing with. 

Dr. Brown, I listened very closely to your analysis here, and you 

have obviously taken a lot of time to examine the National Milk 

proposal. Do you think that if this proposal were implemented into 

law that it would be able to achieve the basic objective, which is 

stabilization? 

Dr. BROWN. I think that when you look at the variance reduction 

that comes from the analysis, a 75 percent reduction in that variance or even a little greater certainly suggests that we are reducing margin volatility, yes. 

Mr. COSTA. To Mr. Kozak and to Mr. Barcellos, it seems to me 

that, I mean, producers always would like to get as high a price 

as they can for their milk and milk products, which is understandable. It seems that the processors obviously—I don’t think that 

there has ever been a question of a stable supply of milk. There 

always seems to be plenty of milk. They would like milk as inexpensive as possible. I understand that. The two goals in terms of 

trying to bring processors and producers together are in conflict. 

They have always been in conflict. Am I right or wrong? 

Mr. KOZAK. Well, I think you are correct, obviously, because that 

has been historically the case, but what the Dairy Security Act is 

trying to do is to address some of the challenges that we have had 

in the past. The program wasn’t ever designed to enhance milk 

prices, and when I told that to our own producers, you could imagine the reaction it got because they think that is what was done. 

It was really to address the volatility, and as I said earlier——

Mr. COSTA. And the volatility has been the problem, and the 

highs are getting higher and the lows are getting lower and they 

are getting narrower together, and we can’t afford to lose the equity that we lost in 2009 and 2010. 

Mr. KOZAK. And I think that also impacts certainly the processors because I have worked on both sides, and in those years either whether it was at IDFA or National Milk, volatility was something that was always the issue. We know we are not going to take 

volatility up, but as Dr. Brown’s report shows, we have done a pretty good job of at least trying to moderate that. I think that is a 

benefit to consumers because it does impact the retail level when 

prices go up and down, and as we know, the farmer—Mr. Scott was 

concerned about processors, rightfully so. The farmer only gets 30¢ 

for every dollar spent at the retail level, and therefore we have to 

worry about the solvency of dairy farmers as well as its impact 

on——

Mr. COSTA. Well, dairy farmers like most farmers are price takers, not price makers. I mean, that is the problem. 

And Mr. Barcellos, I know my time has expired but Mr. Barcellos 

and his family are tremendous role models of what terrific dairy 

producers we have in California, and you are to be commended. 

Tom, on your point of modifying the bill for price differential on 

feed prices, how would you make that work on a national basis? 

Mr. BARCELLOS. Well, on a national basis, if you take the feed 

cost calculation and you use the state average of the ten highest 

1914

producing milk states, you actually cover the entire country east to 

west, and that would make it equitable to all producers. 

Mr. COSTA. And you think that would be able to level out the differences? I mean, because feed costs, as we know, on a region-byregion basis in this country vary and sometimes significantly. 

Mr. BARCELLOS. I think it would come closer to make it more equitable, and mostly because people will offer other opportunities as 

well, we have other little things we would like to pick on but, at 

my highest level of feed input for milk return, I was at 80 percent 

one time. 

Mr. COSTA. How much of your feed do you produce? 

Mr. BARCELLOS. I produce all of my feed. If it wasn’t for my 

farming operation being able to carry that at the time, I would 

have been like many others. I might have been one of the 17. It 

could have been 18. 

Mr. COSTA. Mr. Kozak, do you think you could incorporate that, 

or have you looked at that proposal? 

Mr. KOZAK. Yes, we spent almost the whole year looking at 

things, and I am completely sensitive to what Mr. Barcellos is saying, but let me just say this. If you look at the top 23 producing 

dairy states in the country, and I don’t want to be pessimistic for 

you, Congressman, but California ranks last in the 23 top producing states in the price that farmers receive for their milk marketed. So I contend that it really isn’t the differentiation of feed 

costs because there are many states that have higher feed costs. 

The problem in California is, they get a significantly lower milk 

price and that is why there is a lot of people advocating that they 

go into the Federal Order System. So we ought to be able to look 

at taking care of the price first and certainly then take a look at 

looking at the feed cost issues. 

Mr. COSTA. All right. Well, my time has expired, but thank you 

very much. 

The CHAIRMAN. The chair now recognizes the gentleman from 

Iowa, Mr. King. 

Mr. KING. Thank you, Mr. Chairman, and I thank the witnesses 

for your testimony. 

I would like to pick up where Mr. Costa left off and turn to Mr. 

Barcellos first, and ask, Mr. Barcellos, your testimony, when you 

talk about a program that is indexed to the cost of feed to the ten 

highest milk producing states, can you tell me what is happening 

with dairy cows in California? Are those numbers going up or are 

they going down? 

Mr. BARCELLOS. Those numbers vary as we go. They have been 

put recently as they have been across the country. That would basically be on the outstanding summer, winter and spring that we 

have had. 

Mr. KING. Are they going up or down in proportion to the numbers across the country? 

Mr. BARCELLOS. They are up just slightly. 

Mr. KING. Okay. That is interesting. I would ask you it this way. 

If your feed costs are higher in proportion, then don’t cows move 

away from expensive feed to cheaper feed because it is cheaper to 

move milk than it is feed? 

1915

Mr. BARCELLOS. Well, we actually exported 32 loads of milk in 

1 week from our plant back into Michigan because Michigan was 

short of milk and we had an excess. 

Mr. KING. We are shipping ethanol to Brazil. Joe smiled at that. 

I wanted to ask you, I drink milk, do you burn ethanol, Joe? 

Mr. WRIGHT. I am avid fisherman, and I buy ethanol-free fuel for 

my fishing boat because it is a better fuel, but I don’t have a choice 

in my farm truck. I have to burn ethanol. 

Mr. KING. Thank you, Mr. Wright. I just want to tell you what 

spawned that question. I noticed the difference in your testimony. 

Your written testimony referenced Federal Government-mandated 

renewable fuels but your verbal testimony said federally mandated 

ethanol production. So I just thought I would point out that I noted 

that, and I appreciate there is a difference in viewpoints, but I 

don’t mean to pick on you for that at all. It is more or less my perverse sense of humor. 

Mr. WRIGHT. I think my verbal statement said effectively. There 

is a different language. Effectively, we are talking corn ethanol 

today. Hopefully it will be something else in the future. 

Mr. KING. Well, I thank you, and I might come back to you if I 

have time, but I wanted to turn to Dr. Brown and ask you if you 

could give us your viewpoint on whether we might see the plummeting of milk prices again in that dramatic way that happened in 

2008 and 2009? Among the contributing factors, could you list 

those and tell us how you think that scenario could possibly happen again if you think it could? 

Dr. BROWN. Well, certainly, you look back to 2009 and it was a 

catastrophic event. I think it is hard to find another point in time 

in history that we saw such a rapid move in milk prices. I think 

just the contraction in the U.S. economy as well as the rest of the 

world got us in a situation where there was much more milk trying 

to find a home here in the United States than was the case prior 

to the downturn. That is really what got us into the catastrophic 

drop in milk prices at the same time we were having feed prices 

that were also moving up. So the combination of the two was pretty 

tough for dairy producers. 

Mr. KING. And part of that would be consumers here as well because of lack of confidence in which the downward spiral was all 

around him? 

Dr. BROWN. Absolutely. 

Mr. KING. And I thank you for that. The question I asked Mr. 

Barcellos about which way cows move, do they move toward cheap 

feed, can you respond to that from your studies? 

Dr. BROWN. Well, certainly when you look at history, we had a 

situation back in the 1980s where we saw cows moving to the West 

because of some of the production efficiencies that have been occurring, California included. As we move through time, we have actually started to see that general move slowly back towards what we 

might have thought of as traditional dairy areas, some growth in 

Wisconsin. That wasn’t the case in the past. So, yes, the industry 

is responding to what have been higher feed prices and adjusting. 

It is a slow process. 

Mr. KING. So if we index feed to a region or regional costs in that 

fashion, doesn’t that restrain the market from adjusting to making 

1916

those adjustments and cows moving and production moving towards the best cost? 

Dr. BROWN. It certainly provides a different outcome than if you 

don’t use that weighted index. That is true. 

Mr. KING. Thank you, Dr. Brown. 

And I turn to Mr. Davis and say you gave the clearest voice on 

laissez faire today. Would you care to comment on that, on where 

the production moves according to the cost of feed? 

Mr. DAVIS. I think it certainly should fundamentally move to 

where the cheapest feed or the most inexpensive feed is, and the 

one thing I point out about California is, they have continued 

growth in their milk supply and milk production. For myself, I 

don’t know how to get beyond the fact that the economics must be 

good enough to keep milking those cows. I realize there was a catastrophic time period. And I would also tell you that over 55 percent 

of the California milk production is against this plan. 

Mr. KING. And just quickly, when you look at the spikes in milk 

prices that have gone through that span we talked about, 2008 and 

2009, especially, the peaks and the valleys, would you propose anything to level out those peaks and valleys in markets? 

Mr. DAVIS. Just to allow the government to give us and producers the tools to manage risk. 

Mr. KING. Thank you very much. My time is up and I yield back. 

Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you, sir. I now recognize the gentleman 

from Vermont, Mr. Welch. 

Mr. WELCH. Thank you very much, Mr. Chairman. This Committee is a tremendous Committee, the Agriculture Committee, to 

serve on. It is probably the most bipartisan Committee. There has 

been excellent work by the current Chairman, Mr. Lucas, and had 

tremendous work by Mr. Peterson, and I thank you for allowing me 

to participate. 

This is an incredibly important issue for Vermont dairy. It is important everywhere. I started serving in the Vermont Senate in 

1981 when we had thousands of dairy farms and we are now down 

to under 1,000, and the Vermont farmers have always been like 

farmers everywhere, extremely independent. What they have been 

saying is they want as little government involvement as possible, 

not more. They do not want a Canadian-style quota system. But 

they have gotten together and do support, for reasons much like 

you said, Mr. Wright, they have come to the conclusion that some 

type of voluntary market stabilization program is essential to do 

the one thing they want, and that is to survive. 

Last week, I was on a six-generation farm, the Conant farm in 

Vermont. Ransom Conant, the sixth generation, young farmer, 

about to get married, optimistic about the future despite how incredibly hard it is, and his neighbors are telling us that the current 

system will not work. It won’t work. We have to do something different that is going to give them that stabilization so that they 

don’t have these wild swings, and the wild swings are due to things 

completely beyond their control. This is not like somebody who is 

a really good, prudent, careful, cautious farmer can deal with when 

it comes to the spikes in prices that are completely beyond their 

control, not to mention the weather. So the question for this ComVerDate 0ct 09 2002 12:54 Dec 11, 2012 Jkt 041481 PO 00000 Frm 00328 Fmt 6601 Sfmt 6601 I:\DOCS\112-30\74372.TXT BRIAN
1917

mittee is, are we going to wake up and understand that the status 

quo doesn’t work and then make the tough engagement to change 

to something that provides the prospect that people can survive in 

farming. We need that in all of our communities. You know, some 

of the questions that Mr. Goodlatte raised, those are the questions 

a lot of my farmers raise. Those are all very good questions. But 

we can come up with answers to them to make this work. 

Now, the work you have done at National Milk, the work that 

you have done on economics and farmers is very important because 

you have had to bridge really difficult challenges to get some consensus, and that is with a group of people that can be difficult to 

deal with, independent farmers, okay? But they want to survive. 

I have to ask you, Mr. Davis, you are here representing IDFA, 

and I did note the comment you made about Mr. Peterson, that you 

would hesitate to call him an expert on dairy policy. Now, Mr. Peterson doesn’t need me or Mr. Schrader or anyone else to defend 

him. It is the case that he is widely respected in this Committee. 

He did the impossible. He got the last farm bill through. I have 

never seen anything so hard to do. But here is what concerns me. 

We can’t succeed if IDFA and all the processors are saying no to 

every reasonable effort to do something new. You know, when these 

prices plunged in Vermont, when it was down to $12 a hundredweight, these farms got wiped out, and that was a year when processor profits were the best they ever were, and it is just the way 

it works economically. If the farmers aren’t getting paid much for 

their milk, that means the raw material that the processors need 

is cheap, and that works for you, but it doesn’t work for the farmers. It is not a sustainable model. So I am really asking you, what 

you do is important to farmers. It is really important. Farmers 

can’t succeed if they don’t have processors. But there has to be a 

mutual understanding that the model that we have is sustainable 

on both sides of that equation. So this is so much a question as it 

is just asking you to work with the reality that the status quo for 

the producers, these hardworking farmers, doesn’t work. It is not 

sustainable and we need you at the table. We need IDFA at the 

table to help us get this bill through. I yield back. 

Mr. DAVIS. Can I comment, please? 

The CHAIRMAN. Sure. 

Mr. DAVIS. Again, I haven’t read this article that I was quoted 

in, and all I would say is, I don’t believe in supply management 

and my comment on this panel was, I don’t believe anybody is 

doing the right thing for the dairy industry if they support supply 

management. That was the comment. I don’t know how it was 

taken into Hoard’s Dairyman or what. 

And I would also tell you, we realize we need producers and 

what we have proposed is margin insurance without supply management, and some of it self-funded, and if you pay a dairy farmer 

for all his milk throughout the month, he will have more money 

than if you have supply management in place and you don’t pay 

him for 1 or 2 days a month, and that is a self-funding aspect to 

that. And I would also say one other thing. My family has two 

dairy farms. We milk 6,000 cows. We know and understand the economics of a dairy farm and we have a great respect for it, and I 

know you might pass that off as we are some corporate farm. My 

1918

oldest brother, who manages that operation, wouldn’t feel good 

about that because he is very passionate about what he does and 

we are planning on expanding our herd. So we do know and understand and appreciate what a dairy farmer goes through, and those 

wild swings, we are experiencing those as well. So I appreciate all 

that. All we want is tools to manage the risk. 

Mr. WELCH. Can Mr. Kozak comment? Thank you. 

Mr. KOZAK. I don’t have to tell anybody here about the art of 

compromise. It took a great deal of effort, Mr. Welch, to convince 

farmers to give up the price support. It took an even greater effort, 

I aged in dog years trying to get them to give up the MILC payment as well as the DEIP. That is not some task that we should 

overlook. They wanted a mandatory program. We pulled it back to 

voluntary. We put triggers in it. We made sure that it wasn’t intrusive. I don’t know what more we could do in an effort to compromise and try to address the concerns other than for somebody 

just to say no. 

The CHAIRMAN. The chair now recognizes the gentleman from 

Wisconsin, Mr. Ribble, for 5 minutes. 

Mr. RIBBLE. Finally, Wisconsin dairy gets to weigh in. Best for 

last. 

Mr. Chairman, I ask unanimous consent to submit two statements for the record on behalf of constituents. One is from the Midwest Dairy Coalition. They are supportive of the reform package. 

And one is from the Wisconsin Dairy Business Association. They 

are supportive of margin insurance but opposed to supply management. With your permission? 

The CHAIRMAN. Without objection, so ordered. 

[The documents referred to are located on p. 1933, and 1935.] 

Mr. RIBBLE. Thank you, Mr. Chairman. 

I will start with Dr. Brown. Have you or are you doing an analysis of Senator Bennett’s amendment? 

Dr. BROWN. At this point, no, I have not been asked to do any 

analysis. 

Mr. RIBBLE. Mr. Kozak, go ahead. 

Mr. KOZAK. We did an analysis yesterday because it doesn’t require a great deal of economic modeling, Mr. Ribble, and it showed 

that over each year for farmers at the basic level, it would cost $37 

million a year more than the present Dairy Security Act for dairy 

farmers. That is $186 million over 5 years. And if you insured 

yourself at the $6 margin level and it is capped under the Bennett 

amendment, it would cost dairy farmers $425 million over the life 

of the farm bill. That is on the backs of hardworking farmers. 

Mr. RIBBLE. But they would pay it for themselves and sharing 

the risk? Is that correct? 

Mr. KOZAK. Yes, sir. 

Mr. RIBBLE. Okay. I am going to ask, first of all, you can see the 

box we are in here on this Committee, and I appreciate the debate 

and there is disagreement, there is disagreement at home, but I am 

going to ask a couple tough questions, Mr. Wright and Mr. Davis. 

Mr. Wright, you even said in your testimony first the Southeast as 

a region is milk deficit so supply management makes no sense. And 

I would say the same thing to Mr. Davis. Since supply management only kicks in when there is oversupply, why are people worVerDate 0ct 09 2002 12:54 Dec 11, 2012 Jkt 041481 PO 00000 Frm 00330 Fmt 6601 Sfmt 6601 I:\DOCS\112-30\74372.TXT BRIAN
1919

ried about it? If there is supply deficit, it will never kick in. Is that 

correct? 

Mr. WRIGHT. Well, we are deficit as a region, but as a country, 

if we are oversupplied, we are kind of a unique market. The Florida Order averages 80+ percent class I or fluid, Orders 5 and 7, 

which is the Carolinas, and then those of Alabama and Mississippi——

Mr. RIBBLE. So is this a double hit for you then? 

Mr. WRIGHT. So it is a double hit for us. They could be swimming 

in milk. My neighbors in California could be swimming in milk but 

we could be milk deficit and that thing would kick in. That is the 

challenge. 

Mr. RIBBLE. Mr. Davis, I have heard a lot from my processors as 

well, but isn’t the same thing true, it can’t kick in unless there is—

they can’t be short of milk in this scenario because it would only 

kick in when there is oversupply. Is that correct? 

Mr. DAVIS. Yes, and what I think it will actually do is cause 

more of an oversupply as we lose customers, customers that are 

looking at making choices between the U.S. dairy industry products, Oceana’s dairy industry products or the European Union’s 

dairy industry products, our two main competitors. 

Mr. RIBBLE. Okay. Thank you for your comments. 

Mr. Kozak, I recently did a town hall in Appleton, Wisconsin, 

with 80 dairymen. These dairymen vary dramatically in size and 

scope. The smallest one there was milking 42 cows. The largest 

was milking nearly 17,000. So it was a big range. I asked them all 

to stand up and I said how many of you are familiar with Foundation for the Future’s current program, if you are not familiar, please 

sit down. No one sat down, so all 80 members were aware. And 

then I said how many of you support the program; if you support 

the program, please remain standing. Every single person sat 

down. Why is that? 

Mr. KOZAK. Appleton, Wisconsin. I can’t explain that. All I know 

is this. 

Mr. RIBBLE. Do you see the problem I have? 

Mr. KOZAK. I have the same problem. I did five sessions up there 

this summer, and I appreciate, by the way, the thoughtfulness that 

you and your staff had looking at this because——

Mr. RIBBLE. We are trying to figure it out, just like you. 

Mr. KOZAK. But, at the end of the day, you have to look at consensus and majority. I do know this, that almost all of the dairy 

cooperatives in Wisconsin support this program. And when I do ask 

individual farmers on a basis, you are going to get sometimes different reactions. 

Mr. RIBBLE. Yes, what I have seen—I will be totally candid. 

What I have seen is that the cooperatives will come into my office 

and they will be supportive of it. They will leave, and 10 minutes 

later, ten of their farmers will come in and oppose it. Now, over the 

course of the spring, it softened a bit, so some of the modifications 

have helped a little bit, but I am fearful that we are still not there, 

that we still need to be looking at some alternatives or more involvement by and from the community as well as possibly participation on the risk management side. 

1920

Mr. Chairman, I see my time has run out, so thank you very 

much for holding the hearing today. It has been very helpful for 

me. 

The CHAIRMAN. Thank you, Mr. Ribble, and thank you for your 

patience. 

Before we adjourn, I would like to invite the Ranking Member 

to make any closing remarks he might have. 

Mr. CARDOZA. Well, first of all, I would like to thank the chair 

for doing this today. I think this hearing brought to light a number 

of important issues. Out of all my time in Congress, I have had a 

great relationship working with the chair and I think that the effort shown here today to try to get to the facts is really something 

that I very much appreciate, and thank you for the way you conducted the hearing. 

There is the old saying in the West, that water is for fighting and 

whiskey is for drinking. Frankly, in the dairy industry, what Mr. 

Kozak has tried to do, it reminds me of the water wars in the West 

because he has tried to get warring factions to come together, and 

as we see in some of those fights, it is very difficult to do that 

sometimes. You know, my area is not unanimously embracing this 

bill by any stretch of the imagination but I have to tell you that 

I am very proud of the work that Mr. Peterson has done to try and 

I think that what my colleagues have said here today is, Mr. Chairman, you have really worked hard to try and make this something 

that takes care of people’s issues. I appreciate your work, and I 

also respect you as an expert in this policy, and I mean that from 

the bottom of my heart. 

Mr. Chairman, I am going to yield back my time, but I just want 

to thank the folks that have invested so much to try and keep a 

very vital industry for this country afloat and to smooth out some 

of the trivial water, and if we are going to do our jobs, we are going 

to need the information that we asked for today at this hearing. We 

are going to need every bit of cooperation from all the folks that 

are assembled here that have listened to this testimony. Thank 

you. 

The CHAIRMAN. Thank you, Mr. Cardoza, and thank you to all 

of our witnesses, especially Dr. Brown, for complying with our requests at the Committee. I believe this discussion has been very 

helpful in shedding light on the challenges we face in moving our 

dairy program forward in this next farm bill. I appreciate every 

one’s participation and civility in today’s hearing and look forward 

to working with all of you as we move forward in the farm bill 

process. 

So with that, under the rules of the Committee, the record of today’s hearing will remain open for 10 calendar days to receive additional materials and supplementary written responses from the 

witnesses to any question that was posed by a Member. 

This hearing of the Subcommittee on Livestock, Dairy, and Poultry is now adjourned. 

[Whereupon, at 4:36 p.m., the Subcommittee was adjourned.] 

[Material submitted for inclusion in the record follows:] 

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SUPPLEMENTARY MATERIAL SUBMITTED BY SCOTT BROWN, PH.D., ASSISTANT RESEARCH PROFESSOR, INTEGRATED POLICY GROUP, DIVISION OF APPLIED SOCIAL

SCIENCES, COLLEGE OF AGRICULTURE, FOOD AND NATURAL RESOURCES, UNIVER- SITY OF MISSOURI

During the April 26, 2012 hearing entitled, Formulation of the 2012 Farm Bill 

(Dairy Programs), a request for information was made to Scott Brown, Ph.D.. The 

following is his information submission for the record. 

Insert 

Mr. HUELSKAMP. Would there be any variability between those producers that 

actively engage using their own risk management tools that they would choose 

not to participate in the program if they actually manage their own risk? 

Dr. BROWN. Certainly that is an option. That is the one thing that you have 

the choice of how you want to participate in the program since it’s voluntary. 

You know, even those that are really good risk management operations may 

still choose to participate in the program. It gives them an added risk management strategy to use, more risk management tools in the toolbox. 

Mr. HUELSKAMP. And how much variability is there in the industry of those 

who actually use risk management tools and those that are depending simply 

on government programs? 

Dr. BROWN. Well, we have certainly seen increases in the use of these tools 

over time but still small in the dairy industry relative to a lot of other segments 

of agriculture. I think it is an industry that we have had a lot of government 

support over the long term and it has taken the industry a while to embrace 

some of those risk management tools that are out there now. 

Mr. HUELSKAMP. Those in my sector are heavily dependent on the fed cattle 

market and there are swings up and down, and we would love to see the comparison of the price volatility. There is obviously no program to deal with that 

and you try to manage your risk in the futures market and with forward contracts on both your feed and your product as well, and I am just curious about 

the distinction, how much difference there is in that industry. 

Dr. BROWN. I would be glad to try to provide that. Certainly, the cattle industry is seeing ups and downs. You are correct. I think in percentage terms, you 

look back at 2009 and it is hard to find an industry that lost as much equity 

as we saw in the dairy industry. 

Variance of Agricultural Prices 

Agricultural prices have experienced extreme fluctuations over the past decade. 

There have been many factors that have played a role in this new period of price 

volatility. Extreme weather, shifts in global demand for U.S. agricultural products, 

domestic demand variability and disease issues have all played a role in the price 

volatility agriculture has faced. 

One way to measure the level of price volatility is to examine the variance of a 

price series over a given period of time. Variance is a measure of statistical dispersion indicating how far from the expected value its values typically are. The table 

below shows the variance in indexed agricultural prices over two recent periods 

(prices were indexed to their January 2001 level). Crops prices have generally 

shown the most variance over the past decade. 

Figure 1 provides a graphical look at the indexed crop and livestock prices over 

the last decade. The prices are indexed to the January 2001 level. This graph shows 

that wheat prices increased by 3.5 times the level they were in January 2001 by 

early 2008. Milk prices went from over 1.5 times their January 2001 level by late 

2007 to about 0.9 times their January 2001 level by mid-2009.

Variance of Indexed Agricultural Prices 

Jan. 2007–May 2012 Jan. 2001–May 2012

NE Direct Fed Steer 0.03 0.03

OK Feeder Steer 0.05 0.04

Nat’l Base Bar. & Gilt 0.07 0.06

12-City Broiler 0.01 0.03

NY Egg, Grade A Lg. 0.07 0.12

All Milk 0.06 0.05

Corn 0.32 0.51

Soybeans 0.17 0.38

1922

Variance of Indexed Agricultural Prices—Continued

Jan. 2007–May 2012 Jan. 2001–May 2012

Wheat 0.27 0.41

Cotton 0.10 0.11

Rice 0.15 0.50

Figure 1. Indexed Agricultural Prices

SUPPLEMENTARY MATERIAL SUBMITTED BY JON DAVIS, CHIEF EXECUTIVE OFFICER, 

DAVISCO FOODS INTERNATIONAL, INC.; ON BEHALF OF INTERNATIONAL DAIRY

FOODS ASSOCIATION

May 4, 2012

Hon. THOMAS J. ROONEY,

Chairman,

Subcommittee on Livestock, Dairy, and Poultry, 

House Committee on Agriculture, 

Washington, D.C.

Dear Chairman Rooney:

Thank you for the opportunity to provide IDFA’s position at the Subcommittee’s 

hearing on dairy policy last Thursday April 26. 

During the course of the hearing several members asked questions about the impact of the Dairy Market Stabilization Program (DMSP) on U.S. dairy exports. 

Ranking Member Dennis Cardoza asked for specific economic analysis that IDFA 

has conducted. 

At the hearing, I shared a recent conversation I had with a potential South Korean customer regarding his concerns that the U.S. cannot be a reliable exporter 

with a government supply management program in place. Just this week, at a 

United States Dairy Export Council (USDEC) conference, a major U.S. beverage 

company executive explained to the audience that sales of a new fluid beverage in 

China are exploding. That beverage consists of 50% milk but unfortunately the milk 

is supplied from a source outside the U.S. When asked about the possibility of using 

U.S. milk, he announced that they do not yet consider the U.S. to be a committed 

supplier of milk ingredients for export markets. 

It is clear that the world is watching to see which path we take, and the supply 

management debate in Congress is already influencing our existing and potential 

customers’ views. 

Last November, six key exporting members of IDFA wrote to Congress regarding 

their concern over the impact of the proposed Dairy Security Act (DSA) on a growing dairy export business. The letter noted that the very existence of a government 


112301168.eps
1923

supply control program for dairy would be a signal to our competitors and trading 

partners that the U.S. is not a serious and reliable long term supplier. Proposed 

changes to the mandatory triggers and definitions used in the DMSP have not 

changed this fact, and I have included a copy of the letter for the record. 

For the record, I am also including a paper by IDFA’s Chief Economist Dr. Bob 

Yonkers. The paper is entitled, A Look at Dairy Market Price Volatility and Options 

for Dairy Policy Reform. Dr. Yonkers analysis was written using data supplied by 

a FAPRI analysis that was prepared on behalf of the National Milk Producers Federation. One of its key conclusions is that the FAPRI data underestimates the impact of the DMSP on U.S. exports. 

Since the introduction of H.R. 3062, the DSA last September, a number of different economic analyses of the DMSP have shown different estimated impacts on 

U.S. dairy exports. But, none of them consider how U.S. dairy companies like ours 

will change how we look at export opportunities. The stabilization program will create significant market uncertainty and increase risk calculations for businesses that 

will discourage future long-term investments into new domestic facilities and new 

export markets. 

Unlike Dr. Brown, IDFA was not provided the details of the Senate dairy title 

in advance of the hearing and, as such, we were unable to conduct an independent 

analysis of the Senate proposal for the House hearing. 

Thank you for the opportunity to express our views and for this opportunity to 

respond the Ranking Member’s request. 

Sincerely,

JON DAVIS, 

President and CEO, 

Davisco Foods International, Inc. 

ATTACHMENT 1

A Look at Dairy Market Price Volatility and Options for Dairy Policy Reform 

by BOB YONKERS, PH.D., IDFA Vice President and Chief Economist 

May 25, 2011

Executive Summary 

This paper considers the growth trends in the U.S. milk supply, the commensurate growth in the U.S. share of global dairy trade and proposed options for reducing the milk price volatility that results from participating in global markets. The 

analysis reveals that the relationship between domestic dairy prices and global 

dairy prices has fundamentally changed because of increased U.S. commercial dairy 

exports. Instead of being insulated from global markets, U.S. domestic prices are 

now following global price changes. 

This greater vulnerability to wider price fluctuations in the U.S. dairy market has 

prompted some to consider new U.S. domestic dairy policies with the goal of reducing domestic milk price volatility. This paper reviews other analyses that note the 

many shortcomings of such policies used by Canada and the European Union. Recently, the National Milk Producers Federation (NMPF) has proposed a new, mandatory government program to control farm milk growth called the ‘‘Dairy Market 

Stabilization Program,’’ or DMSP. The paper points to recent analyses of the DMSP 

by the Food and Agricultural Policy Research Institute (FAPRI) and Informa Economics, which show that the DMSP, if implemented, would decrease U.S. dairy exports and increase domestic market price volatility. 

IDFA concludes that dairy policies designed to help farms and firms manage milk 

price volatility are preferable to policies that attempt to insulate the United States 

from global dairy price fluctuations. Policies that attempt to manage volatility would 

limit industry growth and reduce U.S. dairy exports at a cost of thousands of U.S. 

jobs. Policies that enable dairy producers to manage business risk are consistent 

with the approach adopted by other U.S. agricultural sectors and would help support a growing U.S. dairy industry. 

U.S. Dairy Market Trends 

The U.S. dairy market has shown strong and steady growth over the past several 

decades. Farm milk production in 2010 was 192.8 billion pounds, a record high, providing 1.8% more milk than the prior year, 67% more than 35 years ago in 1975, 


112301117.eps
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and 24% more than just 15 years ago in 1995 (source: USDA’s National Agricultural 

Statistics Service). 

This production growth, shown in Figure 1, allowed the industry to meet increased demand for milk and dairy products, not just domestically but internationally as well. In the decade prior to 2004, U.S. dairy exports averaged less than 5% 

of U.S. farm milk production and that level was only achieved largely due to export 

subsidies under the Federal Dairy Export Incentive Program. 

Figure 1: Total U.S. Farm Milk Production, 1950–2010

Source: USDA, NASS.

The U.S. dairy industry’s position in international markets since 2003 has grown 

significantly, as shown in Figure 2. During the past 5 years, the United States exported on average more than 10.2% of farm milk production—more than double the 

average amount in previous years—and exports accounted for a record 12.8% of 

farm milk production in 2010 (source: U.S. Dairy Export Council). And, unlike prior 

to 2004, nearly all these U.S. dairy product exports occurred without the help of 

government export subsidies. 

Figure 2: U.S. Dairy Trade Balance: Exports and Imports as a Percentage 

of Total Milk Solids Production

Source: U.S. Dairy Export Council.

By value, dairy exports have increased from about $1 billion in 2000 to over $3.5 

billion in 2010, an increase that has continued so far in 2011. Although job creation 

numbers are difficult to quantify, the Foreign Agriculture Service of the U.S. Department of Agriculture recently estimated that 8,400 jobs are created for every $1 

billion increase in agriculture exports. Applied to the increase in dairy exports, this 

formula estimates that more than 20,000 new jobs were created in the last decade 

by dairy export growth. 

But will this world demand for dairy products continue? A recent study by Bain 

and Co., commissioned in 2009 by the Innovation Center for U.S. Dairy and funded 

by the dairy producer check-off program, concluded that it would. In fact, demand 

in many countries will outstrip the available farm milk supply, creating a demand 


112301118.eps 112301119.eps
1925

gap that can only be filled by increasing world trade in dairy products. The study 

noted that the U.S. dairy industry is uniquely positioned to take the lead in filling 

the expected gap, which would significantly increase its share of the growing world 

dairy product trade (Read ‘‘The Impact of Globalization on the Dairy Industry: 

Threats, Opportunities and Implications’’ here:http://www.usdairy.com/

Globalization/GlobalImpactStudy/Pages/BusinessCase.aspx.) 

Global Dairy Net Trade: Milk Protein

Source: ‘‘World Trade Trends 2008’’, USDEC; FAPRI. 

U.S. Share of World Trade in Dairy Products Is Growing 

Prior to 2004, U.S. dairy market prices were often higher than world dairy market 

prices, which would explain why U.S. dairy exports usually required government export subsidies. Although the higher prices resulted from a combination of factors, 

some key reasons stand out:

• other countries, especially European Union members, relied heavily on export 

subsidies,

• domestic dairy policies encouraged large government-owned inventories of dairy 

products (especially in the European Union and the United States), and

• world trade in dairy products was relatively limited.

So, what has changed? As early as 2003, world demand for dairy products began 

to outstrip the supply of farm milk, but large government-owned inventories of butter and milk powders, due to intervention dairy policies, temporarily filled the gap. 

Those government-owned cupboards were empty by late-2006, but the strong demand continued, resulting in record-high farm milk prices around the globe in 2007 

and 2008. 

Since 2006 nearly all world trade in dairy products has consisted of commercial, 

not government-subsidized, sales. Government export subsidies were no longer needed. Another benefit of this change, which is rarely cited, is that U.S. dairy market 

prices are no longer consistently higher than world dairy prices, which has caused 

a steady decline of imported dairy products into the United States since 2007 (see 

Figure 2). 

The U.S. dairy industry has taken advantage of the opportunity to increase its 

share of the international commercial market by exporting more dairy products. 

With a mature domestic market for dairy products, the U.S. dairy industry may find 

that increasing dairy exports is the only path to significant growth in coming years. 

However, the export growth and resulting higher farm milk prices also brought 

increased price volatility stemming from changes in world dairy market prices. The 

world financial crisis and the U.S. economic recession, which began in 2008 and battered markets in 2009, hurt U.S. domestic demand for dairy products and curtailed 

global demand for U.S. exports. 

Although U.S. dairy exports dropped in 2009, the decline was only partially due 

to economic hard times. By the summer of 2009, low milk prices also triggered 

USDA to begin purchasing U.S. dairy products under the Dairy Product Price Support Program. When world prices dropped below these support prices, U.S. exports 


112301120.eps
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dropped as well. Because the government policy manipulated domestic prices to be 

above world prices for a few months in early 2009, it effectively limited price volatility at the expense of reduced dairy exports. 

World Dairy Market Price Volatility Is the Root Cause of U.S. Dairy Price 

Volatility 

U.S. dairy market price volatility in recent years is not caused by domestic dairy 

market factors or broader domestic economic conditions. Rather, U.S. dairy market 

price changes in recent years are almost entirely due to volatility in world dairy 

market prices. Increased participation in export markets has made the U.S. industry subject to international price swings, which bring higher prices at times and 

lower prices at times. 

This conclusion is supported by data from USDA’s Agricultural Marketing Service 

(AMS), which reports world dairy market prices on a biweekly basis for the major 

dairy products in world trade for two regions, Europe and Oceania. USDA’s National Agricultural Statistics Service (NASS) publishes data each week on the U.S. 

domestic market prices for four of those major dairy products. 

Figure 3 shows these data for milk powder. (Note: Skim milk powder, or SMP, 

is the standard for international markets, but in the U.S. domestic market the 

standard is nonfat dry milk, or NFDM.) Prior to 2004, the U.S. domestic market 

price was often higher than the world market price; in fact, when world market 

prices fell to low levels, the U.S. domestic market price barely moved. Why? Because 

the U.S. government stepped in to prevent domestic market prices from moving 

lower by purchasing NFDM under the Dairy Product Price Support Program. Between 2000 and early 2004, USDA spent on average $500 million per year buying 

NFDM. 

Figure 3: World and U.S. Market Prices for Powdered Milk

Source: USDA, AMS; mid-point of reported price range, and USDA, NASS.

Beginning in 2004, however, the U.S. domestic market price for NFDM has nearly 

always been at or below the world market price for SMP. Since then, every time 

the world market price increases, the domestic market price follows, and when the 

world market price declines, the domestic price falls as well. The primary reason 

that the domestic price has been lower since 2004 is that dairy importing nations 

are geographically closer to competitors in Europe and Oceania (Russia and the 

Middle East for the former, the growing economies in Southeast Asia for the latter), 

so transportation costs are greater for U.S.-sourced product. With some variation in 

the trends, this same pattern exists for other dairy products traded internationally 

as well. 

Implications for U.S. Dairy Policy 

Although the dairy industry’s ability to use its vast resource base to increase milk 

production emerged in the mid-1970s, the record growth in the past 5 years 

stemmed from increased global demand and new overseas market opportunities for 

U.S. dairy products. Without this growth, the significant climb in U.S. milk production would not have occurred. 


112301121.eps
1927

The United States now has transitioned from a dairy importer to a major dairy 

exporter. In addition to one key benefit—increased sales—what are the implications 

of this evolution? 

Price volatility in the U.S. domestic market is inextricably tied to price volatility 

in the world dairy market. Therefore, it is important to consider how dairy polices 

that are designed to reduce or eliminate domestic price volatility would affect the 

industry’s ability to continue to be a major exporter. 

Here are two examples.

1. The European Union has, for the past few decades, controlled domestic markets with farm milk quotas while remaining a major dairy exporter. The EU’s 

policies allowed commercial exporters to sell their products at much lower world 

market prices by implementing extensive export subsidies, known as variable 

levies, to make up the price difference. The EU is now phasing out these programs, and the United States could not adopt similar ones without violating 

international trade obligations under the World Trade Organization (WTO).

2. The strict farm milk quota system enforced in Canada offers another method 

for insulating the domestic dairy industry from world price volatility. While the 

system has reduced, but not eliminated, dairy price volatility in the Canadian 

domestic dairy market, it has harmed industry growth. A recent study conducted for IDFA by Informa Economics found that farm milk quotas in Canada 

led to much higher consumer dairy product prices, lower per capita consumption 

of dairy products, fewer exports of dairy products and more imports of dairy 

products. (Read ‘‘An International Comparison of Milk Supply Control Programs 

and Their Impacts’’ here: http://www.keepdairystrong.com/files/

InformalInternationallComparisonlSupplylControllImpactsl0910.pdf.)

The National Milk Producers Federation (NMPF) has proposed another option, 

called the Dairy Market Stabilization Program (DMSP), with the goal of moderating 

domestic price volatility. In its explanation of the DMSP, NMPF asserts that one 

of its key guiding principles is that the program will ‘‘not encourage imports or negatively affect exports.’’ Later NMPF directly claims that the DMSP will actually ‘‘encourage exports’’ and ‘‘discourage imports.’’ Recent analyses, however, show that the 

DMSP is not consistent with NMPF’s guiding principles and claims. Let’s look at 

the data. 

A recent study by the Food and Agricultural Policy Research Institute (FAPRI) 

analyzed the DMSP proposal in a report first published in early March. (Read ‘‘The 

Economic Impact of the Dairy Market Stabilization Program on 2009 Dairy Markets’’ here: http://www.fapri.missouri.edu/outreach/publications/2011/

FAPRIlMUlReportl04l11.pdf.) This study predicted the month-to-month impact on the U.S. dairy industry if the DMSP had been enacted prior to 2009. However, the only study results included in the report focused on the impact of the program on farm milk prices. Following a request by IDFA, the authors later added 

a link to an appendix table with additional data that presented quite a different picture. (View ‘‘Appendix Table 1. Effects of DMSP on 2009 Dairy Product Markets’’ 

here: http://www.fapri.missouri.edu/outreach/publications/2011/

FAPRIlMUlReportl04l11lAppendix.pdf.) 

The original FAPRI study was widely touted by NMPF as confirming the positive 

benefits of the Dairy Market Stabilization Program for the U.S. dairy industry. A 

closer look at some of the other results in the appendix table, however, reveals negative aspects of the DMSP. The appendix table also is attached to this report as Appendix 1. 

Stabilization Program Would Reduce U.S. Exports 

Contrary to NMPF’s claim that the program would encourage exports, the additional FAPRI appendix data directly predicts that U.S. dairy exports would have 

dropped significantly if the DMSP had triggered limits to farm milk production during the dates reviewed. Study results from the appendix table show that during 3 

months—March, April and May of 2009—U.S. exports of nonfat dry milk would 

have fallen by 38%, butter exports by 16.4% and American cheese exports by 8%. 

In addition, the FAPRI data likely underestimates the impact of the DMSP on 

U.S. exports. In recent years, the domestic dairy market prices for these products 

have rarely been higher than world market prices. The last time the actual U.S. 

market price for NFDM was more than 3¢ above the world SMP price per pound 

was in the fall of 2003 (see Figure 1). The FAPRI study of the DMSP program indicates that domestic prices could be as much as 50¢ above the actual world price (and 

for 3 full months could remain at least 9¢ above the price for SMP sourced out of 

Oceania) and only result in a decline in U.S. exports of 38%. FAPRI study results 

for butter and cheese similarly indicate that U.S. domestic prices could rise far highVerDate 0ct 09 2002 12:54 Dec 11, 2012 Jkt 041481 PO 00000 Frm 00339 Fmt 6621 Sfmt 6621 I:\DOCS\112-30\74372.TXT BRIAN
1928

er above world market prices than seen in recent years, yet the report estimates 

only a modest impact on U.S. dairy product exports. 

It is likely that the program would have caused even greater declines in U.S. milk 

powder exports if it had been in place in 2009. A recent analysis by Informa Economics for IDFA analyzed the difference between world and domestic U.S. dairy 

market prices and its relationship to the level of U.S. dairy product exports. That 

analysis concluded that, given the impact on domestic dairy market prices reported 

in the FAPRI appendix table, U.S. dairy product exports would have fallen by more 

than a 2 billion pound milk equivalent (a drop of over 14%) if the DMSP had been 

in place as dairy policy in 2009. (See Figure 4, taken from ‘‘Response to Criticisms 

of Informa’s DMSP Study,’’ which is available here: http://

www.keepdairystrong.com/files/IDFA%20Response%20to%20Criticism%20of%20

Informa%20DMSP%20Study.pdf.) 

Figure 4: U.S. Milk Equivalent Exports vs. Price Spread to Oceana

Source: Informa Economics.

Although the FAPRI data alone would translate to U.S. job losses in the hundreds, a 14% decline in exports in 2009 would have resulted in losses of more than 

$300 million in dairy exports and a loss of nearly 2,000 jobs. More important, the 

inability of U.S. dairy exporters to be reliable and consistent would have encouraged 

importing nations to look elsewhere, likely causing a long-term systematic reduction 

in dairy exports. It’s clear that the DMSP would discourage investment in processing capacity in the United States with similar long-term results in export capacity, particularly if program regularly triggered off and on, as expected. 

Stabilization Program Would Increase Domestic Price Volatility 

Another key finding noted in the FAPRI study appendix table shows that U.S. 

dairy market prices would be much more volatile when the DMSP would trigger actions to limit farm milk production. This program, intended to stabilize prices, actually would work to destabilize them. Figures 5 to 7 show the appendix table data 

measuring the impact of the DMSP on wholesale dairy product prices in the United 

States. 


112301122.eps
1929

Figure 5: FAPRI Study Impact of DMSP On U.S. Wholesale Nonfat Dry

Figure 6: FAPRI Study Impact of DMSP On U.S. Wholesale Butter Price

Figure 7: FAPRI Study Impact of DMSP On U.S. Wholesale Cheese Price

A Better Dairy Policy Option: Risk Management Tools for Producers 

Dairy programs that attempt to limit price volatility by controlling milk production—regardless of whether they are called quotas or stabilization or growth management—clearly would have a negative impact on U.S. dairy exports. And, because 

they manipulate domestic prices above international prices, these programs also 

could add to domestic milk price volatility. If such programs were adopted in the 

United States, they would remove the industry’s primary opportunity for growth at 

a loss of potentially thousands of U.S. jobs and likely hasten the consolidation of 

production into fewer and fewer facilities. 

There are, however, more-effective and less-intrusive policy options available and 

in use by other industries today. Risk management tools, widely accepted and successfully utilized by other commodities, for example, are underutilized by the U.S. 

dairy industry. 


112301123.eps 112301124.eps 112301125.eps
1930

1FAO, IFAD, IMF, OECD, UNCTAD, WFP, the World Bank, the WTO, IFPRI, and the UN 

HLTF. Available here: http://ictsd.org/downloads/2011/05/finalg20report.pdf. 

In fact, a recent report, ‘‘Price Volatility in Food and Agriculture Markets: Policy 

Responses,’’ authored by a collaboration of international agencies,1 concurs that government efforts to control volatility have significant negative impacts. The report 

notes that agricultural policies designed to insulate domestic prices from world markets actually ‘‘increase world price volatility’’ and that ‘‘policies that distort production and trade in agricultural commodities potentially impede the achievement of 

long run food security.’’ The report recommends policies offering a broader set of fiscal risk-management services, including facilitating commodity hedging, providing 

risk-management education and offering disaster or catastrophic risk insurance. 

IDFA concludes that dairy policies and programs designed to enable dairy producers to better manage milk price volatility are preferable to policies that attempt 

to insulate the United States from global price variation. Risk-management policies 

are consistent with the approach adopted by other U.S. agricultural sectors to expand U.S. trade and support a growing production base.

1931

attachment 

Appendix Table 1. Effects of DMSP on 2009 Dairy Product Markets 

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Year 

(Dollars per Pound)

Cheese Wholesale Price 

Baseline 1.08 1.22 1.25 1.20 1.14 1.14 1.15 1.35 1.33 1.47 1.58 1.65 1.30Scenario 1.08 1.22 1.71 1.75 1.84 1.64 1.50 1.48 1.41 1.76 2.04 1.75 1.60Change 0.00 0.00 0.46 0.54 0.70 0.50 0.35 0.13 0.08 0.29 0.46 0.10 0.30

Butter Wholesale Price 

Baseline 1.11 1.11 1.18 1.20 1.25 1.22 1.23 1.20 1.22 1.28 1.50 1.40 1.24Scenario 1.11 1.11 1.56 1.60 1.64 1.20 1.12 1.04 1.24 1.45 1.79 1.28 1.34Change 0.00 0.00 0.39 0.39 0.39 ¥0.03 ¥0.12 ¥0.16 0.02 0.16 0.29 ¥0.12 0.10

Nonfat Dry Milk Wholesale Price 

Baseline 0.85 0.83 0.84 0.86 0.87 0.90 0.91 0.95 1.02 1.23 1.30 1.37 0.99Scenario 0.85 0.83 1.31 1.10 1.02 0.80 0.80 0.80 1.02 1.31 1.38 1.01 1.02Change 0.00 0.00 0.47 0.24 0.15 ¥0.10 ¥0.11 ¥0.15 0.00 0.08 0.08 ¥0.35 0.03

(Dollars per Cwt)

Class III Price 

Baseline 10.78 9.31 10.44 10.78 9.84 9.97 9.97 11.20 12.11 12.82 14.08 14.98 11.36Scenario 10.78 9.31 12.75 15.79 15.99 15.84 14.04 13.45 13.09 14.61 17.77 17.72 14.26Change 0.00 0.00 2.31 5.01 6.15 5.87 4.07 2.25 0.98 1.79 3.69 2.74 2.91

Class IV Price 

Baseline 9.59 9.45 9.64 9.82 10.14 10.22 10.15 10.38 11.15 11.86 13.25 15.01 10.89Scenario 9.59 9.45 12.48 14.52 13.45 11.19 9.31 9.04 10.22 12.62 14.92 14.23 11.75Change 0.00 0.00 2.84 4.70 3.31 0.97 ¥0.84 ¥1.34 ¥0.93 0.76 1.67 ¥0.78 0.86 

U.S. All Milk Price 

Baseline 13.30 11.60 11.70 11.90 11.60 11.30 11.30 12.10 13.00 14.30 15.40 16.50 12.83Scenario 13.30 11.60 13.19 15.83 16.40 15.10 13.47 13.04 13.31 15.12 17.52 18.19 14.67Change 0.00 0.00 1.49 3.92 4.79 3.79 2.17 0.94 0.31 0.82 2.12 1.69 1.84

(Millon Pounds)

Butter Exports 

Baseline 2.63 2.69 2.12 2.44 3.19 2.52 1.18 1.49 4.78 7.97 10.69 7.75 49.45Scenario 2.63 2.69 1.83 1.99 2.66 2.26 1.12 1.58 4.81 7.87 10.43 7.70 47.58Change 0.00 0.00 ¥0.29 ¥0.45 ¥0.53 ¥0.26 ¥0.05 0.09 0.03 ¥0.10 ¥0.27 ¥0.06 ¥1.87

American Cheese Exports 

Baseline 5.20 4.91 5.07 4.68 5.08 6.17 5.51 5.88 5.34 5.47 5.88 7.78 66.98Scenario 5.20 4.91 4.80 4.30 4.58 5.75 5.20 5.73 5.26 5.29 5.57 7.65 64.23Change 0.00 0.00 ¥0.28 ¥0.39 ¥0.51 ¥0.42 ¥0.30 ¥0.15 ¥0.08 ¥0.19 ¥0.31 ¥0.13 ¥2.75

Nonfat Dry Milk Exports 

Baseline 48.36 27.84 34.68 39.64 44.66 44.95 62.11 62.61 43.60 64.54 43.70 31.89 548.57Scenario 48.36 27.84 21.70 23.46 28.61 35.78 58.19 63.73 44.34 62.81 40.14 38.81 493.77Change 0.00 0.00 ¥12.97 ¥16.18 ¥16.05 ¥9.17 ¥3.92 1.12 0.74 ¥1.73 ¥3.56 6.92 ¥54.81

Source: FAPRI.

1932

About the Author: 

Robert Dean Yonkers, Ph.D., Vice President and Chief Economist, oversees the research and analysis of the economic impact of marketing conditions, government 

regulations and alternative policies on the U.S. and international dairy industries. 

Before joining IDFA, Yonkers was a tenured faculty member at The Pennsylvania 

State University, where he conducted research and developed educational programs 

on the profitability and economic sustainability of the state’s milk producing, marketing and processing sectors. Yonkers serves on the Agricultural Technical Advisory Committee for Animals and Animal Products, an advisory body that provides 

information and advice to U.S. cabinet officials. An active member of the International Dairy Federation’s Standing Committee on Dairy Policies and Economics, 

he was elected chairman in 2009. Yonkers also serves on the Agricultural Advisory 

Committee to the U.S. Commodity Futures Trading Commission and the Board of 

Directors for the Council on Food, Agricultural and Resource Economics. 

About IDFA 

The International Dairy Foods Association (IDFA), Washington, D.C., represents 

the nation’s dairy manufacturing and marketing industries and their suppliers, with 

a membership of 550 companies representing a $110 billion a year industry. IDFA 

is composed of three constituent organizations: the Milk Industry Foundation (MIF), 

the National Cheese Institute (NCI) and the International Ice Cream Association 

(IICA). IDFA’s 220 dairy processing members run more than 600 plant operations, 

and range from large multi-national organizations to single-plant companies. Together they represent more than 85 percent of the milk, cultured products, cheese 

and frozen desserts produced and marketed in the United States. 

ATTACHMENT 2

November 3, 2011

Hon. PATRICIA MURRAY, Hon. JEB HENSARLING,

Chairwoman, Chairman,

Joint Select Committee on Deficit Reduction, Joint Select Committee on Deficit Reduction, 

U.S. Senate, U.S. House of Representatives, 

Washington, D.C.; Washington, D.C. 

Dear Chairwoman Murray and Chairman Hensarling,

We are writing to express our concern and opposition to a pending milk supply 

control policy called the Dairy Market Stabilization Program that is being endorsed 

by the leadership of the House and Senate Agriculture Committees for inclusion into 

the deficit reduction bill to be considered by Congress before the end of the year. 

Our companies manufacture dairy products, primarily cheese and associated whey 

products, and we are proud to be leading a growing and successful effort to greatly 

expand dairy exports. Over the past decade, U.S. exports have grown by nearly $3 

billion and U.S. dairy manufacturers now export the equivalent of nearly 14% of the 

farm milk produced in our country in the form of dairy products like those we manufacture. 

The Dairy Market Stabilization Program, found in H.R. 3062 as introduced by 

Representative Collin Peterson, puts this growth at risk. The program would give 

the U.S. Department of Agriculture new authority to regulate farm milk checks in 

order to reduce the U.S. milk supply under certain conditions. The sole purpose of 

this program is to raise domestic milk prices, when triggered by weak farm profits, 

regardless of the global supply and demand situation for dairy products. As a result, 

consumers will pay higher prices for dairy products. 

Different economic analyses of the Dairy Market Stabilization Program have 

shown different estimated impacts on U.S. dairy exports. But, none of them consider 

how U.S. dairy companies like ours will change how we look at export opportunities. 

The very existence of a government supply control program for dairy will be a signal 

to our competitors and trading partners that the U.S. is not a serious and reliable 

long term supplier. The stabilization program will create significant market uncertainty and increase risk calculations for our businesses that will discourage future 

investment into new domestic facilities and new export markets. 

Studies like the Bain Report have found that the U.S. is uniquely situated to expand its dairy exports. However, we need to have the right dairy policies in place 

in order to take advantage of this major opportunity for growth and job creation for 

our country. 

1933

We strongly believe that the Dairy Market Stabilization Program will have a negative impact on dairy exports, cannot be fixed by turning it off after exports start 

declining, and should not be part of a bill whose purpose is to reduce Federal deficit 

spending. 

We would be pleased to meet with you at your earliest convenience to discuss our 

concerns in greater detail. 

Very truly yours,

JON DAVIS, COO, 

Davisco Foods International, Inc.;

JEFF WILLIAMS, President and CEO, 

Glanbia Foods;

JOHN JETER, CEO and President, 

Hilmar Cheese Company;

TERRY BROCKMAN, President, 

Saputo Cheese USA Inc.;

LOU GENTINE, Chairman & CEO, 

Sargento Foods Inc.;

ROBERT D. BYRNE, PH.D., 

Director—Industry and Regulatory Affairs, 

Schreiber Foods, Inc.

CC:

Senator MAX BAUCUS

Representative XAVIER BECERRA

Representative DAVID CAMP

Representative JAMES CLYBURN

Senator JOHN KERRY

Senator JON KYL

Senator ROBERT PORTMAN

Senator PATRICK TOOMEY

Representative FRED UPTON

Representative CHRIS VAN HOLLEN

SUBMITTED STATEMENT BY HON. REID J. RIBBLE, A REPRESENTATIVE IN CONGRESS

FROM WISCONSIN; ON BEHALF OF STEVE ETKA, COORDINATOR, MIDWEST DAIRY COALITION

Chairman Rooney, Ranking Member Cardoza, and Members of the Subcommittee:

I am Steve Etka, Coordinator of the Midwest Dairy Coalition, an alliance of dairy 

cooperatives based in the Upper Midwest that collectively represents nearly 11,000 

dairy farmers, or about 20 percent of the dairy farmers in the nation. On a regional 

basis, the Coalition’s membership represents a majority of the Upper Midwest dairy 

farmers. 

As you prepare to craft the provisions of the 2012 Farm Bill, I thank you for this 

opportunity to provide testimony. The Midwest Dairy Coalition greatly appreciates 

all this Committee has done over the last couple of years to work with the dairy 

industry. Along with your counterparts in the Senate, you put together a far-reaching package of dairy reforms to help the dairy sector better weather economic 

storms of the future, and to temper some of those storms. We particularly appreciate the tireless work of Congressman Collin Peterson in spearheading that effort 

and for the work of Congressmen Reid Ribble and Tim Walz for advocating for the 

needs of Upper Midwest dairy farmers throughout this process. 

The Senate Agriculture Committee recently released its farm bill draft. I am 

pleased to share that the Midwest Dairy Coalition is supporting the Senate dairy 

provisions. It is my understanding that those provisions are the product of collaboration with the House Agriculture leadership, as well. 

When Congressman Peterson introduced the Dairy Security Act in October of last 

year, we had some concerns. Without a doubt, the Coalition members felt the original DSA made many important dairy reforms to address the realities of higher 

input costs that dairy farmers are currently facing relative to 2008, when the last 

1934

Farm Bill was enacted. However, we were concerned that the bill did not do enough 

to address the economic needs of the majority of dairy farmers in the Upper Midwest, or to provide an adequate safety net for producers transitioning from the Milk 

Income Loss Contract (MILC) Program. Further, we were concerned that the Federal Milk Marketing Order provisions of the bill would exacerbate existing regional 

inequities of the current system, making matters worse instead of better. 

I am very pleased that the House and Senate Agriculture Committee leadership 

worked with us, and others, in the dairy industry in support of changes to the original DSA legislation to address our concerns. 

Specifically, we requested that:

(1) the Federal Milk Marketing Order provisions be removed, and the package 

remain free of any FMMO provisions that artificially deflate the value of milk 

used for manufactured dairy products;

(2) a two-tier premium structure be added to the Supplemental Margin Protection Program provisions, whereby there would be lower premiums for the first 

4 million pounds of a producer’s annual production. Not only would this reduce 

the cost of margin insurance for all participating dairy farmers, it would be particularly helpful in encouraging Midwest dairy producers to buy up to adequate 

margin protection levels, to help in the transition from the Milk Income Loss 

Contract (MILC) Program, which is eliminated under the base DSA bill.

We were very pleased to find that others in the dairy industry agreed with our 

concerns, and these changes are now part of the dairy package that is included in 

the Senate farm bill draft. We recognize that even the Senate dairy package is a 

work in progress, and that efforts are still underway to address changes in feedcost calculations made as a result of recent changes in CBO scoring parameters. We 

look forward to continuing to work with both Committees as you seek to address 

this dynamic in a way that continues to provide a credible safety net for the nation’s 

dairy producers. 

I would also like to mention the debate about the stabilization provisions of the 

dairy package. The dairy industry in recent years has been plagued by milk price 

volatility. The wide swings in prices paid to dairy farmers have brutalized our producers. Under the leadership of National Milk Producers Federation, the industry 

came together to debate ways to address the volatility problem. The stabilization 

provisions that are included in the negotiated dairy package have been the source 

of much debate. 

We have had very diverse opinions within the Midwest Dairy Coalition membership about growth management provisions. But like the rest of the dairy industry, 

the Coalition had to reach a compromise on the stabilization issue because of its 

importance within the overall reform package and the need to address price volatility. The voluntary nature of the current stabilization provisions, whereby producers who sign up for the subsidized margin protection program must also agree 

to participate in the stabilization program, helped forge a compromise. We are encouraged that the current dairy package reinforces that a producer’s production base 

under the Dairy Market Stabilization Program would be a temporary, rolling base, 

and would not limit a producer’s long-term production decisions and options. For a 

region like the Upper Midwest, where at times plant capacity exceeds our milk supply, this flexibility is critical. 

We have also encouraged the inclusion of provisions to allow for a continued safety net for dairy producers in the interim period following passage of the new dairy 

legislation. This would allow time for USDA implementation. As a practical matter, 

the complexity of establishing an entirely new dairy program could result in delays 

in implementation. 

We are pleased that the Senate dairy provisions provide farmers the option of continuing under the MILC program, until the new program is up and running. This 

will help minimize disruption and confusion during this interim period. 

Last, it is particularly critical for dairy farmers that Congress reauthorize the 

farm bill this year. Dairy is in a somewhat different position than other farm bill 

programs, in that the MILC program steps down to a significantly lower level of 

support on August 31, 2012, 1 month prior to the expiration date of the rest of the 

farm bill. If Congress is unable to meet the farm bill authorization deadline of September 30th of this year, there may be pressure to extend the farm bill by 1 year 

to allow more time for negotiations. But that outcome would be unacceptable to 

dairy producers, because a 1 year extension of the stepped-down MILC program 

would be significant reduction in the safety net for dairy producers. 

Therefore, we look forward to working with this Committee as you start drafting 

your version of the farm bill. We thank you for tireless work on needed dairy reVerDate 0ct 09 2002 12:54 Dec 11, 2012 Jkt 041481 PO 00000 Frm 00346 Fmt 6621 Sfmt 6621 I:\DOCS\112-30\74372.TXT BRIAN
1935

forms, to date, and look forward to working with you toward a farm bill enactment 

this year. 

SUBMITTED LETTER BY HON. REID J. RIBBLE, A REPRESENTATIVE IN CONGRESS FROM

WISCONSIN; ON BEHALF OF LAURIE FISCHER, EXECUTIVE DIRECTOR, DAIRY BUSINESS ASSOCIATION OF WISCONSIN

April 23, 2012

Hon. FRANK D. LUCAS,

Chairman,

House Committee on Agriculture, 

Washington, D.C.

Dear Chairman Lucas:

The Dairy Business Association (DBA) is an industry organization comprised of 

Wisconsin dairy producers, processors and allied corporate members. Our mission 

is to promote the growth and success of all dairy businesses. We are compelled to 

voice our concerns over the inclusion of the Dairy Security Act (DSA) in the upcoming farm bill. The supply management provision within DSA would substantially 

harm dairy farms in Wisconsin and throughout the nation. Wisconsin’s dairy industry generates $26.5 billion in economic activity and employs over 146,000 Wisconsin 

residents. Due to the scope of the dairy industry’s integration with other sectors, 

it plays an integral role in the health of Wisconsin’s economy. 

While some of the provisions of the DSA are necessary, the inclusion of any form 

of supply controls (whether voluntary or mandatory) in the farm bill will harm dairy 

producers and processors in Wisconsin and, ultimately, harm our nation’s ability to 

compete in the global marketplace. Wisconsin dairy processors are currently reporting a milk deficit of 10 percent. This means, in order to operate at full capacity and 

meet consumer demand, Wisconsin cheese plants must import milk. We are already 

experiencing a milk deficit; our dairy processors cannot afford to have milk production artificially limited. 

To counteract this problem, Wisconsin’s Governor just announced a new program 

to help dairy farmers increase their milk production. The Grow Wisconsin Dairy 

30x20 program has been designed with the goal of increasing milk production in 

Wisconsin to 30 billion pounds of milk by the year 2020. The supply management 

provision within DSA directly contradicts our state’s goals. 

The Secretary of Wisconsin’s Department of Agriculture, Trade and Consumer 

Protection, Ben Brancel, indicated in his November 3, 2011 letter to the leaders of 

the Agriculture Committees that, ‘‘A national dairy policy which allows the market 

to determine prices paid is preferable to a government program which tries to stabilize prices or maintains a certain price.’’ DBA members agree with Secretary 

Brancel’s stance. 

Clearly, the Governor and his Secretary believe allowing farmers to modernize 

and expand their businesses to meet both domestic and foreign demand is the right 

direction for dairy policy. Even an economic analysis of DSA performed by Professors Mark Stephenson and Charles Nicholson indicated the harm supply management would cause. This analysis estimated that under the DSA, dairy producers 

could lose between $.60 to $1.83 per hundredweight on all the milk they sell. This 

would be devastating for an industry that is forced to rely on numerous variables, 

some which are out of their control, to be profitable. 

As you lead the House Agriculture Committee through the drafting of the farm 

bill, we respectfully ask for the inclusion of an alternative dairy proposal that contains margin protection coverage, but eliminates supply controls. This proposal will 

provide much needed risk management tools to help the dairy industry and is far 

less disruptive than supply management proposals. 

I sincerely appreciate the challenges you face in meeting the budget constraints 

of the farm bill. DBA respectfully requests for the enactment of national dairy policies that rely on market forces, not government policies, to determine where, when 

and how much milk will be produced. 

Sincerely,

LAURIE FISCHER, 

Executive Director.

CC:


112301167.eps
1936

Hon. COLLIN C. PETERSON,

Ranking Minority Member,

Wisconsin’s Federal Delegation 

(1937)

FORMULATION OF THE 2012 FARM BILL 

(SPECIALTY CROP AND NUTRITION 

PROGRAMS) 

WEDNESDAY, MAY 8, 2012

HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON NUTRITION AND HORTICULTURE, 

COMMITTEE ON AGRICULTURE, 

Washington, D.C. 

The Subcommittee met, pursuant to call, at 11:02 a.m., in Room 

1300 of the Longworth House Office Building, Hon. Jean Schmidt 

[Chairwoman of the Subcommittee] presiding. 

Members present: Representatives Schmidt, King, Rooney, 

Crawford, Lucas (ex officio), Baca, Pingree, Sablan, Peterson (ex 

officio), and McGovern. 

Staff present: John Goldberg, Tamara Hinton, Pam Miller, Mary 

Nowak, Matt Perin, Patricia Straughn, Wyatt Swinford, Suzanne 

Watson, John Konya, Nathaniel B. Fretz, Keith Jones, Lisa 

Shelton, Jamie Mitchell, and Caleb Crosswhite. 

OPENING STATEMENT OF HON. JEAN SCHMIDT, A 

REPRESENTATIVE IN CONGRESS FROM OHIO 

The CHAIRWOMAN. Thank you, everybody. We are going to call 

this hearing to order. I want to thank you for coming to review title 

X, specialty crop programs; and title IV, nutrition programs, to 

help us prepare for the farm bill. I thank all of our witnesses for 

joining us today and I look forward to hearing your insightful testimony. I also want to thank my friend, Ms. Pingree, for joining me 

today in this hearing. It is well known that a certain degree of comity and bipartisanship exist here on the Agriculture Committee and 

I look forward to working with my friends on the other side as we 

go through this farm bill process. 

Today’s hearing will cover two separate components of the farm 

bill: specialty crop and nutrition programs. But I would like to 

point out that they are closely intertwined. I believe having a diet 

that is full of specialty crop products can lead to a more nutritious 

and healthy lifestyle. 

To start the farm bill process, the Agriculture Committee held 11 

audit hearings last year with the USDA agencies as the main witnesses. I enjoyed the homework that Chairman Lucas gave Agriculture Committee Members so that we would have a firm understanding of the programs within the framework on the farm bill. 

Last summer, this Subcommittee held farm bill audit hearings and 

heard from Agricultural Marketing Service and Animal and Plant 

1938

Health Inspection Service about how they operate title X specialty 

crop programs. Similarly, we heard from the Food Nutrition Service on how it operates the title IV nutrition and feeding programs. 

I believe the review of how the programs are being administered 

and operated gave Members of this Subcommittee a bedrock of understanding. I appreciate the opportunity to learn as much about 

individual programs before the farm bill hearings begin. 

As we undertake the important task of crafting our nation’s farm 

policy in writing the farm bill, it is impossible to ignore the tough 

fiscal situation we find ourselves in. With soaring deficits and 

unfathomable national debt, we must be mindful of this grave financial situation. In order for us to reauthorize and craft responsible farm programs, it is our duty and responsibility to ensure 

that every dollar being spent is a wise dollar being spent. Continuing to throw money at programs that are inefficient, duplicative, or wasteful would be a gross abuse of the taxpayer dollars and 

taxpayer trust. 

Farm programs and feeding programs have had unusually high 

profiles in recent months. First, back in the fall, the Agriculture 

Committee was a target of possible cuts from the Super Committee 

and the ag community was proactive in offering budget savings. 

And now we find ourselves again in the center of the budget-cutting debates. We were instructed to find $33 billion in savings by 

the House Budget Reconciliation instructions and we were debating 

those recommendations on the House Floor this week. 

We on the Agriculture Committee are in a unique position in 

writing the next farm bill. With 37 programs that have no baseline 

funding and public demanding that we spend less, I respect Chairman Lucas’ belief that there are no sacred cows in the farm bill 

and that every program is on the table. I believe that during our 

farm bill audit process, we were able to identify programs and policies that could use further scrutiny. 

I welcome all of our witnesses this morning and look forward to 

their testimony. The first panel will include growers and representatives of the specialty crop community. We have a diverse variety 

of crop representatives from Florida’s citrus industry, nursery and 

landscape plants from the Southeast, California’s vegetable growers 

and packers, and fruit and vegetable growers from my native State 

of Ohio, and an organic grower from Maine. I am interested in 

hearing the panelists’ thoughts on how they use the Specialty Crop 

Block Grant Program and the opportunities that funding opens to 

producers. I am impressed at the range of diverse projects that this 

program funds from research to marketing and promotion as well 

as pest and disease control. 

I would argue that giving the states the ability to approve grants 

based on local needs and circumstances has been a success. I also 

look forward to hearing producers’ viewpoints on how the Plant, 

Pest, and Disease Program works for them in early plant pest detection, surveillance, and response. I want to know and learn about 

the challenges and successes that are in this program, as well as 

in the well regarded Clean Plant Network. It is of the utmost importance that American producers are able to meet the threats 

head-on from disease, pest, and pathogens, and this program is essential to that effect. 

1939

We certainly face a challenge in how we continue this Specialty 

Crop Research Initiative. As we are all aware, this program has no 

baseline funding going forward in the next farm bill. Capitalizing 

on successful collaboration between universities, growers, agencies, 

and grower associations from SCRI will be a concern of this Committee’s moving forward. Though SCRI is not technically in this 

Subcommittee’s jurisdiction, it is nevertheless a critical element of 

the overall specialty crop portfolio. This importance makes continuing the program a reasonable goal. Again, it is evident that we 

have our work cut out for us in the specialty crop arena, and I look 

forward to our witnesses’ testimony. 

Additionally, we have a full day. We will have a second panel 

that will examine Federal feeding programs. Witnesses represent 

research institutions, nutrition programs, and food banks. Under 

this Subcommittee’s jurisdiction, the major feeding programs that 

the USDA administers are the Supplemental Nutrition Assistance 

Program, commonly known as SNAP; the Emergency Food Assistance Program, called TEFAP; and the Commodities Supplemental 

Food Program, CSFP; and the Fruit and Vegetable Program, FFVP; 

and the Senior Farmers’ Market Nutrition Program, SFMNP. 

SNAP is the Federal Government’s primary food assistance program. In this program, benefits are fully financed by the Federal 

Government and a cost-share between states and the Federal Government is in place for administrative costs. There are approximately 44.7 million participants in SNAP who receive an average 

benefit of $133.85 a month. In this program, there is help for those 

truly in need and it is unfortunate when abuses occur. It is discouraging to open a newspaper and read stories of fraud, trafficking, 

and abuse involving the SNAP program. No matter what side of 

the aisle you are on, we can all agree on the importance of SNAP 

in helping those in need, and we can all agree that these kind of 

abuses must be stopped. I plan to look into the program more to 

see how we can stop abuse and fraud in this program. 

I look forward to learning more about how the TEFAP program 

is operated as well. TEFAP purchases excess foods on the markets 

and distributes the stock to participants through state agencies and 

local feeding organizations. I am very interested in hearing Mr. 

Bivens’ testimony about how his food bank, in Oklahoma, spends 

96 percent of its funding directly on individuals receiving assistance. 

We will also look at the Farmers’ Market Nutrition Programs, 

educating recipients and consumers on the links between healthy 

eating—especially fruits and vegetables—and healthy lifestyles is 

imperative. 

I think we can all agree that we have a lot of information to review this morning and I am glad that we have the opportunity to 

do so. Again, as we begin to write the next farm bill, it is imperative that we get input from growers, markets, farmers, ranchers, 

research institutions, and program directors so we can fully understand from your firsthand experience what is and what is not 

working. 

Some of the decisions on program authorizations and funding 

levels will be difficult, but with proper evaluation, I am confident 

1940

that we can put together a farm bill that meets the goals of food 

safety and security, world prosperity, and nutritional wellbeing. 

[The prepared statement of Mrs. Schmidt follows:]

PREPARED STATEMENT OF HON. JEAN SCHMIDT, A REPRESENTATIVE IN CONGRESS

FROM OHIO

Thank you all for coming to this hearing to review Title X specialty crop programs 

and Title IV nutrition programs to help us prepare for the farm bill. I thank all of 

our witnesses for joining us today. I look forward to hearing your insightful testimony. 

I also want to thank my friend, Ranking Member Baca, for joining me in holding 

this hearing today. It is well known that a certain degree of comity or bipartisanship exists here on the Agriculture Committee, and I look forward to working with 

my friend as we go through this farm bill process. 

Today’s hearing will cover two separate components of the farm bill—specialty 

crop and nutrition programs—but I would like to point out that they are closely 

intertwined. I believe having a diet that is full of specialty crop products can lead 

to a more nutritious and healthy lifestyle. 

To start the farm bill process, the Agriculture Committee held 11 audit hearings 

last year with USDA agencies as the main witness. I enjoyed the ‘‘homework’’ that 

Chairman Lucas gave Agriculture Committee Members so we would have a firm understanding of the programs within the framework of the farm bill. 

Last summer, this Subcommittee held farm bill audit hearings and heard from 

Agriculture Marketing Service and Animal and Plant Health Inspection Service 

about how they operate Title X specialty crop programs. Similarly, we also heard 

from Food and Nutrition Service on how it operates the Title IV nutrition and feeding programs. 

I believe the review of how the programs are being administered and operated 

gave Members of this Subcommittee a bedrock understanding. I appreciated the opportunity to learn as much about individual programs before the farm bill hearings 

began. 

As we undertake the important task of crafting our nation’s farm policy in writing 

the farm bill, it is impossible to ignore the tough fiscal situation that we find ourselves in. 

With soaring deficits and an unfathomable national debt, we must be mindful of 

this grave fiscal situation. In order for us to reauthorize and craft responsible farm 

programs, it is our duty and responsibility to ensure that every dollar being spent 

is a wise dollar spent. Continuing to throw money at programs that are inefficient, 

duplicative, and wasteful would be a gross abuse of taxpayer dollars and taxpayer 

trust. 

Farm programs and feeding programs have had unusually high profiles in recent 

months. First, back in the fall, the Agriculture Committee was a target of possible 

cuts from the Super Committee, and the agriculture community was proactive in offering budget savings. And now we find ourselves again at the center of budget cutting debates. We were instructed to find $33 billion in savings by the House Budget 

reconciliation instructions, and we are debating these recommendations on the 

House floor this week. 

We on the Agriculture Committee are in a unique position in writing the next 

farm bill, with 37 programs that have no baseline funding and a public that demands less spending. 

I respect Chairman Lucas’ belief that there are no sacred cows in the farm bill 

and that every program is on the table. I believe that during our farm bill audit 

process, we were able to identify programs and policies that could use further scrutiny. 

I welcome all of our witnesses this morning and look forward to their testimony. 

The first panel will include growers and representatives of the specialty crop community. We have a diverse variety of crops represented from Florida’s citrus industry, nursery and landscape plants from the Southeast, California’s vegetable growers and packers, a fruit and vegetable grower from my native Ohio, and an organic 

grower from Maine. 

I am interested in hearing the panelists’ thoughts on how they use the Specialty 

Crop Block Grant Program, and the opportunities the funding opens to producers. 

I am impressed at the range of diverse projects that this program funds—from research to marketing and promotion as well as pest and disease control. I would 

argue that giving the states the ability to approve grants based on the local needs 

and circumstances has been a success. 

1941

I also look forward to hearing producers’ viewpoints on how the Plant Pest and 

Disease program works for them in early plant pest detection, surveillance, and response. I want to know and learn about the challenges and successes that are in 

this program and in the well-regarded Clean Plant Network. It is of the utmost importance that American producers are able to meet the threats head-on from disease, pests, and pathogens—and this program is essential to that effort. 

We certainly face a challenge in how we continue the Specialty Crop Research Initiative. As we are all aware, this program has no baseline funding going into the 

next farm bill. Capitalizing on the successful collaboration between universities, 

growers, agencies, and grower associations from SCRI will be a concern of the Committee’s moving forward. 

Though SCRI is not technically in this Subcommittee’s jurisdiction, it is nevertheless a critical element of the overall specialty crop portfolio. This importance makes 

continuing the program a reasonable goal. 

Again, it is evident that we have our work cut out for us in the specialty crop 

arena, and I look forward to our witnesses’ testimony. 

Additionally this morning, we will have a second panel that will examine Federal 

feeding programs. Witnesses represent research institutions, nutrition programs, 

and food banks. 

Under this Subcommittee’s jurisdiction, the major feeding programs that the 

USDA administers are the Supplemental Nutrition Assistance Program (SNAP), the 

Emergency Food Assistance Program (TEFAP), the Commodity Supplemental Food 

Program (CSFP) the Fresh Fruit and Vegetable Program (FFVP), and the Senior 

Farmers’ Market Nutrition Program (SFMNP). 

SNAP is the Federal Government’s primary food assistance program. In this program, benefits are fully financed by the Federal Government, and a cost-share between states and the Federal Government is in place for administrative costs. There 

are approximately 44.7 million participants in SNAP, who receive an average benefit of $133.85 per month. 

The program is there to help those truly in need, and it’s unfortunate when 

abuses occur. It is discouraging to open a newspaper and read stories of fraud, trafficking, and abuse involving the SNAP program. No matter what side of the aisle 

you sit on, we can all agree on the importance of SNAP in helping those in need. 

I plan to look into the program more to see how we can stop abuse and fraud of 

the program. 

I look forward to learning more about how the TEFAP program is operated, as 

well. TEFAP purchases excess food on the markets and distributes the stock to participants through state agencies and local feeding organizations. I am very interested in hearing Mr. Bivens’ testimony about how his Food Bank in Oklahoma 

spends 96% of its funding directly on individuals receiving assistance. 

We will also look at the Farmers’ Market Nutrition Programs. Educating recipients and consumers of the links between healthy eating—especially fruits and vegetables and healthy lifestyles—is imperative. 

I think we can all agree that we have a lot of information to review this morning, 

and I am glad that we have the opportunity to do so. 

As we begin to write the next farm bill, it is imperative that we get input from 

growers, marketers, farmers, ranchers, research institutions, and program directors 

so we can fully understand from your first-hand experience what is working and 

what is not working. Some of the decisions on program authorizations and funding 

levels will be difficult. But with proper evaluation, I am confident that we can put 

together a farm bill that meets the goals of food safety and security, rural prosperity, and nutritional well-being. 

I would like to recognize my friend from California, Ranking Member Baca, for 

any opening remarks he may have.

The CHAIRWOMAN. I would like to now recognize my good friend 

from Maine, Ms. Pingree. 

OPENING STATEMENT OF HON. CHELLIE PINGREE, A 

REPRESENTATIVE IN CONGRESS FROM MAINE 

Ms. PINGREE. Thank you very much, Chairwoman Schmidt. I 

thought you did a really impressive job with all of those initials. 

It is like my other committee, the Armed Services Committee, 

sometimes I am always trying to figure out what is that program 

anyway with all those little letters. 

1942

I am thrilled we are here today having this hearing and very 

glad that the Committee has begun its work of writing a farm bill 

this year. 

While I was actually born in Minnesota in a farming family, I 

moved to Maine about 40 years ago and started an organic farm 

growing and selling healthy local food, and in those days, it was 

a little bit out of the mainstream. But today, local food is a growing 

$5 billion industry in which direct consumer outlets from farmers 

markets to CSAs operate in all 50 states. But there is still a lot 

of work to be done to make sure we fully realize that potential. 

Nutrition programs and specialty crop programs are both an important link in ensuring that all families have the option of putting 

fresh and good food on their tables. Specialty crops—or actually in 

Maine we call them fruits and vegetables—make up a large and diverse cross-section of agricultural interests across the country. By 

investing in programs like the Specialty Crop Block Grants, the 

National Organic Certification Cost-Share Program, and the Farmers Market and Local Food Promotion Program—to speak of a few 

initials—we will grow this sector of the economy, increase the number of farmers, and meet our food security needs I believe. 

Nutrition programs are equally important in meeting those goals. 

Beyond protecting SNAP benefits for the most vulnerable, we need 

to think creatively about how to link nutritional programs to farmers. If we make commonsense reforms like providing EBT readers 

at farmers markets, make it easier for schools to purchase local 

fresh food, we are increasing healthy food options for low income 

families and expanding markets for farmers. When farmers sell to 

local markets, they get to keep a bigger share of the dollar. It is 

a win for the farmers and it is a win for our families. 

SNAP, as we all know, is the largest program in the farm bill. 

It seems to me great when we encourage families to use their benefits to buy fresh food teaching them how to cook healthy meals and 

support local farmers at the same time. I agree with my colleague 

budgets are tight and we need to do everything in our power to reduce the deficit, but those cuts and those savings cannot be put on 

the backs of the nation’s most vulnerable. SNAP is one of the most 

effective programs we have to help struggling households to meet 

one of their most basic needs and we must continue to support this 

vital program. 

Last year, I introduced the Local Foods, Farm, and Jobs Act, a 

package of reforms to the farm bill that will help move our nation’s 

food policy in the right direction. That bill would make it easier for 

farmers to sell their food locally, to make it easier for schools to 

buy local food, make it easier for us to rebuild the local and regional food systems. In writing the bill, our goals were simple: expand opportunities for farmers and make it easier for consumers 

to have access to healthy food. 

It is my sincere hope that we use these same basic principles in 

crafting a farm bill. The farm bill is about the economy and jobs 

as much as it is about food and farms. If we spend more on food 

grown locally and not spend it in other regions of the country or 

in another country, we will grow our local economies even more 

and expand our markets for eating fresh fruits and vegetables for 

everyone around the country. 

1943

Thank you for being here today. To everyone on the panel, I am 

very much looking forward to your testimony and the testimony of 

our next panel. 

Thank you very much, Madam Chair. 

[The prepared statement of Ms. Pingree follows:]

PREPARED STATEMENT OF HON. CHELLIE PINGREE, A REPRESENTATIVE IN CONGRESS

FROM MAINE

Thank you Chairwoman Schmidt. I’m very happy we are having this hearing 

today, and I am glad the Committee has begun its work of writing a farm bill this 

year. 

When I moved to Maine forty years ago and started an organic farm, growing and 

selling healthy food locally was a little out of the mainstream. Today ‘‘local food’’ 

is a growing $5 billion industry with direct-to-consumer outlets from farmers markets to CSAs in all 50 states, but there is work still to be done to ensure we fully 

realize its potential. 

Nutrition programs and specialty crop programs are both an important link in ensuring that all families have the option of putting fresh and good food on their tables. 

‘‘Specialty crops’’—or as we call them in Maine ‘‘fruits and vegetables’’—make up 

a large and diverse cross section of agriculture across the country. By investing in 

programs like Specialty Crop Block Grants, the National Organic Certification CostShare Program, and the Farmers Market and Local Food Promotion Program, we 

will grow this sector of the economy, increase the number of farmers and meet our 

food security needs. 

Nutrition programs are equally important in meeting these goals. Beyond protecting SNAP benefits for the most vulnerable, we need to think creatively about 

how to link nutrition programs to farmers. 

If we make common-sense reforms like providing EBT readers at farmers markets, and make it easier for schools to purchase local fresh food, we are increasing 

healthy food options for low-income families and expanding markets for farmers. 

When farmers sell to local markets, they get to keep a bigger share of the dollar. 

It’s a win for farmers and it’s a win for our families. 

SNAP is the largest program in the farm bill—shouldn’t we be encouraging families to use their benefits to buy fresh food, teaching them how to cook healthy meals, 

and support local farmers at the same time? 

Yes, budgets are tight, and we need to do everything in our power to reduce the 

deficit, but these cuts, and these savings cannot be put on the backs of the nation’s 

most vulnerable. SNAP is one of the most effective programs we have to help struggling households to meet one of their most basic needs. We must continue to support 

this vital program. 

Last year, I introduced the Local Farms, Food and Jobs Act—a package of reforms 

to the farm bill that will help move our nation’s food policy in the right direction. 

This bill would make it easier for farmers to sell food locally, make it easier for 

schools to buy local food, and make it easier for us to rebuild the local and regional 

food systems. 

In writing this bill, our goals were simple: expand opportunities for farmers and 

make it easier for consumers to have access to healthy local food. 

It is my sincere hope that we use these same basic principles in crafting a farm 

bill. 

The farm bill is about the economy and jobs as much as it is about food and 

farms. If we spend more on food grown locally and not at a big factory farm or in 

another country, we will grow local economies. 

Thank you for being here today, I am looking forward to hearing from both of our 

panels.

The CHAIRWOMAN. Thank you. 

And the chair would request that other Members submit their 

opening statements for the record because we are on a tight schedule today and that way we will have enough time for the panelists 

and for questions. 

[The prepared statements of Messrs. Lucas, Southerland, Baca, 

and Sablan follow:]

1944

PREPARED STATEMENT OF HON. FRANK D. LUCAS, A REPRESENTATIVE IN CONGRESS

FROM OKLAHOMA

Good morning. 

I want to thank Chairwoman Schmidt and Ranking Member Baca for holding today’s hearing to review specialty crop and nutrition programs as we prepare for the 

next farm bill. 

Last June, the Committee started the farm bill process by holding 11 audit hearings—focusing our attention on the U.S. Department of Agriculture—to look for 

ways to improve programs for farmers, increase efficiency and reduce spending. 

We then went out to the countryside this spring to hear directly from producers 

in the field, and now the hearings taking place in Washington will round out the 

information gathering that is necessary in writing sound and effective farm policy. 

It’s important to consider a variety of perspectives when writing comprehensive 

bipartisan legislation. I am pleased that this Subcommittee is hearing from witnesses from across the country representing our nation’s specialty crop industry. 

The 2008 Farm Bill expanded upon existing programs and established some new 

ones that have proven beneficial in assisting specialty crop growers with research, 

pest and disease pressures, maintaining and opening international markets, and increasing consumption of the best fruits and vegetables in the world. Given the wide 

variety of specialty crops grown in different climates throughout the U.S., it is impressive that this sector of agriculture is largely united as the Specialty Crop Farm 

Bill Alliance. Having your input on how these programs have been implemented and 

what changes need to be considered will only strengthen these programs for the future. 

I also appreciate the perspective from each of the witnesses representing the nutrition community. Nutrition accounts for almost 80 percent of our Committee’s entire mandatory spending for the farm bill, and I know every Member of this Committee wants to ensure that every dollar is spent as wisely and effectively as possible. 

I am pleased Rodney Bivens with the Regional Food Bank of Oklahoma could be 

here today. The work at food banks across the country is a tremendous example of 

how the public-private partnership can benefit those in need. The Regional Food 

Bank, together with the Community Food Bank of Eastern Oklahoma, provides food 

to more than 1,250 programs and schools. Oklahoma’s food banks distributed 63.1 

million pounds of food in Fiscal Year 2011, nearly double the amount of distribution 

since 2007. We all know the extreme demand placed on food banks in recent years, 

and we applaud the work of all food banks as they strive to meet the increasing 

demands for emergency food assistance. 

Again, I want to thank all of the witnesses for sharing your valuable insight with 

us today. The road ahead of us won’t be easy. But I’m confident that by working 

together, we can craft a farm bill that continues to support the success story that 

is American agriculture. 

PREPARED STATEMENT OF HON. STEVE SOUTHERLAND II, A REPRESENTATIVE IN

CONGRESS FROM FLORIDA

Thank you for holding this hearing to review specialty crop and nutrition programs within reauthorization of the farm bill. I welcome the opportunity to reauthorize Federal agricultural policies affecting American agricultural production in 

the development of the 2012 Farm Bill. 

As a significant contributor to U.S. farm receipts and balance of trade, it is extremely important that the issues affecting specialty crops play a meaningful role 

in the farm bill. Specialty crops, including fruits, vegetables, nuts, horticultural 

crops and others, represent nearly 44% of gross agricultural cash receipts in the 

U.S., and hence have a significant stake in our nation’s agricultural policy. 

Florida ranks among the top ten states in the nation in agricultural crop value 

and second in the specialty crop production with a wide variety of fruit, vegetable 

and nursery crops grown through the state. The farm bill 5 year farm policy measure should continue and strengthen its emphasis on key areas such as pest and disease, research, giving states the flexibility needed to better address agricultural 

challenges and other key areas, to ensure critical resources are available to respond 

to the unique needs of specialty crops. 

Historically, many Florida agricultural producers—and specialty crop growers 

throughout the country—have chosen to base their economic decisions on the marketplace and have not relied on Federal farm price support programs. However, 

these markets can be very volatile and the industry faces extreme and somewhat 

unique pressures including ever increasing environmental challenges, labor and proVerDate 0ct 09 2002 12:54 Dec 11, 2012 Jkt 041481 PO 00000 Frm 00356 Fmt 6601 Sfmt 6621 I:\DOCS\112-30\74372.TXT BRIAN
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duction costs beyond that of our competitors, subsidized foreign market competition. 

In addition, unprecedented exposure to pests and disease and state-of-the-art agricultural research needs tailored to the needs of fruit and vegetable production is 

also vital. 

Florida is listed by the U.S. Department of Agriculture as the number two highrisk state, second only to California regarding exotic pest and disease introductions 

pressure. According to the Florida Department of Agriculture, costs to combat pests 

and diseases affecting Florida farmers, have easily exceeded $1 billion over the last 

decade. 

Specialty crop farm bill measures such as the such Pest and Disease Management 

Program ‘‘Section 10201’’, Section ‘‘10202’’, Specialty Crop Block Grants, the Specialty Crop Research Initiative, and well as marketing, nutrition, and other programs provide valuable opportunities for Florida and U.S. specialty crop industry 

in American farm policy. 

In addition, as a Member of the Subcommittee on Nutrition and Horticulture of 

the House Agriculture Committee, with jurisdiction over our nations’ nutrition and 

food stamps, I recognize the importance of balanced nutrition for health and welfare, particularly for those less fortunate in our society. As such, it is critical that 

we ensure that valuable nutrition and food stamp funds go to those most needy in 

the most efficient and cost effective manner possible to meet the nutrition needs of 

our nation, promote American agriculture—all while ensuring the best possible use 

of taxpayer dollars. 

I would also like to commend the adoption through State of Florida of the Healthy 

Schools for Healthy Lives Act, under the leadership of former Member of Congress, 

Agriculture Commissioner Adam Putnam. The Healthy Schools for Healthy Lives 

Act would help to improve nutrition in school cafeterias across the state, directing 

more of Florida’s fresh fruits and vegetables to student’s and help children build 

healthier eating habits. Also vital to meeting hunger needs are our local food banks, 

community and charitable organizations, who through vital private public partnerships are working steadfastly to reach those most in need. 

Mindful of the fiscal constraints facing our Federal budget and increasing national 

debt, we must be vigilant within this Committee and working with the U.S. Department of Agriculture to focus valuable Federal resources in those areas with the most 

effective impact to sustain and strengthen specialty crops, nutrition and agricultural 

production in our nation. Thank you again for the opportunity to hold this hearing 

I look forward to working with my colleagues as we consider reauthorization of the 

2012 Farm Bill. 

PREPARED STATEMENT OF HON. JOE BACA, A REPRESENTATIVE IN CONGRESS FROM

CALIFORNIA

Thank you Chairwoman Schmidt, and thank you to our witnesses for their time 

and expertise today. As we prepare to write a farm bill, your views are of great importance. 

In 2008, I was proud to be part of a historic farm bill that added record funding 

to vital nutrition programs. I believe those changes made the difference between 

health and hunger for many families during this recession. 

In 5 short years, so much has changed. We have endured a recession that has 

been devastating to my district where unemployment is still near 13%. Instead of 

28 million people on SNAP, there are over 46 million Americans who rely on this 

supplemental program to get by. 

Over the course of those 5 years, our House leadership has changed. I am pleased 

to serve with you, Chairwoman Schmidt, and truly appreciate the level of cooperation and shared responsibility that we have. But I am troubled by the tone of this 

Congress. I am troubled that we are considering a reconciliation bill that shows 

such an obvious detachment between Members of Congress and our constituents. 

The reconciliation package approved by the full Agriculture Committee last month 

proposes $33 Billion in cuts to the SNAP program. This package would turn back 

the clock on the nutrition safety net for a record number of Americans. It also highlights what I believe are the misplaced priorities of some of my colleagues. At a time 

when America spends billions of dollars in assistance to foreign countries, it is 

wrong to cut vital assistance for the poor and disadvantaged at home. 

We all must remember—the struggling families who rely on SNAP to put food on 

the table are in our hands. The decisions we make drastically impact their lives, 

so I caution my colleagues to be mindful of our responsibility. 

Like everyone, I recognize that we must ensure SNAP is operating efficiently, and 

cost-effectively. The unprecedented number of SNAP enrollees has placed tremenVerDate 0ct 09 2002 12:54 Dec 11, 2012 Jkt 041481 PO 00000 Frm 00357 Fmt 6601 Sfmt 6621 I:\DOCS\112-30\74372.TXT BRIAN
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dous stress on the USDA and the states. We must take the time to carefully examine how this program functions under duress. But as a father, a grandfather, and 

a Christian, I also know it is wrong to balance our budget on the backs of our most 

vulnerable Americans. 

As we begin to work on the farm bill—it is important we craft a nutrition title 

and a specialty crops title that: protects our nutrition safety net; promotes production and consumption of healthy fruits and vegetables; and ensures that no one in 

America goes hungry. 

Moving forward, I hope Congress will work on a bipartisan basis to craft a responsible farm bill. Yes, we must reduce our deficit, but we also must protect the health 

and well-being of the American people. 

Again, I thank all of our witnesses for their willingness to participate in today’s 

hearing. We are here to listen and to learn so we can make the best policy choices 

possible. 

PREPARED STATEMENT OF HON. GREGORIO KILILI CAMACHO SABLAN, A DELEGATE IN

CONGRESS FROM NORTHERN MARIANA ISLANDS

Good morning and thank you, Chairwoman Schmidt and Ranking Member Baca. 

Any Federal program of the size and scope of the Supplemental Nutrition Assistance 

Program must constantly be monitored to make sure it is efficient, free of abuse, 

and reaching the people it is intended to help. 

I have to say, however, that the discussion seems academic to me, when the people I represent do not have access to SNAP. 

The Northern Marianas receives a block grant each year that is supposed to be 

the equivalent of SNAP, but in fact only provides half the assistance that SNAP 

would. In fact, the local government and the Department of Agriculture do such a 

poor job of negotiating that grant that last week—for the second year in a row—

benefits had to be cut. 

Food, much of it imported and shipped over long distances, is expensive in our 

islands. Yet, some 10,000 people—20 percent of our entire population—are now 

forced to get by on $3.64 per day for food. I have tried doing this; and I plan to 

do it again. I can tell you that having this little money to feed oneself is not healthy. 

I have been working to get more food aid to my people since the day I arrived 

here in 2009. Secretary Vilsack provided a 13.6 percent increase that year to match 

the increase in the Recovery Act that other Americans received. Last year, Agriculture found another $1 million to add to the FY12 block grant. 

But the fact is this piecemeal approach—trying to fix a block grant system that 

simply cannot adjust to changing need—is not working. If it were working benefits 

would not have been cut last week. 

So, I have also introduced legislation, H.R. 1465, the AYUDA Act, which includes 

the Northern Marianas in SNAP. Being included in SNAP, will give the Americans 

I represent the same access to food assistance as other American receive. Being included in SNAP will make the system more efficient and will reduce fraud. Being 

included in SNAP will mean that as economic circumstances change in the Marianas Federal expenditures will go up or go down in response, replacing this zombie 

block grant program that operates oblivious to economic realities. 

Regarding the need to reduce fraud—an issue we are all most concerned with—

I would remind the Subcommittee that when the Northern Marianas Governor met 

Department of Agriculture officials here in Washington in February, he told them 

that fraud is occurring in the system he administers. Chairwoman Schmidt, Ranking Member Baca, Rep. Pingree, and myself, sent a formal request asking the Department to investigate, but we have received no response. We have also received 

reports that the block grant program has been administered in the Northern Marianas in a manner that is in violation of the Department’s own civil rights policies. 

The only response I have received from the Department on this is that the local operations manual will be rewritten to say that such violations are prohibited, which 

checks the bureaucratic box, but does nothing to make whole those who did not receive the food assistance they were entitled to. 

What is even more frustrating to me about this situation is that Secretary of Agriculture already has the statutory authority to extend SNAP to the Northern Mariana Islands. He could give my constituents the same assistance other Americans 

receive, if he chose to do so. He could exercise greater management control to ensure 

that the reports of fraud and civil rights violations are addressed effectively. He has 

not. Last summer in an open hearing of the Nutrition Subcommittee, Department 

officials promised ‘‘we will work with you’’ on my goal to bring the Northern Marianas into SNAP. As I mentioned, the Department did provide an additional $1 milVerDate 0ct 09 2002 12:54 Dec 11, 2012 Jkt 041481 PO 00000 Frm 00358 Fmt 6601 Sfmt 6621 I:\DOCS\112-30\74372.TXT BRIAN
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lion for the block grant for this fiscal year. But that was insufficient to keep benefits 

from being cut. 

What weighs on me each and every day is that hundreds of families I represent 

have to choose whether to pay their utility bills so their kids have light to do their 

homework, or fill their cars with expensive gasoline to get to work, or put sufficient 

and nutritionally adequate food on their tables. This should not be. SNAP has proven its value. It has long-standing bipartisan support because it is a program that 

works: responsive in times of need, helping the most vulnerable, and lifting people 

out of poverty. Yes, we need to find ways to reduce our government deficit, but 

SNAP expenditures will decline in the years ahead as the economy continues its recovery. In the meantime, we need to continue helping those Americans who need 

our help, including those who live in the islands. 

Thank you for this opportunity.

The CHAIRWOMAN. So right now, we are going to go with our first 

panel, which is already in front of us. We have Mr. Jerry Lee, the 

Environmental Service Manager of Monrovia Growers in Cairo, 

Georgia. Thank you for being with us. We have Mr. Michael 

Jarrard, President and COO of Mann Packing Company in Salinas, 

California. We have Ms. Lisa Schacht, Owner/Operator of Schacht 

Family Farm and Market in Canal Winchester, Ohio, on behalf of 

the Ohio Produce Growers and Marketers Association. We have Mr. 

Russell Libby, Executive Director of Maine Organic Farmers and 

Gardeners Association in Unity, Maine; and Mr. Dan Richey, President and CEO of Riverfront Packing Company in Vero Beach, Florida, on behalf of the Florida Fruit & Vegetable Association. 

So as you can see, we have both coasts, we have the Northwest, 

we have the South, and we have the Midwest in front of us. And 

I am looking forward to each and every individual’s testimony. So 

Mr. Lee, we will begin when you are ready. 

STATEMENT OF JERRY LEE, ENVIRONMENTAL SERVICES 

MANAGER, MONROVIA GROWERS, CAIRO, GA 

Mr. LEE. Chairwoman Schmidt, Ranking Member Baca, Members and guests, thank you for the chance to speak today on specialty crops in the farm bill. I am Jerry Lee of Monrovia in Cairo, 

Georgia. We are a national grower of nursery and greenhouse 

plants supplying 48 states and Canada from facilities in Georgia, 

North Carolina, Oregon, and California. Our industry represents 1⁄3

of the value of specialty crops worth almost $17 billion at farm 

gate. It contributes to over $175 billion in economic output and sustains almost two million full- and part-time jobs. 

Our national organization, the American Nursery and Landscape 

Association, is an active leader in the Specialty Crop Farm Bill Alliance. The 2008 Farm Bill funded important infrastructure building programs to help ensure future success of specialty crop growers. For our industry, the Plant, Pest, and Disease Program and 

the National Clean Plant Network, Sections 10201 and 10202, have 

been the most essential. Globalization has meant more travel, more 

trade, and more introduced plant pests. Whenever a new pest 

comes to our shores, it usually causes havoc somewhere in our industry. 

We lived through such a nightmare, our operation. In March 

2004 a previously unknown disease known as Phytophthora 

ramorum, the cause of so-called Sudden Oak Death was detected 

for the first time in plants originating in Monrovia and two other 

nurseries. In that year, the disease was found in retail operations 

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in 22 states. The pandemonium that followed had states enacting 

protectionist regulations that devastated interstate commerce. 

Losses to our company were estimated at $6.9 million, something 

few nurseries could survive. 

Pest and disease funds support threat identification, prevention, 

mitigation, technology development, and other projects resorting 

from a collaborative process among Federal, state, and industry 

stakeholders. For nurseries, funds are helping to develop innovative systems approaches much like the food safety programs now 

common in food processing. We would hope to move cleaner plants 

with less government involvement. 

The National Clean Plant Network has expanded and strengthened the infrastructure to import and distribute clean stock of 

high-value, high-risk crops such as apples, peaches, grapes, citrus, 

and berries. Clean stock of the newest varieties enhances grower 

profitability. My written statement includes prior Congressional 

testimony with more detail. 

The farm bill marked up by your Senate counterparts consolidates the Pest and Clean Plant Programs. We can support consolidation if NCPN receives the priority it deserves. The Specialty 

Crop Block Grant Program provides state ag departments with 

funds to support programs that enhance production and marketing 

in specialty crops. In Georgia, block grants have funded vital landscape water conservation training and outreach during the 

drought. A new marketing program known as Plant Something 

started with a block grant in Arizona. It has been adopted in six 

states and is expanding. It educates consumers on why to plant, 

what to plant, and where to go. Our industry’s products are a discretionary purchase and we must convince consumers that investments in plants and landscapes are financially wise, improve quality of life and the environment. 

A few lessons learned and suggestions for the future: specialty 

crops have been under-served in terms of research. The Specialty 

Crop Research Initiative has helped but your insistence on more industry involvement early in the peer review and merit process 

would ensure that industry relevance is fully considered. The 

matching fund requirement that has been an impediment for Federal researchers, like those at the ARS, allowing Federal resources 

to contribute to the match will help ensure that the best scientists 

can fully collaborate. 

Energy programs like the Biomass Crop Assistance Program, or 

BCAP, had noble intentions but unintended consequences. Tree 

bark and wood processing byproducts had established markets like 

nursery growing media, mulch, composite panels, and furniture. 

For many such uses there are no substitutes. BCAP almost paid 

Federal subsidies to divert these materials to energy production 

and would have devastated energies like ours in the process. After 

thousands of public comments, USDA established mostly helpful 

rules. Still, we see we think clear farm bill definitions would help. 

In 2008, the farm bill became very relevant to the high-value 

specialty crop industries, which generate jobs and economic activity 

well beyond traditional row crops. For our industry, the Plant, 

Pest, and Disease Clean Plant Research and Block Grant proviVerDate 0ct 09 2002 12:54 Dec 11, 2012 Jkt 041481 PO 00000 Frm 00360 Fmt 6601 Sfmt 6601 I:\DOCS\112-30\74372.TXT BRIAN
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sions have been among the most beneficial. We hope that they will 

be continued and improved upon in the next farm bill. 

Thank you. 

[The prepared statement of Mr. Lee follows:]

PREPARED STATEMENT OF JERRY LEE, ENVIRONMENTAL SERVICES MANAGER, MONROVIA GROWERS, CAIRO, GA 

Chairwoman Schmidt, Ranking Member Baca, distinguished Members of the Subcommittee, and guests, thank you for the opportunity to testify today on how the 

specialty crop provisions of the 2008 Farm Bill have worked, and thoughts about 

the next farm bill. I am Jerry Lee, of Monrovia in Cairo, GA. This division of Monrovia began as Wight Nurseries in 1887 and in 2001 merged with Monrovia, which 

started operation in 1926. Monrovia is a national grower of nursery and greenhouse 

plant material, supplying 48 states and Canada from our four production facilities 

located in Georgia, North Carolina, Oregon and California. 

The priorities outlined in my testimony reflect those of the American Nursery & 

Landscape Association (ANLA) and the Georgia Green Industry Association (GGIA). 

ANLA, our national organization, represents all facets of the nursery and landscape 

industry, including growers, garden retailers, landscape design and installation professionals, and industry suppliers. ANLA is an active participant in the Specialty 

Crop Farm Bill Alliance. Our industry is the third largest plant crop in production 

value, behind corn and soybeans but ahead of wheat, cotton, and tobacco. It produces crops valued at $16.7 billion at farmgate, contributes to over $175 billion in 

economic output, and sustains 1.95 million full- and part-time jobs. GGIA represents 

the ‘‘green industry’’ within our state, which accounts for a $7 billion annual economic impact and employs 70,000 Georgians. GGIA is our state trade association 

and our membership includes wholesale nurseries, retail garden centers, greenhouse 

growers, landscape contractors, irrigation contractors and allied organizations. 

Today I will speak to several sections of the 2008 Farm Bill that have proven to 

be of particular importance to our industry. Title X, Sec. 10201 provided funding 

for critical plant pest and disease initiatives. Sec. 10202 funded the National Clean 

Plant Network, or NCPN. These sections of the farm bill acknowledge that devastating foreign plant pests and pathogens present enormous threats to U.S. specialty crop producers, and they are funding vital programs to address the threats. 

I will also touch on the specialty crop block grant program. Finally, I will offer a 

few thoughts about relevant programs included in other titles of the farm bill—the 

Specialty Crop Research Initiative, and the Biomass Crop Assistance Program—and 

discuss a few implementation challenges and lessons learned. 

Section 10201—Plant Pest and Disease Program 

Sec. 10201 has funded an array of programs and initiatives in partnership with 

collaborators including industry and the states. Funded programs have been suggested, organized, prioritized, and implemented under six broad goal areas:

• Enhance Analysis and Survey

• Domestic Inspection

• Enhance Pest Identification and Technology

• Safeguard Nursery Production

• Outreach and Education

• Enhance Mitigation

Important work has been accomplished under each of these goal areas, and is 

summarized in USDA–APHIS’ periodic reports to Congress. Goal 4, Safeguard Nursery Production, recognizes that nursery stock can be a vector for moving serious 

pest threats around the country and globally. Several projects funded under this 

goal are contributing to the development of innovative systems for managing pest 

threats, modernizing the nursery certification system, and avoiding the spread of 

disease threats like Phytophthora ramorum (the cause of so-called Sudden Oak 

Death) on nursery stock. Another initiative established the National Ornamentals 

Research Site at Dominican University of California, where work on disease prevention, detection and mitigation strategies for quarantine pest threats is now underway in a ‘‘real-world’’ nursery setting. 

In March, 2004, P. ramorum was detected for the first time in nursery stock originating at Monrovia and two other nurseries. That year the pathogen was found in 

retail operations in 22 states and 177 individual sites. The pandemonium that followed had individual states enacting various protectionist regulations that devVerDate 0ct 09 2002 12:54 Dec 11, 2012 Jkt 041481 PO 00000 Frm 00361 Fmt 6601 Sfmt 6621 I:\DOCS\112-30\74372.TXT BRIAN
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astated interstate commerce. The fact is, the typical U.S. nursery derives 70% of its 

income during a thirteen week period in the spring and any disruption during that 

window has severe repercussions to our industry. Losses to our company from P. 

ramorum positives were estimated at $6.9 million, something few businesses in our 

industry could survive. In addition, disease scouting and testing probably costs us 

$30,000 a year or more. Beyond the direct impact to our industry and the consumer, 

enormous public and private sector resources were consumed to contain the pest and 

prevent the spread of this previously unknown threat. 

Work now underway, thanks to the 2008 Farm Bill, is contributing to the development of integrated measures, or systems approaches, for safer certification and 

movement of nursery crops interstate and internationally. We participate in one 

such program, the U.S. Nursery Certification Program (USNCP), which has existed 

for several years as a pilot. In its current form, the USNCP facilitates trade with 

Canada, our largest trading partner for nursery and greenhouse plants. Participants 

develop detailed pest prevention and management policies and procedures, documented in a manual and reinforced through ongoing training and record-keeping on 

pest control and best practices. Participation allows us to self-issue the documentation needed to ship our product, avoiding the costs and delays of waiting for a government inspector to certify each load. Work to streamline and expand this program 

is now underway thanks to the farm bill. 

With respect to the Pest and Disease Program, USDA–APHIS has done a generally good job of managing a broad-based and inclusive process for soliciting and 

receiving funding suggestions from cooperators including the states, industry, and 

other Federal agencies. 

Section 10202—National Clean Plant Network 

The National Clean Plant Network stands out as a shining success of the specialty crop title of the 2008 Farm Bill. Farm bill funding has enabled expansion and 

strengthening of mostly established infrastructure and expertise to safely import 

and distribute clean material to producers of nursery stock for high-value and ‘‘highrisk’’ crops such as apples, peaches, cherries, grapes, citrus, and berries. Commercial 

growers of these crops benefit from access to healthy stock of the newest varieties 

that enhance U.S. competitiveness and grower profitability. Robert Woolley, of Dave 

Wilson Nursery, Hickman, CA, testified last year before the Senate Agriculture 

Committee, and covered the program and its accomplishments. I have attached an 

excerpt of Mr. Woolley’s testimony to my statement. 

It is worth noting that the farm bill recently marked up in the Senate would consolidate the Pest and Disease Program and the National Clean Plant Network. We 

are supportive of consolidation if the work of the NCPN receives the priority it deserves. NCPN has accomplished a lot with limited funds. Expansion of the program 

to additional crops may require additional funds. 

Specialty Crop Block Grant Program (Farm Bill 2008—Section 10109) 

The Specialty Crop Block Grant program provides state departments of agriculture and U.S. territories with funds to support local, regional and statewide programs that enhance producers’ ability to compete in the marketplace and provide 

consumers with safe, abundant plants and food. This recognition of states’ individuality and niche markets is important in facilitating advancements in marketing, 

pest control, food safety, and production efficiencies of specialty crops. My industry 

would encourage this Committee to support your Senate counterparts’ efforts to expand funding for this program and allow the opportunity for multi-state proposals, 

so that relevant specialty crop priorities can be approached on a regional basis 

where that makes the most sense. 

A few success stories may be useful. Close to home, Georgia has faced serious 

long-term drought conditions in recent years. Specialty Crop Block Grants afforded 

the Georgia Green Industry Association the outreach funds for 4 consecutive years 

to bring desperately needed water conservation and irrigation training to many 

locales in Georgia. Through this outreach, GGIA has developed local chapters to 

help disseminate information and provide training to nursery and landscape professionals throughout the state. This vital outreach and its positive impact on the horticulture industry in Georgia would not have been accomplished without the assistance of specialty crop block grants. 

Another success story began in Arizona 2 years ago, and has grown into a six 

state unified promotional campaign for the nursery industry entitled ‘‘Plant Something’’. Through the website www.plant-something.org, consumers are introduced to 

the monetary, environmental and health benefits of planting and installing a landscape for their home and community. After identifying the state in which they live, 

they are linked to specific state information about appropriate trees and plants and 

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shown the garden centers nearest them. Participating states to date include Arizona, Colorado, Idaho, Minnesota, Massachusetts and Washington. This project is 

a stellar example of the purpose of these block grants which is to increase the consumption of specialty crops, and the competitiveness of the specialty crop industry. 

After all, my industry’s products are a discretionary purchase, and we need to convince consumers to choose plants and landscape enhancements over other home improvements or leisure activities. 

One potential concern regarding the 2012 Farm Bill mark reported out of the Senate Committee on Agriculture, Nutrition and Forestry has to do with the new formula for state allocations of Block Grants, which includes acreage in the calculation. 

This change in approach under-appreciates high value specialty crops that require 

less acreage. In addition, it may undervalue intensive farming represented by crops 

that have multiple ‘‘turns’’ in a calendar year. Removing the acreage component or 

deemphasizing it somewhat in the funding formula may allow for funding to be allocated in a more equitable manner. 

Specialty Crop Research Initiative (Farm Bill 2008—7311) 

Since its inception in the 2008 Farm Bill, The Specialty Crop Research Initiative 

has played a vital role in foundational research on production efficiencies, food safety, pest management, and crop characteristic improvements through breeding. 

While specialty crops make up approximately 50% of U.S. farm gate receipts, programs to support and sustain the sector receive less than 5% of the crop related 

dollars in the farm bill. However, even this modest investment shows the capacity 

to has had significant impact on the specialty crop industry. Projects that develop 

food safety metrics for leafy greens and tomatoes to protect consumers, precision irrigation and nutrient management strategies to protect waterways and prevent disease outbreaks, and management strategies for pollinators like bees that are threatened by an unexplained decline, benefit both growers and consumers. 

SCRI has been a successful program due largely to the spirit of collaboration between industry, universities and government agencies that the program helps to foster. However, like all programs, some modifications should be made to encourage 

further collaboration, increase efficiencies, and further grow the return on investment. Greater industry involvement in the peer review and merit process would 

help science reviewers identify projects with greatest relevance to growers. While 

scientists often recognize new or innovative techniques and tools, they might not always know market needs and industry concerns. Expanding the dialogue between 

industry and science reviewers would surely improve the quality and relevance of 

funded projects. 

An additional impediment to collaboration and improvements in efficiency has 

been the non-Federal dollar match requirement in the 2008 Farm Bill. This requirement prevented Federal agency dollars from being included in fund matching. For 

example, state and private university faculty can use salaries and fringe to meet 

their matching requirements but Federal researchers, like those in the Agricultural 

Research Service (ARS) of the USDA, cannot. Removing the non-Federal match requirement, as the Senate Committee mark recommends, would create a more even 

playing field and go a long way to assuring that the scientists best suited, be they 

in universities, state departments of agriculture, or Federal agencies, are able to 

pursue the needed research. 

Implementation Challenges and Lessons Learned 

Pest and Disease Program—Congress in the 2008 Farm Bill recognized the 

need to improve the pest safety net, but the improvements in that important legislation have been threatened because USDA, after the farm bill became law, determined that an earlier limit on using funds from the Commodity Credit Corporation 

for administrative costs applied to many farm bill programs. This USDA legal opinion held up money for Section 10201, the Clean Plant Network, the Specialty Crop 

Block Grants, and other programs. The legal opinion would of course appear to contradict Congressional intent. But it has forced Congress to enact a series of temporary fixes. The programs have suffered from stopping and starting. Many specific 

projects require advance planning for staffing, purchase of supplies like traps and 

lures, or very specific timing to target a pest when it can be detected or controlled. 

A permanent correction needs to be achieved in the farm bill. 

Biomass Crop Assistance Program—The Biomass Crop Assistance Program 

had noble intentions of reducing our nation’s reliance on foreign and non-renewable 

energy sources while tapping our agricultural and engineering infrastructure to develop reliable and renewable domestic energy supply. The program was intended to 

help incentivize farmers, ranchers, and forest landowners to participate in this new 

marketplace and by growing new ‘‘energy crops’’ or sending waste products to bioVerDate 0ct 09 2002 12:54 Dec 11, 2012 Jkt 041481 PO 00000 Frm 00363 Fmt 6601 Sfmt 6621 I:\DOCS\112-30\74372.TXT BRIAN
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mass conversion facilities where they would then be used for bioenergy. However, 

there were unintended consequences. 

One problematic issue identified shortly after the bill’s passage was the potential 

of diverting softwood and hardwood bark from established markets and uses to bioenergy facilities. Conifer bark is the primary component of growing media used in 

container nursery operations, and in many greenhouse operations. For context, 70% 

of nurseries in the U.S. are container operations and 100% of greenhouse businesses 

are container operations and there really are no viable replacements for bark substrates at this time. 

After considerable consultation and thousands of written comments from the public, the USDA established a rule to prevent this specific market distortion by emphasizing that the purpose of the program was to incentivize ‘‘. . . cultivation of 

new biomass for new markets rather than divert biomass from existing markets.’’ 

The rule goes on to define softwood and hardwood bark that has existing markets 

as a high-value material that is not eligible for BCAP funding. 

The current statute defines ‘‘renewable biomass’’ in relevant part as ‘‘. . . any organic matter that is available on a renewable and recurring basis . . .’’. Although 

there is an exclusion in the statute for materials from public lands that are used 

in higher valued products, the exclusion is not explicit regarding such materials 

from private lands. Byproducts such as bark, sawdust, shavings and woodchips 

could be considered to be eligible for subsidies in programs promoting bioenergy. 

Manufactured products such as composite wood used in wood-based furniture, cabinets doors, flooring, architectural moulding and millwork and other commercial 

products such as landscaping mulch and commercial growing media rely exclusively 

on these wood by-products as their only available raw material. A definitional exclusion of biomass from private lands for use in higher valued products is needed in 

order to eliminate the incentive to divert basic raw materials away from existing 

industries that could be put at risk. At the same time, it would encourage the expansion of America’s fuel supply and the development of new sources of renewable 

energy. We ask you to support an amendment to the definition of ‘‘Renewable Biomass’’ that excludes bio-based materials from public and private 

land that are used for higher value products. 

Conclusion 

In 2008, the farm bill became extremely relevant to the specialty crop industries 

which, as you know, represent roughly half the value of all U.S. crop production. 

Moreover, they generate jobs and economic activity in rural communities well beyond that generated by traditional mechanized row crops. To illustrate, a farming 

colleague in New York recently shifted 1,000 acres out of high-value vegetables, and 

into field corn, over concerns about labor availability. Her payroll for farming that 

1,000 acres went from $2.5 million for vegetables, to about $70,000 for field corn. 

This represents a huge decrease in money being generated and spent in a rural area 

that lacks much economic opportunity. 

For the nursery and greenhouse industry, the plant pest and disease, clean plant 

network, and block grant provisions have been among the most beneficial. We hope 

that they will be continued—and improved upon—in the next farm bill. Thank you 

again for this opportunity to testify at this important hearing, and we wish you the 

best in your deliberations. 

ATTACHMENT

Excerpt from Testimony of Robert Woolley, Specialty Crop Farm Bill Hearing, Senate Agriculture Committee 

July 28, 2011

What is a ‘‘clean plant?’’ A ‘‘clean plant’’ is free of systemic infection by especially 

injurious or quarantine graft-transmissible disease-causing pathogens. (Graft-transmissible means spread through the most common methods for producing new plants 

that are essentially copies of the desired variety.) Enabling our nursery industry to 

produce clean plants is of critical importance because a number of serious diseases—

virus and other graft-transmissible agents—can be moved into the United States or 

to new locations by nursery stock. Once a disease that systemically infects perennial 

plants has become established in a region, it is usually impossible to eradicate. Infected plants have deleterious impacts on the fruit and nut tree and other specialty 

crop industries, including:

• Low yields and unpredictable cropping times;

• Poor fruit quality affecting flavor and marketability;

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• Premature plant decline and death requiring frequent and expensive replacement and affecting both home owner and grower confidence in our industry and 

its products;

• Frequent and expensive treatments in the nursery and in fruit and berry farms 

and orchards to mitigate plant problems;

• Decreased ability to move both plants and resulting crops in domestic and international trade.

Virtually all fruit and nut trees are propagated asexually, via budding or grafting. 

This allows graft-transmissible disease to spread in nursery stock if plants are 

grown from infected mother trees. Diseased mother trees often show no signs of infection, even when infected with serious quarantine disease, and once infected with 

a virus or virus-like agent, the disease can’t be removed from an orchard tree. So, 

to prevent the spread of disease, nurseries rely on various testing protocols to determine if mother plants are clean.

The National Clean Plant Network diagnoses and treats plants against the pathogens that cause serious disease. This prevents the spread of plant disease by enabling 

nurseries to produce clean plants as well as providing a safe method for the introduction of new varieties from abroad.

The fruit and nut tree component of the National Clean Plant Network is comprised of three regional centers: the Clean Plant Center of the Northwest located 

at Washington State University, Prosser; Foundation Plant Services at the University of California, Davis; and the Southeastern Budwood program at Clemson University in South Carolina. The National Clean Plant Network provides technical expertise and equipment not available in the private sector to test ‘mother’ trees to 

see if they are clean. If no clean trees are available, the NCPN has the capability 

to eliminate virus and other disease causing pathogens via heat treatment, chemotherapy, and other effective methods that cannot be implemented at the farm level. 

In addition to supporting the needs of the fruit and nut tree industry both nationally and regionally, the NCPN also works with other specialty crops such as grapes, 

berries, citrus, and hops; building broad cooperation among interests that help to 

provide access to clean high-value crops crucial to nurseries and growers. This year, 

the network is providing support to these specialty crops through 18 clean plant 

centers in 14 states that ensure provide diagnostic and therapeutic services, and to 

help establish ‘mother’ plantings from which nurseries can obtain clean material 

vital to the specialty crop industry. The NCPN maintains mother trees in isolated 

orchards that are periodically tested to confirm their cleanliness, and serve as a protected source of disease tested plants for use by industry. 

The NCPN provides the critically important role of screening new varieties for 

safe introduction to U.S. producers. New fruit and nut varieties are often considered 

the ‘‘life blood’’ required to maintain the competitiveness of U.S. producers. Our producers need the safe and affordable method provided by the NCPN to obtain new 

varieties from overseas sources—without this capability, illegal (‘‘suitcase’’) importation of plant materials will occur, with the accompanying hazard of the introduction 

of exotic and destructive disease. The NCPN also plays a crucial role in enabling 

the exportation of nursery stock and new varieties by U.S. producers by providing 

testing for required phytosanitary documentation. 

NCPN scientists also develop new detection methodologies and provide advice to 

state and Federal regulatory agencies regarding certification programs. Recent advances in plant pathogen diagnostic and treatment technologies being supported by 

the NCPN (such as deep sequencing and cryotherapy) are allowing scientists at 

clean plant centers to rapidly and more fully understand and treat disease at early 

stages; namely to be pro-active (rather than reactive) in their elimination of disease 

causing organisms before they become a problem. 

The NCPN coordinates regional clean plant facilities into a cohesive and efficient 

national network, providing a forum for the exchange of technical information, coordinated planning between clean plant centers and the harmonization of certification standards which will allow the safe interstate/inter-regional and international movement of nursery stock. NCPN, working in states such as Michigan, 

Oregon, and Pennsylvania, is exploring opportunities to more efficiently and rapidly 

facilitate the movement in the nursery trade of clean plants such as fruit trees, nut 

trees, and berries. 

Select accomplishments of the NCPN for all five specialty crops—fruit trees, 

grapes, berries, citrus, and hops—include the following:

• About 800 plant accessions annually undergo crucial diagnostic and therapeutic 

services;

1954

• About 5,000 plant accessions of the greatest industry interest are maintained 

in secure quarantine foundation plantings;

• About 30,000 tests are conducted annually on plants in the field to ensure their 

continued freedom from disease causing organisms, thus ensuring their safe 

availability to industry;

• About 200,000 clean buds, scions, and rootstock are made available annually to 

nurseries and growers, much of this supporting the fruit and tree nut industry;

• Support to five specialty crop industries (fruit trees as well as grapes, berries, 

citrus, and hops) at 18 clean plant centers in 14 states.

We see the NCPN as one of the very brightest success stories of the farm bill. 

Before the NCPN was formed in 2009, regional clean plant facilities served the orchard and nursery industries with good cooperation and interaction but without the 

robust coordination and adequate resources provided by the new national network. 

Continued funding of the NCPN under the farm bill is essential to maintaining and 

improving the network’s role of protecting U.S. nursery and specialty crop producers, the home landscape, and even the environment. 

Plum Pox Virus—a Farm Bill Sec. 10201/10202 Success Story 

Plum pox virus (PPV), a serious disease of stone fruit, was first detected in the United States in September 1999. Overall, more than $4.5 million in Farm Bill Sec. 

10201 funding from 2009 through 2011 went toward local and national detection 

surveys to mitigate or manage immediate threats from the disease to U.S. stone 

fruit growers in Pennsylvania, New York, and Michigan. In 2009, USDA–APHIS 

and state partners used farm bill funding to complete the last stage of intense monitoring to declare eradication of PPV in Pennsylvania. 

Without 10201 funding eradication efforts in Pennsylvania may not have been 

successful. For successful eradication, surveys must be ongoing for several years, 

even after an area has tested negative. Such programs are expensive to maintain 

and without additional Federal funding, Pennsylvania may not have sustained its 

PPV eradication program to completion. 

To quote Benjamin Franklin’s most famous adage, ‘‘An ounce of prevention is 

worth a pound of cure.’’ The overall cost of the Pennsylvania plum pox eradication 

effort—including surveys, indemnifications for removal of orchards and impacts to 

the local community—is estimated in USDA studies to be close to $50 million. The 

$5 million annual funding of the National Clean Plant Network via Sec. 10202 of 

the farm bill is a well-spent ‘‘ounce of prevention’’ that will enable the safe importation of plant materials, thereby reducing or eliminating the temptation for illegal 

(‘‘suitcase’’) importations and the accompanying risk of the introduction of serious 

pests and disease.

The CHAIRWOMAN. Thank you very much. 

And now we have Mr. Michael Jarrard. 

STATEMENT OF MICHAEL JARRARD, PRESIDENT AND CHIEF 

OPERATING OFFICER, MANN PACKING COMPANY, SALINAS, CA 

Mr. JARRARD. Thank you, Chairwoman Schmidt and Members of 

the Committee, for this opportunity to testify this morning. My 

name is Mike Jarrard. I am the President of Mann Packing Company located in the Salad Bowl capital of the world, Salinas, California. Our company grows and processes fresh vegetables in California, Arizona, and Mexico and distributes them to consumers nationwide and Canada. We are local, national, and international 

contributing to the health and wellbeing of people in California and 

across the country. 

Additionally, I also serve as the Chairman of the Board for Western Growers Association, an agricultural trade association comprised of California and Arizona growers responsible for providing 

nearly half the nation’s nutritious and healthy fresh fruits and 

vegetables and nuts. Indeed, Western Growers has long stood 

proud of our belief that we grow the best medicine. 

No discussion of the farm bill and specialty crops can begin without pointing out the benefits from the Specialty Crop Block Grant 

1955

Program. This is one of the signature achievements in the 2008 bill 

and we strongly urge you to continue and even enhance funding for 

this innovative approach that creates a Federal-state partnership 

designed to enhance the competitiveness of the industry. 

Why are producers so interested in this program? Because unlike 

many Federal programs, the block grant program’s design is responsive and tailored to meet local needs. As designed, the program 

is administered by state governments who are permitted within 

Federal guidelines to choose competitively selected products to the 

particular concerns of specialty crop producers in each state. The 

program’s design is thus very flexible. 

For example, in my home State of California last year, block 

grant money was used to fund, among many priorities, several 

projects at the Center for Produce Safety at the University of California, Davis. These projects addressed ongoing research needs to 

validate and improve on-farm practices to continuously improve 

food safety. 

California is not the only beneficiary of this flexible approach. 

Last year in Florida, block grant funding was used to develop the 

next generation of pesticides and fungicides for avocados. Work 

funded in Minnesota increased the financial planning skills of specialty crop growers there. Funding in Ohio educated producers 

about the new Food Safety Modernization Act rules. Finally, funding in Oklahoma developed a curriculum to educate pre-K school 

children about the health benefits of eating fresh fruits and vegetables. 

All 50 states benefit from the block grant program and the Senate Committee version of this farm bill enhances funding for this 

critical need. We ask the House to do the same. 

The 2012 Farm Bill must renew a commitment between specialty 

crop growers and America’s children, as well as those less fortunate 

via the purchase and distribution of our produce through the nutrition programs. I know you will hear later from witnesses regarding 

the importance of nutrition programs, but I want to emphasize that 

for our growers nutrition programs are as important for both feeding our less fortunate and our nation’s children who need assistance while at the same time benefitting our industry economically. 

Therefore, we view the Fresh Fruit and Vegetable Program and 

Specialty Crop Purchases in Section 32 of the Department of Defense Fresh Program as important to our interests. Our growers 

are proud to be part of those efforts and want to maintain the increased role that specialty crop produce has in nutrition programs 

since the 2008 Farm Bill as we move forward to 2012. 

I especially want to highlight the Fresh Fruit and Vegetable Program in that regard. This program, by providing students with the 

fresh fruit or vegetable snack every day at school increases their 

consumption of a wide variety of fresh fruits and vegetables, creates a healthier food environment at school, and positively affects 

family eating habits. This program is especially powerful when 

linked with focused educational efforts and can lead children down 

a pathway toward healthy fruit and vegetable choices. 

Fresh Fruit and Vegetable Program provides an opportunity for 

the produce industry to grow its future while at the same time 

helping society now. Why? Because today it is widely recognized 

1956

that the rate of obesity in our nation’s children is drastically rising. 

Obesity in America is now adding an astounding $190 billion to our 

annual healthcare costs, exceeding smoking as public health enemy 

number one. Furthermore, just yesterday, the Centers for Disease 

Control and Prevention released a report estimating that 32 million more Americans will become obese by 2030, increasing the annual price tag to $550 billion. 

Eating habits are developed at an early age, and if children can 

learn healthy eating habits, they are more likely to carry those 

habits into adulthood. It is well documented that long-term healthy 

eating can significantly reduce the risk of many chronic diseases. 

It is for those reasons that the joint USDA and United States 

Health and Human Services dietary guidelines have routinely 

called for an increase in the consumption of fruits and vegetables 

among Americans of all ages. The Bush Administration in 2005, for 

example, recommended a doubling of fruit and vegetable consumption, a call to action the Obama Administration echoed in the 2010 

report. 

On behalf of Mann Packing and the California and Arizona specialty crop industry, I am appreciative of this Committee’s willingness to examine the issue that affects us now and the 2012 Farm 

Bill might be beneficial to helping our industry thrive. Thank you. 

[The prepared statement of Mr. Jarrard follows:]

PREPARED STATEMENT OF MICHAEL JARRARD, PRESIDENT AND CHIEF OPERATING

OFFICER, MANN PACKING COMPANY, SALINAS, CA 

Chairman Lucas, Ranking Member Peterson and Members of the Committee, 

thank you for the opportunity to testify this morning. My name is Mike Jarrard. 

I am the President and COO of Mann Packing Company, located in Salinas, CA. 

My company ships field-packed and fresh-cut, value-added vegetable commodities to 

customers nationwide. We are local and national, contributing to the health and 

well-being of people in California and across the country. In addition to serving as 

President and COO of Mann Packing, I also currently serve as Chairman of the 

Board for Western Growers Association, an agricultural trade association 

headquartered in Irvine, California. Western Growers members are small, medium 

and large-sized businesses that produce, pack and ship almost 90 percent of fresh 

fruits, nuts and vegetables grown in California and approximately 75 percent of the 

fresh fruits, nuts and vegetables grown in Arizona. Western Growers members 

produce in—and directly contribute to the economies of—29 states overall. In total, 

Western Growers members account for nearly half of the annual fresh produce 

grown in the United States, providing American consumers with healthy, nutritious 

food. Indeed, Western Growers’ has long had the slogan: ‘‘We grow the best medicine’’. 

Many decades ago as farm bills were debated here in the halls of Congress, my 

predecessors in the specialty crop industry used to have one refrain: ‘‘just leave us 

alone, our markets and industry is just fine’’. Those days faded away long ago however as our industry began to face enormous pressure that went beyond the capacity 

of any one grower to handle. Today growers in California face pest and disease concerns on a scale that we have never seen which could cripple entire commodity 

groups. Our growers must also prepare themselves for food safety concerns, real or 

imagined, that can destroy markets here or overseas. Growers face natural resource 

pressures and accompanying regulatory burdens that we could not have imagined 

even a decade or so ago. Our growers like many in agriculture, also face an unsettled labor situation that constantly creates uncertainty. We face all these threats 

while we continue to try to grow healthy nutritious food for Americans and people 

around the world. 

As our industry began to face these outside forces, we came together to seek out 

a new paradigm in U.S. agriculture policy. It took many, many years to get a seat 

at the table, but the Specialty Crop Competitiveness Act of 2004 followed by the 

2008 Farm Bill provided, for the first time, meaningful investments in specialty 

crops to enhance the competitiveness and profitability in this strategic area of U.S. 

1957

agriculture. I wanted to acknowledge that work and the efforts of those of you on 

this Committee who participated in those efforts. As we look forward to the 2012 

bill, we want to build and expand upon those groundbreaking changes—all of which 

have helped our industry. 

Enhancing the Industry’s Competitiveness 

No discussion of the farm bill and specialty crops can begin without an immediate 

conversation about the Specialty Crop Block Grant Program. This is one of the signature achievements in the 2008 bill and we strongly urge you to continue, and 

even enhance, funding for this innovative approach that creates a Federal-state 

partnership designed to enhance the competitiveness of the industry. Why are producers so interested in this program? Because the program is designed to be responsive and is tailored to meet localized needs—unlike so many Federal Government 

programs. As designed the program is administered by state governments who are 

able, within Federal guidelines, to tailor competitively selected projects to the particular concerns of specialty crop producers in each state. 

The program’s design is thus very flexible. For example in my home State of California last year block grant money was used to fund, among many priorities, several 

projects at the Center for Produce Safety at UC Davis. These projects addressed ongoing research needs to validate and improve on-farm practices to continuously improve food safety. Last year in California, funds were also used to help socially disadvantaged growers improve production and increase their marketing efforts. California is not the only beneficiary of this approach. Last year in Florida, block grant 

funding was used to develop the next generation of the pesticides and fungicides for 

avocados. Work funded in Minnesota helped increase the financial planning skills 

of specialty crop growers there. Funding in Ohio helped educate producers about the 

new Food Safety Modernization Act rules. Finally, funding in Oklahoma developed 

a curriculum to educate pre-K school children about the health benefits of eating 

specialty crops. All fifty states benefit from this program, and the Senate Committee 

version of the farm bill enhances funding for this critical program. We ask that the 

House do the same. 

The Farm Bill as a Critical Tool in Addressing Pest and Disease 

For specialty crop producers Federal dollars spent on pest and disease control represent vital opportunities to strengthen our industry and protect our livelihoods. 

Every year growers across the country face potentially devastating outbreaks of destructive pests and debilitating disease. For growers in my home State of California 

for example we face outbreaks of an invasive pest or plant disease on regular 

basis—often from foreign countries. With no control over the borders in order to prevent an infestation from abroad, we believe it is incumbent upon the Federal Government to support outbreak prevention efforts and the economic impact of that 

these events may cause. 

Fortunately, farm bill funding in the form of the Plant Pest and Disease program 

is used for early plant pest detection and surveillance, for threat identification and 

mitigation of plant pests and diseases, and for technical assistance in the development and implementation of audit-based certification systems and nursery plant 

pest risk management systems. Farm bill funding through the Specialty Crop Research Initiative is used to help develop the next generation of crops and/or technologies that will be able to better resist threats from pests and disease. This onetwo punch of short and medium term efforts of identification and interdiction combined with long-term research is critical to our industry and must be maintained 

in the 2012 Farm Bill in order to combat current and future threats. In addition, 

I note that the Senate Committee bill enhances funding for the USDA Office of Pest 

Management. This office acts as a liaison and counterweight on behalf of agriculture 

with the EPA on various pest management issues—we would ask that the House 

likewise fund this office. 

Ensuring that Our Nation’s Children Access Fresh Fruit and Vegetables 

The 2012 Farm Bill must renew a commitment between specialty crop growers, 

and America’s children and those less fortunate via the purchase and distribution 

of our produce through the nutrition programs. I know you will later hear from witnesses regarding the importance of nutrition programs, but I want to emphasize 

that our growers view those programs as important for both feeding our less fortunate and our nation’s children who need assistance, while at the same time benefiting our industry economically. Our growers are proud to be part of those efforts 

and we want to maintain the increased role that specialty crop produce has had in 

nutrition programs since the 2008 Farm Bill as we move forward in 2012. 

We therefore view the Fresh Fruit and Vegetable program, specialty crop purchases in section 32 and the DOD Fresh program as important to our interests. I 

1958

especially want to highlight the Fresh Fruit and Vegetable (FFVP) program in that 

regard. This program by providing students with a fresh fruit or vegetable snack 

every day at school, increases their consumption of a wide variety of fresh fruits and 

vegetables, creates a healthier food environment at school and positively affects 

family eating habits. This program is especially powerful when linked with focused 

educational efforts and can lead children down a pathway toward healthy fruit and 

vegetable choices. FFVP provides an opportunity for the produce industry to grow 

its future while at the same time helping society now. Why? Because today, it is 

widely recognized that the rate of obesity in our nation’s children is drastically rising. Eating habits are developed at an early age and if children can learn healthy 

eating habits the more likely they are to carry those habits into adult hood. It is 

well documented that long-term healthy eating can significantly reduce the risk for 

many chronic diseases. It is for those reasons that the joint USDA and United 

States Health and Human Services (HHS) dietary guidelines have routinely called 

for an increase in the consumption of fruits and vegetables among Americans of all 

ages. The Bush Administration, in 2005, for example recommended a doubling of 

fruit and vegetable consumption, a call to action the Obama Administration echoed 

in the 2010 report. 

The Farm Bill as a Tool to Improve Trade 

Federal Government investment in our agricultural sector requires a fair, level 

playing field with international competitors who do not face the regulatory burdens 

of U.S. producers. To that end, the farm bill provides $200 million annually for the 

Market Access Program that helps all agricultural sectors in marketing products 

overseas. Likewise the farm bill also provides $9 million annually for technical assistance to specialty crop producers as American producers face technical barriers 

to trade. The latter program is particularly significant to our industry given the numerous phytosanitary trade barriers that we face in markets around the world. To 

pick one example among many, during 2011 China maintained trade barriers 

against Californian pears, apples, and strawberries. Both of those trade programs 

help our growers export to foreign markets and I urge the House to maintain those 

programs at those levels. 

Improving Resource Management through the Farm Bill 

Farm bill dollars assist producers across the country to better and more efficiently 

use resources. For California’s growers these programs help us address a myriad of 

resource concerns but I wanted to highlight at least one that seems to always be 

an issue in my state: water. Farm bill programs such as the Environmental Quality 

Incentives Program (EQIP) provide critical resources to upgrade irrigation systems 

and improve on-farm water use efficiency through other techniques—this helps address the issue in the short and medium term. Coupled with these efforts are Federal research dollars that help our industry plan for the longer-term by developing 

the next generation of crops that will use less water. For our growers you can see 

how the farm bill is critical to our industry’s long and short-term survival. Ensuring 

the farm bill continues investing in these priorities is especially important to our 

state in which competition for resources is intense and growing. 

I did want to address one other specific area of concern with respect to resource 

management: air quality. As the Committee knows, the 2008 bill provided specific 

funding for areas that face air quality controls. That provision benefited many growers in the San Joaquin Valley but I understand that this provision is likely to be 

eliminated and potentially replaced. We hope that if the House chooses to replace 

those provisions with a new ‘‘Regional Conservation Partnership Initiative’’ model 

that California and other states’, air quality concerns are reflected in conservation 

spending going forward. 

Labor Concerns as a Critical Issue 

While I know this issue is not directly in the jurisdiction of this Committee or 

the farm bill, I would be remiss if I did not mention the critical need to address 

labor issues. Agricultural producers across the country want a legal and stable 

workforce. Not only is agriculture’s role in maintaining a safe and secure food supply vital to our economic recovery, it is critical to the strength of rural America. 

Western Growers members and their employees are members of the very communities in which they grow, pack, and sell products. In 2009, when the California 

water crisis forced us to fallow 500,000 acres in the Central Valley, thousands of 

farms jobs were lost, and rural non-farm businesses supported by these jobs suffered. Some communities realized unemployment levels of 40 percent. 

Without a workable agricultural program, growers in California and across the 

country will eventually face similar predicaments. Securing a legal workforce is not 

a new challenge for agriculture. We’ve been working towards this goal for over 15 

1959

years. But Congress’ failure to pass immigration reform, combined with a diminishing labor supply, threats due to I–9 audits by Immigration and Customs Enforcement, and now mandatory E-Verify legislation emerging at the state and the Federal levels, it is clear that U.S. agriculture will be decimated without a workable 

mechanism to hire and continue to employ the labor we need. While this can not 

be addressed as part of the 2012 Farm Bill I urge every Member of this Committee 

to work toward a solution. 

Crop Insurance 

This has been a hot topic during this farm bill and I suspect that specialty crop 

organizations around the country have discussed this issue more over the last few 

months than we have over the last few years, as the safety net for program commodities moves towards revenue based crop insurance products. While we are interested in exploring how crop insurance could be useful to our industry, we also want 

to ensure that changes to the system do not distort normal market cycles. Why do 

we have concerns? We are worried that ill-conceived or overly generous crop insurance products might distort market signals. In 1999 RMA authorized a watermelon 

program in several states—a program that had disastrous national consequences. 

When that program rolled out watermelon plantings and production in Florida and 

Texas increased dramatically causing the national watermelon market to collapse 

in turn adversely impacting many, including producers in California. 

While we know that this program was not properly implemented and agency 

changes have been made since 1999, this example serves as a cautionary tale to us 

about how an expansion of crop insurance could lead to market distortion and cause 

a functioning market to collapse. Since it is clear that crop insurance is being expanded going forward, we are pleased that the Senate recently put some boundaries 

and speed bumps in place. We hope these changes to current law will prevent our 

concerns from materializing. Indeed, we are interested in seeing how crop insurance 

might be shaped to help growers deal with food safety and quarantine issues—something crop insurance to date has not fully addressed. 

Ensuring a Level Playing Field 

In previous farm bills, restrictions have been in place to ensure that commodity 

row crop growers who received government support payments were not allowed to 

plant specialty crops. To the extent that the 2012 Farm Bill maintains such commodity support program payments, and does not restrict payments to actual planted 

acres, then we would suggest that planting restrictions must be maintained. Specialty crop growers should not face subsidized competition—Federal tax dollars 

should not subsidize the production of fruits and vegetables grown by our program 

commodity friends. 

On behalf of Mann Packing, and the California specialty crop industry, I am appreciative of this Committee’s willingness to examine the issues that affect us and 

how the 2012 Farm Bill might be beneficial in helping our industry thrive. We look 

forward to working with you.

The CHAIRWOMAN. Thank you very much. 

And now Ms. Schacht from Ohio. 

STATEMENT OF LISA L. SCHACHT, OWNER/OPERATOR, 

SCHACHT FAMILY FARM AND MARKET; PRESIDENT, OHIO 

PRODUCE GROWERS & MARKETERS ASSOCIATION, CANAL 

WINCHESTER, OH 

Ms. SCHACHT. Chairwoman Schmidt and distinguished Members 

of this Committee, I truly appreciate this opportunity to speak to 

you today. I wish to express my sincere gratitude of your thoughtful consideration of the horticulture industry and the producers reliant on its success. I am Lisa Schacht of Schacht Family Farm and 

Market, with my husband David, we have operated a small fruit 

and vegetable farm in close proximity to Columbus, Ohio, for over 

30 years. We produce a diverse variety of crops and market them 

directly to the consumers, as well as wholesale to other retailers 

and distributors. We have capitalized on the accessibility of our 

farm to the public to build a loyal client base. Having ample tools 

to achieve this is crucial and the farm bill plays a significant role. 

1960

The farm bill has both direct and indirect impact on our farm. 

We do participate in redeeming SNAP and the Senior Farmers’ 

Market Nutrition benefits. The Specialty Crop Block Grant Program, as administered in Ohio, and the Specialty Crop Research 

Initiative have funded projects from which we have drawn new and 

improved resources. These efforts, though not direct revenue to us, 

generally have the greatest impact. Programs like the Farmers 

Market Promotion Program, Fruit and Vegetable Snack Program, 

Farm-to-School Program, and Value-Added Grant Program have 

provided more residual benefit to us. And though not measurable, 

any effort that raises nutrition awareness has good potential to 

generate more revenue at the producer level. As well, this is putting more nutritious, safe food in the hands of American people. 

I am also the current President of the Ohio Produce Growers and 

Marketers Association. This is a statewide industry association representing all specialty crop enterprises in my state ranging from 

very large to very small. Today, I want to briefly highlight the programs in the farm bill that we view as a priority of the horticulture 

industry. 

First, SNAP and nutrition programs: these programs have attempted to drive benefit recipients to producers, and across Ohio, 

producers have reached out to the recipients. As a result, there is 

significant increase in farmers markets with electronic transfer access. I began in the days of the paper vouchers. The use of the EBT 

card has reduced the paperwork burdens to those of us redeeming 

benefits but not without some costs. In my opinion, funding for the 

SNAP, WIC Fruit and Vegetable Program, and the Senior Farmers’ 

Market Nutrition Program needs to be more directed to management of the benefits. Without extensive education about practical 

use of the benefits, the actual return on the taxpayers’ investment 

is crippled. The elderly and the individuals receiving the benefits 

must have more knowledge of fruit and nutrition to make proper 

choices. 

Next, the research-based programs of the Specialty Crop Block 

Grant Program and the Specialty Crop Research Initiative are 

truly the favorite sons of the farm bill to our growers. I know past 

testimony has described these as appropriate approaches to the 

challenges of assisting such a diverse sector of agriculture. Ohio 

has various microclimates and farm populations that require efforts to be pinpointed to specific needs. These programs being administered any higher than the state or regional level will reduce 

the effectiveness of research needed for competitiveness. Our producers are not looking for direct payment for support but again the 

tools that help them be the best producers possible. 

In Ohio, OPGMA has been the grant recipient recently for an ongoing food safety project. This project began as an initiative to address meeting consumer/buyer expectations of good practices and 

grew into a thorough educational and certification process. When 

similar programs have been attempted on a national level, they 

have been challenged because of the difficulty to get ‘‘one-size-fitsall’’ results. With state-specific programs, our growers will have 

greater potential for new or expanded marketing opportunities in 

and out of Ohio. Growers are involved in the process and are benefiting from the results of the funded programs. 

1961

Marketing programs: because a great number of producers in 

Ohio market either directly to consumers or within their local communities, promotional programs funded through the farm bill also 

need to be on the local level. Any broad-based efforts need to be 

focused on nutrition and food management education aimed at all 

socioeconomic groups. Also, efforts need to be unbiased in regards 

to cultural practices of conventional versus organic. Sustainability 

starts with economic viability. Marketing to specific consumer 

trends should be the responsibility of private enterprise. 

And last but not least, Farm-to-School and the Fruit and Vegetable Snack Programs will hit at the core of benefitting both citizens and producers. The early introduction of good nutritional 

choices and better awareness of improved health will have a ripple 

effect. Children will develop good eating habits. Farmers who seek 

to participate in these opportunities will reap direct benefit 

through increased sales. And those continuing to market in more 

traditional manner should also see increases because of the potential of heightened demand. 

In conclusion, I repeat that fruit and vegetable production is diverse with unique needs. Having programs in the farm bill that enhance and propel the horticulture industry must be flexible enough 

to serve producers where those needs are. Increased access, knowledge, and consumption of fresh produce will benefit both consumers 

and producers. 

I thank you, Chairwoman Schmidt and the Committee, for today’s invitation. 

[The prepared statement of Ms. Schacht follows:]

PREPARED STATEMENT OF LISA L. SCHACHT, OWNER/OPERATOR, SCHACHT FAMILY

FARM AND MARKET; PRESIDENT, OHIO PRODUCE GROWERS & MARKETERS

ASSOCIATION, CANAL WINCHESTER, OH 

Chairwoman Schmidt, Ranking Member Rep. Baca, and distinguished Members 

of this Committee. I truly appreciate this opportunity to speak with you today. I 

wish to express my sincere gratitude for your thoughtful considerations of the horticultural industry and the producers reliant on its success. 

I am Lisa Schacht of Schacht Family Farm and Market. With my husband, David, 

I operate a small fruit and vegetable farm in close proximity of Columbus, Ohio. We 

produce a diverse variety of crops and market them directly to customers as well 

as wholesale to other retailers and distributors. We established our enterprise just 

over 30 years ago. Though also raising some USDA program crops for rotational 

purposes, we are not participating in their related programs. Our primary production is focused on our horticultural crops. 

We have capitalized on the accessibility of our farm to the public to build a loyal 

client base. Our commitment to producing consistently high quality products in a 

sustainable fashion has created rapport with our customers. Having ample tools to 

achieve this is crucial. The USDA farm bill plays a significant role in this. 

The USDA farm bill has both direct and indirect impact on our operation. We do 

participate in redeeming SNAP and the Senior Farmer Market Nutrition benefits. 

The Specialty Crop Block Grant Program as administrated in Ohio and the Specialty Crop Research Initiative have funded projects from which we have drawn new 

or improved resources. These efforts, though not direct revenue to us, generally have 

the greatest impact. Programs like the Farmers’ Market Promotion Program, Fruit 

and Vegetable Snack Program, Farm to School Program, and Value Added Grant 

Program have been more residual in effect. And though not measurable, any effort 

that raises awareness has good potential to generate more revenue at the producer 

level. As well, this is putting more nutritious, safe food in the hands of the American people. 

I am also the current President of the Ohio Produce Growers & Marketers Association (OPGMA). This is a statewide industry association representing all specialty 

crop enterprises. We are committed to consumer and processor satisfaction, environVerDate 0ct 09 2002 12:54 Dec 11, 2012 Jkt 041481 PO 00000 Frm 00373 Fmt 6601 Sfmt 6621 I:\DOCS\112-30\74372.TXT BRIAN
1962

mentally friendly practices, business success, and the provision of fulfilling career 

opportunities for family and employees. Members could be small but producing an 

extensive variety of crops, very large producing only a few crops, or any combination 

of the like. Our members would tell you that specialty crop production and marketing are truly labor intensive and provide extensive economic activity in their 

communities. 

In comparison to my farm, my OPGMA peers may have greater direct impact 

from the farm bill. So I wish today to emphasize the virtue of the programs written 

into the bill for the horticulture industry. 

The SNAP and nutrition programs have attempted to drive recipients to producers. Across Ohio, producers have reached out to the recipients. There is a significant increase in farmers markets with electronic transfer access. I began in the days 

of the paper vouchers. The use of the EBT cards has reduced the paperwork burdens to those of us redeeming benefits, but not without some costs. 

In my opinion, SNAP, WIC Fruit and Vegetable Program, and the Senior Farmers’ Market Nutrition Program need more of its funds directed to better management of the benefits. Without extensive education about the practical use of the benefits, the actual return on taxpayers’ investment is crippled. The elderly and individuals receiving the benefits must have more knowledge of food and nutrition to make 

the choices that reap their reward. 

The research-based programs of the Specialty Crop Block Grant Program and the 

Specialty Crop Research Initiative are truly the favored sons of the farm bill to our 

growers. I know past testimony has described these as appropriate approaches to 

the challenge of assisting such a diverse sector of agriculture. Ohio has various 

micro climates and farm populations that require efforts to be pin-pointed to specific 

needs. These programs being administered any higher than the state or regional 

level will reduce the effectiveness of research needed for competitiveness. Our producers are not looking for direct payment for support, but, again, the tools that help 

them be the best producers possible. This will contribute to greater food security 

overall. 

In Ohio, OPGMA has been a grant recipient recently for an ongoing food safety 

project. This project began as an initiative to address meeting consumer/buyer expectations of good practices and grew into a thorough educational and certification 

process. When similar programs have been attempted on a national level, they have 

been challenged because of the difficulty to get ‘‘one-size-fits-all’’ results. With statespecific programs, our growers will have greater potential for new or expanded marketing opportunities in and out of Ohio. Since the beginning of block grant funding 

for horticulture, stakeholders in Ohio have concertedly strove for the best results 

for Ohio producers. Growers are involved in the process and are benefiting from the 

results of the funded projects. 

Because a great number of producers in Ohio market either directly to consumers 

or within their local communities, promotional programs funded through the farm 

bill also need to be on the local level. Any broad-based efforts need to be focused 

on nutrition and food management education. Also efforts need to be unbiased in 

regards to cultural practices of conventional versus organic. Sustainability starts 

with economic viability. Bringing up awareness of the health and wellness benefits 

of more consumption of fruits and vegetables should reach all socioeconomic groups. 

Marketing to specific consumer trends should be the responsibility of private enterprise. 

Also, Farm to School and the Fruit and Vegetable Snack Programs will hit at the 

core of benefiting both citizens and producers. The early introduction of good nutritional choices and better awareness of improved health will have a ripple effect. 

Children will develop good eating habits. The operations seeking to participate in 

these opportunities will reap direct benefit through increased sales. Those continuing to market in more traditional manners should also see increases because of 

the potential for heightened demand. 

In conclusion, I repeat that fruit and vegetable production is diverse with unique 

needs. Having programs in the farm bill that enhance and propel the horticulture 

industry must be flexible enough to serve producers where those needs are. Increased access, knowledge, and consumption of fresh produce will benefit both consumers and producers. 

I thank you, Chairwoman Schmidt and the Committee, for the invitation to speak 

today. I recognize the challenge before you in writing the 2012 Farm Bill. Horticulture producers know firsthand what it is to balance very diverse demands. I simply ask that if possible to maintain the critical tools in the current farm bill and 

where conducive to expand them. Trust that our producers will be responsible with 

the resources they may be fortunate enough to receive.

1963

The CHAIRWOMAN. Thank you very, very much. 

And now we have Mr. Russell Libby from Maine to talk about 

organic farming. 

STATEMENT OF RUSSELL W. LIBBY, EXECUTIVE DIRECTOR, 

MAINE ORGANIC FARMERS AND GARDENERS ASSOCIATION, 

UNITY, ME 

Mr. LIBBY. Good morning, Chairwoman Schmidt and Honorable 

Members. I am Russell Libby, Executive Director of the Maine Organic Farmers and Gardeners Association, or MOFGA. MOFGA is 

the largest state-level organic association in the country with 6,500 

member farms, businesses, and households. Formed in 1971, we 

started the country’s first organic certification program in 1972, an 

apprenticeship program to match new farmers with experienced 

teachers in 1975, and hired the first organic ‘‘extension agent’’ in 

1986. Our annual harvest celebration, the Common Ground Country Fair, draws 60,000 people each September to Unity, Maine, a 

town of 2,400, making it the country’s largest organic food event. 

We also run a highly successful new farmer training program. Of 

the 140 program participants over the past 12 years, 87 percent are 

currently farming. Our USDA-accredited organic certification program includes about five percent of the farms in Maine and 20 percent of the dairy farmers. 

We have been in business for 40 years and over that time we 

have witnessed tremendous growth in organic agriculture and in 

the opportunity for farmers to rebuild local economies through food 

production. Our farmers have built a robust direct-to-consumer 

marketing movement in Maine with close to 150 farmers markets 

and several hundred farms offering community-supported agriculture programs. With a number of small investments and no-cost 

policy changes, the 2012 Farm Bill can facilitate this growth. 

We are a member of the National Organic Coalition and work 

closely with the National Sustainable Ag Coalition, so our farm bill 

priorities closely mirror those. 

Horticulture title: the National Organic Program does an increasingly good job of working with issues that confront organic food 

producers and processors around the country. The Specialty Crops 

Program is a long-overdue recognition of the needs of fruit and vegetable farmers from around the country. 

Our suggestions: First, fund national organic certification costshare at the level included in the Senate farm bill. Organic agriculture is a strong and growing sector of American agriculture and 

organic certification cost-share is an investment in business development for agriculture. Many organic farmers rely on the costshare program to help them access markets. The program also enables farmers to remain in the organic market by offsetting annual 

certification fees. Farmers must meet strict organic standards to be 

certified and the costs of the program are going up. As the requirements for the National Organic Program become more strictly defined, the time farmers spend in record-keeping and compliance increases. Without organic certification cost-share, farmers here at 

home with opt not to certify and companies will have to source ingredients from overseas instead of from local farmers. 

1964

Second, encourage more organic farmer participation in critical 

conservation programs. The 2008 Farm Bill included important 

provisions in EQIP and the CSP for organic farmers. However, both 

programs need reform to address unique needs of organic farming 

systems. Issues such as unfamiliarity of NRCS staff with organic 

programs, overlapping planning requirements with NOP, and lack 

of adequate planning assistance should be addressed in the next 

farm bill. 

Third, help the National Organic Program to be more effective. 

The National Organic Program enforces national organic standards, accredits certifiers, develops equivalency agreements, handles 

complaints—in essence, ensures integrity. These are essential functions. However, the program requires a capital infusion to keep 

technology up to date. NOP should receive a one-time infusion of 

$5 million in mandatory funds for technology upgrade and then 

should be authorized to receive appropriations increasing at a rate 

of 20 percent annually beginning with $10 million in Fiscal Year 

2013. 

And I have a few comments on nutrition. When things work 

right, the full range of USDA programs make a significant difference to farmers and the general public. Linking nutrition programs to access at farmers markets, expanding EBT programs, developing more opportunities for farmers to supply school lunch, all 

these things make farmers more profitable. 

How can you help them make this happen? First, make it easier 

for farmers to access EBT programs. There are many different possibilities but one of them is to really focus on treating wireless retail food vendors as fixed location stores are now treated. Second, 

increase the ability of school lunch programs to source directly 

from farmers who meet their standards by: one, allowing flexibility 

in schools, and two, similarly allowing schools flexibility to use 

commodity dollars to purchase locally available foods. 

Obviously I wrote more than I have time for. I want to say just 

a word or two on seeds and breeds. Conventional plant breeding is 

critical for farmers across the spectrum. The conventional plant 

breeding programs are very under-funded and can use support. 

And I would like to conclude just by saying that your actions in 

the farm bill shape the possibilities for farmers across the country 

and I encourage you to keep thinking about the possibilities for 

local food as you move forward. Thank you. 

[The prepared statement of Mr. Libby follows:]

PREPARED STATEMENT OF RUSSELL W. LIBBY, EXECUTIVE DIRECTOR, MAINE ORGANIC

FARMERS AND GARDENERS ASSOCIATION, UNITY, ME 

‘‘Small Changes Make Big Differences on the Ground’’

Good morning, Chairwoman Schmidt and Honorable Members of the House Agriculture Committee. I am Russell Libby, Executive Director of the Maine Organic 

Farmers and Gardeners Association, or MOFGA. MOFGA is the largest state level 

organic organization in the country, with about 6,500 member farms, businesses, 

and households. Formed in 1971, we started the country’s first state organic certification program in 1972, an apprenticeship program to match new farmers with experienced teachers in 1975, and hired the first organic ‘extension agent’ in 1986. We 

now have 26 employees who work on services to farmers, education, and outreach 

to the general public. 

1965

MOFGA’s annual harvest festival, the Common Ground Country Fair, draws 

60,000 people each September to Unity, Maine, a town of 2,400, making it the country’s largest organic food event. 

We also run a highly successful new farmer training program. Of the 140 program 

participants over the past 12 years, 87% are currently farming. Our USDA-accredited organic certification program includes about 5% of the farms in Maine, and 

about 20% of the dairy farmers. 

MOFGA has been in business for 40 years, and in that time, we have witnessed 

tremendous growth in organic agriculture and in the opportunity for farmers to rebuild local economies through food production. Our farmers have built a robust direct-to-consumer marketing movement in Maine, with close to 150 farmers’ markets 

and several hundred farmers offering Community-Supported Agriculture programs 

that supply about 2% of the families in Maine with produce, summer and sometimes 

winter, and an increasing array of products. With a number of small investments 

and no-cost policy changes, the 2012 Farm Bill can facilitate this growth and opportunity. 

We are a member of the National Organic Coalition, and work closely with the 

National Sustainable Agriculture Coalition, so our farm bill priorities reflect theirs 

in many ways. 

Horticulture Title 

The horticulture title of the farm bill is critically important for organic farmers. 

The National Organic Program does an increasingly good job of working through 

issues that confront organic food producers and processors around the country. The 

Specialty Crop Grants program is a long-overdue recognition of the needs of fruit 

and vegetable farmers from around the country. 

Our suggestions:

1. Fund national organic certification cost-share at the level included 

in the Senate farm bill voted out of Committee. Organic agriculture is a 

strong and growing sector of American agriculture, and organic certification 

cost-share is an investment in business development for agriculture. Many organic farmers rely on the cost-share program to help them access markets (retailers, specialty food processors). The program also enables farmers to remain 

in the organic market by offsetting annual certification costs for farmers. Organic producers must meet strict organic standards to be certified, and the costs 

of certification are going up. As the requirements for the National Organic Program become more strictly defined, the time farmers spend in record-keeping 

and compliance increases substantially. Without national organic certification 

cost-share, farmers here at home will opt not to certify, and organic companies 

will have to source organic product from overseas instead of from American 

farmers to meet strong consumer demand.

2. Encourage more organic farmer participation in critical conservation 

programs. The 2008 Farm Bill included important provisions in Environmental Quality Incentives Program (EQIP) and the Conservation Stewardship Program (CSP) for organic farmers in recognition of the historical 

lack of participation and conservation benefits of these systems. However, both 

programs are in need of reform to address the unique needs of organic farming 

systems. Issues such as the unfamiliarity of NRCS staff with organic systems, overlapping planning requirements with the National Organic 

Program, and lack of adequate planning assistance should be addressed in the next farm bill. By the way, one of the places that we’ve been 

very successful in the past few years is getting our new young farmers to participate in NRCS programs, which helps to strengthen the base for that agency 

long into the future.

3. Help the National Organic Program (NOP) to be more effective. The 

National Organic Program enforces the national organic standards, accredits 

certifiers, develops equivalency agreements, handles complaints—in essence, 

NOP ensures the integrity of the organic seal. These are essential functions to 

the survival and growth of the organic sector. Additionally, the program requires a capital investment in innovative technologies that will position the program to be able to grow with the organic sector, providing domestic and international oversight, and transparency and streamlining of systems, data, and information. NOP should receive a one-time infusion of $5 million in mandatory funds for the technology upgrade, and then should be authorized to receive appropriations increasing at a rate of 20 percent annually beginning with $10 million in FY 2013.

1966

Nutrition Title 

When things work right, the full range of USDA programs make a significant difference to farmers and the general public. Linking nutrition programs to access at 

farmers’ markets, expanding EBT programs, developing more opportunities for 

farmers to supply the school lunch program—all of these things make farmers more 

profitable. 

The largest programs within the farm bill are embedded in the nutrition title. If 

farmers are not able to provide food through programs in the nutrition title for the 

people who need it the most, they are shut out of a major income stream. If the 

people who are eligible for nutrition assistance do not have access to fresh, local 

produce, they may not get the full nutritional benefits from the assistance they receive. Connecting farmers with consumers who participate in nutrition assistance 

can benefit producers and consumers. 

How can you help this to happen?

1. Make it easier for farmers to access EBT programs. The range of marketing options has widened dramatically over the past decade, with farmers’ 

markets, CSAs, farmstands, buying clubs and other options. Please amend Section 7(h) of the Food and Nutrition Act of 2008 to treat wireless retail food vendors as fixed locations stores are now treated.

2. Increase the ability of school lunch programs to source directly from 

farmers who meet their standards by:

a. Allowing flexibility in schools. Rather than requiring produce purchases 

through the DOD Fresh program, allow schools the option to use their DOD 

credit to purchase food directly from local farmers. (Requires amending Department of Defense (DOD) Fresh program in Section 10603(b) of the Farm Security and Rural Investment Act of 2002)

b. Similarly, allow schools to use 15% of their ‘commodity’ dollars to purchase 

locally available foods that in turn help to support their communities. This 

addresses a key tension in many rural communities. Farmers support their 

schools through property taxes, and in turn would like their schools to be able 

to support them through purchases.

Other programs important to the whole.

Farmers Market and Local Food Promotion Program. As interest in direct 

markets grows, and farmers innovate to supply more. The expanded Farmers Market Promotion Program continues to serve direct marketers, but also includes those 

farm businesses that are trying to develop farm to institution and food hub opportunities across the country. It deserves more funding: the $30 million proposed in the 

Local Foods, Farms and Jobs Act will only scratch the surface of the current interest. Every new market opened or expanded through the program provides more jobs 

and keeps money circulating in the many participating communities. 

Seeds and breeds. I understand that the prevailing worldview is that the solutions for the future revolve around biotechnology, but I want to say a few words in 

favor of all-purpose, traditional breeding. In the late 1800’s, farmers in my part of 

western Kennebec County, Maine, were deeply engaged in the refinement of the 

Hereford as a cattle breed suitable for the U.S. The dry bean varieties that work 

in our humid Northeast climate were selected over long stretches of time by farmers, and then further refined by plant breeders at public universities. Even now 

farmers in New England benefit from plant breeding done at the University of New 

Hampshire by Brent Loy, who has developed melons and pumpkins that thrive in 

the Northeast. In our rush to the cellular approach, I hope we don’t lose sight of 

the value of traditional plant breeding. The Seeds and Breeds provisions of the last 

farm bill were a good starting point, but we need the public plant breeders and the 

long-term commitment to make those varieties available. 

Expanding Economic Opportunities 

In conclusion, markets for farmers are changing rapidly. There are thousands of 

new farmers markets around the country and Community Supported Agriculture 

programs (CSAs) are also rising in number. In Maine, the number of farmers markets has grown tenfold in the past 30 years, and CSAs now supply about two percent of Maine families. While this growth in direct producer-to-consumer marketing 

it exciting, there is a nearly untapped marketing opportunity at the wholesale, retail, and institutional level of sales. Through your actions with the farm bill as I 

have outlined above, you can give this stage of marketing the jumpstart it needs. 

This larger scale represents the bulk volume of food sales, and it is in this area that 

the next generation of farmers is working to make inroads. With your help, small 

changes can truly make big differences on the ground. 

1967

Thank you. I would be happy to answer questions.

The CHAIRWOMAN. Thank you so much. 

And now our final panelist is Mr. Richey, from Florida. 

STATEMENT OF DANIEL R. RICHEY, PRESIDENT AND CHIEF 

EXECUTIVE OFFICER, RIVERFRONT PACKING COMPANY; 

MEMBER, BOARD OF DIRECTORS, FLORIDA FRUIT &

VEGETABLE ASSOCIATION, VERO BEACH, FL 

Mr. RICHEY. Good morning. I would like to thank Chairwoman 

Schmidt, Ranking Member Baca, and the Subcommittee of the opportunity to appear before you today. I would also like to thank 

Committee Members Tom Rooney and Steve Southerland, who represent a sizeable portion of Florida’s agricultural production for 

their strong support of our industry. My name is Dan Richey. I am 

President and CEO of Riverfront Packing Company in Vero Beach, 

Florida. I am testifying today on behalf of the Florida Fruit & Vegetable Association and as a veteran citrus grower and shipper. 

As we look towards the next farm bill, I would like to focus on 

two areas of vital concern to growers in my state and specifically 

Florida citrus. First is the impact of invasive plant pests and diseases which pose a dire threat to the future of our industry. Today, 

citrus growers and shippers in Florida are dealing with citrus canker, greening, and black spot, a triple threat of diseases that have 

caused severe economic harm and challenged the sustainability of 

the citrus industry, which is a major contributor to the economy in 

Florida, our fourth-largest state. 

Let us focus for a moment on a citrus canker-related example. 

Citrus canker was declared endemic after the hurricanes of 2004, 

2005, spread it to the point that eradication was no longer a viable 

option. Initially, we were prevented from shipping any fruit due to 

the fear that fruit could possibly spread the disease. Fortunately, 

over time, a global consortium of researchers determined that fruit 

is not a pathway for the spreading of this disease. We eventually 

regained access to other citrus-producing states in the U.S. and 

other countries such as Japan and Korea which acknowledged and 

accepted the science. 

However, Europe has refused to accept the science and has imposed Draconian restrictions upon us. As a result, in the past 8 

years since the imposition of its regulation by the EU, our shipments to the EU have declined from 9.5 million cartons to 2.7 million cartons. With fewer shipments going to Europe, this has created an oversupply of citrus destined for another significant export 

market, Japan. Prices have dropped off and our revenues are down 

21 percent this year over last. In short, canker has caused a significant decline in our market prices due to the non-tariff trade barrier 

imposed on us by the Europeans based on an invasive disease that 

arrived on our shores. This is but one example. There are many 

others. 

We desperately need dedicated research funding and assistance 

to be able to combat these pests and diseases and other pending 

threats such as sudden death and CBC. Our growers have spent 

over $40 million of our own dollars over the past 4 years towards 

defeating the disease challenges, but we cannot do it alone. That 

is why we were extremely pleased that the 2008 Farm Bill estabVerDate 0ct 09 2002 12:54 Dec 11, 2012 Jkt 041481 PO 00000 Frm 00379 Fmt 6601 Sfmt 6601 I:\DOCS\112-30\74372.TXT BRIAN
1968

lished a number of tools that can help producers address these 

challenges that impact us both domestically and internationally 

and particularly tasked the Technical Assistance Specialty Crops, 

which was established in the 2002 Farm Bill and enhanced in the 

2008 Farm Bill and is a critical and effective mechanism for reducing technical barriers to trade and foreign markets. 

Second, the Specialty Crop Research Initiative, which was established as a competitive grant program designed to address and develop solutions to critical issues like invasive pests and food safety. 

And third, Section 10201 of the 2008 Farm Bill, which has provided critical funding and direction for innovative initiatives to 

identify and mitigate offshore threats and improve pest detection 

and rapid response in the U.S., thereby also improving domestic 

growers’ ability to export product to other countries. 

It is critically important that Congress continue these important 

programs and build on the successes they have created over the 

last 4 years. On a much brighter note, thanks to several Federal 

and state nutrition initiatives focused on children in schools, we 

are beginning to make a significant difference to health and 

wellbeing of an entire generation of Americans. 

In Florida, for example, the Department of Agriculture now has 

responsibility for school feeding programs. It is a win-win proposition for children and our producers. From a big picture standpoint, children benefit because the quality of their school meals will 

improve and they will learn healthy eating habits that can last a 

lifetime. The good news for growers is that it creates powerful possibilities for new markets and consumers. 

In addition, the Federal Government’s new dietary guidelines 

call for half of the plate to be fruits and vegetables. The Fresh 

Fruit and Vegetable Program which provides school children a 

snack each day has been a great success, this year reaching more 

than four million low income elementary schoolchildren nationwide. 

Also, new rules from the USDA require more fruits and vegetables to be served in school breakfasts and lunches. All of these factors combine to provide the perfect opportunity for specialty crop 

producers to connect with consumers and increase consumption of 

healthful fresh produce. To do that, we need a farm bill that provides specialty crop producers the tools they need in order to grow 

and market safe, wholesome, and affordable fruits and vegetables. 

Many of the pressures that specialty crop producers and my family operation face are similar to those producers of other commodities—increased regulation, high energy costs, transportation costs, 

and input costs. However, the perishability of our crops results in 

different and unique challenges for our producers. We hope these 

unique characteristics can be addressed through programs and policy in the upcoming farm bill that drive domestic consumption and 

expand foreign market access while also investing in research, food 

safety, conservation, and pest exclusion policies that will benefit 

both specialty crop producers and those who consume our products. 

Again, thank you for the opportunity to testify today. 

[The prepared statement of Mr. Richey follows:]

1969

PREPARED STATEMENT OF DANIEL R. RICHEY, PRESIDENT AND CHIEF EXECUTIVE

OFFICER, RIVERFRONT PACKING COMPANY; MEMBER, BOARD OF DIRECTORS,

FLORIDA FRUIT & VEGETABLE ASSOCIATION, VERO BEACH, FL 

Good afternoon. I would like to thank Chairwoman Schmidt, Ranking Member 

Baca and the Subcommittee for the opportunity to speak with you today on behalf 

of the Florida specialty crop industry. 

I also would like to thank Congressman Tom Rooney and Congressman Steve 

Southerland, who are both Members of the Subcommittee and represent a sizable 

portion of Florida’s agriculture production, for their strong support of our industry. 

My name is Dan Richey, and I’m President and CEO of Riverfront Packing Company in Vero Beach, Florida. I’m testifying today on behalf of the Florida Fruit & 

Vegetable Association as a veteran citrus grower and shipper. FFVA’s members represent the vast majority of fresh fruit and vegetable production in my home state. 

The association’s President, Mike Stuart, co-chairs the Specialty Crop Farm Bill Alliance, a national coalition of more than 120 organizations representing growers of 

fruits, vegetables, dried fruit, tree nuts, nursery plants and other products. The alliance was established to bolster the competitiveness of specialty crop agriculture and 

improve the health of Americans by broadening the scope of U.S. agricultural public 

policy. 

I’d like to talk to you about two issues that are of vital concern to growers in my 

state and specifically the industry I represent, Florida citrus. First is the serious 

problem of invasive plant pests and diseases, which pose a dire threat to the future 

of our industry. I also would like to discuss some very positive developments taking 

place in Florida with regard to nutrition and increased consumption of fresh fruits 

and vegetables. Our hope is that the next farm bill will continue the investments 

in the specialty crop industry that Congress first made in the 2008 Farm Bill. 

Pests and Disease 

Florida agriculture is the second largest industry in the nation’s fourth largest 

state. In 2010, Florida had agriculture exports of more than $3.1 billion, ranking 

seventh in the United States. Fresh fruits and vegetables accounted for almost $700 

million of those exports. Florida citrus alone is a $9 billion industry that fuels our 

state’s economy by providing 76,000 jobs. 

Today, citrus growers and shippers are dealing with citrus canker, greening, and 

black spot—a triple threat of diseases that have caused severe economic harm. 

These diseases are a direct result of our state’s porous borders. After 9/11, the focus 

of border inspections shifted from agriculture to homeland security, leaving our 

crops vulnerable to myriad invasive pests and diseases. Now we are paying a very 

high price. 

I’ll focus on what has happened to our industry since canker was first discovered. 

Initially, we were prevented from shipping any fruit with lesions that indicated the 

disease. Fortunately, over time a global consortium of researchers determined that 

fruit is not a pathway for the disease. We eventually regained access to other citrusproducing states in the U.S. and other countries such as Japan and Korea, which 

acknowledge the science. 

However, Europe remains in ‘‘lockdown’’ mode—a clear example of a non-tariff 

trade barrier imposed on us. Now, at additional cost, we must have USDA or a 

state-designated agency certify any grove with fruit that may be destined for Europe 

as canker-free. We also must inspect it at the packinghouse to ensure no fruit has 

lesions. As a result, in the past year our shipments to the EU have declined by a 

million cartons, or about ten percent. 

But this trade barrier has wider implications. With fewer shipments going to Europe, there is an oversupply for citrus destined for another significant export market: Japan. Prices have dropped off, and our revenues are down 21 percent. In short, 

canker has caused a significant decline in our market prices due to a non-tariff 

trade barrier imposed on us by the Europeans. 

These plant pests and diseases came into our state because our borders are unprotected. We desperately need dedicated research funding and assistance to be able 

to fight canker, black spot, greening and whatever else is right around the corner. 

We can’t do it on our own. 

As you can see, the challenges we face on the ground have a broad impact on our 

industry. That is why we were extremely pleased that the 2008 Farm Bill established a number of tools that can help producers in our industry address these important impediments that impact us both domestically and internationally. 

In particular, Technical Assistance to Specialty Crops (TASC), which was established in 2002 Farm Bill and enhanced in the 2008 Farm Bill, is a critical and effective mechanism for reducing technical barriers to trade that limit specialty crop 

1970

grower’s access to many markets overseas. TASC’s major focus is to address sanitary, phytosanitary, and technical barriers that prohibit or threaten the export of 

U.S. specialty crops. 

In addition, the Specialty Crop Research Initiative (SCRI) was established as a 

competitive grant program for specialty crops that incorporates the prevention, detection, monitoring, control, and response to food safety hazards in the production 

and processing of specialty crops, including fresh products. The 2008 Farm Bill was 

the first Federal legislation to provide the significant funding required to begin to 

address the considerable research and extension needs of the country’s specialty 

crop producers and processors. Its emphasis on stakeholder involvement, a competitive funding process, and a matching funding requirement was a welcome shift in 

Federal policy. The SCRI explicitly sought to address short-, mid-, and long-term 

stakeholder needs. Nationwide, specialty crop industries are grateful for this unprecedented initiative and are already benefiting from significant research outcomes. Finally, Section 10201 of the 2008 Farm Bill has provided critical funding and direction for innovative initiatives to identify and mitigate offshore threats, and improve pest detection and rapid response in the U.S., thereby also improving domestic growers’ ability to export product to other countries. 

The pest prevention mission of public agricultural agencies in the United States 

is to protect agriculture, the environment, and its citizens from the economic and 

environmental harm that injurious plant pests can cause. Satisfying this mission 

while, at the same time, providing for equitable and orderly domestic and international trade, is a major challenge. It is vital that the United States maintains its 

responsibility for the protection of the nation’s food supply, our agricultural economy, and plant health. Therefore, policies established under the 2008 Farm Bill provide the greatest opportunities for the reduction in risks, establish a consistent and 

clear communication structure, and provide for problem resolution with built-in accountability. We believe Congress should continue these important programs and 

build on their successes over the last 4 years. 

Nutrition 

On a much brighter note, specialty crop growers in my state have a unique market opportunity. Under the direction of Agriculture Commissioner Adam Putnam, 

the Department of Agriculture and Consumer Services now oversees the school food 

and nutrition programs. The Healthy Schools for Healthy Lives Act, which became 

effective January 1, gave the department the responsibility to educate students on 

nutrition and to ensure they have access to the healthful products provided by fresh 

fruit and vegetable producers throughout the state. 

From a big-picture standpoint, children benefit because the quality of their school 

meals will improve, and they will learn healthy eating habits that can last a lifetime. Diseases attributed to obesity and poor eating habits—high blood pressure, diabetes and heart disease—are a major contributor to soaring health-care costs. 

The good news for growers is that it creates powerful possibilities for new markets. We now can have a presence in the lunchroom in the schools of Florida 180 

days a year to tell our story and build it into lesson plans. Specialty crop producers 

have the opportunity to develop a loyal customer base among school districts, which 

feed 2.5 million children every day, and in many cases twice a day, in addition to 

summer feeding programs. 

The timing couldn’t be better. The Federal Government’s new dietary guidelines 

call for half of the plate to be vegetables and fruits. The Administration has taken 

aim at child obesity with the Let’s Move program, which focuses on healthy eating 

and physical activity. There is significant interest by consumers in eating food that 

is produced domestically, regionally or locally. The Fresh Fruit and Vegetable Program, which provides school children a snack each day, has been a great success. 

It introduces children to a variety of fresh produce they may have never tried. In 

addition, this highly effective program provides young students with a fresh fruit 

or vegetable snack every day at school and increases their overall consumption of 

a wide variety of fresh fruits and vegetables. Nationally, the program will reach 

more than four million low-income elementary school children nation-wide this coming school year. My State of Florida will receive $6.2 million this school year to implement the Fresh Fruit and Vegetable Program; this will allow 22 of our elementary schools to participate and approximately 70,000 students to benefit. 

In addition, new rules from the U.S. Department of Agriculture require more 

fruits and vegetables to be served in school breakfasts and lunches. School districts 

that meet the guidelines receive an additional 6¢ of Federal reimbursement for each 

meal. All of those factors provide the perfect backdrop for the specialty crop industry 

to connect with consumers and increase consumption of healthful fresh produce. 

1971

To do that, though, we need a farm bill that expands access and availability of 

safe, wholesome and affordable fruits and vegetables. Although I’m representing the 

grower community today, support for nutrition programs is important in every Congressional district, not just those in which producers operate. 

Conclusion 

We look forward to working with the Committee on the development of the next 

farm bill. Many of the pressures that specialty crop producers and my family farm 

face are similar to those of producers of other commodities—increased regulation, 

high energy costs, transportation costs and input costs. However, the perishability 

of our crops result in different marketing strategies, market requirements and the 

need to move our products to market quickly. We hope these unique characteristics 

can be addressed through agricultural policies that drive domestic consumption, and 

expand foreign market access while investing in research, food safety, conservation 

and pest exclusion policies that benefit the members of the specialty crops industry. 

Like producers of program crops, fruit and vegetable growers face significant challenges in the production and marketing of their commodities that must be addressed 

if they are to be competitive in an increasingly global marketplace. We ask that the 

Committee continue to build on the foundation and investment of the 2008 Farm 

Bill and ensure that our important issues are appropriately addressed as you move 

forward in the development of the 2012 Faun Bill. We certainly recognize the fiscal 

constraints facing the Congress; however, the many challenges facing our industry 

will only worsen if real and adequate policy reforms are not provided through a 

farm bill that appropriately meets the needs of the broad U.S. agriculture community. 

Again, thank you for the opportunity to testify today. The Florida Fruit & Vegetable Association and the Specialty Crop Farm Bill Alliance look forward to working 

with you on a farm bill that will continue to invest in specialty crop agriculture, 

keeping our industry strong and competitive in the global marketplace.

The CHAIRWOMAN. And thank you. 

And I would like to announce that Mr. McGovern, the gentleman 

from Massachusetts, who is not a Member of this Subcommittee, 

has joined us today. And I have consulted with the Ranking Member and you are totally welcome and we hope that you will ask 

some questions when you are called. And we may have other Members join us as well. 

I would like to begin by asking the panel a general question. 

Given the fiscal constraints we are dealing with, where should we 

prioritize funding for specialty crop programs? Who wants to take 

a shot at that? 

Mr. LEE. Well, in the nursery industry, what we have been doing 

is looking at the process of the old regulatory framework of saying 

I am going to have a pest-by-pest program, quarantine. I am going 

to have a shipment-by-shipment inspection. It is not going to be 

sustainable going forward. Most of the section 10201 funding that 

we have looked at was a coordinated effort of using best management practices and having that being done on the nursery level, requiring less inspections. We have also managed to find out that by 

looking at these various BMPs, we can apply them not only to one 

set of pests but to multiple sets of pests, reducing the need for any 

additional type audits for those kind of things. 

So we have seen a great deal of success in pooling those type programs together that would be less labor-intensive in the future. I 

do have to say that to be able to pull that off, it took a very much 

coordinated effort between the stakeholders, USDA, National Plant 

Board, all those people involved sitting at the table because we saw 

that these programs, once we start having those discussions, we 

are able to take existing programs and modify them slightly making them easier to use, less labor-intensive. And we are also able 

to apply them to additional pests. 

1972

The CHAIRWOMAN. Thank you. 

Anyone else? 

Mr. RICHEY. Madam Chair, just to reiterate maybe some of my 

oral testimony, there are three areas that are of keen interest to 

our industry and are broad-reaching. And one of those is the Specialty Crop Research Initiative. That is an area of significant funding but has a broad reach. Citrus greening may be the poster child 

for that program when you think about Texas, Arizona, Florida, 

California, and we are wrestling with this in more of a global 

sense. And that program is one that has a significant funding that 

can be overarching and overreaching to be able to assist us in that 

regard. 

Certainly continuation of the state block grants, that has been a 

very great benefit to us. Those dollars have been deployed on a 

competitive basis in a very positive manner from small producers 

to large producers all the way, facing the whole gamut there. 

And certainly Section 10201, that has been also again used in 

Florida specifically for port interdiction. We are number two second 

to California as far as ranking relative to the potential for disease 

proliferation and introduction. And that program has been very 

beneficial in an outreach. The Don’t Pack a Pest Program that is 

in all of the airports and seaports has been very effective. 

So those are three areas that I would like to ask for your consideration on continuation and funding at adequate levels. 

The CHAIRWOMAN. Thank you. You know, I hear the term buy 

local, and even in my own community buy local has a variety of 

definitions and I was wondering how each of you would define buy 

local. What does that mean? 

Mr. JARRARD. I will start by answering that or try to answer 

that. Local means a lot of different things to a lot of different people but the best way to approach the issue is really just consider 

that all produce is good produce whether it is organic, whether it 

is local, or whether it is conventional. Let the market determine 

and the consumer determine how they want to purchase their 

produce and from whom they want to purchase that. So it is a very 

tough definition to describe but again let the market determine 

which avenue they pursue their produce purchases from. 

Ms. SCHACHT. I tend to agree with him that mine is a local market and I draw from my community and outskirts of Columbus. 

The consumer will ultimately decide that. They will make their decisions and their choices according to what they value in that if we 

are given those tools through the research initiative or the block 

grants to have the highest quality produce, it is not going to matter 

if it is organic or convention or if it is from a bordering state to 

your state as well if it is the high-quality nutritious food that the 

people need in their hands. 

Mr. LIBBY. I would just add that I think one of the benefits to 

everybody at the table from the movement toward more local food 

eating is that people get in the habit of eating fruits and vegetables 

who may not have had that habit before. So in the Northeast 

where seasonal growers, people start eating fruits and vegetables 

and eat more of them because they have a relationship with a 

farmers market or a CSA and then they go looking the rest of the 

year and they go looking for high-quality product from wherever 

1973

they can find it. So it is really changing people’s daily habits 

through the exposure to direct marketing that is making a big difference out there. 

The CHAIRWOMAN. Thank you. Now, I am going to turn my attention to the senior Minority Member, Ms. Pingree. 

Ms. PINGREE. Thank you very much, Madam Chair. Thank you 

again for holding this hearing today. It has been fascinating really. 

I appreciate all of your testimony. And while I want to focus a little 

bit on some of the issues around local produce and farming, I appreciate what Russ Libby just said, that part of what we are all 

talking about is developing healthier food habits, getting people to 

eat more fruits and vegetables. This is about making them more 

available to people whether they buy them on SNAP benefits or 

from the senior program, or get them in school lunch, educating 

people to cook with healthy foods and vegetables, these are all 

great things both for the health of our nation and for our nation’s 

economy. So I commend you all here today and just wanted to 

thank you so much for what you are doing everywhere around the 

country. 

I am thrilled to be able to have Russ Libby here since we are 

both from the State of Maine. I just want to emphasize again one 

of the reasons I have been focusing on some of this legislation is 

not just because of my own personal experience but also in our 

state when Russell said that four percent of the farmers now have 

organic markets, 20 percent of our dairy farmers. This is such a 

huge reversal over the last 20 years when all we saw were dairy 

farmers closing down their businesses, local farmers going out of 

business, and what happened to our small local economies going in 

the same direction. So we are just thrilled to see some growth in 

our rural economy and some new opportunities for us and again to 

encourage people to have healthy food habits. 

I already mentioned earlier in my statement, the numbers are 

out there about these new markets and I guess I am going to ask 

you specifically, Russell, can you talk a little bit about some of the 

barriers that are out there to farmers? We hear a lot whether it 

is aggregation or distribution, some of the things that are available 

in other places we don’t have in regions like New England. And 

also how do you evaluate what we are doing on promoting farmers 

markets and other ways for people to buy more locally and buy direct-retail to give more money to the farms? So just feel free to answer those. 

Mr. LIBBY. Well, most of our farmers start as direct markets. 

Many of them are beginning farmers. They work their way up. And 

very quickly they realize that a direct market by itself isn’t sufficient and they are working their way into wholesale markets. And 

you very quickly find that scale becomes an issue, that hitting a 

large wholesale market on a continuous basis is challenging for individual farmers. And we basically started recreating a distribution 

system with multiple wholesalers aggregating product and moving 

it into places that farmers aren’t going to get on an everyday basis. 

I think the real issue is the one that the panelists from California and Florida have already met that at some point you need 

to aggregate volume to supply large volume markets, and in New 

England that is just beginning. We are missing that aggregation 

1974

stage for many products and that is going to be critical if we are 

going to access larger markets with New England produce. It is 

happening. The biggest barriers are really access to capital. If 

somebody has an idea, there is no clear pipeline for funding, processing, or aggregation systems once you move beyond individual 

farms. 

Ms. PINGREE. Great, thank you. 

Ms. Schacht, do you want to answer that? I know you clearly also 

have a local market and I appreciate your testimony in that regard 

as well. 

Ms. SCHACHT. Thank you. Actually, in my opinion, I don’t think 

the barriers are quite as significant as people make out to. We 

started with three crops on 11 acres and we are now about 20 different crops on 60 acres so we have been able to grow our market 

ourselves. I mentioned that we also wholesale to some distributors. 

It is up to the producer to decide what scale and level they want 

to be at and how they want to work that and then to go after the 

tools they need for doing so. And the opportunities in our country 

is there for that. 

The aggregation is if you want to hit the box stores or you want 

to hit the very, very large outlets, and that is a challenge in that 

it will take innovation or it will take the efforts of those involved 

to really put together the program they want. I would rather see 

again the funds and the priorities of the farm bill be on the research side of it, that we be given the kind of science-based background on the issues that we are having to address as opposed to 

getting involved in the channels that we as producers need to work 

to develop ourselves. 

Ms. PINGREE. Great, thank you. 

I have about 15 seconds. Again, I appreciate all of your testimony. I represent organic, sustainable, and conventional growers in 

my state and I am anxious to see people eat more fresh food. 

Russell, can you say 5 seconds about the organic crop insurance 

issues just briefly? You know, one of the challenges is organic growers have to pay a premium and we are just trying to figure out 

ways to make sure everybody has access to crop insurance that 

works for them. And I am out of time but if you can give 2 seconds, 

I bet the chair will allow it. 

The CHAIRWOMAN. More than 2 seconds, I want to hear your answer. 

Mr. LIBBY. Well, the critical issue for not just organic farmers 

but organic farmers in particular is that the crop insurance program as it is structured now is really not very favorable to diversified farms. So you have a diversification issue and an ability to 

prove your base, your yields, which gets more complex the more diverse your farm is. And for organic farms in particular it has been 

challenging for USDA to find ways to recognize organic price premiums because there is not continuing ongoing information available on what those premiums are. So individual farms have their 

history. MOFGA has been doing a price survey for about a decade 

so we have some state-level information but there is really no good 

national price information that lets USDA assess how much of an 

additional surcharge if any they need to charge for an organic crop 

insurance package. 

1975

Ms. PINGREE. Thank you. 

Thank you for the additional time. Thank you, Madam Chair. 

Mr. JARRARD. Madam Chair, just a minute, if I might just 

add——

The CHAIRWOMAN. Please do. 

Mr. JARRARD.—and I won’t take too much time, but the crop insurance topic is very important to us in California, Arizona where 

a lot of the produce is grown. We don’t want any type of programs 

that would be in any shape or form a subsidy across the produce 

industry. So we are very adamant that there are no crop insurance 

products that are built either third-party or internally through the 

government forces that are going to corrupt the market forces for 

competitive pricing. 

The CHAIRWOMAN. Thank you. 

Now, I would like to ask Mr. Southerland if he has any questions. He is not here. I am sorry, Mr. Crawford. I apologize. I 

looked right at you. I mean you are next, Mr. Crawford. 

Mr. Crawford, would you like to have any questions? 

Mr. CRAWFORD. Sure, thank you, Madam Chair. I appreciate the 

opportunity. 

I understand the importance of export programs such as Technical Assistance for Specialty Crops, market access programs, so in 

general anyone that wants to comment, do you feel these programs 

are sufficient to secure the kind of access around the world that 

you need to maintain a vibrant industry? Anybody want to take 

that one? 

Mr. RICHEY. I will take a shot at it, Congressman. 

The TASC grant program has been very beneficial for us and 

when we ran into the brick wall in Europe, we had to very quickly 

move to get some research to pursue whether or not fruit was a 

vector for spreading this disease. And we were able to do so by accessing TASC grants. And they were very, very helpful. Without 

them, we probably would not be anywhere near down the road towards trying to come to a conclusion of this barrier that the Europeans have put before us. So it was very, very beneficial and very, 

very helpful. 

Mr. CRAWFORD. Okay. In your view was there anything else that 

could be done to expand market opportunities? 

Mr. RICHEY. The market access issue in our industry has been 

probably paramount because we were initially denied access to our 

own country. So just additional levels of funding to take on the research challenges that we have as our borders have become more 

porous and we have these invasive pests and diseases that were 

nonexistent 15 years ago. The need for additional research dollars 

so that we can take on these issues as we face them would certainly be beneficial. 

Mr. CRAWFORD. Excellent. Okay. On that note, I want to direct 

a question to Mr. Lee. The Pest and Disease Program was designed 

to help different states and regions of the country deal with their 

own unique pest and disease pressures. How is APHIS working 

with the various stakeholders to ensure that we don’t have a onesize-fits-all program in the nursery industry? 

Mr. LEE. What we have developed, there is a group that has been 

pulled together by USDA APHIS. It is called SAPP, the Systems 

1976

Approach Program Partnership. And in that the very beginning 

premise that we came around to were, number one, it had to be 

scalable. Number two, it needed to be risk-based. In other words, 

there are parts of the country either by geography or by basically 

the pest pressure or the products they grow, the destination markets, all those things are factors that come into play when you 

start saying what does a program need to look like? So what we 

have been working towards is putting together more or less a toolbox that you can pull pieces out of and apply the ones that apply 

to you to reach the pest mitigation standards you require. That is 

a lot said to try to pull something together like that, but the programs we have looked at so far have far more commonalities than 

they do differences. 

Mr. CRAWFORD. Excellent. Okay. 

Mr. Libby, I have a question for you. We are in the process right 

now in the commodity title of dealing with potentially seeing the 

direct payment to producers of the traditional program crops, seeing that direct payment eliminated. What is your opinion? Do you 

think a direct entitlement payment to cover organic certification 

costs should be maintained? 

Mr. LIBBY. Yes, I do and I stated that in my testimony. There 

are three reasons that is important. One is that the certification 

fees that are charged are based on gross income but of course farmers are not grossing their income. Many of them are barely netting. 

There are different classes of farmers for whom cost-share is probably less relevant, but it is hard to sort what those are in Federal 

legislation. So do you pick successful farmers and they are out and 

unsuccessful farmers are in? 

The cost-share program in this case is different from the Direct 

Payment Program because you have to be certified if you want to 

use the word organic. The Federal Government has taken control 

of that word. You have no choice and so you are being asked to be 

certified if you are selling more than $5,000 worth of product a 

year whether your markets require it or not. So in essence, those 

requirements are forcing people to be certified and the cost-share 

is a partial reimbursement of some of those costs. 

Mr. CRAWFORD. Okay. So basically that sounds like the heart of 

your argument there is that because you are forced to be certified, 

there should be some sort of mechanism in place to help offset the 

cost associated with that? 

Mr. LIBBY. Yes, I see it more as comparable to participation in 

NRCS programs than I do the direct payments. It is capped. It is 

limited at $750 per year per farm. It is capped at 75 percent so if 

your fee is lower, it is a lower fee. And it has no relationship to 

the number of acres that you are producing. 

Mr. CRAWFORD. Thank you, sir. 

I yield back. 

The CHAIRWOMAN. Thank you. 

Mr. McGovern? 

Mr. MCGOVERN. Well, I thank you very much, Madam Chair. 

And I want to thank Mr. Sablan for giving me this opportunity to 

go first. 

First of all, thank you all for your testimony and I appreciate it 

for a number of reasons. One reason why I am glad you are here 

1977

is I heard over and over the importance of some of these nutrition 

programs and some of these programs like Fresh Fruits and Vegetable Program, the Farm-to-School Program was mentioned, the 

Specialty Crop Block Grant Programs, the benefits that they bring 

to helping get healthy food to people in need and kids in schools. 

Mr. Jarrard, you talked about Section 32 in the DOD Fresh Program. And unless I missed this, nobody here is advocating that we 

cut any of these programs, are you? 

Mr. JARRARD. No. 

Mr. MCGOVERN. I mean you are talking about the benefits of 

these programs and not about the need to cut these programs and 

you have made the case why these programs are important. One 

is because if you cut back on some of these programs, there are 

costs associated with that, cost to farmers, cost to citizens in the 

community, a less healthy community. You will have more avoidable healthcare costs that we will have to take care of. Kids don’t 

learn as well in school without a nutritious meal. Productivity in 

the workplace suffers. You know, there are costs to not supporting 

the programs that you have just talked about. Anybody disagree 

with me on that? 

Mr. JARRARD. I certainly don’t disagree. You are dead on correct. 

Mr. MCGOVERN. But here is kind of the irony and that is we are 

talking about building an infrastructure to provide healthier foods 

for our people and yet a couple of weeks ago the full Committee 

here cut $33 billion out of the SNAP program, which is the very 

program that I think would enable people to be able to take advantage of some of these foods. 

Ms. SCHACHT. I think, too, the thing you have to recognize 

though that there are some distinctions in the SNAP program, and 

the SNAP program is more universal dollars to be spent at the recipient’s discretion. But there is work being done to better educate 

them in order to use those benefits in a more wise way. 

Mr. MCGOVERN. We wouldn’t want to cut any programs that help 

promote nutrition education? 

Ms. SCHACHT. And I am probably a little bit of an anomaly on 

the panel. I tend to, from a personal perspective, want to see cuts 

to occur and occur across the board, and if you need to make cuts, 

then we certainly recognize that we may have to be part of that 

where a portion of what was in the 2008 bill cannot be provided 

again. We are just concerned that if you are going to eliminate programs altogether that have had benefits, that they not be eliminated. 

Mr. MCGOVERN. But you talked about the importance of local 

farmers markets being able to take advantage of EBT technology 

and you mentioned there were some issues with farmers markets 

being able to utilize that. Am I correct? 

Ms. SCHACHT. Well, I think it was both of us but I am still not 

sure if you really asked a direct question about it. 

Mr. MCGOVERN. I guess what I am just trying to point out here 

is kind of the irony of what we are doing here today. We are talking on one hand about the importance of building this infrastructure to support local farmers, to provide healthier foods to our citizens of all incomes, and at the same time we are moving to make 

significant cutbacks: $33 billion was what we voted on a few weeks 

1978

ago—that is huge—which would make it more difficult for families 

to be able to utilize that benefit at farmers markets. And all I am 

simply saying is that none of you are advocating cutting back on 

any of the programs that you have been talking about here today, 

and we are going to take up a reconciliation measure in the House 

Thursday which exempts the Pentagon budget from any cuts. And 

I just think there is a certain irony to all of this. 

Mr. Jarrard, do you want to comment? 

Mr. JARRARD. Go ahead, Dan. I will comment. 

Mr. RICHEY. Thank you, Congressman. I think one of the items 

that is worthy of recognition here is the small degree relatively in 

a sense that specialty crops are a part of the farm bill. And we 

have just recently over the last two farm bills begun to build a little traction and be able to get what we believe is recognition. What 

we are talking about today is a smaller portion. We are not a subsidized—there is no set aside programs as Mike mentioned earlier. 

There is no overarching sustainable benefits that we receive in the 

specialty crop alliance here, and we are looking for support of these 

programs, which are a smaller part of the farm bill and are just 

now tracking up that are more reflective of what we are talking 

about relative to that as opposed to the overall——

Mr. MCGOVERN. Yes, I mean I support all that you have talked 

about here today. I am a strong supporter. You know, as we discuss 

this farm bill, we are talking about the importance of the programs 

that you provide and this Committee has already taken action to 

cut back on SNAP by $33 billion. It seems to me the good work 

that you are doing, we want more people to take advantage of it. 

Mr. JARRARD. We do. And if I might add, and we don’t want the 

Fresh Fruit and Vegetable Program to get caught up in the conversation you are going to have later today about nutrition because 

it is very important to recognize that it is a distinct program focused on the underprivileged children in school to promote 

healthier eating habits by providing them healthy fresh fruits and 

vegetables and nuts. 

And actually, if you need some additional ammunition to support 

that, when you look at the 2011 study that was done to follow up 

to find out the benefits of that program, it did actually increase 

consumption among those children of fresh fruits and vegetables by 

15 percent. So it is making a difference. It is $150 million. It is $1 

to $2 a week per child, which is a pittance. 

Mr. MCGOVERN. And I strongly support it. I also want to make 

sure that their parents can be able to take advantage of farmers 

markets and be able to have access to fresh fruits and vegetables, 

too. 

The CHAIRWOMAN. Thank you. And I look forward to a lively discussion when we go to the next panel. 

Ms. Schacht, I would like to ask you why are the research dollars 

so important or valuable to producer growers? 

Ms. SCHACHT. I think one of the things that has to be recognized 

is, again, about the diversity of the type of crops that are produced 

and that the scales of that is at significantly small numbers at 

times, but yet very high economic dollars involved. They can generate and they can offer, again, quite a significant improvement in 

dietary needs in that producers are willing to strive to find new 

1979

technologies and new methods, a variety of tools that they can use. 

But it is very difficult to do that on the scale where they really get 

a comprehensive picture and really the caliber of end results that 

give them the information they need. So if we do it through something like the Specialty Crop Research Initiative where the landgrant colleges or other research entities have that additional dollars, then we see the kind of research we need in order to implement, to have those new tools to implement on our farms. 

The CHAIRWOMAN. Does anybody else want to add to that? Mr. 

Libby? 

Mr. LIBBY. The Specialty Crop Block Grants are really the place 

that fills in holes. As our land-grant institutions have been under 

financial pressure, as our state agencies have been under financial 

pressure, the Specialty Crop Block Grant Program has become the 

place where people can go quickly to solve problems that they otherwise don’t have access to funds. And it has become a way to jump 

outside the day-to-day and jump into the possibilities in a way that 

I don’t think there are any other pools of money there. So that cost 

sharing out to the states is a very effective way to make things 

happen. 

The CHAIRWOMAN. Mr. Jarrard, do you want to add anything? 

Mr. JARRARD. Just to reinforce his point about the block grants. 

Since the 2008 Farm Bill, 180 food safety programs have been implemented with that money across 39 states. I think we are all 

aware of the food safety instances that have broken out over the 

course of the last 7 years around produce. There has been a lot of 

benefit centered around food safety as a result of this block grant 

money being tailored and allowed the states to choose where to allocate that money to what is most important. You know, again, so 

it is very, very effective the block grant money. 

The CHAIRWOMAN. Can you add how the Specialty Crop Block 

Grant Program has been utilized in your specific state, Mr. 

Jarrard? 

Mr. JARRARD. Yes, so in California green onions are a commodity 

that are vulnerable to Listeria, for example, because they are 

grown in the ground and surrounded by a lot of dirt obviously. And 

so there was a grant made by the State of California through the 

Federal State Block Grant funds that allowed us to focus on how 

we could develop a better food safety program just around the commodity of green onions, which is very important to recognize because not all commodities are treated equally, nor are all geographies. So a lot of times you have to tailor a specific food safety 

program around a product or around a particular locale. 

So the Green Onion Program allowed us to educate the growers, 

as well as the processors of green onions and the handlers on new 

food safety practices. And quite honestly, in the last 4 years, I can’t 

recall an incident related to green onions when before that I actually had our company quit selling green onions for that very reason. I didn’t want to be vulnerable to one commodity until those 

food safety programs were put in place. And now they are and now 

we are back to selling green onions. 

The CHAIRWOMAN. Thank you. Mr. Lee, the pest and disease program was designed to help different states and regions of the country deal with their own unique pest and disease pressures. How is 

1980

APHIS working with various stakeholders to ensure that we do not 

have a one-size-fits-all program for the nursery industry? 

Mr. LEE. And this question might have been asked already, but 

we have worked with the USDA APHIS really since about 2009 

both in developing the framework of the expectations of the sections 10201, 10202 funding for our industry. It also involved a lot 

of collateral berries, grapes, those kind of things. From that, we 

have continued to work together looking at what the program 

should look like, what the National Clean Plant Network would 

look like. We have looked at all those things and have been able 

to take some existing programs, make those more scalable to what 

the individual sites or areas or the risk factors are in that particular area based even upon the product they supply where they 

ship it to you. And so we have been walking down that path. And 

much of the section 10201 funding are running parallel lines to 

supply the information we need to be able to make those sciencebased decisions. 

The CHAIRWOMAN. Thank you. I would like to recognize the 

Ranking Member of this Committee, Mr. Baca. And I know that 

you probably had an opening statement, and if you would like to 

briefly in 30 seconds summarize it for the record, that would be 

fine. And otherwise, I don’t know how your other two Members feel 

if I jump in and let you ask some questions. Are you all fine with 

that? 

Mr. BACA. I would like to go in the order. 

The CHAIRWOMAN. All right. 

Mr. BACA. I think Mr. Sablan has been sitting here for some time 

and we should go to him before I do. But I do appreciate that very 

much. Thank you, Madam Chair. 

The CHAIRWOMAN. All right. Mr. Sablan? 

Mr. SABLAN. Yes, I thank you, Madam Chair and Mr. Baca. I am 

going to make this short because I am very excited about the next 

panel actually. 

But Mr. Jarrard, much if not most of the product we get from 

the states comes from your area, products and those kind of vegetables. But in your testimony one thing that pops up is you mentioned the pressure the agriculture industry is under to secure a 

legal workforce. So can you give how this agriculture industry in 

California would be impacted say if E-Verify legislation will be enacted on a national level, please? 

Mr. JARRARD. So if I understand your question, you are focusing 

on labor, is that correct? 

Mr. SABLAN. Yes. Yes. Because everyone is talking about the food 

but we need farmers. We need people to produce the food. 

Mr. JARRARD. Yes. So definitely that is outside probably the 

bounds of today’s conversation but one that we are very passionate 

about. And we are actually going to be here in D.C. next week with 

meeting of consortium of different industries to help create momentum for developing a Guest Worker Program. As you are very familiar most likely that 70 percent of the workers within agriculture 

are not well documented and it puts our companies at very much 

a high risk. And this extends beyond just agriculture; it is true for 

hospitality, it is true for construction, it is true for every restaurant 

that you walk into across the United States. And I know that is 

1981

a bold statement but it is pretty fair. It puts every business at risk 

so we need to address the immigration status of a lot of the individuals in this country and provide them a legal means to be working in this country. 

Mr. SABLAN. Like how? 

Mr. JARRARD. Excuse me? Guest Worker Program. 

Mr. SABLAN. Yes. Any suggestions on how we resolve making 

sure that you are not hiring people who are not—and I like your 

words, not well documented. 

Mr. JARRARD. Yes, and I apologize. I had a hard time understanding your questions. Can I ask you to repeat it? 

Mr. SABLAN. Yes, what do you suggest we do—when you discuss 

with the different groups—to address the problems that you may 

have with not well documented workers? 

Mr. JARRARD. Well, first, I keep mentioning Guest Worker Program, right, and so that is maybe a bit of a blanket statement. But 

we need a means for identifying who is in the country illegally, 

give them the opportunity to legally apply for work in the United 

States, and then gauge whether they extend their stay here or not 

or renew that stay. 

Mr. SABLAN. Because you need these workers. 

Mr. JARRARD. Oh, yes. 

Mr. SABLAN. Are you with me? 

Mr. JARRARD. Yes. 

Mr. SABLAN. I mean probably most of you need these workers. 

Mr. JARRARD. Right. The myth is that most Americans will do 

these jobs and the reality is that they won’t. 

Mr. SABLAN. Yes. And I know this is also a matter that maybe 

is outside of our Committee’s jurisdiction but I am going to get in 

trouble with this, but do you believe that CBP, Customs and Border Protection, is devoting adequate resources to help mitigate the 

introduction of new pests and disease through U.S. ports? 

Mr. JARRARD. I am going to defer that question to either Dan——

Mr. SABLAN. Maybe Mr. Richey? 

Mr. JARRARD. Yes. 

Mr. RICHEY. I think I understood the question relative to 

invasive pests, are we doing an adequate job? I think after 9/11 

when we transferred the responsibility of the agricultural stations 

at the airports and seaports to Homeland Security, at least in our 

industry, we can tie a direct correlation in an uptick of invasive 

pests and diseases. We have had an ongoing wish to see that back 

to the Department of Agriculture for a more enhanced look at those 

invasive pests and diseases. Homeland Security obviously has a 

priority and rightly so and it is not necessarily agriculture products 

coming into the country. 

So we have seen a downturn in what we believe is the interdictions. Some of the block grants have allowed us to ramp that up 

in our own states, so we have used that money to try to complement the efforts from the Federal Government. Again, we are 

probably the poster child. We had no canker. Well, we did have 

canker. That would not be a correct statement. We had no black 

spot, we had no greening. All these things have come into our country through the porous borders that we now have and have not 

been properly mitigated and captured at the border. 

1982

Mr. SABLAN. Yes, my time is up. Thank you, Madam Chair. 

The CHAIRWOMAN. Thank you so much. 

Ms. Pingree, do you have any more questions? 

Ms. PINGREE. Does Mr. Baca have questions? 

The CHAIRWOMAN. He wanted to go in order. 

Mr. BACA. She asked questions previously? 

The CHAIRWOMAN. She did. Well, then, okay. I misunderstood 

you. Then the Ranking Member, would you like to make a statement, ask questions? 

Mr. BACA. Well, thank you. I will submit my statement for the 

record without having to go in there, but I appreciate that, Madam 

Chair. 

[The prepared statement of Mr. Baca is located on p. 1945.] 

Mr. BACA. I would like to ask some questions. 

Mr. Jarrard, food safety is such an important concern to the 

American public. Can you describe the steps that are taken to ensure that all fruits and vegetables—regardless of where they are 

grown—meet the very best food safety standards? And I am very 

much concerned with that because I want to make sure that American farmers are the first and the best at providing safest fresh 

fruits and vegetables in the world. 

Mr. JARRARD. Well, thank you for the question. It is a very important one to answer. One of the best models that I can cite is 

after the 2006 spinach E. coli incident, the industry within California and Arizona reacted very quickly by creating and implementing the Leafy Greens Marketing Agreement by which all 

members in California and Arizona are bound to abide by. And 

they were tailored specifically to leafy greens, leafy greens being 

your romaine, green, red leaf, iceberg-type lettuces and spring 

mixes. And within 2 months we had those standards developed and 

being incorporated into the practices of our growers and our handlers. So again that is a very important model to cite. We are in 

the process of trying to make that a national requirement, but that 

obviously requires the voluntary signup of a lot of the other states 

because it is an agreement as opposed to an order. 

In terms of other measures that we are taking, I will go back and 

cite the block grant programs. And the fact that there have been 

180 of these food safety programs developed across 39 states since 

2008 is testament to what not only those funds can do but how important it resonates with the growers across the United States. Has 

it been competitive and developed a sense of assurance among the 

countries that we export to? I can say that definitely in the case 

of Canada where we saw a lot of product. They will not accept any 

type of leafy greens unless it is a Leafy Green Marketing Certified 

Grower. 

Mr. BACA. Yes. Well, we are in compliance. I appreciate what our 

American farmers are doing. I just want to make sure that when 

we look at some of the produce that is being imported to our markets we make sure of its safety. The consumer who is buying that 

product then has to know the difference between an imported product and an American product, whether it is fresh fruit, vegetables, 

or others. And that needs to be done because there has to be clarification. And maybe I am biased in saying, hey, buy only American 

1983

products, buy our American farmer’s product versus something that 

comes from another country. 

I am also concerned with the cost effectiveness of what we are 

doing, when it comes to implementing our safety requirements. 

And what is it costing us when we find out that a product from another country is not safe? Is there a cost to this and is it cost effective? 

Mr. JARRARD. Yes, honestly I can’t speak to the programs outside 

of the United States, the food safety programs. Food safety resonates very loudly with our customers and our customers purchase 

both from the United States as well as internationally. And there 

are a number of third-party food safety audits that everybody who 

supplies them is required to pass. There are global food safety initiative standards that are being developed and implemented across 

the spectrum of all produce, including internationally. Is it an even 

playing field today? No, it is not. It is not an even playing field 

within the United States but we are moving in that direction. 

Mr. BACA. Are there any policy changes that need to be done in 

the 2012 Farm Bill to ensure the highest food safety standard possible? 

Mr. JARRARD. I can’t speak to the farm bill. I may defer that to 

one of my panelists here in a moment, but I will mention something that is a bit onerous to us and that is the Tester amendment 

that was made a part of the Food Safety Modernization Act that 

excludes growers of less than $500,000 in revenue of having to adhere to those food safety measures. With that I will pass it on to 

one of the other panelists. 

Mr. BACA. Okay. I know that my time has run out but I would 

like to ask Mr. Lee a question if you don’t mind, Madam Chair. 

And only because I have been wearing this band that I have on me, 

One Family, One Alabama. I actually went there when we were 

talking about the immigration problem, and I would like to ask Mr. 

Lee. You mentioned the struggle of specialty crops producers on 

labor availability—and I know Mr. Sablan asked the question—

how would you describe the labor situation in Georgia? What impact has H.B. 87 had on the agricultural labor in Georgia? 

Mr. LEE. Yes, immigration is probably the largest issue we have. 

When the bill originally passed, it took effect in July of last year 

for certain sized companies. But the fear that was out in the workplace of racial profiling was enormous. 

Mr. BACA. Oh, yes. 

Mr. LEE. All the training the House Bill required to prevent racial profiling has never happened. Your local law enforcement people do not even know where to go to get that training. So that has 

not been made available. Initially, as soon as the bill passed and 

took effect in July of last year, I have lost roughly ten percent of 

the workforce. Now, I don’t believe they were all illegal; they may 

have had members of their family that was potentially illegal, but 

that was a big drain. I can tell you the economy has been tough 

on our industry now just like everyone else’s industry. Typically, 

we would be running a crew in the Georgia location alone of somewhere around 550 people, which requires us to hire 130 people in 

like the February and March time frame. That would not happen 

today. So if the economy miraculously turned around tonight, our 

1984

production levels would probably remain constant because there is 

not the workforce to do the job. 

Mr. BACA. Thank you, Madam Chair. 

The CHAIRWOMAN. Okay. In the interest of time, I am going to 

ask our Members to keep their questions for 5 minutes and we are 

going to continue this round and then go to the next panel. 

Ms. Pingree? 

Ms. PINGREE. Well, thank you very much, Madam Chair. 

It is great to have a chance to chat with all of you a little bit 

again. I am just going to pick up on at least one question that we 

really haven’t talked at all about before and it is great the dialogue 

and the information you all have been providing with us this morning. 

So Russell, I want to know a little bit more about the beginning 

farmer programs and the impact they have. You know, one of the 

concerns, we have talked a little bit about the workforce and one 

of the challenges in the United States is the average age of the 

farmer has been going up and the personnel to do the farming is 

a challenge. And one of the great things we have experienced in 

Maine is the average age of the farmer is actually going down and 

we are seeing a certain amount of increased interest in young people getting engaged in farming. And there are a lot of barriers, as 

we all know, whether it is access to capital or many of the regulatory questions people have talked about today. I mean it is not 

easy. Even if you are taking over a family farm it is not always 

easy to hang onto it and continue doing it. 

But can you just talk briefly about some of the beginning farmer 

programs and how they are working? And I know it is one of the 

things that we do look at in the farm bill. 

Mr. LIBBY. Well, Congresswoman Pingree, I know you have experience here because you started one of our programs a few years 

ago. 

Ms. PINGREE. And I didn’t bring this up for that reason, okay? 

Mr. LIBBY. But the BFRDP program has been very helpful to 

farmers across the country to people who are trying to train new 

farmers. So we have been running an apprenticeship program for 

many years matching people who were interested in farming with 

farmers who were willing to teach. We used to have 50 people a 

year in that program; now, we have closer to 200 people a year. 

And we realize that they are not ready to farm after they have 

done 1 or 2 summers of work on a farm. They have the bug; they 

are not ready. And we tried to find a bridge between them, and we 

started a 2 year program to provide intensive education, 

mentorship, and business planning training to prospective new 

farmers. 

As I mentioned earlier, we have had 120 people go through that 

program in the last 12 years; seven out of eight of them are still 

farming. And we funded out of our own funds originally, we used 

foundation funds to grow it a little bit, and then we just received 

a BFRDP grant to carry us for the next 3 years. We are bringing 

in 25 new people per year in a 2 year cycle. It is not a huge number but it is a really successful model because what we are finding 

is these are successful young farmers. 

1985

And I will just use one example of somebody who just stepped 

off our board. Year 1 had worked on a farm in New York, came 

back to Maine ready to farm, leased land and now in year 4 is 

grossing a little over $200,000 per year, four full-time employees, 

six seasonal employees. Another person started with no farming experience, farmed on our education center for 2 years, and now yearround eight greenhouses, ten employees. This is how we are creating jobs on the ground by giving people a little bit of an educational start and turning them into people who are ready to run 

successful farm businesses. 

So I would really encourage the Committee to support BFRDP 

funding. I know it is a challenge finding funding right now but if 

we are thinking about who is going to grow food in the future and 

we want independent farmers, somewhere they need to be trained. 

Ms. PINGREE. Thanks. I have about a minute and a half. And 

just to clarify, I also have the hospitality industry in my district 

so I am very aware of many of the issues that have been brought 

up about the difficulty of accessing workers. 

So beyond just the immigration issues, I am wondering if anybody else has either had successes or knows of issues around how 

we make it possible for more people to be on a farm, to be an entrepreneurial farmer, the farmer themselves. Anybody want to make 

a comment on this? And if you don’t have experience, you don’t 

have to. 

Great. I will just yield back my time. I know we are anxious to 

get to the next panel. And I appreciate again everybody’s testimony 

today. It has been really insightful and you come a long way and 

you are busy people and I thank you very much for being here. 

The CHAIRWOMAN. Thank you. And I am going to pass on my opportunity for questions and allow Mr. McGovern 5 minutes. 

Mr. MCGOVERN. I will pass on my opportunity to ask questions. 

Again, I just thank the panel for taking the time to be here. This 

has been very informative. Thank you. 

The CHAIRWOMAN. You are welcome. And Mr. Sablan, I know you 

have to leave to go somewhere else, but would you like to ask questions, make a statement at this point? 

Mr. SABLAN. Yes, but it is for the next panel, Madam Chair, if 

I may. 

The CHAIRWOMAN. So you wanted to make a statement before 

the next panel because you have to leave? Is that what——

Mr. SABLAN. With the next panel, yes. 

The CHAIRWOMAN. I will yield the opportunity for you to do that. 

Mr. SABLAN. Oh, thank you very much. 

The CHAIRWOMAN. I am pretty easygoing. Can you tell? 

I would like to thank all of you. We could really talk to you all 

day. You have shown us so many insights into the industry, and 

I just want to say one thing as we go to the next panel on nutrition. Nutrition is important in each and every aspect of our lives, 

and Mr. Libby brought to my attention that the first female Olympian for the marathon, Joan Benoit Samuelson, is a personal friend 

of his and she is a person that I admire. And I know that the reason why she runs so well is because she has a very well balanced 

diet and is probably very organically fed. So I just had to make a 

personal comment on that and I want to thank all of you. 

1986

I would like to call the second portion of this to order and to recognize the second panel. 

We have Mr. Rodney Bivens, Founder and Executive Director of 

the Regional Food Bank of Oklahoma, Oklahoma City, Oklahoma. 

We have Dr. Ron Haskins, Senior Fellow, Economic Studies Program of the Brookings Institute in Washington, D.C. We have Ms. 

Stacy Dean, Vice President for Food Assistance Policy in the Center on Budget and Policy Priorities in Washington, D.C. And we 

have Mr. Phil Blalock, Executive Director, National Association of 

Farmers Market Nutrition Programs in Alexandria, Virginia. 

Welcome to all of you and we will begin with Mr. Bivens. 

STATEMENT OF RODNEY W. BIVENS, FOUNDER AND

EXECUTIVE DIRECTOR, REGIONAL FOOD BANK OF

OKLAHOMA, OKLAHOMA CITY, OK 

Mr. BIVENS. Good morning, Madam Chair and Members of the 

Subcommittee. My name is Rodney Bivens and I am the Executive 

Director of the Regional Food Bank of Oklahoma. I am honored to 

be representing food banks and partner agencies involving in fighting hunger and feeding hope. There are 202 Feeding America food 

banks covering every county in the United States serving more 

than 61,000 pantries, shelters, soup kitchens, and other organizations providing food to 37 million Americans, one in eight people. 

I want to tell you about the Regional Food Bank of Oklahoma, but 

more importantly, about the silent crisis that exists in this country—hunger. 

The Regional Food Bank of Oklahoma is the largest private hunger relief charity in the state. Last year, we distributed more than 

46 million pounds of food to more than 900 charities, feeding programs, and schools throughout 53 counties in our service area. Seventy percent of those were faith-based. Over 38,000 volunteers donated 120,000 hours last year of service saving us $2 million enabling us to maintain administrative and fundraising costs of less 

than four percent. 

The food bank system is under tremendous stress with the drop 

in the Emergency Food Assistance Program, or TEFAP, which supplied 17 percent of our most desired food last year. Unfortunately, 

TEFAP declined by 51 percent this year because strong stable commodity prices led to fewer bonus purchases. Without more Federal 

support for TEFAP, the food bank distribution system throughout 

this country is at risk of falling further behind in meeting the 

needs of those who struggle to put food on their table. 

The reality is our operational costs including food and fuel continue to increase. If not for SNAP benefits providing the safety net 

during these difficult times, the food bank system might have collapsed under sheer volume of people needing help. So many people 

we serve have run out of unemployment benefits, exhausted their 

savings, and are chronically underemployed and rely on SNAP and 

our pantries to feed their families. Even in Oklahoma where the 

unemployment rate is relatively low, many are turning to food 

banks or SNAP or both for the first time in their life. 

I know many people when they think of a hungry person, they 

think of a homeless person, a panhandler standing on the street 

corner. But the truth is the majority of people we serve are chilVerDate 0ct 09 2002 12:54 Dec 11, 2012 Jkt 041481 PO 00000 Frm 00398 Fmt 6601 Sfmt 6601 I:\DOCS\112-30\74372.TXT BRIAN
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dren, seniors living on fixed income, the working poor living from 

one paycheck to the next. 

The Regional Food Bank provides enough food each week to feed 

more than 90,000 people and nearly 1⁄2 of those are children. Children do not ask to be hungry or live in poverty. It is due to circumstances beyond their control. Our Food for Kids Backpack Program is providing kid-friendly food every weekend for more than 

12,000 chronically hungry children and 478 elementary schools 

bridging the gap between school lunch on Friday and breakfast on 

Monday. This simple act of giving a child food is changing lives. As 

one principal stated, ‘‘when hunger ends, learning begins.’’ 

At Public City West High School, 19 out of 53 football players 

had broken bones because they were malnourished from consistent 

lack of food. Normally, a teen has two to three. One of the players 

was so desperate for food he contemplated robbing a 7-Eleven store 

not for money or cigarettes but for food. He said it was almost 

worth going to jail in order to eat. 

The food bank established a School Pantry Program at 43 middle 

and high schools in order to feed more than 700 chronically hungry 

students. It is unthinkable to me and should be to all of us that 

children are going hungry when we have such abundance of food 

around us. At one school a mom tearfully thanked the teacher and 

told her that she was so humbled and embarrassed accepting food 

from the school pantry but they just couldn’t live on the full-time 

minimum wage income and SNAP benefits. They bring in $1,600 

a month, $19,200 a year for a family of five. That is $14,300 less 

than the poverty level. And there are thousands just like them. 

At the other end of the spectrum, the food bank also provides 

food to more than 4,800 seniors through CSFP, Mobile Senior Pantries and home delivery. Seniors who have sacrificed so much for 

this country should not have to choose between getting a prescription filled and having food to eat. 

Even in difficult times our great country faces, we cannot afford 

to balance the budget on the backs of those who have so little. Investing in fighting hunger isn’t just the right thing to do to help 

our struggling neighbors; it can help reduce long-term costs associated with hunger and poor nutrition. This is why we ask you to 

join us in promoting the vital Federal nutrition programs through 

protecting SNAP from cuts and harmful policy changes. Children, 

the elderly, and those living with disabilities make up 84 percent 

of SNAP recipients. 

Further, we ask that you would increase funding for mandatory 

TEFAP and clarify the USDA’s authority to make bonus purchases 

when need for food assistance is high, not only when commodity 

prices are low. 

Finally, we ask that you make CSFP a seniors-only program so 

we may continue our commitment to ensure that no senior citizen 

has to decide between proper medical care and nutrition. 

I thank you for your time. 

[The prepared statement of Mr. Bivens follows:]

PREPARED STATEMENT OF RODNEY W. BIVENS, FOUNDER AND EXECUTIVE DIRECTOR, 

REGIONAL FOOD BANK OF OKLAHOMA, OKLAHOMA CITY, OK 

May 8, 2012

1988

RODNEY BIVENS, 

Founder and Executive Director,

Regional Food Bank of Oklahoma

Subcommittee on Nutrition and Horticulture, 

House Committee on Agriculture, 

Washington, D.C.

Dear Madam Chair and Members of the Subcommittee:

On behalf of the Regional Food Bank and Oklahoma’s vast network of partners 

involved in the fight against hunger, we thank you for the opportunity to provide 

testimony during this crucial period concerning food insecurity throughout Oklahoma and across our nation. The Regional Food Bank is the largest private hungerrelief organization in our state, serving 53 counties in central and western Oklahoma, and distributing over 46.2 million pounds of food last year through a network 

of more than 900 partner agencies and schools. We are also a member of Feeding 

America, a national network of over 200 food banks working in partnership with 

61,000 local agencies providing emergency assistance to 37 million people each year, 

including 14 million children and three million seniors. 

The Regional Food Bank currently distributes enough food to feed more than 

90,000 Oklahomans every week, which is made possible through generous individual 

donations, strong corporate partnerships, and USDA Commodities that provide a 

vital portion of our supply of nutritious produce. Our food bank relies on the tremendous support of community volunteers, who last year donated over 120,000 

hours to sort and pack food, saving us more than $2 million in labor costs. We have 

a strong commitment to operating efficiently, which helps keep our administrative 

costs below four percent. Ninety-six cents out of every dollar received goes directly 

to Oklahomans who need it most. 

In addition to our distribution to emergency food operations, the Regional Food 

Bank also operates targeted programs to combat childhood and senior hunger where 

it exists in our communities. Without proper nutrition, some children are forced to 

skip school; some have difficulties learning and paying attention in class; and some 

will drop out of school and be subject to crime, drugs, and other hardships that often 

exist for those without a strong educational backing. Because we believe it is our 

moral responsibility to ensure that no child is forced to go to school hungry, our 

Food for Kids Backpack Program is providing nutritious, yet shelf-stable, kid-friendly food every weekend to more than 12,300 chronically hungry children in 478 elementary schools throughout the 53 counties we serve. Further, we believe that 

childhood hunger does not end at the elementary level. Therefore, in 2010 we established 43 middle and high school food pantries that are now serving more than 700 

adolescents throughout our service area. 

At the other end of the spectrum, the Regional Food Bank believes that seniors 

who have sacrificed tremendously for our country should not have to choose between 

getting a prescription filled and having enough food to eat. In response, we provide 

nutrition assistance to more than 4,800 seniors through our Mobile Pantry Program, 

the Commodity Supplemental Food Program (CSFP), and home deliveries. We are 

also currently in the process of expanding our outreach to seniors through the development of additional fresh food mobile pantries, which will distribute fresh fruits 

and vegetables to seniors in low-income sections of our service area, providing them 

with the much-needed nutritional supplement that they otherwise would be unable 

to afford or access. 

Unfortunately, even with the outpouring of community-based support and continuous operational improvements, we are still struggling to meet the increasing need 

for emergency nutrition assistance. 

Our partner agencies have reported a 30 to 50 percent increase in demand for 

emergency food assistance in the most recent fiscal year, and a number of agencies 

have also recently indicated that 25 percent or more of the families they currently 

serve are first-time clients that have never had to ask for help until now. Not surprisingly, current statistics on poverty and hunger in Oklahoma reflect these conditions. 

The U.S. Census Bureau’s newly released state-level data from the American 

Community Survey on Poverty indicates that at least one out of every six Oklahomans lives in poverty, which is already set at the low standard of $23,050 annually 

for a family of four. Oklahoma’s poverty rate remains 14th highest among the states 

and 1.6 percentage points above the nation as a whole. 

Unfortunately, Oklahoma’s food insecurity rates also mirror current economic 

hardships. While the USDA’s most recent report on Household Food Security in the 

United States has indicated that food insecurity rates nationwide have remained 

1989

roughly fixed at around 14.5 percent since 2009—which represents an already high 

portion of American families who often do not know where their next nutritious 

meal will come from—Oklahoma’s rates continue to rise and remain consistently 

above the national rate at an average of 16.4 percent. Most alarming is that Oklahoma is now tied with Arkansas as the number one population for very low food 

insecurity; this means that 7.5 percent of Oklahoma’s households experience hunger 

and the physical implications that result from malnutrition on a routine basis. 

Despite the reality that our nation’s economic crisis continues to be experienced 

deeply both here in Oklahoma and across our nation, the Regional Food Bank of 

Oklahoma continues to strive to protect and uplift our most vulnerable citizens. 

Over the past year, in response to the heightened need for emergency nutrition assistance across our network, we have responded by stretching our resources through 

our fundraising capacity, our food sourcing, and through maximizing our efficiency 

standards to achieve a 27 percent increase in distribution from the previous fiscal 

year. However, we simply cannot maintain this current level of distribution alongside increasing demands for our services with additional cuts to the crucial safety 

nets that exist in Federal nutrition programs. Hundreds of thousands of Oklahoma’s 

working families, children, seniors, and individuals with disabilities temporarily rely 

on these programs to ensure that they won’t have to worry about malnourishment 

as another impediment to self-sufficiency in the form of a well-paying job, the pursuit of higher education, affordable healthcare, and other important necessities. 

While we understand the tremendous importance in balancing our nation’s budget, we are compelled to request that you reject any cuts to Federal nutrition programs. As national unemployment rates continue to hover significantly above prerecession levels, and food insecurity rates persist in mirroring these conditions, the 

need for nutrition assistance has never been greater in Oklahoma and across our 

nation. Any cuts to such vital nutrition assistance will increase hardship within the 

already struggling population served by the Regional Food Bank of Oklahoma and 

further inhibit our organization’s ability to keep up with the increasing need for 

supplemental nutrition. Please take a moment to review some of the Federal programs through which we both partner and receive crucial assistance. Without help 

from these programs, it will not be possible to respond to the overwhelming need 

we are experiencing:

• The Emergency Food Assistance Program (TEFAP) ensures a steady 

stream of nutritious USDA Commodities for distribution through our nation’s 

charitable food system. The Regional Food Bank of Oklahoma has administered 

this program since 1996. TEFAP is by far our largest Federal program, in that 

it provides us 3 to 9 million pounds of food per year, depending on the year. 

Last year, 17 percent of the 46.2 million pounds of food we distributed through 

our network of emergency pantries consisted of TEFAP Commodities; unfortunately, TEFAP declined this year by an astounding 51 percent because stable 

commodity prices led to fewer bonus purchases. While this time last year we 

received just over 40 truckloads of TEFAP Commodities, now we expect to see 

only 23 truckloads. The decrease in vital commodities is a key contributor to 

our warehouse supply being at nearly decade-long record lows, and the populations we serve going without some of the best quality food available from our 

network. Without more Federal support for TEFAP in the upcoming farm bill, 

both the Regional Food Bank and the entirety of America’s food banking system 

is at risk of falling behind in meeting the needs of Americans struggling to put 

food on their tables. Accordingly, we respectfully request that the Committee 

work to provide as much increased mandatory funding for TEFAP as possible, 

including language in the farm bill that clarifies USDA’s authority to consider 

the need for increased food assistance when deciding whether to make commodity purchases under the CCC or Section 32.

• The Supplemental Nutrition Assistance Program (SNAP) safeguards millions of families against hunger and provides them with the opportunity to afford not only enough food, but nutritious food. Although SNAP has experienced 

dramatic growth since 2007 due to our nation’s highest unemployment rates in 

nearly 30 years, the program has never been more efficient. SNAP now boasts 

an all-time program high with an accuracy rate of 96.19 percent, which is markedly higher than many other prominent benefit programs. SNAP is also efficient 

in that it largely avoids duplicative efforts; the USDA’s 2011 analysis of characteristics of SNAP households found that only eight percent of all SNAP households also received Temporary Assistance for Needy Families (TANF) benefits, 

and that only another four percent received State General Assistance (GA) benefits. Even more exciting is that SNAP benefits generate local economic activity. 

For every $1 spent in SNAP benefits, $1.73 to $1.79 is generated in local marVerDate 0ct 09 2002 12:54 Dec 11, 2012 Jkt 041481 PO 00000 Frm 00401 Fmt 6601 Sfmt 6621 I:\DOCS\112-30\74372.TXT BRIAN
1990

kets. Though the Regional Food Bank of Oklahoma does not partner directly 

with SNAP, approximately 37 percent of the people we serve are SNAP recipients requiring additional assistance.

SNAP has had tremendous success in Oklahoma, and allows hundreds of thousands of our citizens to be able to achieve greater financial security and selfsufficiency. Currently, over 600,000 Oklahomans are enrolled in SNAP, of whom 

more than 270,000 are children. These individuals receive an average amount 

of just $4.22 per day to help them with their nutritional needs. Much like the 

majority of working families the Regional Food Bank serves, Oklahoma’s SNAP 

recipients are not just looking for a handout—48.6 percent of households receiving SNAP benefits had earned income in 2010, and the average length of participation in SNAP is currently only about 9 months.

Additionally, SNAP has brought significant economic benefits to Oklahoma, in 

that SNAP dollars are quickly spent in our local markets, whereas many SNAP 

recipients would otherwise be forced to turn to already overwhelmed emergency 

food pantries. In 2010, SNAP created $1.5 billion in economic activity for Oklahoma. SNAP sales to more than 2,800 grocery stores and other retail outlets 

totaled $861 million. Oklahoma’s SNAP program is also remarkably efficient. 

Oklahoma’s most recent SNAP accuracy rates mirror national trends with a 

record-high of 95.78 percent, of which nearly 1⁄4 of all errors result from underpayments. Also notable is that record-high SNAP accuracy rates are also coming 

at a time when Oklahoma has eliminated the resource asset test; the elimination of the asset test has not only saved considerable time and resources of 

both the Department of Human Services and qualifying families, but more importantly, has allowed approved families to be able to actually save beyond the 

$2,000 or $3,250 maximum resource limits to go toward a down payment on a 

house, to buy a reliable car, to save for a college education, and other savings 

necessities characteristic of the socially-mobile and financially-secure. In all, the 

SNAP program of today, both in Oklahoma and across the U.S., is allowing families to move beyond the stigma of low-income and towards self-sufficiency.

• The Commodity Supplemental Food Program (CSFP) provides a nutritious monthly food package targeted at the specific nutritional needs of low-income seniors. The Regional Food Bank of Oklahoma began operating CSFP in 

January 2010. We receive monthly shipments of this CSFP commodity food, 

which must be stored and managed separately from TEFAP commodity foods. 

This assistance goes completely to serve our needy senior population, which is 

currently at a caseload of 2,982. Due to the increasing needs of Oklahoma’s senior population, our senior programs have been in need of significant expansion 

for quite some time.

• The Child and Adult Care Food Program (CACFP) provides nutritious 

meals to Oklahoma’s children in after school settings. The Regional Food Bank 

of Oklahoma began participating in CACFP in 2010 through a partnership with 

the Oklahoma Department of Education. We utilize this program for snacks and 

meals provided through our Kids Cafe program, which provides after-school nutrition and healthy-minded educational activities and tutoring services. We have 

also recently been approved to use CACFP reimbursement for our school break 

response to ensure that chronically hungry children can continue to receive adequate nutrition even when school is not in session.

The Regional Food Bank of Oklahoma faces a challenging time ahead. Food donations are expected to drop significantly in the upcoming months, and the demand 

for food shows no signs of leveling off. If, in fact, the demand for food escalates dramatically due to Federal budget cuts in nutrition programs, we will be placed in the 

difficult situation of having a tremendous increase for our services at a time when 

less food is available. As you know, our situation is not isolated. Our organization’s 

experience mirrors thousands of others across the nation who are attempting to provide the most basic necessities to millions of struggling American citizens. 

Without proper nutrition as a solid foundation, children living in poverty will not 

have the ability to grow in a healthy manner so that they can learn and become 

productive citizens; parents will not have the capability to protect and provide for 

their family’s stability; struggling adult individuals will not have a firm grasp on 

the resources needed to thrive; and seniors will find their limited resources 

stretched beyond their limits. This is why we respectfully ask you to join us in proVerDate 0ct 09 2002 12:54 Dec 11, 2012 Jkt 041481 PO 00000 Frm 00402 Fmt 6601 Sfmt 6621 I:\DOCS\112-30\74372.TXT BRIAN
1991

moting a successful future for our citizens through the protection of vital Federal 

nutrition programs. 

Sincerely,

RODNEY W. BIVENS, Executive Director,

Regional Food Bank of Oklahoma.

The CHAIRWOMAN. Thank you. 

Dr. Haskins? 

STATEMENT OF RON HASKINS, PH.D., SENIOR FELLOW,

ECONOMIC STUDIES PROGRAM, BROOKINGS INSTITUTION; 

CO-DIRECTOR, CENTER ON CHILDREN AND FAMILIES, 

WASHINGTON, D.C. 

Dr. HASKINS. Thank you, Chairwoman Schmidt, Ranking Member Baca, and other Members of the Committee. I am pleased to 

be invited here and it is an honor to testify. I am going to talk 

about three things quickly. First, I am going to talk about the purposes of SNAP, then I am going to talk about spending on meanstested programs and on SNAP, and then finally I am going to talk 

about potential savings. 

The purposes of SNAP make it one of the most diverse meanstested programs in the nation. We are all familiar with its function 

as a nutrition program with 45 million people in it and about 

1⁄2

of them children. Spending $76 billion and tons of research shows 

that it has a real function for reducing hunger and increasing nutrition in the country. 

Second, it is countercyclical. This is less widely recognized. It is 

one of our few programs that is in effect guaranteed annual income 

that can only be spent on food. And when the economy goes down, 

it goes up; when the economy goes up, it goes down. If you look at 

the pattern of spending in SNAP, you will see that that is the case. 

And so this is the same of families. When families hit hard times, 

they can qualify for SNAP and when they improve, then their 

SNAP benefit is reduced. So it is a very important countercyclical 

program, one of the few automatic programs like that that we 

have. 

And then finally support for the poor and poor who work. And 

I would like to make a point of this for the Committee because I 

find that this is not widely understood. When Congress passed the 

Welfare Reform Bill in 1996, it had also passed before that time 

and has subsequently passed additional legislation to create what 

I call the work support system. These are programs that provide 

benefits to low income working families. Before roughly the 1980s 

in most cases when people on welfare went to work, they lost everything. They didn’t get welfare benefits. Now, there is earned income tax credit, the child tax credit, both of which are refundable, 

food stamps in the amount in the 2002 Farm Bill so states could 

more effectively give it to families. And so it is an essential part 

of this work support system. 

And here is how it works if you look at the chart. The figures 

on the left are from 1989, on the right are for 2006. Ignore the ones 

on the far right for a moment. The first bar graph is life in the 


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state of nature. This is what poverty would be if there were no government programs of any type. And believe it or not, these are 

never-married mothers in 1989, half of them would have been poor 

if there were no Federal programs. And even in 2006 40 percent 

would be poor. The reason that number went down from almost 

half to 40 percent is because so many of those low income mothers 

went to work. Most single mothers are the most disadvantaged because they are never married. 

And then if you can see that we started giving them benefits and 

the benefits that did not come from the Tax Code reduced poverty 

by about 25 percent in 1989, but it did the same thing in 2006, in 

fact a little bit more despite the fact that life in the state of nature 

got a lot better because those mothers were working. 

And now if we add the benefits through the tax code you can see 

that we dramatically reduce poverty again in 2006 but not in 1989. 

And if you look at the far right, that is the total reduction in poverty because of these programs. That is why I say work support 

system of which SNAP is an essential component is a very important function of the program. 

Second, spending, we spend a lot of money on means-tested programs and whether you measure it in constant dollars year after 

year after year, or if you measure it per person in poverty which 

kind of controls for population increases and increase and decrease 

in poverty and so forth, it increases almost every year. And the 

exact same thing is true with SNAP. I estimate that if we include 

state spending and Federal spending, we are spending about a trillion dollars—not quite but almost a trillion dollars on means-tested 

programs in this nation and it increases almost every year. So we 

have done a good job thus far even left, right, no matter how you 

look at. We are providing a lot of support to the poor. 

And finally, let me pass to savings. I mentioned four different 

kinds of savings in my testimony but I only want to mention two 

here. The first one is a block grant. The House has passed the 

block grant. It is pretty surprising. A lot of people wouldn’t have 

thought that this could be done, and it definitely will control spending. So I would like to make some comments to the Committee because I was somewhat involved in welfare reform in 1996 and we 

created a block grant. 

And in particular, I want to alert the Committee to three things. 

First, inflation will make the block grant decline in value even if 

you build in reductions. Inflation will take it beyond that. We created a block grant in 1996 with no inflation adjustment. It has lost 

a third of its value since then. Maybe you want to do that but you 

should be aware of it. 

Second, the purposes need to be tightly specified. I absolutely 

guarantee you if you create a block grant, the states will have very 

smart guys and ladies who figure out everything they can do with 

the money in that block grant. So if you think the program should 

be focused on nutrition, then you need to make sure you have airtight language that the states can only use it for nutrition because 

otherwise they will spend it on other things. 

And then finally I would like to just say one word about work 

requirements. I may differ with some Members of the Committee 

on this but all of our means-tested programs should have strong 

1993

1 Congressional Budget Office, ‘‘The Supplemental Nutrition Assistance Program,’’ Washington, D.C.: Author, April 2013. 2Dorothy Rosenbaum, ‘‘SNAP Is Effective and Efficient,’’ Washington, D.C.: Center on Budget 

and Policy Priorities, April 2012. 3 Congressional Budget Office, ‘‘The Supplemental Nutrition Assistance Program.’’

work requirements. There are work requirements in food stamps. 

They seem to me to be largely observed in a breach. I think they 

should be strengthened. We should have a strong work requirement and we should impose penalties on both individuals and 

states who do not participate in a work program. The states would 

do it because they do something similar in TANF but they need 

more funding, so you have to invest money in order to save money 

in this case. 

So that is my testimony. Again, I appreciate the chance to testify. 

[The prepared statement of Dr. Haskins follows:]

PREPARED STATEMENT OF RON HASKINS, PH.D., SENIOR FELLOW, ECONOMIC STUDIES

PROGRAM, BROOKINGS INSTITUTION; CO-DIRECTOR, CENTER ON CHILDREN AND

FAMILIES, WASHINGTON, D.C. 

Chairman Schmidt, Ranking Member Baca, and Members of the Subcommittee:

Thanks for inviting me to testify today. It is a privilege to testify before this important Subcommittee on the Supplemental Nutrition Assistance Program (SNAP), 

one of the nation’s most important means-tested programs. 

In accord with my discussions with Subcommittee staff, I plan to talk about the 

purposes of the SNAP program, spending on means-tested programs in general and 

SNAP in particular, and ways that spending on the SNAP program might be reduced. The last section includes a brief discussion of SNAP work requirements. 

Purposes of SNAP 

SNAP serves three main functions. The first and most important is to increase 

the ability of the poor to purchase a nutritionally adequate, albeit low cost, diet. Except in cases of fraud, the benefit can only be spent on food by individuals or families that struggle with low income. The average income (not counting the SNAP benefit) of families receiving SNAP is less than $9,000 per year and few families with 

income over 130 percent of the poverty level (about $18,000 for a mother and two 

children) receive the benefit. So the program, with some exceptions, is well targeted.1 In addition, after years of intense effort by the U.S. Department of Agriculture and the state agencies that administer the program, SNAP payment accuracy has improved greatly and is now the highest it has ever been.2

A second purpose of the program is to serve as an economic stabilizer. This purpose of the program serves two ends. From the perspective of poor individuals and 

families, the program is always available when need increases. Because it is an entitlement, every individual or family who meets the benefit requirements—roughly 

low income and low resources—can count on the benefit. Technically the United 

States may not have a guaranteed annual income, but in effect SNAP provides a 

means-tested guaranteed annual income for which every man, woman, and child in 

the U.S. is eligible if they meet the income and resources test. Thus it is not surprising that the number of Americans who receive SNAP bears a striking correlation with the state of the economy. As shown in Figure 1, when unemployment goes 

up, so does SNAP; when unemployment goes down, so does SNAP, although in both 

cases there is a time lag.3 Next to Unemployment Compensation, SNAP is probably 

the nation’s most reliable program for helping disadvantaged families during an economic downturn. 

SNAP is also a stabilizer from the perspective of the American economy. Because 

the number of families getting benefits increases as unemployment and earnings fall 

during economic downturns, the program serves the Keynesian function of boosting 

spending during a recession, which in turn stimulates the American economy at a 

moment when stimulus is needed. The SNAP program fills both of these stabilizing 

functions automatically without the need for more legislation because of its openended entitlement funding. 

1994

4 Because SNAP phases out as earnings from work rise, SNAP also is a work disincentive for 

some families. Research shows that without SNAP and other means-tested benefits, more people 

would work and unemployment spells would be shorter. See Casey B. Mulligan, ‘‘Means-Tested 

Subsidies and Economic Performance since 2007,’’ NBER Working Paper Series No. 17445; Cambridge: National Bureau of Economic Research, 2011, available at http://www.nber.org/papers/

w17445. 5 Ron Haskins, Work over Welfare: The Inside Story of the 1996 Welfare Reform Law (Washington: Brookings, 2006), Chapter 15. 6Gary Burtless and Ron Haskins, ‘‘Inequality, Economic Mobility, and Social Policy,’’ in Peter 

H. Schuck and James Q. Wilson, eds., Understanding America: The Anatomy of an Exceptional 

Nation (New York: Public Affairs, 2008), pp. 495–538. 7 U.S. Census Bureau, America’s Families and Living Arrangements: 2011, ‘‘Table FG5. OneParent Unmarried Family Groups with Own Children Under 18, by Labor Force Status of the 

Reference Person: 2011,’’ available at http://www.census.gov/hhes/families/data/cps2011.html. 

Figure 1

Unemployment Rate and Number of SNAP Recipients, 1969–2011

Source: FNS Supplemental Nutrition Assistance Program Participation and 

Costs, http://www.fns.usda.gov/pd/SNAPsummary.htm and Bureau of 

Labor Statistics, Unemployment Rate from the Current Population Survey.

A third function that seems to be less appreciated than the other two is that food 

stamps supplements the income of working poor and low-income families.4 Experience with the 1996 welfare reform law shows that many low-income single mothers 

are capable of finding jobs and working full time, but they tend to have low wages 

and to live in poverty as a result of their low wages.5 Sadly, wages at the bottom 

of the earnings scale have been stagnant or declining for the past 3 decades, making 

it increasingly difficult for single mothers—or any other household that depends on 

the earnings of one low-skilled worker—to escape from poverty even when they 

work full time.6 To improve the financial status of these low-income mothers and 

to increase their incentive to work, Congress has enacted many laws since roughly 

the mid-1980s that expand or reform the rules of programs that provide cash or inkind benefits to low-income working families. These programs include the Earned 

Income Tax Credit, the Child Tax Credit, Medicaid, child care, and of course SNAP. 

Indeed, this Committee and its Senate counterpart, working with the Bush Administration, reformed several administrative requirements of the SNAP program in the 

2002 Farm Bill to make it easier for states to administer SNAP in cases in which 

families have earnings. It is widely believed that these reforms led to increased receipt of SNAP by poor and low-income working families. For the foreseeable future, 

the nation will have millions of low-income single mothers who work and around 

25 percent of these mothers and their children will have earnings below the poverty 

leve1.7 Many of them lack the skills to earn more money. As a result, without earnVerDate 0ct 09 2002 12:54 Dec 11, 2012 Jkt 041481 PO 00000 Frm 00406 Fmt 6601 Sfmt 6621 I:\DOCS\112-30\74372.TXT BRIAN

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8 Ron Haskins, ‘‘Balancing Work and Solidarity in the Western Democracies,’’ (Berlin: Social 

Science Research Center Berlin, October 2010). 9 Richard Bavier, personal communications, May 3–4,2011. 

ings subsidies such as SNAP, they and their children will live in poverty on a more 

or less permanent basis despite their work effort. 

Combating this problem is the major reason the Federal Government and the 

states have developed the work support system. Figure 2, taken from an earlier edition of the Ways and Means Committee’s Green Book, illustrates how effective this 

system is in helping low-income never-married mothers, the most disadvantaged 

subgroup of single mothers, get themselves and their children out of poverty. The 

bar graphs on the left in the first panel are for 1989 before passage of the 1996 

Welfare Reform Law; the bar graphs on the right in the first panel are for 2006, 

a decade after welfare reform. Comparing the first bar graph in each set, it can be 

seen that the poverty rate for these mothers and children before any government 

taxes or transfers dropped by nearly 20 percent between the 2 years (from 48.3 percent to 39.6 percent). That’s because so many more never-married mothers were 

working in 2006. In the 4 years following welfare reform, there was a 40 percent 

increase in the share of these mothers who had jobs, a remarkable performance by 

any measure.8 Even so, their earnings alone would have left almost 40 percent of 

these never-married mothers and their children in poverty in 2006, despite the huge 

increase in work. When SNAP and other in-kind and social insurance benefits received by the families are counted as income, however, the 2006 poverty rate fell 

by nearly 25 percent to 29.9 percent. As compared with 1989 when many fewer 

mothers worked, the combination of increased work and government in-kind and insurance benefits produced a poverty level that was almost 25 percent lower in 2006. 

Further, when we add the work support benefits that come through the tax code 

primarily the EITC and the Child Tax Credit—poverty does not fall at all in 1989 

but falls another 13 percent in 2006. The reasons the tax benefits reduced poverty 

so much in 2006 is that many more of these never-married mothers were working 

and the tax code benefits are based on earnings. 

As shown by the second panel in Figure 2, the work support system reduced poverty by only 19 percent in 1989 but by 34 percent in 2006. Clearly, the work effort 

of disadvantaged mothers, combined with benefits from the work support system, 

greatly reduced poverty among these mothers and children. 

Other than providing Social Security to the elderly, this combination of work requirements in the cash welfare program (Temporary Assistance for Needy Families) 

and work supports is the most effective strategy the Federal Government has developed to reduce poverty. And the best part is that there is something in this strategy 

for everyone to like because it is based both on personal responsibility and on government help premised on personal effort. I would emphasize for the Subcommittee 

the important role of SNAP benefits in this poverty reduction. An analysis performed for Brookings using data from the Census Bureau’s Survey of Income and 

Program Participation (SIPP) showed that of the 1.7 million mothers who supplemented their earnings with SNAP benefits in 2010, the average monthly SNAP benefit of $354 constituted 20 percent of their income. Thus, without SNAP, many more 

of these families would have been in poverty (as Figure 2 shows). In fact, if the cash 

value of SNAP benefits is subtracted from the income of families with working 

mothers, another 1.1 million mothers and their children would fall below the poverty level in an average month in 2010. Moreover, the same SIPP analysis shows 

that over 40 percent of single moms with incomes between 100 percent and 149 percent of the poverty level received SNAP benefits.9 It is reasonable to view these single mothers as doing what the public expects them to do by working, many of them 

full time. Government in turn rewards their work effort by supplementing their 

earnings and thereby substantially reducing poverty. 

1996

10 Housing, Title I grants to local education agencies, and half of Pell Grants were counted as non-entitlement spending. Thus, $545.0 of total spending of $626.2 or 87 percent was entitlement spending in 2011. 11The number of people in poverty in 2011 will not be published by the Census Bureau until 

next fall. Based on a model designed by Richard Bavier, a former senior official at OMB, that 

has successfully predicted the poverty level for the past several years, poverty increased by .6 

percentage points in 2011, bringing the poverty rate to 15.7 percent in that year. According to 

the American Community Survey, the population of the United States in 2011 was 306 million. 

Thus, around 48,042,000 people were poor in 2011. This is the figure used to compute meanstested spending per person in poverty for 2011. 

Figure 2

Government Programs and Work Combine to Reduce Poverty

Source: U.S. House of Representatives. Committee on Ways and Means, 

2008 Green Book, Appendix E, Table E–31.

Note: The Earned Income Tax Credit (EITC) and Child Tax Credit (CTC) 

are refundable tax credits designed to help lower income families, particularly single parent families. Data are for families headed by never-married 

mothers.

Thus, the SNAP program performs many important functions and performs them 

fairly well. This does not mean that the program cannot be improved or that it 

would be a huge blow to the poor to reduce spending on the program, depending 

on how deep the cuts are and how they are engineered. Before considering the 

search for SNAP savings, we should briefly review spending on SNAP and other 

means-tested programs. 

Spending on Means-Tested Programs and SNAP 

The dotted line in Figure 3, based on a Brookings analysis of Federal budget data 

published by the Office of Management and Budget, shows Federal spending since 

1962 in the ten means-tested programs that spent the most money in 2011, the second biggest of which is SNAP. We estimate that in 2011 about 87 percent of the 

spending in these ten programs was on entitlement programs, including SNAP.10

The figure shows that Federal spending on poor and low-income Americans has increased enormously. Since 1980, by which time all but two of the ten biggest programs were in place, spending has increased by about $500 billion, from $126 billion 

to $626 billion after adjusting for inflation. The solid line in Figure 3 expresses the 

increase in Federal means-tested spending as spending per person in poverty. Expressed in this way, over the past 5 decades, Federal spending on major means-tested programs has increased from about $516 to a little more than $13,034 per person 

in poverty. If we use the figure on spending per person in poverty in 1980, when 

most of the major means-tested programs were in place, the increase is from about 

$4,300 to $13,000 per person or more than $3 spent in 2011 for every dollar spent 

in 1980.11


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Figure 3

Federal Means-Tested Spending on Biggest Programs, 1962–2011 (Constant 

$2011)

Notes: This series includes ten spending sources: Medicaid, SNAP, EITC, 

CTC where credit exceeds liability, SSI, AFDC/TANF, Housing Assistance, 

Medicare Part D Low Income Subsidy, ESEA Title I Grants to Local Educational Agencies, and Federal Pell Grants. Data on the last two are available starting only in 1980 and include approximately $27 billion in ARRA 

spending in 2009.

Sources: Most spending sources from OMB, Fiscal Year 2013 Budget, Tables 8.5, 11.3, 12.5. Title I and ESEA spending from Department of Education Budget History Table. Medicare data from CMS, 2011 Medicare 

Trustees Report, Table IV.B11, number for 2011 is estimated. All figures 

adjust to constant dollars using OMB total deflator from historical table 

10.1. Data on number of people in poverty through 2010 came from Census 

Bureau, 2011 number estimated by Richard Bavier.

More recently, means-tested spending increased from about $477 billion to $626 

billion in the 3 years of the Obama Administration, an increase of about 31 percent. 

However, the recession that began in December 2007 and the increase in poverty 

during and following the recession is an important part of the explanation for increased means-tested spending during the Obama Administration. Many programs, 

including SNAP, increased automatically when poverty rose during the recession. In 

addition, spending on a host of poverty programs, again including SNAP, was boosted still further by temporary provisions in the 2009 American Recovery and Reinvestment Act (ARRA). Yet because the increase in the number of poor people was 

so high, spending per person in poverty increased by only about nine percent as contrasted with the 31 percent increase in total spending during the first 3 years of 

the Obama Administration. In fact, spending per person in poverty actually fell in 

both 2010 and 2011. Much of the portion of the rise in means-tested spending that 

was authorized as part of the ARRA expired after 2010, although SNAP benefits are 

an exception as we will see below. 

Three additional points should be made about total means-tested spending by the 

Federal Government. First, while it is true that the nation’s major means-tested 

health programs account for nearly 45 percent of all the means-tested spending 

today and a little less than half of the increase in means-tested spending since 1980, 

nearly all the other programs have increased substantially as well. Between 1980 

and 2011, for example, the EITC increased from $3.4 billion to $55.7 billion, the 

Supplemental Security Income program from $15.3 billion to $49.6 billion, and the 

housing programs from $14.5 billion to $45.9 billion. Second, it should be kept in 

mind that these spending data are for only the ten largest means-tested programs. 

The Congressional Research Service estimates that in 2009, spending on these ten 


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12Karen Spar, ‘‘Federal Benefits and Services for People with Low Income: Programs, Policy, 

and Spending, FY2008–FY2009’’ (R41625), (Washington: Congressional Research Service, January 2011), p. 12. 13 Ron Haskins, Statement to the House, Committee on the Budget, Strengthening the Safety 

Net, hearing, April 17, 2012, available at http://budget.house.gov/UploadedFiles/

haskinstestimony4172012.pdf. 14 Joe Richardson, Jim Monke, and Gene Falk, ‘‘Reducing SNAP (Food Stamp) Benefits Provided by the ARRA: P.L. 111–26 & S. 3307’’ (R41374), (Washington: Congressional Research 

Service, August 2010). 

programs represented about 75 percent of total Federal means-tested spending.12 If 

that percentage remained roughly the same for 2011, total Federal means-tested 

spending in that year was closer to $835 billion than the $626 billion spent on the 

ten biggest programs. Third, states also spend a great deal of money on means-tested programs. In previous testimony before the House Budget Committee, I estimated state spending at about 25 percent of Federal spending, which would bring 

total Federal and state spending on means-tested programs to over $1 trillion in 

2011.13

Turning now to spending specifically on the SNAP program, the dotted line in 

Figure 4 shows that, like other means-tested programs, spending on SNAP has increased dramatically over the years (all figures given below are in constant 2011 

dollars). SNAP spending was $24.2 billion in 1980, $26.6 billion in 1990, and $75.7 

billion in 2011. As the solid line in Figure 4 shows, SNAP spending per person in 

poverty, despite some fluctuations over the years, has increased greatly since 1969. 

As compared with its previous per-person-in-poverty peak in 1995, this figure had 

increased from $1,034 to $1,575 by 2011. By either of these measures, SNAP spending has increased over the years. 

As mentioned above, the SNAP spending figures for recent years were substantially increased by the ARRA. The effect of the ARRA expansion was to increase the 

benefit of the average SNAP household by about 15 percent. The ARRA increases 

translated to increases of $24, $44, $63, and $80 a month for one-person, two-person, three-person, and four-person households respectively, although all these figures have declined since enactment of the ARRA. The cost of the increased benefits 

was around $57 billion. Although the benefit increases were originally expected to 

last until 2018, subsequent legislation altered the original ARRA provision so that 

the across-the-board SNAP increases will terminate in 2014, saving well over $14 

billion.14

Figure 4

Spending on SNAP and Spending Per Person in Poverty, 1969–2011


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15 Alice M. Rivlin and Isabel Sawhill, eds., Restoring Fiscal Sanity: How to Balance the Budget

(Washington: Brookings Institution Press, 2004); Alice M. Rivlin and Isabel Sawhill, eds., Restoring Fiscal Sanity 2005: Meeting the Long-Run Challenges (Washington: Brookings Institution 

Press, 2005); Brookings-Heritage Fiscal Seminar, Taking Back Our Fiscal Future (Washington: 

The Brookings Institution and The Heritage Foundation, 2008); Ron Haskins and others, Premium Support: A Primer (Washington: The Brookings Institution, Budgeting for National Priorities Project, 2011). 16The Congressional Budget Office has outlined four categories of ways to reducing spending 

in the SNAP program. These four approaches are to change program rules to reduce the number 

of people in the program, change rules to reduce benefits, change the way the program is administered such as penalties on states that make overpayments to recipients, and changing the program to a block grant; see Congressional Budget Office, ‘‘The Supplemental Nutrition Assistance 

Program,’’ (Washington: Author, April 2013), pp. 8–12. 

Source: Data on SNAP Spending and Recipients from FNS, Supplemental 

Nutrition Assistance Program Participation and Costs, http://

www.fns.usda.gov/pd/SNAPsummary.htm, poverty data through 2010 from 

Census Bureau, 2011 number estimated by Richard Bavier, all other dollar 

amounts adjusted to $2011 using CPI for all Urban Consumers for Food 

and Beverage, Bureau of Labor Statistics (Series CUUR0000SAF). 

Controlling SNAP Spending 

It is no secret that the Federal Government is facing an unprecedented fiscal crisis. In contrast with the United State Senate, the House has adopted a budget each 

year for the past 2 years that, if enacted, would actually reduce the nation’s annual 

deficit and the amount of debt held by the public as a percentage of GDP. Since 

2003, some of my Brookings colleagues and I have been writing about the dramatic 

threat to the nation’s future imposed by the profligacy of Federal spending as compared with Federal revenues.15 One conclusion that I have come to about deficit reduction is that Congress will be more successful if sacrifice is shared—albeit not 

necessarily equally—by all parts of the Federal budget in order to achieve something approaching fiscal sanity. Discretionary spending was a good place to begin, 

but that well is nearly dry. Now the Federal Government needs cuts or moderated 

increases in entitlement spending (especially Medicare) and additional revenues. 

‘‘Spread the pain’’ should be the motto of budget cutters. Although I have spent almost all my entire career thinking about, writing about, and working on legislation 

affecting the nation’s poor, I believe that means-tested programs, including SNAP, 

must be controlled either by reducing the rate of spending increases or by actual 

reductions in the amount spent. 

In this section I consider four options for moderating or reducing spending on 

SNAP.16 The first two options have received attention by both the House and Senate Agriculture Committees and by advocacy groups that defend the SNAP program. 

Both options would modify a program simplification rule that has a direct impact 

on the level of SNAP benefits received by many households. The fundamental purpose of SNAP is to augment the food purchasing power of households that may not 

have enough money to buy nutritious food. To make the determination of how much 

money the household has to purchase food, SNAP allows households to deduct certain standard expenses from income before computing the eligibility for and level 

of the SNAP benefit. One of the biggest deductions is the shelter deduction, including spending on utilities. Because documenting utility costs requires lots of paperwork and document verification, states are allowed to have a Standard Utility Allowance that can be claimed by any household that can show it pays out-of-pocket 

utility costs. Such households are not required to submit all their utility bills each 

month, thereby saving a lot of hassle for recipients and administrative expenses for 

states. Another administrative simplification is that households that receive help 

from the Low-Income Home Energy Assistance Program (LIHEAP) are assumed to 

be eligible for the Standard Utility Allowance by virtue of the fact that their receipt 

of LIHEAP demonstrates need. As they often do, states have taken advantage of the 

LIHEAP simplification rule by giving some households a token LIHEAP benefit of, 

say, $1 which thereby qualifies the household for the shelter deduction and saves 

both the recipient and the state lots of administrative hassle. 

Two of the cost-savings reforms now in play would modify the Standard Utility 

Allowance. One proposal would require states that game the system by granting 

token LIHEAP benefits to provide LIHEAP benefits of at least $10 in order to qualify for the exemption. This proposal would save about $4.5 billion over 10 years. A 

second proposal would repeal the entire LIHEAP–SNAP link so that families that 

receive the allowance would need to show their utility bills in order to receive the 

utility portion of the deduction. This proposal would save around $15 billion over 

10 years. At least part of the savings in both proposals are based on the assumption 

2000

17 Inflation will erode the value of benefits to around $59 billion in 2022. 18 Congressional Budget Office, The Budget and Economic Outlook: Fiscal Years 2012 to 2022

(Washington: Author, January 2012), p. 52. 19 Congressional Budget Office, ‘‘The Supplemental Nutrition Assistance Program,’’ (Washington: Author, April 2013), p. 4 and Figure 2. 20Government Accountability Office, ‘‘Better Information Needed to Understand Trends in 

States’ Uses of the TANF Block Grant,’’ (GA0–06–414), (Washington: Author, 2006). 

that some households that have to experience the hassle of showing some or all utility bills would forego the utility deduction. The tendency for some families to accept 

the lower benefit by avoiding the hassle of showing utility bills would be strengthened by the fact that most of them would still receive a SNAP benefit; the effect 

of the policy change would be to reduce the size of the SNAP benefit, not to eliminate it altogether for most households. In effect, these proposals save money by reducing the size of the SNAP benefit. Losing part of the SNAP benefit certainly does 

not help these households, but most of them would still receive a SNAP benefit. 

A third policy change that would save money, and one already enacted by the 

House Budget Committee, would be to convert SNAP to a block grant and reduce 

the amount of money in the block grant as compared with spending under current 

law. The Congressional Budget Office (CBO) estimates that spending on SNAP will 

decline from $80 billion in 2012 to $73 17 billion in 2021 18 as the economy recovers. 

Thus, funding in the block grant would have to be lower than the amount by which 

SNAP is already projected to decline.19 The more general point on block grant funding is that Congress can save a great deal of money by lowering the number of Federal dollars in the block grant each year below the CBO spending baseline. 

Because the 1996 Welfare Reform Law converted the Aid to Families with Dependent Children program from an open-ended entitlement like the current SNAP 

program to a block grant with capped funding, the Federal Government has experience with what happens when states receive block grant funding. The new program 

created in 1996 was the Temporary Assistance for Needy Families (TANF) program, 

a block grant of $16.5 billion that gave states enormous flexibility as long as they 

met program requirements, especially the stringent work requirements, and spent 

the money on poor and low-income families. Three lessons of the decade and a half 

experience with TANF should be considered as Congress contemplates a SNAP 

block grant. The first is that the value of a capped block grant declines every year 

due to inflation. The $16.5 billion TANF block grant has lost about 1⁄3 of its value 

since the mid-1990s. In the case of the SNAP program, the explicit purpose of converting the open-ended entitlement to a block grant is to save money. Still, in assessing the adequacy of funding in any block grant with capped funding, Congress 

must take into account the fact that without an inflation adjustment, the value of 

the block grant will actually decline even faster than whatever annual caps are 

placed on the block grant. 

The second lesson taught by experience with the TANF block grant is that unless 

the uses of a potential SNAP block grant funds are tightly specified, states will use 

the flexibility inherent in a block grant to spend the money for many purposes other 

than providing food subsidies. In a 2006 report, for example, the Government Accountability Office reported that states ‘‘used Federal and state TANF funds to support a broad range of services, in contrast to 1995 when spending priorities focused 

more on cash assistance.’’ 20 Thus, although TANF was built on a program that focused almost all its resources on cash subsidies for destitute families, states now 

use TANF funds for child care and early childhood education, child protection, and 

other social services. Since its inception in the 1960s, the major goal of the SNAP 

program has been to help families purchase nutritious food. Unless Congress wants 

to diffuse the use of SNAP funds to other purposes, language in the block grant 

must be clear that funds can only be spent to help families purchase food or for 

closely related purposes. Some Members of Congress may wish to give states more 

flexibility in the use of a SNAP block grant, but they should do so with full realization that providing such flexibility to states will result in some of the money being 

spent on programs that have little or nothing to do with nutrition. 

A final way to save money in the SNAP program is to strengthen the program’s 

work requirements. Indeed, more American must work and earn all or most of their 

household income if Federal and state governments are to move in the direction of 

fiscal solvency. The current SNAP program has work requirements that look strong 

on paper. These include the requirement that non-disabled and non-elderly recipients register for work, accept a job if offered, search for work or meet other work 

requirements that states impose (and are approved by the Department of Agriculture). In addition, recipients cannot quit a job or voluntarily reduce their hours 

of work to less than 30. A separate provision, often called the ABAWD (able-bodied 

2001

21 Congressional Budget Office, ‘‘The Supplemental Nutrition Assistance Program.’’ 22Department of Agriculture, ‘‘2013 Explanatory Notes,’’ available at: http://

www.obpa.usda.gov/30fns2013notes.pdf. 23 Congressional Budget Office, ‘‘The Supplemental Nutrition Assistance Program.’’ 24David A. Long, ‘‘The Budgetary Implications of Welfare Reform: Lessons from Four State 

Initiatives,’’ Journal of Policy Analysis and Management 7, no. 2 (1981): 289–299. 

adults without dependents) rule, recipients between the ages of 18 and 50 who have 

no dependents must work at least 20 hours per week or they can qualify for SNAP 

benefits for only 3 months (6 months under some circumstances if they lose a job) 

in a given 36 month period.21

But these requirements do not seem to be rigorously enforced. In fact, the Administration has requested that the ABAWD rule be suspended for 2013 (as it was for 

part of 2009 and 2010). But those who think able-bodied welfare recipients should 

be required to work may want to strengthen the SNAP work requirements. If the 

Agriculture Committee decided to move in this direction, at least three changes in 

Federal law would be required. First, Federal law should set participation standards 

stipulating the percentage of non-exempt adults receiving SNAP who must engage 

in, say, 20 hours of work-related activity each week. The TANF program requires 

states to meet a 50 percent participation standard and that standard seems reasonable for the SNAP program as well. Second, SNAP would need to impose fines on 

individuals, including complete disqualification from the program, for noncompliance 

with work requirements. States already have the authority to impose sanctions, but 

states must use the sanctions more extensively if they are to have their intended 

impact. Like SNAP recipients, states that fail to meet their work requirements 

would also be subject to financial sanction. The goal of sanctions on states is to get 

them to implement the SNAP work requirements as aggressively as they implemented the TANF work requirements after the 1996 welfare reforms. Third, states 

will need additional funding to operate their employment programs. The Administration has requested $218,873,000 for 2013 to reimburse states at 50 percent to operate their employment and training programs.22 Although my view is that job 

search is the most effective use of funds, the SNAP employment and training account currently will pay for job search training and support, workfare, educational 

activities, and self-employment training. The Agriculture Committee would have to 

explore the cost of imposing a 50 percent work requirement on states, perhaps 

phased-in over 5 years beginning at 20 percent, with the Congressional Budget Office. However, about 60 percent of SNAP recipients would be exempt from the work 

requirement because of age or disability (in 2010, 47 percent were children, eight 

percent were elderly, and six percent were disabled).23 Although there would certainly be up-front costs, in the long run extensive and rigorous research on work 

requirements in the cash welfare program shows that there would be budget savings 

for Federal, state, and local governments.24

Conclusion 

As Congress considers savings in means-tested programs in general and the 

SNAP program in particular, it would be wise to review the costs of policies designed to reduce spending as well as the savings from such policies. Just as policymakers are concerned about costs and benefits when they consider creating new programs, the same review of costs and benefits should be applied to decisions about 

achieving savings through cuts in existing programs. As we have seen, the SNAP 

program performs several functions in admirable fashion: it stabilizes individual 

and family income more reliably than any other means-tested program; it creates 

a countercyclical force in the American economy by automatically rising during periods of increased unemployment and falling as employment recovers; it serves as a 

work incentive for millions of working families (but not all working families); and 

it substantially reduces poverty among low-income working families. In my view, it 

does not follow that the SNAP program should be off the table as Congress struggles 

to find ways to reduce the nation’s budget deficit. Unless Congress takes action on 

the deficit now, and especially on government spending, the actions we will be 

forced to take later will make even what seem like difficult changes in SNAP and 

other means-tested programs today seem rather modest. At least for now, the 

achievements of the SNAP program should lead policymakers to keep cuts moderate 

and to do as little damage as possible to the ways in which SNAP achieves its many 

purposes. If I could protect individual means-tested programs from the deficit-reducing scalpel (or ax), SNAP would be high on my list of protected programs. But given 

the seriousness of the budget crisis, and the need to extend program cuts to entitlement spending, the SNAP program should not be completely protected. Even so, beVerDate 0ct 09 2002 12:54 Dec 11, 2012 Jkt 041481 PO 00000 Frm 00413 Fmt 6601 Sfmt 6621 I:\DOCS\112-30\74372.TXT BRIAN
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cause no other program fulfills such a diverse array of worthy goals as effectively 

as SNAP, cuts should be made with caution.

The CHAIRWOMAN. Thank you so much. 

Ms. Dean? 

STATEMENT OF STACY DEAN, VICE PRESIDENT FOR FOOD

ASSISTANCE POLICY, CENTER ON BUDGET AND POLICY

PRIORITIES, WASHINGTON, D.C. 

Ms. DEAN. Thank you. Madam Chair, Ranking Member Baca, 

and Members of the Committee, thank you for the invitation to testify today. I am Stacy Dean, Vice President for Food Assistance 

Policy at the Center on Budget and Policy Priorities, a nonpartisan 

policy institute here in Washington. 

I am really pleased to have the opportunity to talk to you today 

about the Supplemental Nutrition Assistance Program, or SNAP. 

SNAP is designed to provide a basic nutrition benefit to low income 

families, the elderly, and people with disabilities who cannot afford 

an adequate diet. And while the program is not perfect, it does an 

admirable job of meeting its core purpose. Even though many low 

income Americans continue to struggle as Mr. Bivens said, really 

don’t know where their next meal will be coming from, SNAP has 

largely eliminated severe hunger and malnutrition in the United 

States. This would be a very different country without the program. 

So I would like to take this opportunity to highlight some of the 

programs key strengths and to respond to concerns about its 

growth. As Dr. Haskins said, SNAP is highly responsive to need. 

It is an entitlement meaning anyone who qualifies under its rules 

can receive benefits. And this is the program’s most powerful feature. It enables SNAP to respond quickly and effectively to support 

low income families and the communities they live in during times 

of economic distress. Enrollment expands when the economy weakens and contracts when the economy recovers. 

Now, some critics have used growth to raise concerns about the 

program and justify proposals to cut its food benefits. Many of their 

claims about growth are flatly wrong as I will explain. Again, the 

economy is the overwhelming reason for SNAP’s recent growth. 

The recession and lagging recovery weakens the economic circumstances of millions of Americans and dramatically increase the 

number of households who qualify and apply for SNAP. 

There have been two other factors that have contributed to recent growth. First, the 2009 Recovery Act Congress temporarily increased SNAP benefits as a highly effective, targeted means of delivering economic stimulus. And according to CBO, this accounts 

for about 20 percent of the recent growth. And second, the program 

is doing a better job at reaching people who qualify. That accounts 

for about ten percent of the growth in caseloads. 

And for those concerned about SNAP’s recent growth, CBO 

projects that SNAP spending will shrink in the years ahead as the 

economy recovers. By 2021 it will be nearly back down to pre-recession levels as a share of the economy or GDP. And moreover, SNAP 

is projected to grow no faster than the economy in futures years or 

decades, so there is no basis for claims that SNAP is contributing 

to the nation’s long-term budget problems. 

2003

So let me list two more of SNAP’s key strengths before wrapping 

up. As Dr. Haskins said, SNAP is a powerful anti-poverty program. 

While benefits are modest, they have a big impact. SNAP lifted 

about four million Americans above the poverty line in 2010, including about two million children according to our analysis using 

the National Academies of Science’s measures of poverty which 

counts SNAP as income. And SNAP is a very important work support. The number of low income working households on SNAP has 

risen dramatically over the past decade reflecting both a substantial rise in the participation of eligible working families, as well as 

wage erosion at the low end of the pay scale, which has made more 

working households eligible for SNAP. 

Looking ahead to the farm bill, I recognize that you are working 

in a very difficult budget environment that could make needed investments in the program extremely difficult to enact. Ideally today 

we would be discussing ways to strengthen the program such as 

improving benefit adequacy, supporting innovative state practices 

or finding new ways to connect eligible low income seniors to the 

program. But let us be clear. Cutting SNAP benefits as a means 

to achieve deficit reduction has serious negative consequences. It 

would compromise low income Americans’ ability to obtain a basic 

diet and it would have potential health effects on substantial numbers of our most vulnerable citizens. 

SNAP households include four million seniors, four million adults 

who receive disability benefits, and 23 million children, including 

ten million children in households with annual income below half 

the poverty line. Those are powerful figures but they don’t fully express the stories of families that use the program. As I travel 

around the country working with SNAP administrators to help improve their programs, I have met many families as they apply for 

or work to renew their benefits. I have met a single mom working 

as a gas station attendant whose ex-husband stopped paying child 

support, a woman with a new baby whose husband lost his job as 

a roofer due to a work-related accident, and a disabled woman who 

was incredibly grateful for SNAP because it freed up money for her 

to pay for medicine. 

So as you formulate the 2012 Farm Bill, I ask that you keep 

those families in mind and recognize how well SNAP serves them. 

Thank you very much. 

[The prepared statement of Ms. Dean follows:]

PREPARED STATEMENT OF STACY DEAN, VICE PRESIDENT FOR FOOD ASSISTANCE

POLICY, CENTER ON BUDGET AND POLICY PRIORITIES, WASHINGTON, D.C. 

Thank you for the invitation to testify today. I am Stacy Dean, Vice President for 

Food Assistance Policy at the Center on Budget and Policy Priorities, a nonpartisan 

policy institute located here in Washington. The Center is an independent, nonprofit 

policy institute that conducts research and analysis on a range of Federal and state 

policy issues affecting low- and moderate-income families. The Center’s food assistance work focuses on improving the effectiveness of the major Federal nutrition programs, with a particular focus on the Supplemental Nutrition Assistance Program 

(SNAP). We receive no government funding. 

My testimony today focuses on the impact of SNAP (known as the Food Stamp 

Program until 2008), its performance during the recent economic down turn, and 

issues for consideration during the upcoming reauthorization of the program. SNAP 

is our nation’s most important anti-hunger program. As of February of this year, 

it was helping 46 million low-income Americans to afford a nutritionally adequate 

diet by providing them with benefits via a debit card that can only be used to purVerDate 0ct 09 2002 12:54 Dec 11, 2012 Jkt 041481 PO 00000 Frm 00415 Fmt 6601 Sfmt 6621 I:\DOCS\112-30\74372.TXT BRIAN
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chase food. One in seven Americans is participating in SNAP—a figure that speaks 

both to the extensive need across our country and to SNAP’s important role in addressing it. 

Policymakers created SNAP to help low-income families and individuals purchase 

an adequate diet. It does an admirable job of providing poor households with basic 

nutritional support and has largely eliminated severe hunger and malnutrition in 

the United States. 

When the program was first established, hunger and malnutrition were much 

more serious problems in this country than they are today. A team of Field Foundation-sponsored doctors that examined hunger and malnutrition among poor children 

in the South, Appalachia, and other very poor areas in 1967 (before the Food Stamp 

Program was widespread in these areas) and again in the late 1970s (after the program had been instituted nationwide) found marked reductions over this 10 year period in serious nutrition-related problems among children. The doctors attributed a 

significant part of this reduction to the Food Stamp Program. Findings such as this 

led then-Senator Robert Dole to describe the Food Stamp Program as the most important advance in the nation’s social programs since the creation of Social Security. 

Consistent with its original purpose, SNAP continues to provide a basic nutrition 

benefit to low-income families, elderly and people with disabilities who cannot afford 

an adequate diet. But today’s program is stronger than at any previous point. By 

taking advantage of modern technology and business practices, SNAP has become 

substantially more efficient, accurate, and effective. While many low-income Americans continue to struggle, this would be a very different country without SNAP. 

Despite these successes, Census data indicate that in 2010 more than one in 

seven households nationwide were ‘‘food insecure,’’ meaning that at times throughout the year households were uncertain of having sufficient resources to provide 

adequate food for family members; almost 49 million people lived in such households. Reauthorization of SNAP provides an important opportunity to review the 

program’s strengths and improve it for individuals in need. 

Special Features of SNAP 

Protecting Families from Hardship and Hunger 

SNAP benefits are an entitlement, which means that anyone who qualifies under 

the program’s rules can receive benefits. This is the program’s most powerful feature; it enables SNAP to respond quickly and effectively to support low-income families and communities during times of economic downturn and increased need. Enrollment expands when the economy weakens and contracts when the economy recovers.


11230128.eps
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Since December 2007, when the recession began, SNAP enrollment has increased 

by 19 million people. In some of the states hit hardest by the downturn, caseloads 

have more than doubled. For example, in Nevada, Florida, and Utah, where unemployment increased by up to 160 percent between December 2007 and December 

2011, the number of SNAP participants increased by 125 to 160 percent. 

SNAP’s ability to serve as an automatic responder is also important when natural 

disasters strike. States can provide emergency SNAP within a matter of days to 

help disaster victims purchase food. After the hurricanes of 2005, for example, 

SNAP provided more than two million households with almost $1 billion in temporary food assistance. In 2011, SNAP responded to two major sets of disasters: the 

spring floods and tornados (primarily in the Southeast and Midwest), and in the 

fall, Hurricane Irene and Tropical Storm Lee (in the Mid-Atlantic and Northeast). 

Lessening the Extent and Severity of Poverty and Unemployment

While the targeting of benefits adds some complexity to the program, it helps ensure that SNAP provides the most assistance to the poorest families with the greatest needs. 

These features make SNAP a powerful tool in fighting poverty. A CBPP analysis 

using the National Academy of Science measure of poverty, which counts SNAP as 

income and identified 47.3 million people living in poverty in 2010, found that SNAP 

kept about four million people out of poverty, including about two million children. 

SNAP lifted 1.3 million children above 50 percent of the poverty line in 2010, more 

than any other benefit program. 

SNAP is also effective in reducing extreme poverty. A recent study by the National 

Poverty Center estimated the number of U.S. households living on less than $2 per 

person per day, a classification of poverty that the World Bank uses for developing 

nations. The study found that counting SNAP benefits as income reduced the number of these extremely poor families with children in 2011 from 1.46 million to 

800,000, and reduced the number of children in extreme poverty in 2011 by 1⁄2—

from 2.8 million to 1.4 million.


11230129.eps 11230130.eps
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During the deep and prolonged recession and weak recovery, SNAP has become 

increasingly valuable for the long-term unemployed. In 2010, according to the Joint 

Economic Committee, over 20 percent of those who had been unemployed for more 

than 6 months received SNAP benefits. SNAP is one of the few resources available 

for jobless workers who have exhausted their unemployment benefits; nearly 25 percent of households in which someone’s unemployment benefits ended were enrolled 

in SNAP. 

SNAP also protects the economy as a whole by helping to maintain overall demand for food during slow economic periods. In fact, SNAP benefits are one of the 

fastest, most effective forms of economic stimulus because they get money into the 

economy quickly. Moody’s Analytics estimates that in a weak economy, every $1 increase in SNAP benefits generates $1.71 in economic activity. Similarly, the Congressional Budget Office (CBO) rated an increase in SNAP benefits as one of the 

two most cost-effective of all spending and tax options it examined for boosting 

growth and jobs in a weak economy. 

Supporting and Encouraging work 

Over the last 2 decades, the share of SNAP households that are working households has risen significantly. In 2010 more than three times as many SNAP households worked as relied entirely on welfare benefits for their income. (See chart: 

‘‘Working Households Have Risen.’’) Nearly half of all SNAP households with children have earned income. 

Working Households Have Risen 

Share of SNAP Households With Children by Type of Income

Data Source: USDA Office of Research and Analysis, Characteristics of 

SNAP Households.

Despite sharply higher unemployment during the recession, the share of SNAP 

families with children that have earnings has remained stable. Even in 2010, when 

unemployment was 9.6 percent and jobs were hard to find, the majority of SNAP 

households that contained a non-disabled working-age adult were working households. The number of low-income working households on SNAP has risen dramatically over the past decade, reflecting both a substantial increase in SNAP participation among eligible low-income working households and wage erosion at the low end 

of the wage scale, which makes more working households eligible for SNAP. 

The data also show that the majority of non-disabled working-aged adults who were not working while receiving SNAP worked either in the prior year or the following year. Among SNAP households that worked in the year before they began 

to receive SNAP, only four percent did not work in the following year, which indicates that turning to SNAP when families face hard times does not lead them to 

cease working. 

SNAP benefits help low-wage working families make ends meet. Moreover, the 

SNAP benefit formula contains an important work incentive. For every additional 

dollar a SNAP recipient earns, her benefits decline by only 24¢ to 36¢—much less 

than in most other programs. Families that receive SNAP thus have a strong incentive to work longer hours or to search for better-paying employment. 

States further support work through the SNAP Employment and Training program, which funds training and work activities for unemployed adults who receive 

SNAP. Due to limited funding, however, the program can help only a modest portion 

of SNAP recipients who are unemployed and aren’t enrolled in, or subject to, another work program or set of work requirements, such as under TANF. The Committee’s recommendations to the Budget Committee for reconciliation would exacerbate this problem by imposing large cuts in SNAP employment and training funding, as discussed below. While many SNAP participants work, some face multiple 


11230131.eps
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barriers to work due to their very low skills or health problems. A 2003 GAO report 

found that SNAP E&T participants generally have limited education—often they 

have not finished high school—with limited work history and skills. State officials 

reported to GAO that SNAP E&T participants often had to rely on seasonal and 

intermittent employment and often lacked reliable transportation and affordable 

child care, factors that contributed to the challenge of finding and maintaining employment. SNAP E&T is an important means to assist these individuals gain the 

skills they need to enter or re-enter the workforce. 

Some have argued that the existing workforce system and programs are duplicative of SNAP E&T and that SNAP E&T thus isn’t needed. That is not the case. Existing job training programs are not equipped to serve many SNAP participants. 

Funding for job services under the Temporary Assistance for Needy Families block 

grant is already inadequate, and is unavailable to many SNAP participants, including those without children. Job programs funded by the Workforce Investment Act 

(WIA) are generally not designed to address the barriers to employment that many 

low-income SNAP participants face. Because WIA is serving an increasing number 

of non-poor jobseekers with a frozen level of funding, the number of low-income individuals receiving job training through WIA has declined. Indeed, the GAO reported 

that some state agencies operating WIA programs are reluctant to provide intensive 

services to SNAP participants due to concern that doing so would adversely affect 

the program’s performance measures. 

Supporting Healthy Eating 

While I’ve focused so far primarily on SNAP’s role in reducing poverty and responding to downturns, we should not forget that SNAP enables low-income households to afford a more healthy diet. Because SNAP benefits can be spent only on 

food, they raise families’ food purchases more than an equivalent amount of cash 

assistance would. Fruits and vegetables, grain products, meats, and dairy products 

comprise almost 90 percent of the food that SNAP households buy. In addition, all 

states operate SNAP nutrition education programs to help participants make 

healthy food choices. Recent research finds that the nationwide expansion of SNAP 

in the 1960s reduced the incidence of low birth weight, as well as infant mortality 

to some extent. 

Issues Related to SNAP 

Despite SNAP’s many strengths and its powerful response to the recent downturn, 

some policymakers have raised questions about the program, primarily concerning 

waste and fraud, SNAP’s recent growth, and its effect on the nation’s long-term fiscal problems. I will examine each of these issues in turn. 

SNAP has one of the most rigorous payment error measurement systems of any 

public benefit program. Each year states take a representative sample of SNAP 

cases (totaling about 50,000 cases nationally) and thoroughly review the accuracy 

of their eligibility and benefit decisions. Federal officials re-review a subsample of 

the cases to ensure accuracy in the error rates. States are subject to fiscal penalties 

if their error rates are persistently higher than the national average.

In addition, the combined error rate—that is, the sum of overpayments and underpayments (see box) reached an all-time low in 2010 of just 3.81 percent. The 

overpayment error rate counts benefits either issued to ineligible households or 


11230132.eps
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1 Congressional Budget Office, ‘‘The Supplemental Nutrition Assistance Program,’’ April 2012.

issued to eligible households in excess of what Federal rules provide. The underpayment error rate measures errors in which eligible, participating households received smaller benefits than SNAP rules call for. The combined payment error rate 

is the sum, not the net, of the overpayment and underpayment error rates. 

In 2010, for example, the overpayment error rate was 3.05 percent and the underpayment rate was 0.75 percent. The combined error rate was thus 3.81 percent. But 

the net loss to the Federal Government from errors (the overpayment rate minus 

the underpayment rate) was 2.3 percent. 

In comparison, the Internal Revenue Service (IRS) estimates a noncompliance 

rate on the income tax of 16.9 percent in 2006 (the most recently studied year). This 

represents $385 billion lost to the Federal Government in 1 year. Under-reporting 

of business income alone cost the Federal Government $122 billion in 2006, and 

small businesses report less than half of their income. 

The overwhelming majority of SNAP errors that do occur result from mistakes by 

recipients, eligibility workers, data entry clerks, or computer programmers, not dishonesty or fraud by recipients. In addition, states have reported that almost 60 percent of the dollar value of overpayments and more than 90 percent of the dollar 

value of underpayments were their fault, rather than recipients’ fault. Much of the 

rest of overpayments resulted from innocent errors by households facing a program 

with complex rules. 

Finally, SNAP has low administrative overhead. Almost 95 percent of Federal 

SNAP spending goes to providing benefits to households for purchasing food. Most 

of the rest goes toward Federal and state administrative costs, including reviews to 

determine that applicants are eligible, employment and training activities, nutrition 

education, monitoring of retailers that accept SNAP, and anti-fraud activities. 

Increases in SNAP Costs 

There is widespread misunderstanding regarding the reasons for the large growth 

in SNAP spending in recent years and what is likely to happen in the future. SNAP 

costs have grown substantially over the past decade, but for reasons that show the 

program is working. And they are expected to come down in the coming years. 

Claims that cuts to SNAP are justified because the program is growing in 

unsustainable ways are misplaced. 

The single biggest reason for program growth is the effect of the recession and 

lagging recovery on the economic circumstances of millions of Americans. Unemployment peaked at ten percent in late 2009, and long-term unemployment (of 6 months 

or more) has set all-time highs. 

2009

2The most recent year for which USDA publishes estimates is 2009. 

To be sure, the downturn does not explain all of the recent increase in SNAP 

costs. Some people assume that eligibility expansions are largely responsible for the 

remainder of the cost increase and that, as a result, SNAP expenditures and participation will continue growing even after the economy recovers. Careful analysis indicates, however, that such assumptions are incorrect. 

As in many other areas of budgetary analysis, the year one picks as a starting 

point for a historical analysis matters. For SNAP, starting only 10 years ago provides a distorted picture of program growth because SNAP participation and costs 

had plummeted at that point, in part due to a large decrease in the proportion of 

eligible families receiving SNAP in the late 1990s. The 1996 welfare law was intended to encourage work, but due to problems in state administrative systems in 

the first years of implementation, many families moving from welfare to workingpoor status were cut off SNAP when they left welfare, even though they remained 

eligible for SNAP. This was not what Congress had intended. 

Aggravating this problem, some states instituted administrative practices in those 

years that had the unintended effect of making it harder for many working-poor 

parents to participate in SNAP (largely by forcing them to take too much time off 

from work for repeated visits to SNAP offices at frequent intervals, such as every 

90 days, to reapply for benefits). 

This prompted many to call for reforms that would improve access to SNAP for 

low-income working families and led both the Clinton and Bush Administrations to 

act to address this problem. A bipartisan consensus emerged that making it difficult 

for families to continue receiving SNAP when they left welfare for low-wage work 

would discourage work and conflict with welfare reform goals. 

As a result, Congress enacted meaningful, although relatively modest, changes in 

2002 and 2008 to lessen barriers to SNAP participation among the working poor, 

as well as modest improvements in benefits largely aimed at low-wage workers and 

their families. In addition, most states took steps to improve access for working families. These measures have succeeded: the SNAP participation rate, which had 

plummeted from 75 percent of eligible individuals in 1994 to 54 percent in 2002, 

is back to 72 percent today.2 Of particular note, SNAP participation among low-income working families has risen steadily, from 43 percent in 2002 to about 60 percent in 2009, a record high. 

The final major contributor to recent SNAP spending growth is the temporary 

SNAP benefit increase that Congress enacted as part of the 2009 Recovery Act in 

order to reduce hardship and deliver high ‘‘bang-for-the-buck’’ economic stimulus. 


11230133.eps
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CBO reports that this provision accounted for 20 percent of the growth in the program between 2007 and 2011. 

In sum, there are three main reasons for the large increase over the past decade 

in SNAP expenditures: the economy, a large increase in participation among eligible 

households (especially eligible working households), and the Recovery Act’s temporary benefit increase. These three factors dwarf the impact of eligibility changes 

during this period. 

What lies ahead with regard to SNAP costs? Under current SNAP law, without 

any changes, expenditures will decline in the coming years, for two reasons. 

First, history suggests that SNAP caseloads and expenditures will fall after unemployment and poverty fall, as CBO’s recent report on the SNAP program notes. 

SNAP caseload growth already has slowed dramatically; in fact, in January and 

February (the most recent 2 months of data), SNAP participation was modestly 

lower than the prior month. According to CBO, in the coming years the share of the 

population that participates in SNAP will fall back to 2008 levels.

the way back to their 1995 level as a percentage of GDP by 2018, and then to edge 

below that level. 

This means that SNAP is not contributing to our long-term budgetary problems. 

Unlike health care programs and Social Security, there are no significant demographic or programmatic pressures that will cause SNAP costs to grow faster than 

the economy. This also means that the recent growth in SNAP expenditures is not 

a sound justification for imposing SNAP cuts. 

The Budget and SNAP 

This year’s farm bill will likely need to produce savings that contribute to deficit 

reduction. The nation is on an unsustainable fiscal course, and changes are needed 

to correct that path. But the United States also has levels of poverty and inequality 

significantly higher than most other western industrialized nations. Furthermore, 

poverty—and especially deep poverty—among children may have negative long-term 

effects on the economy, as well as on the children themselves. 

The 2010 report by deficit commission co-chairs Erskine Bowles and Alan Simpson and a majority of the commission members emphasized, as one of its core principles, that deficit reduction should not increase poverty or harm the disadvantaged. 

The report did not call for reductions in any low-income program outside Medicaid. 

Similarly, when the Senate’s bipartisan Gang of Six developed it’s framework for 

deficit reduction, it also said that SNAP should not be cut. Last year, a diverse 

group of Christian leaders representing the Catholic Bishops’ Conference, the Episcopal Church, the Salvation Army, the National Association of Evangelicals, and 

others issued a call for policymakers to safeguard the poor in deficit reduction and 

to draw a ‘‘circle of protection’’ around programs targeted on them. 

History shows that deficit reduction need not harm the poor. In 1990, 1993, and 

1997, policymakers enacted legislation that reduced deficits substantially—and 

helped produce 4 years of surpluses—without harming low-income families. In fact, 

all three laws included well-designed measures (such as improvements in the 


11230134.eps
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Earned Income Tax Credit for working-poor families and creation of the Children’s 

Health Insurance Program) that reduced poverty and hardship. These examples provide useful precedents for policymakers today. 

I urge policymakers to seriously consider these principles and precedents in evaluating proposed changes to SNAP, such as the Committee’s recent recommendations 

to the Budget Committee on reconciliation savings and the Budget Committee’s proposal to block grant SNAP. 

House Agriculture Committee Reconciliation Recommendations 

Required by House Concurrent Resolution 112 to produce $33 billion in savings 

over the next decade, the Committee produced legislation last month that would obtain the entire amount from cuts to SNAP. I am deeply concerned about the package 

that the Committee approved.

• The cuts would affect every SNAP household. Some two million individuals, disproportionately working families and seniors, would lose SNAP benefits 

entirely. All remaining 44 million individuals who receive SNAP would see their 

benefits cut. For example, in September 2012, every household of four would see 

its benefits cut by at least $57 a month; all households of three would lose at 

least $31 a month.

• The proposal would increase poverty and hardship and could affect the 

economy adversely. As noted, SNAP lifted about four million people out of 

poverty in 2010, including about two million children, under a poverty measure 

that counts the value of SNAP and other non-cash benefits, as analysts generally recommend. The proposed cut in SNAP benefits would push some households into poverty and deepen the extent of poverty for millions of others.

• The proposal would cut funds for job training at a time when the unemployment rate exceeds eight percent. Some proponents of large cuts in 

SNAP and other low-income programs argue that policymakers should place 

greater emphasis on promoting work. Yet the House SNAP proposal would cut 

Federal funding for SNAP employment and training by 72 percent by removing 

Federal matching funds for job training and other employment programs for 

jobless SNAP recipients, along with associated child care, transportation, and 

other work supports. This cut would make it harder for SNAP households that 

are unemployed to find jobs.

Many observers do not expect the House reconciliation package to become law because of opposition in the Senate. I would urge you to set aside this package and 

to reconsider cutting SNAP as you move forward with the farm bill. Cutting SNAP 

benefits could compromise low-income Americans’ ability to obtain a basic diet, with 

potential negative health effects on poor children, seniors, and people with disabilities. SNAP households include four million seniors, four million adults who receive 

disability benefits, and 23 million children, including ten million children in households with cash income below half the poverty level. 

Block Grant Proposal 

The proposal in the House budget to convert SNAP to a block grant and cut it 

at least $133.5 billion over 10 years is ill-advised. 

As noted, SNAP funds go overwhelmingly for food purchases—nearly 95 percent 

of Federal SNAP expenditures go directly for benefits to recipients. Most of the remainder goes to determine eligibility, administer the work requirements and work 

programs, and approve and monitor compliance by retail food stores—costs that 

would largely remain under a block grant. The math here leads to an inevitable result; the only way to secure savings of this magnitude would be to substantially cut 

eligibility, benefit levels, or both.

If the savings were to come entirely from restricting eligibility, more than eight 

million people would need to be cut adrift if the cuts began taking effect in 2013. 

(If the cuts did not begin until 2016, the year in which the House budget envisions 

converting SNAP to a block grant, an average of almost ten million people would 

have to be cut from the program from 2016 through 2022 to achieve the required 

savings.) States would likely restrict eligibility, at least in substantial part, by lowering income (and possibly asset) limits, which would primarily remove low-income 

working families from the program. A program structure that provides SNAP to 

families on public assistance but denies it to many who work for low wages would 

have much weaker work incentives than SNAP has today. 

If the savings were secured by cutting benefit levels instead, increased hunger 

and food insecurity would likely result. Considerable research suggests that the 

SNAP benefit level may already be too low to enable many families to secure an 

adequate diet throughout the month. (Many run out of adequate food toward 

2012

month’s end.) It would be dangerous to shrink benefit levels for needy children, seniors, and others. 

Converting SNAP to a block grant at substantially reduced funding levels also 

would have other deleterious effects.

• SNAP would no longer be able to respond to increased need during economic 

downturns, so hardship and hunger would be worse in future recessions than 

if SNAP’s current structure is maintained.

• Nor would SNAP be able to bolster the economy during recessions as it does 

today. In studying the effect of 22 different tax and spending options to promote 

economic growth and jobs in a weak economy, economist Mark Zandi of Moody’s 

Analytics rated temporary increases in SNAP benefits first in effectiveness per 

dollar of cost, ahead of both unemployment insurance and all tax-cut options. 

CBO similarly gives SNAP increases its top rating for effectiveness in a weak 

economy. This is because SNAP benefits are quickly spent and injected into the 

economy, rather than saved. Preventing SNAP from expanding automatically as 

the economy weakens by converting it to a block grant would remove what 

economists call an ‘‘automatic stabilizer’’ and hence likely make recessions 

somewhat deeper and longer.

• Finally, a proposal to cut SNAP like that in the House budget would almost certainly make deep poverty more widespread and severe—especially among children, who make up about half of SNAP beneficiaries. That could have harmful 

long-term consequences for these children. Emerging research shows the importance to children’s future earnings prospects of adequate family income and purchasing power during early childhood. 

Looking Ahead 

Debates over the overall budget framework and whether to cut safety net programs have impeded the conversation that policymakers ought to be having as a 

part of the farm bill: how can we strengthen SNAP to respond still more effectively 

to hunger and poverty? Despite SNAP’s many strengths, the program could be improved to ensure that it more comprehensively responds to low-income families’ 

needs. 

I will highlight three particular areas for the Committee’s consideration. 

Revisiting Eligibility Restrictions 

One of SNAP’s strengths is that it is not limited to particular population subgroups but instead is largely available to low-income people based on their financial 

circumstances. Some low-income people, however, are not fully eligible for SNAP, 

which reduces its ability to meet need. 

While several of SNAP’s eligibility restrictions are worth revisiting, one in particular stands out. Childless unemployed adults face an overly harsh SNAP restriction. People aged 18 to 50 who are not raising minor children may receive SNAP 

benefits for only 3 months (while they are not employed at least half time) out of 

every 3 years, even if they have looked diligently for work but cannot find it. I encourage the Committee to consider moderating this overly harsh restriction. 

Benefit Adequacy 

While SNAP is a powerful response to poverty and food insecurity, the program’s 

relatively modest benefits reduce its impact. The average SNAP household received 

about $287 a month in benefits in Fiscal Year 2010; the average recipient received 

about $134 a month, or about $1.50 per meal. Many researchers have questioned 

whether the benefits are sufficient to meet families’ basic needs throughout the 

month, a question that the Institute of Medicine is now examining. 

Moreover, recent research suggests that the Recovery Act’s temporary boost in 

SNAP benefits contributed to improved food security of SNAP households between 

2008 and 2009. 

Ideally, the Committee would explore ways to improve SNAP benefits—either 

overall or for specific groups, such as senior and disabled households, as it did in 

2008. At a minimum, the Committee should not reduce benefits. 

Program Access 

SNAP does a good job of reaching eligible people. As noted, it reached 72 percent 

of all eligible individuals in a typical month in 2009 (the most recent year available). 

Participation rates have increased over the past decade, reflecting increased need, 

program simplification, improved enrollment policies, and expanded outreach efforts. Because the neediest individuals, who are eligible for larger benefits, participated at higher rate than other eligible persons, the 72 percent of eligible individVerDate 0ct 09 2002 12:54 Dec 11, 2012 Jkt 041481 PO 00000 Frm 00424 Fmt 6601 Sfmt 6621 I:\DOCS\112-30\74372.TXT BRIAN
2013

uals who participated received 89 percent of the total benefit amount that would be 

provided if 100 percent of eligible individuals participated. 

Yet SNAP does not reach all types of households equally well. While families with 

children participate at high rates, working families and seniors participate at relatively low rates.

• Working families. In 2009, some 60 percent of the eligible working poor participated. While participation among these families has improved in recent 

years, more could be done.

• Seniors. Eligible seniors, who face unique barriers in accessing and applying 

for benefits, are particularly under-served. Many low-income seniors who struggle to get by on small fixed incomes have unmet dietary needs but don’t receive 

SNAP assistance. Just 35 percent of eligible individuals over age 60 participated 

in 2008, though participation rates have increased modestly in recent years. 

SNAP Participation Rates by State, 2009

Source: USDA, ‘‘Reaching Those in Need: State SNAP Participation Rates 

in 2009’’.

In addition, SNAP participation rates vary widely from state to state. (See chart: 

‘‘SNAP Participation Rates by State, 2009.’’) Some states, such as Illinois, Maine, 

Missouri, Washington, and West Virginia, consistently serve a high percentage of 

eligible households (over 80 percent), while others serve a lower percentage (such 

as California, Delaware, Kansas, Texas, and Wyoming). 

The Committee should look for further opportunities to streamline and simplify 

program rules in order to ease barriers that impede eligible households from participating and to make it easier for state agencies to serve these households. Possibilities include expanding outreach to under-served populations, better enabling poor 

households to apply for benefits (such as by providing more access to online and 

telephone services), and improving retention of eligible households at renewal. 

Households that participate in SNAP must reapply for their benefits after a fixed 

period of time, typically every 6 or 12 months. States have found that a significant 

share of eligible households don’t complete the reapplication process by the state’s 

deadline and are cut off; many of these households then file a new application, but 

this creates a gap in food assistance as well as more work for the state (since new 

applications are more time-consuming than renewals). Addressing this problem 

could improve participation rates, reduce administrative burdens on states, and reduce food insecurity among needy families. 

Supporting States’ Efforts to Strengthen Program Integrity and Access 

Another important area worth exploring is the remarkable advances in state 

SNAP agencies’ use of technology and innovative business practices, which have improved program efficiency as well as overall access to the program. Despite dramatic 

increases in their SNAP caseloads during the economic slump and fewer administrative resources with to manage their workloads (due to state budget cuts), a number 

of states have done an impressive job of meeting the increased need. 

Some states have begun offering new options for applying for and renewing benefits—such as online applications, which roughly half of the states now offer—that 


11230135.eps
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enable low-income households to apply at times more convenient for them than traditional office hours (which often conflict with their work hours). This approach can 

improve access for working families and those in remote locations, where the nearest SNAP agency might be a long distance away. Online applications can also help 

streamline a SNAP agency’s workload. Because online applications enable families 

to take care of some of the application process themselves, state staff have fewer 

data to enter in order to process applications. The same goes for other on-line tools. 

Families often have questions about the status of their case or need to report 

changes in their circumstances. Because responding to unscheduled inquires can 

distract eligibility staff trying to work through other cases, a number of states have 

sought to automate these functions. An increasing number of states offer online 

service tools that allow clients to report changes or check the status of their case. 

States have developed other tools that can help to improve program integrity as 

well as access. For example, Utah has developed a tool that helps eligibility workers 

conduct data matches across a wide range of state and Federal databases (such as 

Motor Vehicles, State Vital Statistics, Social Security Administration, Child Support, Unemployment Insurance, state tax records, consumer credit checks, and other 

commercial databases). These databases help states verify the income (and other eligibility factors) that the household reports and detect instances where households 

may not have reported information accurately. Previously, eligibility workers needed 

to query each database separately, which could involve separate links, user names, 

and passwords for each match. The new software, known as ‘‘eFind,’’ pools all the 

matches together for the worker within seconds, reducing processing delays and facilitating cross-program sharing of information as well as detection of errors and 

fraud. Helping states share these tools with other states, including exploring ways 

for the Federal Government to procure sound solutions one time in lieu of 50 states 

individually paying for technology tools that improve program integrity and access, 

should be a priority. 

Separate from these technology tools, a number of states have also reconfigured 

and streamlined their staff business processes in order to handle increased workloads while reducing the amount of staff time it takes to determine eligibility and 

also increasing payment accuracy. These efforts can yield strong results for the program and its clients. While USDA makes a concerted effort to share best practices 

and technology tools across states, individual SNAP agencies are often left to figure 

out these modes of improvement on their own. I encourage the Committee to explore 

means to facilitate greater use of these practices. 

In conclusion, I hope that policymakers will be able to step back from the usual 

type of Washington debates and political battles and consider what policies would 

be best for ‘‘the least among us.’’ I urge you to follow the Hippocratic oath and ‘‘do 

no harm.’’ And I also would ask you to adopt the Bowles-Simpson principle of protecting the disadvantaged and avoiding measures that would increase hunger, poverty and hardship in a nation as abundant as ours.

The CHAIRWOMAN. Thank you. 

Mr. Blalock? 

STATEMENT OF PHILIP A. BLALOCK, EXECUTIVE DIRECTOR, 

NATIONAL ASSOCIATION OF FARMERS MARKET NUTRITION 

PROGRAMS, ALEXANDRIA, VA 

Mr. BLALOCK. Madam Chair and Members of the Committee, my 

name is Phil Blalock. I am the Executive Director of the National 

Association of Farmers Market Nutrition Programs. Our association represents most of the 36 states, and six Indian tribal organizations that operate WIC, Farmers Market Nutrition Programs and 

51 Senior Farmers’ Market Nutrition Programs. On behalf of these 

programs, the folks that operate them, the farmers that participate, and the recipients, I thank you for this opportunity. 

These programs meet two very important objectives. They provide fresh produce to women, infants, children, and seniors by providing them benefits to buy fresh fruits and vegetables from small 

farmers who participate. And just as important, they increase income to small family farmers by increasing use and awareness of 

farmers markets, farm stands, and community-supported agriVerDate 0ct 09 2002 12:54 Dec 11, 2012 Jkt 041481 PO 00000 Frm 00426 Fmt 6601 Sfmt 6601 I:\DOCS\112-30\74372.TXT BRIAN
2015

culture outlets. We have over 18,000 farmers that participate in 

the WIC FMNP program and 20,000 farmers that participate in the 

seniors’ program. Members of our association have been operating 

these nutrition incentive programs since 1989. 

I initiated the program in 1992 in North Carolina and spent the 

next 7 years developing it into a crucial market development tool 

to open new farmers’ markets and stabilize old ones. FMNP programs are unique. They combine the nutritional and educational 

experience of the WIC and senior agencies with the farmer knowledge and training of the State Departments of Agriculture and Cooperative Extension Service. In the last several years, our programs have enhanced their training to include the new WIC fruit 

and vegetable vouchers as well as SNAP Electronic Benefit. This 

has been done by a combination of added resources from within 

state governments or by cooperative efforts with local community 

groups, food banks, and nonprofits. 

In short, our programs provide the necessary infrastructure to all 

nutrition programs operating in farmers markets and other direct 

farm outlets on a statewide basis for most of the nation. We have 

tried to spread a broad net to address hunger in rural and urban 

areas across the nation with the limited resources given to us, but 

we have a lot of under-served areas left. With more resources, we 

can fill in the gaps that are left and spread that net to every county in the United States. 

Last year, existing programs requested over $60 million for their 

programs with less than $40 million being available to small farmers and farm outlets. The last 5 years have seen dramatic changes 

in small farm participation in nutrition programs. We have learned 

that we need to change our approach to incorporate all nutrition 

programs into the scope of operations across all states. The rules 

have been prohibitive to combining resources and crossing program 

barriers has made for time inefficiencies and wasted energy. 

We think recipients, farmers, and taxpayers would be better 

served by combining the programs into one and allowing the state 

level program deliverers to make the decisions necessary to move 

resources around to better serve their populations. This goes hand 

in hand with what farmers have told us. They would like to do 

away with the multitude of paperwork and processing that it takes 

to participate in the many programs. In a perfect world, they would 

go to one place, fill out one form, and participate in all programs. 

If we had a single source that farmers could go to sign up for all 

programs, it would make it much easier for everyone involved and 

farmers would be much more willing to participate. We proposed 

language that would accomplish this, and with some agreement 

from USDA, they seem willing to work with us on it. 

The farmers market nutrition programs are nutrition incentive 

programs. That works for all of us. They give fresh fruits and vegetables to those who need it most. The programs are delivered efficiently using existing knowledge, education, and distribution infrastructure. This farm bill provides us with the opportunity to make 

these programs more efficient and the opportunity to expand into 

areas that have yet to be served. Once again I thank you. 

[The prepared statement of Mr. Blalock follows:]

2016

PREPARED STATEMENT OF PHILIP A. BLALOCK, EXECUTIVE DIRECTOR, NATIONAL

ASSOCIATION OF FARMERS MARKET NUTRITION PROGRAMS, ALEXANDRIA, VA 

Chairman Schmidt and Members of the Committee, thank you for giving our Association the opportunity to participate in this hearing on Farmers Markets and Nutrition Programs. 

Madame Chairman, my name is Phil Blalock. I am the Executive Director of the 

National Association of Farmers Market Nutrition Programs. Our Association represents most of the 37 states, The District of Columbia, Guam, Puerto Rico and six 

Indian Tribal Organizations (ITOs) that operate WIC Farmers’ Market Nutrition 

Programs and 51 Senior Farmers’ Market Nutrition Programs. 

These programs meet two very important objectives. They provide fresh produce 

to women, infants, children, and seniors by providing them benefits to buy fresh 

fruits and vegetables from small farmers who qualify and participate in the FMNP. 

They also increase income to small family farmers by increasing use and awareness 

of farmers markets. 

Nationally, 2.15 million WIC clients buy locally grown fresh vegetables and fruits 

which are safe and healthy from more than 18,245 farmers at more than 3,647 community-based farmers markets, 2,772 farm stands, and CSAs (Community-Supported Agriculture Programs). The Senior FMNP provided 844,999 seniors with benefits that were used with 20,106 farmers in 4,601 farmers markets, 3,861 farm 

stands and 163 CSA’s. 

The last 5 years have seen dramatic changes in small farm participation in nutrition programs. The new food package in the WIC program has offered small farmers 

with another opportunity to help in the fight against hunger across the nation. 

There has also been a tremendous amount of interest and help from multiple groups 

in aiding farmers by increasing SNAP participation by small farmers. Since our programs provide the infrastructure across most of the states for delivery of nutrition 

programs into farmers markets we have found ourselves tasked to work across program differences by providing guidance and leadership to simplify the processes for 

farmers. 

One of the remarkable things about our programs is their design. It has been our 

greatest asset and our greatest challenge. Our programs are all cooperative efforts. 

We take the expertise, eligibility and the distribution system of the WIC agencies 

as well as the senior programs and marry them with the farmer interaction with 

the Departments of Agriculture and Cooperative Extension. The asset is we don’t 

create a bureaucracy or added administrative cost. We take the strengths of those 

agencies and make a new program. The downside is we create a new task for those 

agencies without a lot of administrative dollars. So you have to want to work a lot 

of hours for very little reward to operate an FMNP. 

Our programs are more than just giving a recipient $20–$50 in coupons. They provide nutrition education, assistance when shopping at a farmers market, and help 

in how to prepare products when they return home. This is a big change from buying greasy fries and a burger, or buying something to pop into a microwave. Learning to shop for fresh vegetables and to prepare them takes time and effort; therefore, those of us who have the necessary knowledge must spend the time and energy 

to teach those who do not, whether young or old. The interaction that recipients 

have with the educators and the farmers provides the most effective tool in increasing fruit and vegetable consumption with low income beneficiaries. That makes us 

the perfect fit to help WIC and SNAP recipients get needed nutrition benefits. 

WIC new fruit and vegetable benefit (CVV) use at farmers markets has been disappointing. We are working with several farmers market associations in numerous 

states to identify the issues with farmer participation. The problems range from 

states simply not allowing farmers to participate in the WIC CVV program to less 

drastic but onerous rules that are prohibitive of small producers operating as a WIC 

CVV vendor. 

The biggest complaint that we have from farmers is the varying rules and multitudes of processes that they have to go through to participate in these programs. 

In a perfect world, they would go to one place, fill out one form and participate in 

all programs. We have created many of the problems ourselves with the segmentation of programs across different agencies BUT we also recognize these problems 

and have started the process to fix them. We have been working across the divisions 

in the Food Nutrition Services of the Department of Agriculture to break down the 

silos and simplify the processes. As in all attempts to change government programs 

it takes time, but we have found the Program Directors and their staff to be attentive and willing to work with us to address the issues. I think that they are looking 

for ways to simplify the process and flow of information as much as the farmers are. 

2017

The Food Nutrition Service has been exemplary in their effort to work ‘‘outside the 

box.’’ 

I would like to thank Congress for its continuing support for the WIC Farmers’ 

Market Nutrition Program and the Seniors Farmers Market Nutrition Program. 

These are the only programs that provide direct benefits to small farmers and low 

income families with so little effort. Unlike a lot of government programs, neither 

is considered an entitlement program, a welfare program, or even a subsidy to large 

corporate farmers. The FMNPs provide fresh, locally grown fruits and vegetables to 

low-income women, children and the elderly, and they also provide much needed income to thousands of small family farmers. I don’t need to remind this Committee 

that these farmers spend their dollars in their local communities, thus promoting 

local economic development. These programs are a win-win for the country. 

Our programs have seen reduced funding due to budget constraints and other priorities. As state budgets have tightened, it has been increasingly more difficult to 

find the necessary dollars to provide the required 30 percent state match for the 

WIC FMNP program. We have even had states that have had very successful, established programs simply drop FMNP because they could not provide the match or 

the personnel. 

Our states want to expand into areas that are currently not being served. They 

also want to cooperate with the other programs that are available to farmers. The 

only limitations have been the funds to take this program to every area and a few 

adjustments to the law. FNS data shows that states are requesting fifty-four percent 

more funding annually for WIC and Senior FMNPs than funds are available. And 

all the while, we are only serving very minimum number of recipients as evidenced 

by this very representative example: Washington State’s program only serves 26% 

of eligible recipients in the WIC FMNP. Alabama, the fourth largest SFMNP, is only 

serving 23% of the eligible seniors. The states have requested additional funds; they 

have shown demand; FNS has documented it; the states have proven they have the 

methodology for delivery; it is now time for Congress to come to aid of women, children, seniors and small farmers. 

We have offered a proposal that will consolidate these programs into one, making 

it easier for us to operate across program boundaries and to cooperate fully with 

other groups. It will also make it easier for the farmers to have access to all of the 

programs and still serve recipients effectively and efficiently. The concept is simple. 

We have been operating incentive programs for nutrition programs in farmers markets for more than 20 years. We want to leverage that existing infrastructure and 

knowledge to help deliver all nutrition programs to small farmers. To abandon it 

would be wasteful and irresponsible. We think that the State Departments of Agriculture and the State Health and Human Services Agencies are the only ones that 

will provide the stability and the continuity to end hunger in EVERY county in the 

United States. It is imperative that the democratically elected state agencies remain 

at the center of these efforts as they have a vested interest in the local economies 

and hunger needs. 

We strongly encourage you to make legislative changes that strengthen and expand the Farmers Market Nutrition Programs. These recommended changes provide 

flexibility for the Secretary to move funds where there is more demand. The most 

important action that this change will create is the consolidation of programs for 

a more efficient and effective mechanism within the states local food regions. Our 

association stands ready to work with you and your staff and with USDA staff to 

make this happen. 

Thank you for the opportunity to offer this testimony. I’ll be happy to respond to 

your questions.

The CHAIRWOMAN. Thank you all very much. 

I am going to start off by questioning Dr. Haskins. In your testimony you suggested four policy changes that would lead to savings. 

One of the ideas was changing the way the Low Income Housing 

Energy Assistance Program, LIHEAP, interacts with SNAP. Do you 

feel that these states that have been sending SNAP recipients 

nominal LIHEAP checks are going around the intent of the law? 

And could you give us your thoughts on how setting a minimum 

of LIHEAP payments of that $25 or $50 would affect participation 

by the states? 

Dr. HASKINS. First of all, I didn’t necessary recommend those 

changes; I just reviewed them as possibilities and the Committee 

2018

has to save money, you have to consider all of the possibilities. Yes, 

I definitely think that states take advantage of rules. They always 

do that. I am not criticizing them for that but that is what they 

do. They have taken advantage of the LIHEAP rules and you could 

change the rules in a way that would make it difficult or maybe 

impossible. 

But I would point out that with the actions that they have taken 

in many cases are administratively rational and they themselves 

save money. They save administrative money for the state and they 

save wear and tear on the individual because they don’t have to 

bring all their bills and prove every penny of their bills. If there 

is one thing that makes recipients—drives them nuts it is having 

to bring all kinds of receipts and bills to show how much they spent 

or that they had spent it on a certain thing. 

So it would save money. The CBO thinks it would save money. 

I think it would increase inefficiency but it would save money. 

The CHAIRWOMAN. To follow up, if it increases inefficiency, then 

there might be an added cost to it. Is there a way around the inefficiency? 

Dr. HASKINS. Well, the inefficiency is if you make people bring 

a lot of stubs to an office, or even if you have some arrangement 

where they can fax them in and you have the question, will people 

have access to fax and so forth. There are lots of technological ways 

you can make it less difficult but then the state has to have a 

record-keeping system. So there is just a lot of, I would call it, hassle and that costs money both because of the administrative costs 

but also the personnel who are doing it. 

The CHAIRWOMAN. Do you feel, Doctor, that the reforms in the 

SNAP program can lead to savings that do not substantially affect 

benefits? Do you think that there are some reforms that could create a savings but not affect benefits? 

Dr. HASKINS. I doubt it. I mean people are forever saying that 

we could save money on fraud and there is some fraud in SNAP, 

but I think as much as probably more than any other program. 

SNAP fraud has been reduced quite substantially. Having hung out 

with states for a long time and watched their procedures and been 

part of the Federal Government for many years, there is always 

going to be some fraud. You could not get rid of all of it. And the 

last amount will cost you more to get rid of than you will save if 

you get rid of it. SNAP may be approaching that point. 

The situation that we are in financially in the Federal Government—I am definitely a budget hawk. I had a project at Brookings 

looking at ways to solve the deficit, and there is no way that we 

are going to be able to solve this problem without reducing the 

comfort of many, many millions of Americans. We have to do that 

and we will. 

Ms. DEAN. May I add one quick point? Just to supplement what 

Dr. Haskins said: about 95 percent of Federal spending on this program is for benefits and it would be extremely difficult to achieve 

savings without compromising benefits for poor families or undermining program integrity efforts. 

The CHAIRWOMAN. Along that line, Ms. Dean, in regard to the 

SNAP error rates, your testimony states that the net loss to the 

2019

Federal Government from errors was 2.3 percent. Can you put a 

dollar amount on that? 

Ms. DEAN. Not at the tip of my tongue, Madam Chair. 

The CHAIRWOMAN. But I bet you can get back to me. 

Ms. DEAN. Absolutely. 

[The information referred to is located on p. 2029.] 

The CHAIRWOMAN. I would like to ask, Dr. Haskins, have you 

looked at the economic impact policies like broad based categorical 

eligibility has had on SNAP? 

Dr. HASKINS. No. 

The CHAIRWOMAN. Very good. 

Mr. Bivens, we continue to hear the concerns from food banks 

across the country about reduced supplies, especially with USDA 

making fewer bonus purchases and I have been a little bit involved 

in my own food bank in Cincinnati. What are the options food 

banks face if or when they run out of commodities, and how do you 

handle this with your clients? 

Mr. BIVENS. Well, we have very few options. The reality of it is 

more and more of our food supply is having to come from purchases 

all the time and obviously our own individual costs are going up. 

Food costs are going up, fuel costs are going up, and so our options 

are very limited. In many cases, some of our partner agencies have 

had to reduce their hours, reduce the amount of food they have 

given out, and it is creating additional burdens on the people that 

we are serving. So it is not a good situation right now. The food 

bank system in this country is absolutely being stretched to its limits. 

The CHAIRWOMAN. Thank you. Ms. Pingree? Oh, I am sorry. Mr. 

Baca? 

Mr. BACA. Thank you very much. I am still the Ranking Member. 

Ms. PINGREE. Yes, you are. You came in late but you are still the 

Ranking Member. 

Mr. BACA. Thank you, Madam Chair. Let me talk to Ms. Dean. 

Thank you very much, Ms. Dean, for participating today in the 

hearing. You are well known for your working knowledge of the 

SNAP program and how it functions in each state. Can you tell us 

what you think of the proposal of the SNAP program, especially as 

it requires the model of 50 percent participation and working with 

Congressional Districts? 

Ms. DEAN. I am sorry, Mr. Baca, could you——

Mr. BACA. In your testimony you talk about working with poor, 

those who have incomes yet still qualify for SNAP. These are the 

people that are of special concern for me in my district. And Dr. 

Haskins testified that modeling SNAP after the TANF model of 50 

percent participant may be worth Congressional consideration. Can 

you tell me what you think of this proposal? 

Ms. DEAN. Yes, sir. I apologize. When you said 50 percent I was 

thinking of California’s participation rate, overall participation 

rate, which is another issue. But first, SNAP serves a far more diverse population than the TANF program. Two-thirds of participants in the program can’t be expected to work. They are seniors, 

people with disabilities who typically are not on the TANF program, as well as children. And of those who remain there is——

2020

Mr. BACA. That means that we have to take into consideration 

other people who can’t work and yet qualify, right? 

Ms. DEAN. Absolutely, sir. But of those who remain there is a 

substantial work effort. This is really important, worth noting. 

Then in 2010, almost 60 percent of SNAP families with non-disabled working age adults worked while they received SNAP. This 

was in a year when the economy was deteriorating rapidly. Jobs 

were hard to find and the overall unemployment rate was 9.7 percent. And when you go further back when the economy was more 

sound in the mid-2000s, we have done an analysis looking at SNAP 

participants both while on SNAP, the year before they were on and 

the year after. And the overwhelming majority were either working 

before they came onto the program, obviously lost their job and 

needed help, or quickly moved on to work in the next year. 

So this is a solution in search of a problem that just doesn’t exist. 

Working to reduce the deficit, building a large-scale new work program when we don’t in fact have a problem with SNAP participants working is just the wrong solution for the wrong problem at 

the wrong time. 

Mr. BACA. Okay. Can you give me your thoughts on how the $33 

billion in cuts would affect jobs and how our economy recovers? 

Ms. DEAN. Well, first and foremost it is important to say that 

every single—I presume you are talking about the Committee’s recommendations——

Mr. BACA. Right. 

Ms. DEAN.—for reconciliation. Every single participant in SNAP 

would see their benefits cut. 

Mr. BACA. You know I am against the $33 billion cut? 

Ms. DEAN. Yes, sir. Yes, sir. 

Several million people would be cut from the program altogether. 

So when we remove purchasing power from low income families, 

they are less able to buy food, stores have less demand for their 

products, and the same is true for food manufacturers and farmers. 

So it does have an overall negative impact on the economy. 

Mr. BACA. Okay. Mr. Blalock, how would farmers market feel the effects of the $33 billion in cuts to SNAP as proposed in the reconciliation bill that will be on the Floor this week? 

Mr. BLALOCK. Well, it is very hard to say. It is not well documented how much SNAP benefits are used in farmers market nationwide. In Iowa there is about a million dollars worth of SNAP 

benefits used at farmers markets, so I would imagine we would see 

a proportionate cut to small farmers there and it would happen the 

same in all states. 

Mr. BACA. Mr. Bivens, I am sure that you are aware that last 

month the House Agriculture Committee, as I just stated, passed 

a reconciliation plan that would cut $33 billion from SNAP. In your 

opinion, how would the food banks in Oklahoma be impacted by the 

decrease in SNAP benefit level and SNAP eligible recipients that 

this plan would cause? 

Mr. BIVENS. Well, I would answer this way. The private food sector, including food banks as well as all of the other faith-based organizations we work with would be unable to meet that need. We 

are actually stretched to our limits already trying to keep up with 

the current demand. Over the last 4 years, demand has increased 

2021

30 to 40 percent on our food bank system. We have increased our 

distribution by 95 percent over the last 5 years. We simply can’t 

keep up with that continued distribution. It is not sustainable. So 

if there are additional decreases in SNAP benefits to recipients, we 

would not be able to serve a lot of people in this country that need 

food on a day-to-day basis. 

Mr. BACA. Okay, thank you. I know that my time has run out. 

The CHAIRWOMAN. Thank you. We have been joined by the Chairman of the full Agriculture Committee, Chairman Lucas, from 

Oklahoma. Do you have anything to offer, any statement, questions, sir? 

OPENING STATEMENT OF HON. FRANK D. LUCAS, A 

REPRESENTATIVE IN CONGRESS FROM OKLAHOMA 

Mr. LUCAS. Madam Chairman, if I might be permitted to make 

a brief statement, and I do appreciate the indulgence of yourself 

and Ranking Member Baca for allowing me to do that. And I appreciate your efforts at holding today’s hearing to review the specialty crop and nutrition programs as we prepare for the next farm 

bill. 

Last June, the Committee started the farm bill process by holding 11 audit hearings focusing our attention on the U.S. Department of Agriculture to look for ways to improve programs for farmers, increase efficiency, and reduce spending. We then went out 

into the countryside this spring to hear directly from producers in 

the field and now the hearings that are taking place in Washington 

will round out the information gathering that is necessary in writing sound and effective farm policy. 

It is important to consider a variety of prospects when writing 

comprehensive bipartisan legislation, and I am pleased that this 

Subcommittee is hearing from witnesses from across the country 

representing the nation’s various important interests. The 2008 

Farm Bill expanded our existing programs and established some 

new ones that have proven beneficial to specialty crop producers, 

research, pest and disease pressures, maintaining and opening 

international markets, and increasing consumption of the best 

fruits and vegetables in the world. 

Given the wide variety of specialty crops grown in the different 

climates throughout the U.S., it is important that this sector of agriculture is largely united as the Specialty Crop Bill Alliance. Having their input on how these programs have been implemented and 

what changes need to be considered will only strengthen those programs in the future. 

And I also appreciate each of our witnesses today representing 

the nutrition community. Nutrition accounts for almost 80 percent 

of our Committee’s entire mandatory spending for the farm bill, 

and I know every Member of this Committee wants to ensure that 

every dollar is spent as wisely and as effectively as possible. 

And I am, of course, pleased to have Rodney Bivens from the Regional Food Bank of Oklahoma here today. I have worked with food 

banks across the country. It is a tremendous example of how the 

public-private partnership can benefit those in need. The Regional 

Food Bank, together with the Community Food Bank of Eastern 

Oklahoma, provide food to more than 1,250 programs and schools. 

2022

Oklahoma’s food banks distributed 63 million pounds of food in Fiscal Year 2011, nearly double the amount, as was noted in an answer to a question a moment ago, since 2007. We all know the extreme demand placed on food banks in recent years and we applaud the work of all food banks as they strive to meet the increasing demands of emergency food assistance. 

Again, I want to thank all the witnesses for sharing their valuable insights today. The road ahead of us won’t be easy but I am 

confident that by working together we can craft a farm bill that 

continues to support the success story that is American agriculture. 

And once again to the Chairwoman and the Ranking Member, I 

laud you for the work that you have engaged in in this session of 

Congress. I know that together we will do the best we possibly can 

in crafting a farm bill that meets the needs of all Americans. 

And with that, Madam Chairman, I yield back my time. 

The CHAIRWOMAN. Thank you, Mr. Chairman. And thanks to the 

working cooperation on this side of the aisle. 

Mr. Sablan, I know that you have to leave and so I am going to 

allow you to go next. 

Mr. SABLAN. Thank you very much, Madam Chair. 

Good afternoon and thank you, everyone, also for the courtesy. 

I need to be at another hearing that just started. 

Any Federal program of the size and scope of Supplemental Nutrition Assistance Program must constantly be monitored to make 

sure it is efficient, free of abuse, and reaching the people it is intended to help. I have to say, however, that the discussions seem 

academic to me when the people I represent do not have access to 

SNAP. What we hear about block grant each year that is supposed 

to be the equivalent of SNAP but in fact only provides 1⁄2 and 

sometimes less than 1⁄2 the assistance that SNAP would. In fact, 

the local government and the Department of Agriculture do such 

a poor job of negotiating that grant that just last week for the second year in a row benefits have to be cut at a place where GDP 

has increased every year since 2005, where minimum wages are at 

$5.05 an hour, where gasoline on one island is over $6 a gallon, 

and where electricity is about 42¢ a kilowatt hour. 

So food must be imported and shipped over long distances. It is 

expensive in our islands. Yet for some 10,000 people about 20 percent of the entire population are now forced to get by on $3.64 per 

day for food. I have tried doing this and I plan to do it again. I 

can tell you that living on this little money to feed oneself is not 

healthy and very, very unpleasant. 

I have been working to get more food aid to the people since the 

day I arrived here in 2009. Secretary Vilsack provided a 13.6 percent increase that year to match the increase in the Recovery Act 

that other Americans received. Last year, I recall another $1 million added to the Fiscal Year 2012 block grant. But the fact is this 

piecemeal approach, trying to fix a block grant system that simply 

cannot adjust to changing need is not working. If it were working, 

benefits would not have been cut last week. 

So I have also introduced legislation, H.R. 1465, the AYUDA Act, 

which includes the Northern Mariana in SNAP. Being included in 

SNAP will give the Americans I represent the same access to food 

assistance as other Americans receive. Being included in SNAP will 

2023

make the system more efficient and will reduce fraud. Being included in SNAP will mean that as economic circumstances change 

in the Marianas, Federal expenditures will go up or go down in response replacing this zombie block grant program that operates oblivious to economic realities. 

Regarding the need to reduce fraud, an issue that we are all 

most concerned with, I would remind the Subcommittee that when 

the Northern Mariana’s Governor met U.S. Department of Agriculture officials here in Washington in February, he told them that 

fraud is occurring in the system he administers. Chairwoman 

Schmidt, Ranking Member Baca, Representative Pingree and myself sent a formal request asking the Department to investigate but 

we have received no response. 

We have also received reports that the block grant program has 

been administered in the Northern Marianas in a manner that is 

in violation of the requirements of civil rights policy. The only response I have received from the Department on this is that the 

local operations manual will be rewritten to say that such violations are prohibited which checks the bureaucratic box but does not 

make whole those who did not receive the food assistance they 

were entitled to. 

What is even more frustrating to me about this situation is the 

Secretary of Agriculture already has the statutory authority to extend SNAP to the Northern Mariana Islands. He could give my 

constituents the same assistance other Americans receive if he 

chose to do so. He could exercise greater management control to ensure that the reports of fraud and civil rights violations are addressed effectively. 

Last summer in an open hearing of the Nutrition Subcommittee, 

Department officials promised we will work with you on my goal 

to bring Northern Marianas into SNAP. As I mentioned, the Department did provide an additional $1 million for the block grant 

for this fiscal year but that wasn’t sufficient to keep benefits from 

being cut. 

What weighs on me each and every day is that hundreds of families I represent have to choose whether to pay their utility bills so 

their kids can have lights and electricity to do their homework or 

fuel their cars with very expensive gasoline to get to work, or put 

sufficient and nutritionally adequate food on the table. This should 

not be. 

SNAP has proven its value. It has longstanding bipartisan support because it is a program that works, responsive in times of 

need helping the most vulnerable and lifting people out of poverty. 

Yes, we need to find ways to reduce our government deficit. The 

SNAP expenditures will decline in the years ahead as the economy 

continues its recovery. In the meantime, we need to continue helping those Americans who need our help, including those who life 

in Northern Mariana Islands. 

And I thank you very much for the opportunity, Madam Chair. 

The CHAIRWOMAN. Thank you. 

Chairman Lucas, do you have any questions. 

Mr. LUCAS. Thank you, Madam Chairman, just if you would recognize me for a couple of quick questions. 

2024

Mr. Bivens, TEFAP enjoys a very wide bipartisan support and is 

a great example of the public-private partnership and how it can 

assist low income households. Could you elaborate on your food 

bank’s efforts to engage those private entities to donate to the food 

bank, and how you build those vital relationships and enable you 

to serve the need? Because after all, if you didn’t have that relationship, there would be no resources. 

Mr. BIVENS. You are talking about the private food industry? 

Mr. LUCAS. How you have engaged them and how you have developed those relationships on an ongoing basis. 

Mr. BIVENS. Well, we have two full-time people engage the food 

industry in the State of Oklahoma and they have been extremely, 

extremely gracious in their generosity to the food bank. But like all 

industries, they are underneath a huge amount of pressure to improve their efficiencies and effectiveness. What we have seen over 

the last 10 to 15 years is the amount of private donations coming 

from the private industries is declined or at best remaining flat. 

And that is because they have improved their efficiencies, they 

have improved their packaging. Like everything else, they are determined to improve their bottom line. They are not in business to 

make donations to food banks. They are in business to make a dollar and profit like everyone else. While we do appreciate everything 

they do for us, they are under an immense amount of pressure 

also. 

Mr. LUCAS. Absolutely. 

Mr. Bivens, Dr. Haskins, Ms. Dean, if any of you would care to 

respond, we on the Committee have to contend with a lot of newspaper reports about fraud and abuse within SNAP and especially 

how it relates to both participant and retail trafficking. Do you 

have any suggestions about what USDA may need to do further to 

prevent, stop, prosecute those found intentionally violating the programs? Just your observations, your experiences, if you would 

please. 

Dr. HASKINS. Well, the Department over the years has improved 

greatly and the electronic benefit card has made a real difference. 

Fraud used to be much higher than it is now. And we discussed 

this a little bit before you came in but you get to a point where 

you are spending money to stamp out fraud, and because there is 

so little of it relative to what exists in the past, you wind up spending more money to get rid of what is left than you save. I don’t 

know if the Department is at that point. 

I don’t have specific suggestions but it is an admirable record 

and prosecutions are always in order. If people commit fraud 

against the Federal Government by misusing food stamps, then 

they should be prosecuted. I think that is probably one of the best 

deterrents. 

Ms. DEAN. Mr. Chairman, thank you. I agree with Dr. Haskins. 

The Department and the program’s track record overall with respect to fraud and trafficking is very good. It has been on the decline and so they are in search of an ever-dwindling problem but 

of course an ever-changing problem. The individuals who defraud 

the program change their tactics and USDA has to stay up on top 

of that. 

2025

I think the Senate Committee-passed farm bill included a couple 

of provisions that would help increase USDA’s tools. One was some 

additional funding for them to invest in tools, for example, to do 

data mining and tracking of redemption patterns at retailers so 

that they can identify retailers or clients where they suspect fraud. 

So, more tools to help them identify, investigate, and enforce the 

problem makes a lot of sense. The penalties are very severe for 

trafficking as they should be, but I do believe that more can be 

done. I do think that it is also important that we try to find a way 

to share the facts of the program with the public because they do 

tell a better story than often we read about in the media. 

Mr. BIVENS. I would tend to agree with that. I think what has 

happened is the tracking program needs to be in place and whether 

abuse is taking place at the retailer. If you get those bumps where 

there are more food stamps coming through that particular location, it would give the opportunity for USDA to look at that particular situation. They simply don’t have the tools to be able to do 

that across the country now. Now, I think that problem really happens at that retail level, not at the recipient level. 

Mr. LUCAS. So it is a fair statement to say that enforcement is 

critically important, then we have to have examples of why everyone should comply with the law and that let us face it, when you 

are gaming the system, you are hurting poor people. Whoever is 

manipulating the process, you are hurting the needy by casting 

doubt on the whole entire effort. 

Dr. HASKINS. I agree with that. Could I add something real 

quickly? 

Mr. LUCAS. Please. 

Dr. HASKINS. I think there is no question it is a bipartisan basis 

so the Republicans and Democrats on the Committee should work 

with the Government Accountability Office which specializes in 

things like this. They should be instructed to meet with the Department and see if they can come up with a plan for how they 

could further reduce fraud, make an estimate how much it costs, 

and give you reasons why they think it would work. Then have 

them meet with you or your staff and make suggestions about how 

they could do this with an emphasis on evidence of why they think 

it would work. And if you think it would, try to get the money to 

do it. 

Mr. LUCAS. Thank you, Doctor. 

With that, my time has expired. 

Mr. BACA. You know, I agree with what has been said if you 

yield to me. 

Mr. LUCAS. Of course. 

Mr. BACA. But I don’t believe that is why the solution is just to 

cut $33 billion from the SNAP program. Look at other avenues as 

how we can be cost effective and come with a solution and not impact many of the people who need to put food on the table. 

Mr. LUCAS. The Ranking Member makes a very valid point but 

it is a part of the overall equation, maintaining the confidence of 

the general public in all Federal programs. 

With that, I yield back my time. Thank you, Madam Chair. 

The CHAIRWOMAN. Thank you. 

Ms. Pingree? 

2026

Ms. PINGREE. I am happy to yield my time. I am just going to 

say one thing because I know we have to hurry for votes. Mr. 

McGovern has a lot to say and I want to make sure he is included 

before we adjourn. 

But again I want to just quickly thank the panel for being here 

today and say that I concur with many of my colleagues that I was 

deeply concerned about the amount of cuts that were proposed. I 

thought Dr. Haskins made a good point this is countercyclical and 

we are in a time of great need and high unemployment, certainly 

a huge concern in my state. And I am also very supportive of the 

programs that allow people to access more healthy and fresh foods 

at farmers markets and our seniors and there are really some great 

innovations out there, education programs for people. These are 

critically important and thank you, too, for everyone who works in 

food banks. I am sorry they are so strained and stressed in these 

days. 

And with that I will yield everything and more to my colleague 

from Massachusetts. 

The CHAIRWOMAN. Mr. McGovern, you get the full 5 minutes. 

Mr. MCGOVERN. You are very nice. And again I thank you, 

Madam Chair, for giving me the opportunity to sit on this panel. 

I am the very last person on this Committee. I sit in the very last 

seat way down there and I am new to this Committee and I am 

a little bit confused by this process. You know, we have this great 

panel here and to the best of my recollection nobody here is saying 

that you can find significant savings by cutting SNAP benefits. In 

fact, you all testified to the fact that it is one of the most efficient 

programs that we have that is actually working. It is keeping people out of poverty. 

And it seems to me that this very panel we should have had a 

few weeks ago before we actually took action in this Committee on 

cutting $33 billion out of the program. It seems to me that we probably should have a lot more hearings on this to help educate all 

of my colleagues on both sides of the aisle about the benefits of this 

program. I think we have had two hearings on SNAP compared to 

ten hearings on Dodd-Frank. I think this is a vitally important program. 

Mr. Bivens, you talked about hunger in America. That should be 

discussed more in this Committee and the fact that so many people 

in this country are hungry is something we all should be ashamed 

about. But I just want to ask, I mean, can anybody here explain 

how we can cut SNAP without reducing the amount of food that 

a poor person would receive? Is there any way to do that? 

Mr. BIVENS. I wish I had a magic bullet that I could tell you 

that, but that $33 billion represents faces of the hungry and somebody will go without food if you make those drastic cuts. It is inevitable, especially in the downturn of our economy when SNAP benefits really, really help a lot of people. And as the economy improves, more and more people go off the SNAP program because 

they have good-paying jobs and they no longer need the benefits. 

We are at a time right now we can’t afford to reduce benefits to 

SNAP recipients. 

Ms. DEAN. And if I can just respond, again, the Committee has 

already experienced how extremely difficult it is to cut SNAP withVerDate 0ct 09 2002 12:54 Dec 11, 2012 Jkt 041481 PO 00000 Frm 00438 Fmt 6601 Sfmt 6601 I:\DOCS\112-30\74372.TXT BRIAN
2027

out impacting benefits. As I said before, almost 95 percent of Federal SNAP spending goes towards benefits to households for purchasing food. These are very low income households and most of 

the rest goes to Federal and state administrative costs associated 

with operating the program. So reviews to figure out who is eligible, anti-fraud activities that the Chairman just talked to us are 

so important, employment and training, monitoring of retailers. So 

cuts to those activities, of course, compromise basic oversight. 

Mr. MCGOVERN. We have heard a lot about LIHEAP and categorical eligibility. I just want to ask a question. I mean that doesn’t 

mean that people would receive SNAP who aren’t eligible for 

SNAP, does it? 

Ms. DEAN. No. 

Mr. MCGOVERN. Right? 

Ms. DEAN. No, sir. 

Mr. MCGOVERN. I think there is a misunderstanding that somehow that people are getting a benefit that they are not entitled to. 

I mean they only get SNAP if they are eligible for SNAP. And if 

anything, by making the process more cumbersome, I guess you 

could argue that you might find savings by making it more difficult 

for people to access the food that they need for their families, but 

that is basically denying the people a benefit that they are entitled 

to. 

Ms. DEAN. Right. Obviously, placing barriers to eligible people 

participating in the program would result in savings. But an option 

like categorical eligibility both gives states the option to tailor eligibility rules to adopt some less restrictive rules—I should be clear 

about that—to open up the program’s more unemployed people, for 

example, or individuals with modest savings. But it also represents 

a significant simplification. 

Dr. HASKINS. I don’t think it necessarily means that they lose 

benefits that they deserve or they are entitled to; I think it means 

that you put more emphasis on things that they have to do in order 

to get the benefit, for example, show all their bills. And it is inconvenient and some people decide they are not going to do that, especially since it doesn’t mean that they will lose their whole benefit; 

they just lose the excess deduction. 

Mr. MCGOVERN. And Mr. Bivens, to those who say that food 

banks and charitable organizations could pick up the slack, the 

food banks in Massachusetts that I talked to, they are at capacity 

and they are desperately in need of more food because the demand 

is so great. I would be curious to how you would respond to someone who said, well, if we make some of these cutbacks, food banks 

and charitable organizations could pick up the slack. 

Mr. BIVENS. Well, I think you summarized it quite adequately. 

The charitable food distribution systems in this country primarily 

made up of food banks and the faith-based community simply does 

not have the wherewithal to pick up the difference. Like I have 

mentioned in my testimony earlier, we have increased our distribution by 95 percent in the last 5 years, last year, 46.2 million 

pounds of food. We are going to be down probably ten percent this 

year because of the TEFAP cutbacks. We are anticipating probably 

that is going to continue over the next several years if those aren’t 

restored, and that means somebody is going with a lot less food. 

2028

Mr. MCGOVERN. And let me just make one last point. I want to 

point out that the Gang of Six and the Simpson-Bowles Commission both did not recommend any cuts in SNAP. They do not see 

this as a way to find deficit reduction or to reduce our debt and 

I think that they are right on that. This is the wrong way to go. 

And as I said earlier with the first panel, there is a cost to hunger 

in America in avoidable healthcare costs, in kids who don’t learn 

in school, in lost productivity. So the idea when people say we can’t 

afford to invest in this, my response is you can’t afford not to because the cost is great and we see it all across the country. 

And I don’t know if anybody wants to—Ms. Dean, do you want 

to——

The CHAIRWOMAN. I think we are actually out of time. 

Mr. MCGOVERN. I thank you very much for your testimony. 

Thank you, Madam Chair. 

The CHAIRWOMAN. Thank you. 

And I want to thank this panel and the previous panel for coming here and giving us some very insightful information on a very 

important subject. 

And under the rules of the Committee, the record of today’s hearing will remain open for 10 calendar days to receive additional material and supplementary written responses from the witnesses to 

any questions posed by a Member. This hearing of the Subcommittee on Nutrition and Horticulture—yes? 

Mr. BACA. Madam Chair, before you adjourn, one of the other 

comments that I want to mention—and I know that we were talking about—there is actually a higher need right now in terms of 

the SNAP program. There are 46.3 million people now in need. The 

impact reconciliation is going to have on our lunch program on a 

lot of our kids is very important. When you look at a lot of our students who are still going hungry, there is a need. And that is why 

with the $33 billion cutback, we should look at the impact it is 

going to have on a lot of our children who actually need the SNAP 

program and the assistance in the lunch program. I just wanted to 

stress that but I do appreciate the panelists coming in. 

The CHAIRWOMAN. Thank you. It is a very important discussion. 

And with that, the Subcommittee is adjourned. 

[Whereupon, at 1:38 p.m., the Subcommittee was adjourned.] 

[Material submitted for inclusion in the record follows:] 

2029

1 U.S. Department of Agriculture and U.S. Department of Health and Human Services. Dietary Guidelines for Americans, 2010. 7th Edition, Washington, D.C.: U.S. Government Printing 

Office, December 2010. 2Farm, Nutrition, and Bio-energy Act of 2008. 

3Farm, Nutrition, and Bio-energy Act of 2008. 

SUPPLEMENTARY MATERIAL SUBMITTED BY STACY DEAN, VICE PRESIDENT FOR FOOD

ASSISTANCE POLICY, CENTER ON BUDGET AND POLICY PRIORITIES

During the May 8, 2012 hearing entitled, Formulation of the 2012 Farm Bill (Specialty Crop and Nutrition Programs), a request for information was made to Stacy 

Dean. The following is her information submission for the record. 

Insert 

The CHAIRWOMAN. Along that line, Ms. Dean, in regard to the SNAP error 

rates, your testimony states that the net loss to the Federal Government from 

errors was 2.3 percent. Can you put a dollar amount on that? 

Ms. DEAN. Not at the tip of my tongue, Madam Chair. 

The CHAIRWOMAN. But I bet you can get back to me. 

Ms. DEAN. Absolutely.

Using the FY10 QC figure for net loss of 2.3% and applying it to USDA’s reported 

FY10 benefit issuance from the FY13 budget, the net loss in FY10 was $1.487 billion.

SUBMITTED STATEMENT BY KRAIG R. NAASZ, PRESIDENT & CHIEF EXECUTIVE

OFFICER, AMERICAN FROZEN FOOD INSTITUTE

Chairman Lucas, Ranking Member Peterson and Members of the Committee, I 

am pleased to submit this testimony regarding the 2012 Farm Bill on behalf of the 

American Frozen Food Institute (AFFI), and its more than 500 members. AFFI is 

the sole national trade association representing every sector of the $70 billion frozen 

food industry, including food producers, growers, shippers and warehouses. 

AFFI serves the frozen food industry by advocating its interests in Washington, 

D.C., and communicating the value of frozen food products to the public. As a member-driven association, AFFI exists to advance the frozen food industry’s agenda in 

the 21st century. 

The U.S. Department of Agriculture’s (USDA) recently updated Dietary Guidelines 

for Americans (‘‘guidelines’’) recommend increased fruit and vegetable intake.1 The 

farm bill provides many opportunities to promote increased domestic production of 

fruits and vegetables and enable Americans to increase fruit and vegetable consumption. To meet this goal, AFFI believes U.S. farm policy should encourage the 

domestic production of fruits and vegetables and the consumption of fruits and vegetables in all forms (frozen, canned, dried or fresh). We applaud the policy position 

endorsed in the last farm bill that fruits and vegetables purchased for schools and 

service institutions ‘‘may be in frozen, canned, dried, or fresh form.’’ 2

To promote greater consumption of fruits and vegetables by all Americans, AFFI 

recommends the Committee adopt the following policies: (1) remove restrictions on 

production of fruits and vegetables for processing on program acres; (2) encourage 

the consumption of domestically produced fruits and vegetables by promoting all 

forms through USDA nutrition programs; and (3) ensure consumers participating in 

Federal nutrition programs can choose how best to address individual and family 

nutrition. 

Planting Flexibility 

As you know, to receive Federal subsidies for growing certain crops, producers 

were prohibited from growing fruits and vegetables on all program acres in the 2002 

Farm Bill. The limitation was put in place to ensure program crop producers were 

not given a competitive advantage over producers who did not receive Federal subsidies and who exclusively grew fruits and vegetables for the fresh produce market. 

This prohibition became highly problematic when soybeans were categorized as a 

program crop for food processors and producers in the Midwest who wanted to grow 

fruit and vegetables for processing. 

In response to this problem, the 2008 Farm Bill authorized the creation of the 

Planting Transferability Pilot Program (Farm Flex).3 The pilot program allows program crop producers in seven states (Illinois, Indiana, Iowa, Michigan, Minnesota, 

Ohio and Wisconsin) to apply for approval to plant selected fruit and vegetables for 

processing on base acres without forfeiting government payments on their remainVerDate 0ct 09 2002 12:54 Dec 11, 2012 Jkt 041481 PO 00000 Frm 00441 Fmt 6621 Sfmt 6621 I:\DOCS\112-30\74372.TXT BRIAN
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4P.L. 112–55, Consolidated and Further Continuing Appropriations Act, 2012.

5 63 Fed. Reg. 14349 (March 25, 1998). 6 63 Fed. Reg. 14351 (March 25, 1998). 

ing base acres. Processing vegetables eligible for Farm Flex include cucumbers, 

green peas, lima beans, pumpkins, snap beans, sweet corn and tomatoes. 

The program has allowed producers to have flexibility to meet modest demand for 

increased fruit and vegetable production for processing, enhanced access to consumers for U.S. grown fruits and vegetables and diversified the income of Midwest 

farmers. While modest in size and regionally restricted, the program has allowed 

U.S. food makers, particularly those in the Midwest, to source locally, decreasing 

transportation costs. 

The Farm Flex pilot program has shown a demonstrated benefit to American 

farmers, food producers and consumers by incentivizing the local production of fruits 

and vegetables. USDA’s Economic Research Service, in a 2011 study of the program, 

found the pilot was successful on all criteria as it ‘‘entices a very modest increase 

in processing vegetables production and a very modest decline in processing vegetable prices.’’ The study further found the pilot did not have an impact on the fresh 

fruit and vegetable market. 

AFFI supports the ‘‘Farming Flexibility Act of 2011’’ (H.R. 2675), introduced by 

Reps. Reid Ribble (R-Wisc.), Tim Walz (D-Minn.), Mike Pence (R-Ind.) and Tammy 

Baldwin (D-Wisc.), and companion legislation in the Senate (S. 1427) introduced by 

Sen. Richard Lugar (R-Ind.). The bills would extend Farm Flex and remove planting 

limitations. The 2012 Farm Bill should either eliminate the prohibition on fruit and 

vegetable planting on program acres, or make the Farm Flex program national and 

permanent. 

AFFI recognizes that the future of the commodity programs could greatly impact 

acreage availability for the production of fruits and vegetables. For example, the 

Senate Agriculture Committee’s current version of the 2012 Farm Bill does not extend restrictions on the production of fruit and vegetables on program acres. While 

we understand issues remain to be addressed with the commodity program sections 

of the bill as drafted by the Senate Agriculture Committee, we support the end of 

fruit and vegetable production restrictions. 

Support All Forms of Fruits and Vegetables 

AFFI believes USDA’s nutrition programs must purchase food mindful of the 

shrinking purchasing power of the dollar without compromising nutritional value or 

safety. Frozen fruits and vegetables can help USDA meet this challenge. AFFI commends Congress for directing USDA not to discriminate between vegetables in writing new guidelines for school meal nutrition standards.4 AFFI believes that all 

forms of fruits and vegetables, including frozen, should be utilized and encouraged 

to meet the USDA guidelines’ recommendation for fruit and vegetable consumption. 

Section 32 has been included in the farm bill since 1935 as a dedicated fund of 

approximately 30 percent of annual customs receipts collected that are directed to 

support the U.S. farm sector through a variety of activities. Most of the monies are 

transferred to USDA for the purchase of meats, poultry, fruits, vegetables and fish, 

including frozen products, which are diverted to school lunch and other domestic 

food programs. The program includes a budget of nearly $6 billion and is administered by USDA’s Agriculture Marketing Service (AMS). The funds of interest to 

AFFI members are those Section 32 monies used to purchase non-price-supported 

commodities directly from the market place for use in schools and other domestic 

feeding programs. Approximately $614 million of Section 32 funds were spent on 

fruit and vegetable purchases during fiscal year 2010 and nearly 16 percent of that 

was spent on frozen fruit and vegetables. 

AFFI worked to support Section 32 funding during consideration of the last farm 

bill and applauded provisions that clarified that foods purchased for schools and 

service institution ‘‘may be frozen, canned, dried or flesh form.’’

Frozen fruits and vegetables are nutritionally equivalent, and in some cases, superior, to their raw counterparts. In 1998, the U.S. Food and Drug Administration 

(FDA) ruled that frozen and fresh produce should be treated similarly in terms of 

the use of a ‘‘healthy’’ label.5 Further, the study found ‘‘. . . single ingredient frozen 

fruits and vegetables are nutritionally the same as raw fruits and vegetables. Moreover, these foods can contribute significantly to a healthy diet and to achieving compliance with dietary guidelines.’’ 6

The 2008 Farm Bill spelled out more explicitly how USDA is to use Section 32 

funds, and required new higher minimum levels of fruit, vegetable and nut purchases (in fresh, frozen, canned or dried forms) to support domestic nutrition programs. A separate section in the 2008 Farm Bill delineates how USDA is to allocate 

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7Farm, Nutrition, and Bio-energy Act of 2008.

8 Joy C. Rickman et al, Review: Nutritional Comparison of Fresh, Frozen, and Canned Fruits 

and Vegetables, Part I: Vitamins C and B and Phenolic Compounds, J. SCI. FOOD AGRIC. (in 

press). 9Dianne M. Barrett, Maximizing the Nutritional Value of Fruits and Vegetables, FOOD TECHNOLOGY (April 2007) 10 USDA, Agricultural Research Service, National Nutrient Database for Standard Reference, 

Release 24 (2011), http://www.ars.usda.gov/ba/bhnrc/ndl. 11School Nutritionists Association comments regarding Nutrition Standards in the National 

School Lunch and School Breakfast Programs, Docket ID: FNS–2007–0038. 12School Nutritionists Association comments regarding Nutrition Standards in the National 

School Lunch and School Breakfast Programs, Docket ID: FNS–2007–0038. 

the annual Section 32 appropriation—in order to cover the cost of fresh fruit and 

vegetable purchases for USDA’s Fresh Fruit and Vegetable Program.7

Although many think fresh fruits and vegetables are nutritionally superior to frozen counterparts, this is not the case. Several studies show that frozen fruits and 

vegetables are at least as nutritive as fresh, and in particular cases, can retain nutrients better than fresh.8 In contrast to frozen fruits and vegetables, fresh versions 

can be subject to a good deal of nutrient degradation before being consumed.9 The 

nutritional equivalence of frozen fruits and vegetables is also recognized by the 

USDA’s National Nutrient Database for Standard Reference.10

The Fresh Fruit and Vegetable Program makes fruit and vegetable snacks available at no cost to children in participating schools, but does not allow schools to purchase frozen fruits or vegetables, even though frozen fruits and vegetables are allowed in other USDA feeding programs. 

The program began in 2002 as a pilot in a small number of schools. It was made 

permanent and expanded to cover selected schools in all 50 states, as part of the 

2008 Farm Bill. The program, with an authorized budget of $150 million, is funded 

using Section 32 monies, and is operated by USDA’s Food and Nutrition Service 

independent of the school lunch and breakfast programs. It is available in schools 

in which a high proportion of students are eligible to receive free or reduced-price 

school meals. 

The intent of the program is to provide another opportunity to expose elementary 

school children to fruits and vegetables during the school day. Despite a large body 

of evidence stating that frozen fruits and vegetables have been found to be nutritionally equivalent and, in some cases, superior to their fresh counterparts, frozen 

fruits and vegetables (as well as canned and dried fruits and vegetables) currently 

are excluded from the program. 

Allowing frozen fruits and vegetables to be offered as part of the program provides 

school nutritionists with an affordable option for increasing the variety of healthy 

produce schools can offer, thus furthering the program’s ability to promote improved 

childhood nutrition. The national organization representing the school nutrition 

community, the School Nutrition Association (SNA), when discussing the changes to 

the new school meal pattern commented on the logistical and operational difficulties 

of managing a program that focuses only on increasing consumption of fresh raw 

produce. ‘‘SNA recommends that the Department take into account the impact of increasing fruits and vegetables on rural areas and states such as Alaska where there 

could be challenges on the true availability of ‘fresh’ produce as well as the price 

fluctuations, variety and products availability during the winter months.’’ 11 Similarly, SNA expresses support for USDA’s promotion of consumption of all forms of 

fruits and vegetables, ‘‘the Association supports those requirements outlined in the 

proposed regulation recognizing the availability and utilization of fruits and vegetables in all forms . . . .’’ 12

As well, school nutritionist organizations serving the children most in need across 

the country value the importance of the fruit and vegetable snack program and 

want to preserve the program’s continued utility and integrity by allowing it to be 

expanded. AFFI would like to include with our testimony a letter from the California School Nutrition Association, which recently wrote to USDA urging the program be expanded to all forms of fruits and vegetables. Its letter states it best, 

‘‘There is strong evidence that canned, frozen and dried fruits and vegetables are 

as nutritious as fresh produce. When available, fresh produce is frequently more 

costly. This impacts schools as well as families. With lower costs, more fruits and 

vegetables can be offered to more children. Canned, frozen and dried fruits and 

vegetables provide more consistent and reliable products.’’ 

Consistent with the concerns and needs expressed from school nutritionists who 

know our Federal feeding programs best, USDA’s dietary guidelines and FDA proclamations, as well as numerous scientific studies, AFFI recommends that Congress 

continue its support for funding the purchase of fruits and vegetables in all forms 

2032

by supporting the inclusion of all forms of fruits and vegetables be included in all 

Federal feeding programs, including USDA’s Fresh Fruit and Vegetable Program. 

AFFI applauds the efforts of Rep. Marcia Fudge (D-Ohio) of this Committee and 

the over 25 cosponsors of the ‘‘Let’s Grow Act’’ (H.R. 4351). Rep. Fudge’s focuses on 

addressing the nutritional needs of our most vulnerable communities and schools by 

including expanding the USDA’s Fresh Fruit and Vegetable Program to purchase 

fruits and vegetables in all forms as part of the solution. 

Food Choice Empowers Consumers 

The Supplemental Nutrition Assistance Program (SNAP), previously known as 

food stamps, provides assistance to low- and no-income individuals and families living in the U.S. The number of Americans receiving food stamps reached 45 million 

in May 2011. As of June 2009, the average monthly benefit was $133.12 per person, 

translating to approximately $1.40 per meal. Recipients can purchase any prepackaged edible foods, but are prohibited from purchasing alcohol, tobacco and heated prepared foods. According to the National Food Consumption Survey, individuals 

in food stamp households do not differ significantly from those living in non-recipient households in the nutritional quality of food consumed. 

The 2008 Farm Bill increased benefit levels for SNAP, but Congress rejected restricting certain foods from being purchased during deliberation on that bill, maintaining an existing clear distinction between food items that can and cannot be purchased with SNAP benefits. However, while Congressional attempts to create a list 

of prohibited SNAP foods during the debate of the 2008 Farm Bill failed, the bill 

did reauthorize nutrition education targeted to SNAP-eligible individuals and funded new research, the Healthy Incentives Pilot (HIP), to test the use of incentives 

to encourage nutritious SNAP consumer choices. 

USDA has awarded $20 million for a HIP research demonstration pilot in Massachusetts, which will attempt to apply the double-voucher theory—extra money for 

‘‘healthy foods’’ spent on fruits and vegetable including fresh, frozen, canned or 

dried. Results of this pilot may prove that such incentives are beneficial to increase 

fruit and vegetable consumption, per USDA’s dietary guidelines. 

At a time when so many Americans need the assistance available through SNAP, 

it is more important than ever that policies promote adequacy and access, not introduce unwise program complexities for administrators and retailers or stigmatize low 

income families by limiting purchasing decisions. We believe Congress should focus 

on adopting positive approaches for tackling the challenge of improving nutrition, 

including ensuring families have access to resources to obtain nutrition education 

and a wide variety of foods. 

AFFI urges the Committee to protect SNAP choice and ensure any changes to the 

program in the 2012 Farm Bill focus on benefit access and adequacy. 

Conclusion 

On behalf of AFFI’s more than 500 members, thank you for consideration of our 

testimony. The frozen food industry prides itself on a history of innovation to 

produce food that maximizes nutrition and convenience, while minimizing costs. In 

keeping with the recommendations of USDA’s dietary guidelines, AFFI recommends 

that the Committee draft a 2012 Farm Bill that supports increased domestic production and consumption of fruits and vegetables. AFFI and the frozen food industry 

look forward to working with the Committee to maximize the benefit of farm bill 

programs in providing nutritious food for domestic feeding programs. 

ATTACHMENT

April 3, 2012

JULIE BREWER, 

Chief,

Policy and Program Development Branch, Child Nutrition Division, Food and 

Nutrition Service, 

United States Department of Agriculture, 

Alexandria, VA.

Dear Ms. Brewer:

The California School Nutrition Association (CSNA) appreciates the opportunity 

to comment on USDA’s Fresh Fruit and Vegetable Program (FFVP). CSNA supports 

the FFVP, and we know that students in schools that offer the program consume 

more fruits and vegetables than students who don’t. These students are exposed to 

a wider variety of items, which further expands their experience and tastes. HowVerDate 0ct 09 2002 12:54 Dec 11, 2012 Jkt 041481 PO 00000 Frm 00444 Fmt 6621 Sfmt 6621 I:\DOCS\112-30\74372.TXT BRIAN
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ever, we are concerned about the limitations of the program when it only allows 

fresh items. There are several reasons for our concerns.

• The FFVP is targeted to at-risk schools. In many of these neighborhoods, there 

is limited access to low-cost fresh produce, so the children cannot replicate when 

at they learn in school when they get home.

• There is strong evidence the canned, frozen and dried fruits and vegetables are 

as nutritious as fresh produce.

• When available, fresh produce is frequently more costly. This impacts schools 

as well as families. With lower costs, more fruits and vegetables can be offered 

to more children.

• Canned, frozen and dried fruits and vegetables provide more consistent and reliable products.

• The emphasis on fresh fruit as the form of choice gives the perception that 

schools serving equally nutritious forms of canned, dried or frozen are serving 

nutritionally inferior products which may not be the case.

Therefore, CSNA recommends that the FFVP rules be changed to allow fruits and 

vegetables in all forms. 

We appreciate the opportunity to offer our thoughts on the FFVP rule and CSNA 

is committed to offering the students in California a wide variety of nutritious food 

in all programs. 

Sincerely,

DENISE OHM, CSNA President.

SUBMITTED STATEMENT BY SHARE OUR STRENGTH

Share Our Strength is a national nonprofit organization dedicated to ending childhood hunger in the United States by connecting children with the nutritious food 

they need to lead healthy, active lives. Through our No Kid Hungry campaign, 

Share Our Strength ensures children in need are enrolled in effective Federal nutrition programs; invests in community organizations that fight hunger; teaches at-risk 

families how to cook healthy, affordable meals; and builds public-private partnerships to end childhood hunger at the state and city level. This approach allows 

Share Our Strength to leverage Federal investments in Federal nutrition programs 

to ensure these programs are used effectively and efficiently. We are pleased to submit testimony for the record to the House Agriculture Committee, Subcommittee on 

Nutrition and Horticulture for your hearing on the farm bill reauthorization. 

The reauthorization of the farm bill offers a unique opportunity to ensure children 

in this country receive the food they need to grow and thrive. The Supplemental Nutrition Assistance Program (SNAP) is a critical lifeline for millions of families struggling to make ends meet, helping them to put food on the table and to maximize 

nutrition on a limited budget. More than 16 million children are living in poverty 

in the United States and one in five children are at risk of hunger. Over 46 million 

Americans rely on SNAP benefits to buy the food they need to feed their families, 

and 76 percent of SNAP households include a child, elderly person, or disabled person. Ensuring our children have enough to eat must be a priority for our nation. 

At Share Our Strength, we have long seen firsthand how important SNAP is to 

families. Recently, individuals from across the country have written us to share the 

important role SNAP played during difficult times in their lives, and, most importantly, how the program allowed them to get back on their feet to a place where 

they no longer needed to rely on the program. 

Tracy, from the Chairwoman’s home state of Ohio, told us about how food stamps 

served as a safety net to provide for her children when her family fell on hard financial times. She wrote to us: ‘‘I am now 61 years old but when I was a teen my parents died and I became pregnant. My daughter and I used food stamps as I finished 

school and then became employed. She is now raising our grandchildren after she 

attained her college degree with high honors and I am happily married for many 

years. I am forever grateful that we had that help when it was so necessary if I 

were to succeed and she was to thrive in preschool.’’

L. in Mr. Baca’s home state of California shared with us: ‘‘Like so many other 

people, I was the eldest of two siblings being raised by a single mother. The struggle 

for our family to stay fed was aided by school lunches and by my grandmother who 

often supplied our evening meal and most meals on weekends. It wasn’t until I was 


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much older that I came to realize that she fed us so frequently because there was 

often little to eat at home by the end of the month. As an adult with a professional 

job and a college education, I sometimes run into people that make negative comments about people on public assistance. They could never have guessed that I had 

been one of those people. . . . It is tempting to vilify people that have fallen on hard 

times because then you can comfort yourself with the idea that if you do everything 

right, this won’t happen to your family. Sometimes life just doesn’t turn out the way 

your planned it—not because you failed, were lazy or didn’t try hard enough . . . 

but because that is life.’’

SNAP recipients are often our nation’s heroes. Kimberly in Indiana told us: ‘‘My 

experience with food stamps began in May of 1994, and it should have begun much 

earlier. I have five sons, and my husband was in the U.S.M.C. He was in the military drawdown after the Gulf War, so our civilian life began March 08, 1992. We 

went through a lot of hardship trying to be self-reliant, and in the end it did not 

work. I was desperate, and applied for food stamps. My family began to eat well. 

Their health increased. They became carefree, not having to be hungry. I am grateful to my government for helping us when we needed it.’’

Lack of an adequate, nutritious diet during childhood hinders educational achievement, and has long-term consequences for future workforce competitiveness. Hungry 

children cannot learn as much or as fast because chronic under-nutrition impairs 

cognitive development. They are also more likely to be sick often, resulting in absence or tardiness from school. Hungry children are 1.4 times as likely to repeat 

a school grade. As we compete with a global workforce, hunger saddles our youth 

with lower educational and technical skills and our nation with a less capable group 

of workers. Funding cuts to SNAP would be detrimental to these families and would 

place children who rely on food provided by SNAP at an unfair disadvantage compared with their peers. 

Proposals have been discussed in Congress this year to turn SNAP into a block 

grant program. The estimated effect of such a policy is severe: cuts of as much as 

$134 billion to states that rely on Federal funding for SNAP to ensure families have 

access to food. These funding cuts would be devastating to the families who rely on 

SNAP to feed their children. 

In addition to the health and education benefits SNAP provides to children and 

families, the program also provides crucial economic stimulus activity for communities across the country. Every $5.00 in new SNAP benefits generates $9.00 in total 

community spending. Additionally, SNAP has proven itself a program that is responsive to the economic climate, especially in recent years. As unemployment numbers grew during the recession, SNAP responded quickly and provided benefits to 

families facing job loss, often due to layoffs or budget cuts. Now, as the economy 

slowly begins to recover, SNAP participation is expected to decline to nearly prerecession levels. According to the U.S. Department of Agriculture, new SNAP recipients stay on the program an average of 8 to 10 months, demonstrating the program’s effectiveness as transitional assistance for those falling on hard times. 

As important as ensuring families have access to the SNAP benefits they need 

is giving them the tools to prepare healthy meals with the ingredients they purchase with SNAP dollars. Share Our Strength partners with community nonprofit 

organizations to run Cooking Matters, a 6 week nutrition education program that 

has taught more than 88,000 low-income families how to stretch their food dollars 

in a healthy way since 1993. Many of our community partners depend on funding 

from the SNAP Nutrition Education program to run Cooking Matters courses. Participants in the program learn how to select nutritious and low-cost ingredients, prepare them in healthy ways and maximize their food resources. 

We’ve seen proven results from Cooking Matters, demonstrating additional support for the SNAP Nutrition Education program. One such example is a woman 

named Lareese from Graysonville, Maryland. Lareese is a single mother of two, relying on SNAP and WIC to feed her family. She recently graduated from a dental 

assistant program and is looking for work. Lareese is active in her community center, and signed up to take a 6 week Cooking Matters course offered there. Before 

participating in Cooking Matters, Lareese would sometimes run short on groceries 

before her benefits renewed. Six weeks after graduating from the course, she was 

able to stretch her food money an additional 2 weeks. Before the program, she 

would buy about two food items with a $6 WIC check for fruit and vegetables. Now, 

after having learned to compare the unit price of groceries and consider frozen and 

canned fruit as an alternative to fresh, she’s able to stretch that $6 to buy two packages of frozen fruit, two canned fruits and some applesauce. As a result of Cooking 

Matters and SNAP Nutrition Education, Lareese is providing healthier, more nutritious foods for her family. 

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Myths about the ways in which SNAP recipients spend their benefits continue to 

exist, including that the program’s participants spend their money on unhealthy 

fast-food options. A recent study by Share Our Strength supports our first-hand experience with SNAP recipients who are eager to provide their families with healthy 

foods. We surveyed 1,500 low to middle income families—the majority of whom are 

SNAP or WIC recipients—about their cooking habits. In the study, which was supported by the ConAgra Foods Foundation, 85 percent of families rated eating 

healthy meals as important, and eight in ten families reported they cook dinner at 

home at least five times a week. In a typical week, a low-income family eats fast 

food for dinner one night a week. As income decreases, the frequency of eating dinner made at home increases. But for all the cooking low income families are doing, 

they’re struggling to make healthy meals because their food budgets are limited. 

The study found that three in four families agree that cooking healthy meals at 

home is realistic, but only about half of those we surveyed are able to make healthy 

meals most nights of the week. That is far too many families whose healthy eating 

aspirations aren’t matching up to their daily realities. When asked what was keeping them from eating healthy meals, cost was the most commonly cited barrier. 

Healthy options like fresh produce, lean protein and seafood are commonly passed 

over at the store because of their price. These findings demonstrate strong support 

for the continued Federal investment in Federal nutrition programs, including 

SNAP and SNAP Nutrition Education. 

We recognize the challenges presented by the current fiscal environment, and that 

the Committee is under pressure to find savings this year. However, cutting funding 

for SNAP—either through policy changes that limit eligibility for the program for 

millions of Americans who need these benefits, or by lowering benefit levels—would 

be devastating to the economic and health well-being of our country. Efforts to fight 

against childhood hunger and promote child nutrition have long enjoyed bipartisan 

support, and there is a longstanding, bipartisan commitment to protecting SNAP, 

child nutrition programs, and other nutrition assistance programs in past deficit reduction plans. Congressional committees and the President’s bipartisan National 

Commission on Fiscal Responsibility and Reform have sought ways to find cost-savings in Federal programs without cutting funding for anti-hunger programs. We 

urge you to take the same tack when negotiating the farm bill legislation. 

We appreciate the opportunity to submit testimony on this important issue, and 

look forward to the Committee’s actions moving forward on the Nutrition title of the 

farm bill. For more information or questions regarding this testimony, please contact Lucy Melcher at [Redacted]. 

SUBMITTED QUESTIONS

Response from Daniel R. Richey, President and Chief Executive Officer, 

Riverfront Packing Company; on Behalf of Florida Fruit & Vegetable 

Association 

Questions Submitted By Hon. Steve Southerland II, a Representative in Congress 

from Florida 

Pest and Disease Management Program 

Question 1. Florida is listed by the U.S. Department of Agriculture as the number 

two high-risk state, second only to California. The Florida Department of Agriculture indicates that costs to combat pests and diseases affecting Florida farmers 

have easily exceeded $1 billion over the last decade. 

The 2008 Farm Bill established for the first time a Pest and Disease Management 

Program ‘‘Section 10201’’ for the full range of activities needed to effectively detect, 

control and mitigate pest and disease threats to specialty crops, and protect against 

the spread of invasive pests. How are these funds being used to help to ensure the 

future of specialty crop growers, to protect against imminent plant pest and disease 

threats?

Answer. The Section 10201 program has segregated its activities into a number 

of distinct goals that individually strengthen our ability to mitigate pest and disease 

issues, ideally before they become established in the U.S. Each of these issues areas 

is extremely important in achieving Congress’ original intent. They include; physical 

detection, such as dog teams in Florida’s various ports-of-entry, public awareness 

campaigns, and enhanced research on new technologies to identify these threats 

more effectively. 

However, the real strength of the program is in the ongoing interaction between 

stakeholders and APHIS. The program leaders have been excellent in working with 

industry, state and local partners and educational institutions to better understand 

2036

the urgent needs of industry and where these dollars can be most effectively deployed. 

The result of this interaction is that the Section 10201 program is deploying a variety of unique strategies that are well-suited to the individual tasks and environments where they are intended. In general, the projects that are implemented in 

Florida look significantly different than those in Michigan as the pests and the host 

environments are vastly different. These projects are reviewed each year by the Federal partners and stakeholders for consistency with the original objectives. This 

open process has created a very strong and diverse program that has buy-in from 

a broad range of interested parties. 

Specialty Crop Block Grants 

Question 2. I understand that Specialty Crop Block Grants have helped provide 

specialty crops producers flexibility to meet the unique farming challenges to support projects in research, innovation, pest/disease management, production, nutrition, to fund priority state needs. The program works extremely well through state 

Departments of Agriculture to meet unique state production needs, allowing for 

meaningful input from agriculture producers in Block Grant process. (Florida is the 

second largest recipient based on specialty crop production.) 

Please comment on this Specialty Crop Block grant program, which gives states 

the flexibility to address unique agricultural needs? Could this program also be used 

to address increasing environmental challenges and regulations producers are now 

facing?

Answer. The SCBG program was originally designed with great flexibility at its 

core. Congress provided states with the ability to recommend grants based upon 

their own needs, not prescriptive formulas that tied their hands. As long as the 

grants enhance the competitiveness of specialty crops, they are consistent with Congress’ original intent. 

Certainly the environmental and regulatory challenges that producers face today 

has threatened their competitiveness. As an industry, we have been faced with a 

variety of compliance issues including; numeric nutrient standards, food safety regulations, farm labor, crop protection and air quality issues to name a few. 

Each of these issues, whether fully realized or merely threatened against the industry injects uncertainty into an already-uncertain agricultural market and impacts our ability to accurately forecast future output and necessary investments. 

Specialty Crop Research Initiative (SCRI) 

Question 3. Congress authored the Specialty Crop Research Initiative (SCRI) 

under the farm bill—and while not under the direct jurisdiction of this Subcommittee—in an effort to, ‘‘develop and disseminate science-based tools to address 

needs of specific crops, including identify and address threats from pests.’’ 

The SCRI is an extremely valuable program, as research is often the key tool that 

specialty crop growers rely for the future of crop protection. However, some important modifications are needed to more closely reflect the perspective of specialty crop 

producers. As you know first-hand as a citrus grower, Florida and many other specialty crop regions of the country are fighting an extremely dangerous threat due 

to Citrus Greening represents an immediate threat to the entire $12.2 billion U.S. 

citrus industry in Florida, California, Alabama and Louisiana and Texas. The specialty crop disease has the ability to kill citrus trees and their fruit, within a few 

short years—literally placing the future of citrus production in nation at risk. 

Timely research on Citrus Greening and its vector, the Asian Citrus Psyllid, is 

absolutely essential to ensuring the future of citrus production in this country. Recognizing this dire challenge, domestic citrus growers has ‘‘self-funded’’ more than 

$40 million in research annually over the past 4 years. 

Please share your comments on how the SCRI could possibly work more closely 

with affected specialty crop stakeholder, those producers for whom the SCRI program 

was designed to serve, to make this research program as effective as possible? Do you 

think that ‘‘imminent threats to the future of crop production’’ should be taken into 

account? Should some recognition be taken into account for Specialty Crops of major 

national significance?

Answer. Much like the thoughts behind the Specialty Crop Block Grant program 

and the process that APHIS has instituted in regard to Section 10201, SCRI can 

be strengthened through continued dialogue with stakeholders. Their input must be 

significantly greater than simply checking a box during a grant review process. 

The other programs I cited have this outreach as a major component of their process. That interaction allows constituent groups to have the flexibility to determine 

what their urgent priorities may be during a given year. For the State of Florida, 

citrus canker was a major priority a decade ago. During the intervening time, the 

2037

threat of citrus greening (HLB) supplanted canker as the most imminent threat to 

our future. SCRI and related research programs must retain the flexibility to adapt 

to these threats just as the industry itself must adapt. 

(2039)

FORMULATION OF THE 2012 FARM BILL 

(CREDIT PROGRAMS) 

THURSDAY, MAY 10, 2012

HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON DEPARTMENT OPERATIONS, 

OVERSIGHT, AND CREDIT, 

COMMITTEE ON AGRICULTURE, 

Washington, D.C. 

The Subcommittee met, pursuant to call, at 10:00 a.m., in Room 

1300, Longworth House Office Building, Hon. Jeff Fortenberry 

[Chairman of the Subcommittee] presiding. 

Members present: Representatives Fortenberry, King, Crawford, 

Fudge, Baca, Peterson (ex officio), and Pingree. 

Staff present: Brandon Lipps, Josh Maxwell, John Porter, Suzanne Watson, John Konya, Nona McCoy, Liz Friedlander, Lisa 

Shelton, Anne Simmons, Jamie Mitchell, and Caleb Crosswhite 

OPENING STATEMENT OF HON. JEFF FORTENBERRY, A 

REPRESENTATIVE IN CONGRESS FROM NEBRASKA 

The CHAIRMAN. This hearing of the Subcommittee on Department Operations, Oversight, and Credit to discuss credit programs 

in advance of the 2012 Farm Bill will come to order. 

Good morning everyone. Thank you all for joining us today at the 

fifth hearing of our D.C. farm bill series. This last series is designed for us to gain perspective from agricultural leaders and 

stakeholders across the country on the future of farm policy. 

This is a continuation of our information gathering process for 

the next farm bill that we began 2 years ago. Since then we have 

conducted 11 audit hearings and four nationwide field hearings. 

Additionally, this Subcommittee has held hearings to review credit 

conditions across rural America. Combined, this effort is designed 

to provide Subcommittee Members information regarding what 

farm programs are the most effective for our producers as we prepare to write the 2012 Farm Bill. 

Throughout this process, we have learned that credit conditions 

are generally favorable, but we are reminded that those circumstances can change quickly. Although production agriculture in 

rural economies have been at the forefront of our nation’s fragile 

economic recovery, the agriculture economy is highly cyclical. Just 

a few short years ago, crop prices were down. The U.S. Department 

of Agriculture was predicting that average farm income would decrease by 20 percent, non-performing loans were on the rise and 

credit conditions were generally tight. 

2040

Further, interest rates will eventually rise, record high prices 

will eventually fall. It is important for our constituencies to ensure—that we ensure sound farm and agricultural credit policies 

are in place to sustain a stable food and fiber supply. The Farm 

Service Agency administers several loan programs for farmers, 

ranchers and rural businesses, both through Direct Loan Programs 

and in cooperation with commercial lenders. Farming is capital-intensive and farmers must often apply for large amounts of credit 

to enter farming or to maintain their existing operations. Farm 

equipment can run upwards of a half a million dollars. Combines 

cost more than most homes. It is even cheaper to buy a house here 

on Capitol Hill than it is to buy certain cotton pickers. And the cost 

of land can be prohibitive in and of itself. 

By providing direct loans or guaranteeing commercial loans, the 

Farm Service Agency affords farmers who are denied commercial 

lending access to credit. One of my colleagues just whispered, and 

so does student loans. 

For beginning farmers with no credit history obtaining a loan can 

be impossible. My district is home to a growing community of farmers who raise foods specifically for local farmers markets and other 

emerging food retailers. With little historical data on farmers producing for these new markets, commercial credit institutions are 

sometimes reluctant to offer them credit. 

As the average age of our nation’s farmers increases annually, it 

is imperative that we look at ways to help beginning farmers enter 

the world of farming with high input cost, variable prices and risky 

weather. The Farm Service Agency can play a vital role in ensuring 

that beginning farmers, two of whom we will hear from today, have 

access to the credit necessary to ensure our nation’s long-term food 

supply. However, it isn’t only new farmers that need access to credit. All farmers operate in a risky environment, subject to volatile 

swings in both weather and commodity prices. These volatile 

swings and the effect on farm income can cause commercial credit 

markets to tighten. The Farm Service Agency loans ensure that 

farmers don’t lose access to credit during such difficult times. 

Today we will hear from both commercial lenders and beginning 

farmers on how we might improve loan programs going forward. 

And I welcome you all here today and look forward to your testimony. 

[The prepared statement of Mr. Fortenberry follows:]

PREPARED STATEMENT OF HON. JEFF FORTENBERRY, A REPRESENTATIVE IN

CONGRESS FROM NEBRASKA

Good morning. Thank you all for joining us today at the fifth hearing of our D.C. 

farm bill series. This last series is designed for us to gain perspective from agricultural leaders and stakeholders across the country on the future of farm policy. 

This is a continuation of our information gathering process for the next farm bill 

that we began 2 years ago. Since then we have conducted 11 audit hearings and 

four nationwide field hearings. Additionally, this Subcommittee has held hearings 

to review credit conditions in rural America. Combined, this effort is designed to 

provide Subcommittee Members information regarding what farm programs are the 

most effective for our producers as we prepare to write the 2012 Farm Bill. 

Throughout this process, we have learned that credit conditions are generally favorable, but we are reminded that those circumstances can quickly change. Although production agriculture and rural economies have been at the forefront of our 

nation’s fragile economic recovery, the agricultural economy is highly cyclical. Just 

a few short years ago, crop prices were down, the U.S. Department of Agriculture 

2041

was predicting that average farm income would decrease by 20 percent, non-performing loans were on the rise, and credit conditions were generally tight. Further, 

interest rates will eventually increase; record high prices will eventually fall. It is 

important for our constituencies that we ensure sound farm and agricultural credit 

policies are in place to sustain a stable food and fiber supply. 

The Farm Service Agency administers several loan programs for farmers, ranchers and rural businesses, both through direct loan programs and in cooperation with 

commercial lenders. Farming is capital-intensive, and farmers must often apply for 

large amounts of credit to enter farming or maintain their existing operations. Farm 

equipment can run upwards of half a million dollars. Combines cost more than most 

homes. It’s cheaper to buy a house on Capitol Hill than it is to buy certain cotton 

pickers. And the cost of land can be prohibitive in and of itself. By providing direct 

loans or guaranteeing commercial loans, the Farm Service Agency affords farmers 

who are denied commercial lending, access to credit. 

For beginning farmers with no credit history, obtaining a loan can be impossible. 

My district is home to a growing community of farmers who raise food specifically 

for local farmers’ markets and other emerging food retailers. With little historical 

data on farmers producing for new markets, commercial credit institutions are 

sometimes reluctant to offer them credit. 

As the average age of our nation’s farmers increases annually, it is imperative 

that we look at ways to help beginning farmers enter the world of farming with high 

input costs, variable prices, and risky weather. The Farm Service Agency can play 

a vital role in ensuring that beginning farmers, two of whom we will hear from 

today, have access to the credit necessary to ensure our nation’s long term food supply. 

However, it isn’t only new farmers that need access to credit. All farmers operate 

in a risky environment, subject to volatile swings in both weather patterns and commodity prices. These volatile swings and the effect on farm income can cause commercial credit markets to tighten. The Farm Service Agency loans ensure that farmers don’t lose access to credit during difficult times. 

Today, we will hear from both commercial lenders and beginning farmers on how 

we might improve loan programs going forward. 

I look forward to hearing their testimony.

The CHAIRMAN. Now let me turn to our Ranking Member from 

Ohio, Ms. Fudge. 

OPENING STATEMENT OF HON. MARCIA L. FUDGE, A 

REPRESENTATIVE IN CONGRESS FROM OHIO 

Ms. FUDGE. Thank you very much, Mr. Chairman. And I thank 

you for holding this hearing today. 

During the course of this Congress, this Committee has carefully 

examined different facets of agricultural credit. I look forward to 

incorporating what we have learned over the past year into the 

2012 Farm Bill. I would like to welcome our panelists and thank 

you for your willingness to participate today. I am particularly 

pleased to have an urban farmer and agriculture entrepreneur 

from my home district on the panel. 

Mr. Walton, your presence is greatly appreciated. You bring a 

different perspective that I would like my colleagues to learn more 

about. 

Mr. Walton represents a new generation of city farmers. City 

farmers are among the most innovative thinkers this country has 

to offer. They take meager resources and turn cities green. From 

rooftop gardens to fisheries in the middle of neighborhoods, the 

work they are doing is exceptional. They are changing the way children think about food. They are creating job opportunities for college graduates who would otherwise find themselves unemployed. 

This new generation of farmers is doing all of this without the 

same resources afforded to traditional farmers; important resources 

2042

like credit. Access to credit can make or break rural farmers, and 

urban farmers are no different. 

I would also like to recognize another one of our panelists, Mr. 

Frazee, and the Farm Credit Council. The Farm Credit Council 

came to my district recently in an effort to help our farmers learn 

how to access credit. 

Thank you for your efforts. 

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

forward to hearing from our panel of witnesses. 

[The prepared statement of Ms. Fudge follows:]

PREPARED STATEMENT OF HON. MARCIA L. FUDGE, A REPRESENTATIVE IN CONGRESS

FROM OHIO

Thank you, Mr. Chairman. Thank you for holding this hearing today. During the 

course of the 112th Congress, this Subcommittee has carefully examined different 

facets of agricultural credit. Our hearings have served as an excellent primer. I look 

forward to incorporating what we’ve learned over the past year into the 2012 Farm 

Bill. 

I’d like to welcome our panelists and thank you for your willingness to participate 

today. I’m particularly pleased to have an urban farmer and agricultural entrepreneur from my home district on the panel. Mr. Walton, your presence is greatly 

appreciated. You bring a different perspective that I’d like my colleagues to learn 

more about. 

Mr. Walton represents a new generation of city farmers. City farmers are among 

the most innovative thinkers this country has to offer. They take meager resources 

and turn cities ‘‘green.’’ From rooftop gardens to fisheries in the middle of neighborhoods, the work they’re doing is exceptional. They’re changing the way children 

think about food. They are creating job opportunities for college graduates who 

would otherwise find themselves unemployed. This new generation of farmers are 

doing all of this without the same resources afforded to traditional farmers. Important resources like credit. Access to credit can make or break rural farmers, and 

urban farmers are no different. 

Before I yield back, I’d also like to recognize another one of our panelist, Mr. 

Frazee, and the Farm Credit Council. The Farm Credit Council came to my district 

recently in an effort to help our farmers learn how to access credit. Thank you for 

your efforts. 

Again, Mr. Chairman, thank you for holding this hearing. I look forward to hearing from our panel of witnesses.

The CHAIRMAN. I thank the Ranking Member. 

The chair would request that other Members submit their opening statement for the record so that we would have time to move 

directly into the witnesses’ testimony. 

[The prepared statement of Mr. Baca follows:]

PREPARED STATEMENT OF HON. JOE BACA, A REPRESENTATIVE IN CONGRESS FROM

CALIFORNIA

Chairman Fortenberry and Ranking Member Fudge:

I am pleased to be here today to discuss the important issue of agricultural credit 

as we prepare to move forward with the 2012 Farm Bill in the House Agriculture 

Committee. 

I thank the Chairman and Ranking Member for convening this hearing and hope 

we will be able to gain insight into how agricultural lending has been impacted by 

the recent recession, and the policies that were put forward in the 2008 Farm Bill. 

I also want to thank our witnesses, for taking time from their schedules to help 

us in Congress better understand this issue. 

Because of the recent financial crisis, and the subsequent credit freeze—the Farm 

Service Agency is experiencing some of the highest demands ever for its loan services. 

Is the FSA properly funded to meet this demand?

Are current limits for farm ownership and operating loans sufficient to meet the 

needs of our agricultural producers?

2043

Are farm banks, community banks, and the Farm Credit System doing enough to 

meet the needs of beginning, minority, and women farmers?

These are some of the important questions we must address. 

It is critical that we have this information as we prepare for the upcoming farm 

bill process in 2012. 

Our agricultural producers—and rural America—deserve the best credit system 

that we can give them.

I look forward to hearing from our witnesses today and thank the Chairman and 

Ranking Member again for their leadership. 

Thank you.

The CHAIRMAN. I would like to welcome you all again today. 

We will begin with Mr. Bob Frazee. He is President and CEO of 

the MidAtlantic Farm Credit on behalf of the Farm Credit Council, 

and he is from Westminster, Maryland. 

We also have today with us Mr. Jeff Gerhart. Mr. Gerhart is 

Chairman of the Bank of Newman Grove, and he is testifying on 

behalf of the Independent Community Bankers of America, again 

from Newman Grove, Nebraska. 

Mr. Matthew Williams is also with us. Mr. Williams is Chairman 

and President of Gothenburg State Bank, and he will be testifying 

on behalf of the American Bankers Association. He is from Gothenburg, Nebraska. 

As we heard, Mr. Michael Walton is an urban farmer from South 

Euclid, Ohio, and he is also the Owner of Tunnel Vision Hoops. 

Welcome sir. 

And today, we will also hear from Mr. Justin Doerr, who is a beginning farmer from Plainview, Nebraska, and a returning veteran 

as well. 

Thank you all for coming. 

Mr. Frazee please begin with your testimony. 

STATEMENT OF BOB FRAZEE, PRESIDENT AND CHIEF

EXECUTIVE OFFICER, MIDATLANTIC FARM CREDIT,

WESTMINSTER, MD; ON BEHALF OF FARM CREDIT COUNCIL 

Mr. FRAZEE. Mr. Chairman and Members of the Subcommittee, 

thank you for the opportunity to testify on behalf of the Farm 

Credit System. 

My name is Bob Frazee, and I am President and CEO of 

MidAtlantic Farm Credit. We serve about 10,500 farmers in Maryland, Delaware, Virginia, Pennsylvania and West Virginia. The 

Farm Credit System is comprised of 87 institutions, all of which 

are cooperatively owned by our borrowers. We provide credit and 

other related services to our owners and others consistent with the 

eligibility criteria set out in the Farm Credit Act. 

I report to an 18 member board of directors; 16 of these directors 

are farmers and elected by the members of the cooperative, and 

two are appointed outside directors that have financial experience. 

My board ensures that management makes available loan products 

and financially related services appropriate to the unique needs of 

agriculture in the geographic territory that we serve. 

While Farm Credit institutions obtain loan funds from the investing public through the issuance of system-wide debt securities 

by the Federal Farm Credit Banks Funding Corporation, we don’t 

have access to insured deposits backed by the U.S. Treasury. All 

Farm Credit institutions are regulated by the Farm Credit Administration, an independent agency of the Federal Government 

2044

charged with the responsibility of ensuring that we operate in a 

safe and sound manner. FCA’s budget is covered by assessments 

paid by System institutions, not by taxpayer funds. Our cooperative 

structure and governance ensures that our activities are driven by 

the needs of our farmer members and that there is a reliable and 

competitive credit source available to agriculture that farmers own 

and control. 

Now, a few numbers for you: The Farm Credit System remains 

very strong financially. The System’s combined net income was 

$3.94 billion for 2011. And last week, we reported that the System’s net income for the first quarter for 2012 was nearly $1.1 billion. The System ended with about $175 billion in total loans, and 

we added another $3.9 billion in loans during the first quarter of 

this year. 

The System has a very strong capital position, ending the first 

quarter with capital as a percentage of total assets standing at 15.8 

percent. We continue to change and adapt as agriculture changes. 

We constantly evaluate programs to ensure that we are serving all 

of agriculture. 

Five years ago, MidAtlantic Farm Credit began our StartRight 

Program, which is a suite of loan products specifically designed to 

address the hardships faced by young, beginning and small farmers. Today we are looking to expand that program to include the 

challenges faced by small urban farmers. We are working with the 

State of Maryland to create a fund that will provide the same access to credit and operating capital to those farming in urban areas 

as is available to other agricultural producers in our area. And 

when we finalize our agreement with the state programs, we are 

expecting to have a robust microloan program available in Baltimore City in the next few months that will help support urban agriculture. 

Every Farm Credit association has programs in place targeted 

specifically at meeting the needs of young, beginning and small 

farmers. Nationwide, in 2011, new loans to young farmers totaled 

$7.4 billion, and new loans to beginning farmers added up to $9.6 

billion. We also share our profits directly through patronage dividends with the farmers that borrow from us. In 2011, MidAtlantic 

distributed over $25 million in earnings to our member borrowers. 

The Farm Credit System in total distributed just over $900 million in patronage in 2011. Now, this cash is a real economic stimulus, allowing our customer owners to reinvest in their own operations and their rural communities. 

We remain vigilant regarding price increases in agricultural real 

estate, most notably in the Midwest. System institutions continue 

to finance land transactions by remaining focused on sound underwriting principles and by making credit decisions based upon the 

repayment of the individual borrower. Where necessary, System institutions have implemented adjustments to their own loan underwriting standards to reduce the risk on new loans. The net result 

is that terms are more conservative than the maximum allowed by 

law and regulation but which are designed to maintain safety and 

soundness. 

Farm credit institutions make good use of USDA’s Farm Service 

Agency loan guarantees to support our lending. They allow us to 

2045

serve higher risk credits. We would encourage the Committee to 

ensure that the eligibility requirements for these programs are 

flexible enough to permit farmers to fully use modern legal structures as they structure their businesses. 

H.R. 874 introduced last year by Mr. Owens and Mr. Courtney 

would help address this. We would encourage you to include this 

in the credit title of the farm bill. 

The Senate version of the farm bill includes a substantial rewrite 

of the statutory provisions that govern the operation of the FSA Direct and Guaranteed Loan Programs, as well as the rural development programs. We are still reviewing these, and we look to fully 

understand their implications for further programs. And should we 

find areas of particular concern, we will bring these to the Committee’s attention. 

[The prepared statement of Mr. Frazee follows:]

PREPARED STATEMENT OF BOB FRAZEE, PRESIDENT AND CHIEF EXECUTIVE OFFICER, 

MIDATLANTIC FARM CREDIT, WESTMINSTER, MD; ON BEHALF OF FARM CREDIT

COUNCIL

Mr. Chairman and Members of the Subcommittee, thank you for the opportunity 

to testify today on behalf of the Farm Credit System. My name is Bob Frazee, and 

I am President and CEO of MidAtlantic Farm Credit. MidAtlantic is a part of the 

nationwide Farm Credit System. My remarks today will provide some background 

on the Farm Credit System, comments on current credit conditions and discuss how 

we are working to meet the credit needs of agriculture in the geographic area served 

by my institution. 

Background on the Farm Credit System 

Established in 1916, the Farm Credit System is a unique set of 87 private institutions, including four funding banks (three Farm Credit Banks and one Agricultural 

Credit Bank) and direct-lending associations, all of which are cooperatively owned 

by farmers, ranchers, agricultural cooperatives, rural utilities and others in rural 

America. We are chartered by the Federal Government to provide credit and other 

related financial services to our owners and others consistent with the eligibility criteria set out in the Farm Credit Act. 

MidAtlantic is one of these 87 Farm Credit cooperatives. We are owned by more 

than 10,500 farmers that borrow from us in the states of Maryland, Delaware, and 

parts of West Virginia, Virginia, and Pennsylvania. As President and CEO, I report 

to an 18 member Board of Directors. Sixteen of these directors are farmers elected 

by the members of the cooperative. MidAtlantic is required to have at least one appointed outside director that has financial experience, and we have chosen to have 

two. In no case are employees allowed to serve as directors. 

There are 83 independently operated Farm Credit associations like MidAtlantic 

serving agriculture throughout the United States and Puerto Rico. Every Farm 

Credit association is organized as a cooperative that is owned and governed by its 

farmer-members. Our Board of Directors is responsible for establishing our institution’s capitalization plan consistent with Federal regulations and for ensuring that 

management makes available loan products and financially related services appropriate to the unique needs of agriculture in the geographic territory that we serve. 

Each Farm Credit association obtains funds for our lending programs from one 

of four Farm Credit banks. At MidAtlantic, we get our funding from AgFirst Farm 

Credit Bank (located in Columbia, SC), which is cooperatively owned by twenty-two 

local associations. The four System banks own the Federal Farm Credit Banks 

Funding Corporation (located in Jersey City, NJ), which, as agent for the banks, 

markets to the investing public the System-wide debt securities that are used to 

fund the operations of all Farm Credit System institutions. Unlike commercial 

banks, Farm Credit institutions do not have access to insured deposits guaranteed 

by the FDIC and backed by the U.S. Treasury as a source of funding for our operations. 

Regulatory Oversight by the Farm Credit Administration 

All Farm Credit institutions are regulated by the Farm Credit Administration 

(FCA), which was created by Congress and is subject to oversight by both House 

2046

and Senate Agriculture Committees. The FCA is an arm’s-length, independent safety and soundness regulator. FCA’s three board members are nominated by the 

President and confirmed by the Senate. The FCA has the oversight and enforcement 

powers that other Federal financial regulatory institutions have to ensure that 

Farm Credit institutions operate in a safe and sound manner. 

The Farm Credit System’s mission, ownership structure and authorizing legislation are unique among financial institutions. For farmers, ranchers and the cooperatives that they rely on, it is critically important that Farm Credit’s safety and 

soundness regulator understands our unique mission and what it takes to be successful in accomplishing that mission. 

Fulfilling Farm Credit’s Mission of Serving Agriculture and Rural America 

All Farm Credit System institutions are focused on accomplishing the mission established for us by Congress: to serve agriculture and rural America. Our cooperative structure and governance is designed specifically to ensure that our lending and 

financially related service activities are driven by the needs of our farmer-members 

and to ensure that there is a reliable and competitive credit source available to agriculture that farmers own and control. Our practice is to engage our customers in 

a consultative lending relationship, using our accumulated expertise and knowledge 

of agriculture and finance to craft long term lending relationships that are often delivered across the farmer’s kitchen table. 

Farming has changed since the Farm Credit System was created. We embrace 

that change, and are constantly evaluating programs to ensure that we are serving 

all of agriculture. Five years ago, MidAtlantic Farm Credit began our StartRight 

program, a suite of loan products specifically designed to address the hardships 

faced by young, beginning, and small farmers. Today, we are looking to expand that 

program to include the challenges faced by small, urban farmers. Our staff is working with the state of Maryland to create a fund which would allow city farming the 

same access to credit and operating capital that’s available to other agricultural producers in our area. We are finalizing our agreement with state programs, and expect 

to have a robust microloan program available in Baltimore in the next few months. 

Farming—no matter where it takes place—isn’t a short-term investment for our 

member-borrowers. Our cooperative structure allows us to work with our farmerowners with an approach not focused on achieving quarterly returns to impress investing stockholders. When our customer-owners achieve success in their business, 

our business will succeed as well. Farm Credit’s lending relationship with our member-borrowers is based on constructive credit over the long haul—we make loans, 

retain loans, and service loans. We do not enter and exit agricultural lending as 

farm profitability waxes and wanes. 

Distributing Profits to Farmers through Patronage 

Our commitment to our farmer-members’ business success is demonstrated further by the fact that we share our profits directly through patronage dividends with 

the farmers that borrow from us. Each year, the MidAtlantic Farm Credit’s board 

of directors makes a determination based on our profitability and financial strength 

as to what portion of our net earnings will be returned directly to the farmer-members that own our institution. 

In 2011, MidAtlantic Farm Credit distributed over $25 million in earnings as patronage dividends to the member-borrowers of our cooperative. In total the Farm 

Credit System in 2011 distributed just over $900 million in patronage. This patronage distribution is rural stimulus that allows our customer-owners to re-invest in 

their own operations and to support rural communities through local spending. 

Farm Credit’s Financial Strength 

The Farm Credit System remains very strong financially. The System’s combined 

net income was $3.94 billion for 2011, and we are pleased to report that the System’s net income in the first quarter of 2012 was nearly $1.1 billion. Nationwide, 

Farm Credit ended 2011 with a loan portfolio of about $175 billion and we added 

another $3.9 billion in loans during the first quarter of this year closing the period 

at about $178.6 billion. Farm Credit’s financial performance has allowed growth in 

combined capital to almost $36 billion as of year-end 2011. At the end of the first 

quarter of this year capital as a percentage of total assets stood at 15.8%. 

Current Conditions in Agriculture 

The Farm Credit System continues to be a steady source of credit for agriculture. 

There continues to be much interest in price increases in agricultural real estate, 

most notably in the Midwest. Farmland values have increased for many reasons—

a continuing low level of turnover in agricultural land, higher commodity prices resulting in the availability of cash in the pockets of farmers as well as continued low 

2047

interest rates and the relatively low returns of alternative investments for farmers. 

Farm Credit System institutions approach their markets prudently. System institutions continue to finance land transactions by remaining focused on sound underwriting principles and making credit decisions based on the repayment capacity of 

the individual borrower. Because we hold virtually all of our loans on our own balance sheet, we have a strong interest in seeing that our customers are successful 

and prudent in their own risk-taking, including the purchase and financing of farm 

real estate. 

Given the volatility and risk in the present agricultural real estate values, most 

Farm Credit System institutions have implemented adjustments to their underwriting processes to reduce the risk on new real estate loans. These actions have 

included setting lower loan to value limits or establishing maximum loan per acre 

limits, strengthening loan analysis by stress testing a borrower’s repayment capacity, shortening loan terms, or cross-collateralizing loans with property that has limited debt encumbrance. Appraisals are completed by certified and licensed appraisers who are totally independent of the credit decision process. The net result is 

terms that are more conservative than the maximum allowed by law and regulation, 

but which are designed to maintain safety and soundness. 

A Commitment to Serving Young, Beginning and Small Farmers 

Every Farm Credit association has programs in place targeted specifically at 

meeting the needs of three special categories of borrowers, those that are young, 

those that are just beginning in farming, and those that are small farmers. Our mission to serve the needs of young, beginning, and small farmers leads us to identify, 

understand, and finance the farm operations that these new agriculturalists engage 

in, such as organic, sustainable, local food-related, direct-to-retail, or other emerging 

business models. We recognize that we must reach out to those who are innovators 

in farm enterprises in order to follow today’s niche operation as it becomes tomorrow’s mainstream business. 

Nationwide, the Farm Credit System’s dedication to serving the credit needs of 

Young, Beginning, and Small farmers is evident by the level of credit we have extended to these groups. New loans in 2011 to young farmers totaled $7.4 billion, in 

the same period those to beginning farmers added up to $9.6 billion, and to small 

farmers totaled about $11.2 billion. (It is important to note that farmers may be included in multiple categories since they are included in each category for which they 

meet the defined characteristic; young—35 or younger; beginning—10 years or less 

of farming experience; small—less than $250,000 in annual gross farm sales) 

Importance of Maintaining USDA Programs 

Farm Credit institutions make good use of USDA’s Farm Service Agency (FSA) 

loan guarantees to support our lending, particularly to young and beginning farmers 

and ranchers. The guarantees available through FSA allow us to serve higher risk 

credits that might not otherwise meet our underwriting standards. We would encourage the Committee to review the eligibility requirements for these programs to 

ensure that they are flexible enough to permit modern legal structures that farmers 

are turning to as they structure their businesses. We applaud the efforts of two 

Members of this Committee, Congressman Owens and Congressman Courtney, who 

introduced H.R. 874 last year, important legislation that would address one of these 

issues. We would encourage the Committee to adopt this as you consider the credit 

title of the farm bill. 

The version of the farm bill recently approved by the Senate Agriculture Committee includes a substantial re-write of the statutory provisions that govern the operation of the FSA direct and guaranteed loan programs as well as the Rural Development programs. We are still reviewing these changes in an effort to fully understand their implications for those programs. Should we find areas of particular concern we will bring those to the Committee’s attention. Rural Development’s Community Facility Guarantee Program has been an important way for our Farm Credit 

institutions to provide funding for critically needed facilities in many of the rural 

communities they serve. We have been disappointed that USDA in recent years has 

sought to zero out funding for this program, instead intending to rely solely on its 

direct lending program. We appreciate the continued support Congress has provided 

for the guarantee program. 

Crop insurance remains an extremely important risk management tool for farmers throughout the country. It is extremely important as a lender to agriculture that 

we know our customers have insured their production. This protects the farmer and 

it protects lenders as we provide credit to farmer to cover their operating expenses. 

A strong, effective crop insurance program is vitally important to maintaining credit 

flows to agriculture. We strongly urge the Committee to maintain a robust crop inVerDate 0ct 09 2002 12:54 Dec 11, 2012 Jkt 041481 PO 00000 Frm 00459 Fmt 6601 Sfmt 6621 I:\DOCS\112-30\74372.TXT BRIAN
2048

surance program and that it not be burdened with conservation compliance requirements nor be limited through caps on the level of supported insurance that individuals may receive. 

Serving Rural Communities and Global Markets 

Through CoBank, the Farm Credit System continues to serve the needs of rural 

communities in the energy, communications, and water industries. Customers in 

these industries include rural electric generation and transmission cooperatives, 

electric distribution cooperatives, independent power producers, rural local exchange 

carriers, wireless providers, cable television systems, and water and waste water 

companies. Farm Credit loans to these customers totaled about $15.6 billion at the 

end of 2011. This represents a $1.7 billion increase since 2008. 

CoBank also facilitates the export of U.S. farm products through its international 

financing activities. At the close of 2011, CoBank had just over $3.8 billion of agricultural export loans outstanding. USDA’s GSM–102 export credit guarantee program is very important to our nation’s ability to export agricultural products. Since 

the last farm bill, the GSM–102 program has helped move more than $17 billion 

in U.S. farm products to overseas markets. We support the continuation of the 

GSM–102 program and encourage the Committee to reauthorize it in the coming 

farm bill. 

Addressing Derivatives Reform 

We appreciate the leadership of the Committee in moving forward H.R. 3336, the 

Small Business Credit Availability Act. This legislation addressed needed clarifications regarding the treatment of certain financial institutions that use derivatives 

to manage their interest rate risk and that enter into swaps with customers seeking 

to manage risk in the connection with the extension of credit to those customers. 

These institutions were not the source of the problems in these markets, they 

should not be penalized as the result of the actions of others, and it is clear that 

it was never the intent of this Committee to have these institutions and their activities caught up in the technical definitions and adversely impacted. The approval of 

this legislation by the House helps accomplish this. 

Liquidity at Times of Market Disruption 

The Farm Credit System relies on our access to the financial markets to make 

credit available to our borrowers. A disruption in the efficient operation of those 

markets can adversely impact our ability to serve agriculture. In 2008 we witnessed 

how a world financial crisis could disrupt capital flows. Farm Credit continued to 

access funding but we were forced to change our offerings due to the unwillingness 

of the market to accept longer term debt at that time. Farm Credit never had to 

deny a single farmer, cooperative or other eligible borrower access to credit because 

we could not access the nation’s money markets. Nevertheless, that financial market 

turmoil demonstrated to us that our ability to access the necessary funding to meet 

our mission to agriculture and rural America may be at risk if circumstances beyond 

our control disrupt our market access. We want to continue to keep this issue before 

the Committee as we study how it might best be addressed. 

Conclusion 

The Farm Credit System remains financially strong, stable, economically vital, 

and focused on serving its mission for agriculture and rural America. We continue 

to make credit available to all segments of agriculture including commercial producers as well as young, beginning and small farmers. We are proud of our commitment to rural America. There are no Federal dollars invested in the Farm Credit 

System. We pay for the expense of being regulated by the Federal Government 

through assessments on all Farm Credit System institutions, and we pay insurance 

premiums to provide protection for those who invest in our debt securities. To continue serving our mission, we must have continued access to the national debt markets and an independent, arm’s-length regulator that comprehends the unique requirements of agriculture and rural communities. In addition to being closely regulated, we have the built in oversight mechanism of our owners holding our feet to 

the fire to keep service quality high while protecting their equity in the cooperative. 

Mr. Chairman, thank you again for the opportunity to testify today on behalf of 

the Farm Credit System. I will be pleased to respond to your questions.

The CHAIRMAN. Mr. Frazee, if you could suspend there please. 

We need to try to hold to a 5 minute time constraint on opening 

testimony. So we can turn back to some of your points perhaps during questioning. 

2049

But thank you. 

Also for the panel, we may be interrupted by a call to go vote. 

So if we can expedite through the opening testimony, I think that 

would be helpful to get through the hearing in the best possible 

manner. 

So let’s now turn to Mr. Gerhart please, if you would give your 

testimony. 

STATEMENT OF JEFFREY L. GERHART, CHAIRMAN, BANK OF

NEWMAN GROVE; CHAIRMAN, INDEPENDENT COMMUNITY 

BANKERS OF AMERICA, NEWMAN GROVE, NE 

Mr. GERHART. Mr. Chairman and Members of the Subcommittee, 

thank you very much for this opportunity to testify today on the 

farm bill’s credit title. 

I am Jeff Gerhart, Chairman of the Bank of Newman Grove in 

Newman Grove, Nebraska, and I am testifying as Chairman of the 

Independent Community Bankers of America. 

The Bank of Newman Grove was established in 1891 and continues to serve our rural community today. Our farmers raise corn, 

soybeans, hogs and cattle. Our bank makes loans to farmers for 

farmland, machinery, irrigation, pivot systems, livestock and operating loans, whatever the farmer needs. We have the expertise to 

help our customers finance their modern day agricultural operations. 

Most of our customers are families that have banked with us for 

several generations. Like most community banks, our goal is to 

keep the family farmers passing their farm onto the next generation and in turn keep our rural communities vibrant. We also serve 

local businesses along the main street, from the couple local restaurants, auto repair shops, dental practice, medical clinic, just to 

name a few. 

In fact, the 7,400 community banks across the country continue 

to do an outstanding job of this in their respective communities. 

Community banks have only a little more than ten percent of all 

assets but make almost 40 percent of all small business loans. Further, community banks under $1 billion extend about 56 percent of 

farm operating loans and 62 percent of farm real estate loans from 

the banking sector. 

Now, these days commodity prices and farm incomes are historically high. Net cash income should be right in the $96 billion range 

this year; producer expenses will be a record $334 billion. 

Here are a few observations: Each year our bank does a stress 

test on our farmland values to determine a farmer’s ability to withstand shocks to their income. With high cash levels, farmers have 

reduced debt loads. Most bankers feel land values shown on farm 

financial statements are conservative. Most bankers feel farm customers can handle a modest correction in commodity prices and a 

modest correction in farmland values. 

Farmers have been updating equipment, making capital improvements, and this will benefit them in the long run. And these factors 

should help them be better prepared as we work and look to the 

future. The cyclical nature of agriculture, the uncontrollable risk of 

adverse weather, unknown commodity prices and rising cost of production require a continued and robust farm safety net. 

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1About ICBA

The Independent Community Bankers of America®, the nation’s voice for more than 7,000 community banks of all sizes and charter types, is dedicated exclusively to representing the interests 

Maintaining crop insurance funding is an extremely important 

aspect of the farm safety net. And while crop insurance is not part 

of the credit title, it allows lenders to extend credit. It gives us assurances producers will repay loans even in the event of bad 

weather or falling prices. As a crop insurance agent myself, I can 

attest that crop insurance is a necessary risk management tool 

vital to our farm customers. 

We have a couple of recommendations for the USDA’s Guaranteed Loan Program. First, we would like to see removal of term 

limits on farm ownership loans. Fees have been increased. The program is now self-funding, so there might be not as much reason to 

limit the eligibility for a self-funded program. Community banks 

extend the financing, as you all know, not the government. 

Second, significantly increase the size of guaranteed loan limits. 

Farmland values and production expenses have risen dramatically. 

USDA’s loan limit of $1.2 million has not kept pace. 

Let me give you an example. This past winter, a 160 acre track 

of non-irrigated farmland sold in the Newman Grove area for 

$8,000 an acre, dryland. That is $1,280,000, slightly more than the 

USDA’s loan limit. So 160 acre farm does not cash flow on its own, 

and to be a vital farm operation, the farmer needs in our area probably 750 to 1,000 acres. 

Third, significantly increase the guaranteed volume caps. Higher 

loan limits mean USDA would need to increase the dollar volume 

extended to ensure an equal number of loans are made. Today’s 

farmers often have different entities for tax and estate planning 

purposes, not all of which are owned by both parents and children, 

so there needs to be a look there and some consideration. 

Increase and remove volume caps on the amount of lending in 

subsidiary categories. Certain types of loans have no loan losses, 

like health care. More loans and volume in these categories will 

generate more fees to finance other type of loans, like manufacturing. These recommendations should extend currently limited 

dollars into many more loans, much higher volume loans, and 

many more jobs in rural America without costing additional Federal dollars. 

Mr. Chairman, thank you for devoting time today to discuss the 

agricultural credit issues. And I would be glad to answer any questions at the conclusion. 

[The prepared statement of Mr. Gerhart follows:]

PREPARED STATEMENT OF JEFFREY L. GERHART, CHAIRMAN, BANK OF NEWMAN

GROVE; CHAIRMAN, INDEPENDENT COMMUNITY BANKERS OF AMERICA, NEWMAN

GROVE, NE 

Introduction 

Mr. Chairman and Members of the Subcommittee, thank you very much for the 

opportunity to testify today on a topic of great interest to this Committee, our nation’s farmers and ranchers, and the thousands of community banks that serve rural 

America. 

My name is Jeff Gerhart. I am Chairman of the Bank of Newman Grove, Newman 

Grove, Nebraska. I am testifying today as the Chairman of the Independent Community Bankers of America and I have previously been a member of ICBA’s 1 AgriVerDate 0ct 09 2002 12:54 Dec 11, 2012 Jkt 041481 PO 00000 Frm 00462 Fmt 6601 Sfmt 6621 I:\DOCS\112-30\74372.TXT BRIAN
2051

of the community banking industry and its membership through effective advocacy, best-in-class 

education and high-quality products and services. For more information, visit www.icba.org. 

culture-Rural America committee. I am pleased to present ICBA’s views and recommendations on credit programs for development of the 2012 Farm Bill. 

Bank of Newman Grove, Nebraska 

My hometown of Newman Grove, Nebraska is nestled in the rolling hills of southwest Madison County roughly 120 miles north and west of Omaha or Lincoln. The 

Bank of Newman Grove was established in 1891 and continues to provide our agricultural community with banking services that are needed to be a successful farmer 

in today’s agricultural environment. 

The Bank of Newman Grove makes farmland loans, machinery loans, crop loans, 

irrigation pivot loans, livestock loans—whatever the farmer needs to run a successful operation—we have the expertise to make sure our customers are equipped to 

operate modern day agricultural operations. 

We provide our customers with a good financial analysis of their farming operation in order to help them make good decisions to be successful. Our farmers raise 

corn and soybeans as well as hogs and cattle. Most of our customers are families 

that have banked with us for several generations. In fact, we have a fifth generation 

farm customer who has two daughters—making them the sixth generation doing 

business with us. Community banking for the next generation is important for our 

farming community and for our country. 

In addition to our farmers we also serve many local businesses along our busy 

Main Street—from the City Cafe ́, Barnes Mini Mart, Mid Nebraska Lutheran Home 

(skilled care and assisted living), a dental office and a medical clinic to name just 

a few. 

We also reopened our local steak house ‘‘The Hombre’’ with about 80 local resi- dents who raised $100,000. The ‘‘Hombre’’ is so busy on the weekends you would 

be smart to make a reservation before you arrive. That’s a nice problem to have. 

As I speak, the Bank of Newman Grove is talking with a local couple that is interested in buying our local weekly newspaper that has been in business for over 100 

years. These are examples of just a few ways that our bank and community banks 

in general seek to keep our family farmers passing that farm onto the next generation and in turn keep our rural communities vibrant. 

Community Banks Role in the Rural Economy 

Community banks continue to play an important role in the nation’s economy. 

There are approximately 7,400 community banks in the U.S. and the vast majority 

of these are located in communities of 50,000 or fewer residents. Thousands of community banks are in small, rural, and even remote communities. 

Community banks have only a little more than ten percent of all bank assets but 

make almost 40 percent of all small business loans. This is important since small 

businesses represent an astounding 99 percent of all employer firms and employ 1⁄2

of the private sector workforces. In addition, the more than 26 million small businesses in the U.S. have created 70 percent of the net new jobs over the past decade. 

Small businesses are important in rural America since many farmers and/or their 

spouses have off-farm jobs. As small businesses ourselves, Community banks specialize in small business relationship lending. When our customers do well, community banks do well. 

Community banks under $500 million in assets extend over 50 percent of all agricultural credit from the banking sector. In addition, commercial banks under $1 billion in asset size extend approximately 56 percent of non-real estate loans to the 

farm sector and 62 percent of the real estate credit. Attachment B of our testimony 

provides two charts which reflect community bank agricultural lending. 

Farm Bill Needed Despite a Healthy Farm Economy 

We have experienced a period of historically high prices and farm income levels 

in U.S. agriculture. According to USDA’s February 2012 projections:

• Net farm income is forecast to be $91.7 billion in 2012, down $6.3 billion (6.5 

percent) from the 2011 forecast.

• Net cash income is forecast to be $96.3 billion in 2012, down $12.5 billion (11.5 

percent) from the 2011 forecast.

• Even so, it would remain $15.9 billion above the 10 year average (2002–2011) 

of $80.3 billion.

• Crop receipts are expected to experience a slight increase in 2012. A marginal 

decline is anticipated for 2012 U.S. livestock sales.

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2 2012 Farm Sector Income Forecast, Revised Feb. 13, 2012, www.ers.usda.gov/Briefing/

FarmIncome/nationalestimates.htm. 3 Crop Insurance and the Future Farm Safety Net, Keith Collins and Harun Bulut, 4th Quarter 2001, CHOICES MAGAZINE.

Net farm income measures wealth, while net cash income is a measure of solvency, or the ability to pay bills and make payments on debt. Along with income 

we also keep a close eye on the expense side of the equation. Higher commodity 

prices have led to higher input costs, which have led to a higher level of production 

expenses for farmers. 

After surpassing the $300 billion figure for the first time in 2011, total production 

expenses are forecast to increase $12.5 billion in 2012 to $333.8 billion. While not 

as large as the increase in 2011, this forecast is the second consecutive increase of 

over $10 billion. In 6 of the last 8 years, the increase in expenses has been doubledigit. As in 2011, the 2012 figure will set both nominal and inflation-adjusted 

records.2

Some members of the media, Congress and the general public have been asking 

why a new farm bill is even necessary in an era of ongoing higher prices and record 

farm income levels. Those of us who have been involved in agriculture and lending 

to agriculture for many decades know that change is the only constant in farming. 

Booms are often followed by busts and the euphoria of high prices can be met headon by the nerve wracking challenges of extremely low prices. 

Let me offer a word of caution when looking at income and expense numbers. 

They do not always move together. The farmer does not always make a profit when 

a crop is planted, harvested and sold or when livestock is sold. Farmers don’t directly set their own prices. There are no guarantees. 

The cyclical nature of agriculture and the uncontrollable risks of severe adverse 

weather combined with unknown commodity prices and costs of production require 

a continued safety net for farmers and ranchers. 

A strong farm program also supports lenders in their decisions to extend loans 

to the farm community with some assurance that the loans will be repaid. A strong 

farm program helps to support our local communities—rural and non-rural. From 

Newman Grove to Omaha and similarly from small towns to larger cities across 

America, our success depends upon a strong agricultural industry. 

Importance of Crop Insurance 

Before commenting specifically on the credit title, I would stress the importance 

of the crop insurance program to the farm bill from a lender’s perspective and as 

a crop insurance agent in my community. On the main street of Newman Grove, 

there are three competitive insurance agencies that provide our farmers with quality insurance products. 

Crop insurance is important to the adequate supply of credit to farmers and 

ranchers as it provides assurance that farmers will be able to repay their operating 

loans in the event of weather related or price related calamities. Crop insurance is 

a good risk management tool that our farm customers have learned to use to better 

manage the risk that exists in farming today. The dramatic evolution of crop insurance in meeting the needs of most of our nation’s farmers has been truly impressive. 

The use of crop insurance by U.S. farmers has grown sharply, from 45 million insured acres in 1981 to 262 million in 2011. The amount of insured liability rose from 

$6 billion in 1981 to more than $113 billion in 2011.3

Estimates are that crop insurance will have paid out over $11 billion to farmers 

and ranchers for 2011, a record level of indemnity payments. The fact that there 

were not calls for a multi-billion dollar emergency disaster bill during the past year 

is significant. 

Texas, Oklahoma, Kansas and other states experienced the worst drought in their 

history and we really don’t know what this year will bring. But, crop insurance is 

a testimony to the risk management needs of the farmers and ranchers. Crop insurance is a risk management tool that works and has provided stability to our agricultural economy. 

ICBA urges Congress to maintain existing levels of funding for crop and revenue 

insurance programs, particularly if they are to be the foundation of the next farm 

bill. 

ICBA Recommendations: Credit Title 

Mr. Chairman, ICBA has made detailed recommendations suggesting adjustments 

that can be made to USDA guaranteed loan programs that could stretch existing 

dollars further. These recommendations cover USDA’s guaranteed farm loan programs and the agency’s Business and Industry (B&I) program. 

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While we believe that additional funds should be added to these programs, at the 

very least there should be no cuts to these programs. The program multiplies a very 

minimal amount of Federal dollars into billions of dollars of loan volume in rural 

America. 

Our full recommendations are attached as Attachment A. A summary of these 

recommendations follow. 

Guaranteed Farm Loan Recommendations 

• Remove Term Limits on Farm Ownership (FO) Loans

Rationale—Fees have been increased and this program is now self-funding. 

There is no reason to limit eligibility for this self-funded program. Community 

banks extend the funds for guaranteed farm loans, not the government. Commodity programs do not have term limits and these programs can have significant budgetary costs.

• Significantly Increase the Size of Guaranteed Loan Limits

Rationale—The costs of farmland and production expenses have risen signifi- cantly in recent years. The current loan limit ($1.2 million) has not kept pace 

with the costs of financing today’s farmland values and the program is at risk 

of becoming largely irrelevant for financing the needs of family farmers.

Let me give you an example: This past winter 160 acres of non-irrigated land 

sold for $8,000 per acre just northwest of Newman Grove. One hundred sixty 

acres of dryland is now selling for $1.28 million. If the land had irrigation, the 

price would be higher. A 160 acre farm would not be viable in our area and 

could not cash flow. Even a farm twice that size would not be profitable in our 

area. Our farmers average between 750 to 1,000 acres.

Congress should direct USDA to test a pilot project that allows producers to 

choose to pay higher fees for even larger loan limits above whatever a new and 

higher loan limit would be set at for all producers. This would help accommodate individual family farmers’ needs for operating loans. Real estate loans 

should also be included in the pilot program.

• Significantly Increase Guaranteed Loan Volume Caps

Rationale—With an increase in loan limits, USDA would need to increase the 

amount or volume of dollars that are extended to ensure an equal or larger 

number of FO loans can be made. USDA should be given flexibility to accomplish this since the guaranteed FO program is self-funding.

• Expand Eligible Borrowers to Meet Planning Needs

Rationale—While USDA has flexibility to meet most demand for guaranteed FO 

loans based on types of entities, eligibility needs to be expanded to allow guaranteed FO loans to borrowers who either own or operate family farms instead 

of requiring them to both own and operate a family farm.

Today’s farms often have different entities for tax and estate planning purposes, 

not all of which are owned by both parents and children. Protections need to 

be in place to ensure these loans do not go to large corporations that form various types of entities while providing flexibility to access both farm real estate 

and operating loans. 

Guaranteed B&I Loans—Modify how the Subsidy Rate is Calculated 

• Disallow Loss Calculations Above Current Loan Limits

Rationale—Losses should not be calculated based on loans that USDA no longer 

guarantees, as such calculations do not reflect the true risks of how the program is operated.

• Limit Loss Calculations to a Fifteen to Twenty-Year Timeframe

Rationale—Many changes have been made since the program’s inception in 

1974 and loss calculations should reflect a time period that is more representative of how the program has evolved and how it has been managed in recent 

history.

• Increase/remove caps on amount of lending in ‘‘zero subsidy’’ categories

Rationale—Various categories or types of B&I loans have had no losses (e.g.,

health care, etc.). Allowing these categories to have significantly more loans and 

volume than currently allowed would generate higher fee revenues to USDA. 

The additional revenues could finance more loans in other B&I categories (e.g.,

manufacturing).

Additional options would include raising the guarantee percentage from 80 percent to 90 percent and lowering the origination fee from two percent to one percent 

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4Kansas City Fed symposium: Recognizing Risk in Global Agriculture, 

www.kansascityfed.org/publications/research/rscp/rscp-2011.cfm. 

on small B&I loans—loans up to $5 million or a loan size determined by the Secretary—and reducing paperwork. These changes, however, would require raising 

fees on the largest loan categories to offset reduced revenues from the lower fees 

on smaller loans. Congress should ask USDA what changes could be accommodated 

for smaller B&I loans in this manner while being revenue neutral. 

Mr. Chairman, all of these recommendations for USDA guaranteed loan programs 

would very likely extend currently limited dollars into many more loans and significantly higher guaranteed loan volumes without requiring any new government funding. 

We must seek to think creatively and outside of the box when dealing with scarce 

Federal dollars. 

The ability of USDA’s guaranteed loan programs to multiply the impact of very 

few Federal dollars to such an enormous degree should serve as a model of efficiency 

for many other government programs. 

Farmer Mac 

Farmer Mac has proposed legislation to expand their ability to act as a secondary 

market. This authority would allow Farmer Mac to purchase business loans, operating loans, short term loans and USDA guaranteed loans, and remove limits on the 

size of loans on acreages of less than 1,000 acres and other changes. 

ICBA bankers and staff have discussed these changes with Farmer Mac and will 

continue discussing these issues in an effort to fully understand and assess these 

proposals and their potential for enhancing the activities of community banks in 

rural America. 

Are Farmland Prices a Bubble? 

There have been suggestions that current farmland prices represent a ‘‘bubble’’ 

that could burst causing economic harm in rural America much like the housing 

bubble that burst causing much devastation in the national economy. 

Even some Federal banking agencies, not wanting to be caught unaware or unprepared, as they may have been with subprime mortgages and the activities of the 

nation’s largest financial institutions, have suggested that the farm economy is in 

or nearly in a bubble. Ag banks are watching this closely and have conservative underwriting standards in place to protect both their banks and their customers. 

On the other side of this debate, various ag economists and likewise some ag 

bankers do not believe we are in a farmland bubble at this time. Many suggest 

farmland values could drop, and perhaps significantly, without causing great harm 

to the farm economy, although such an outcome is not at all desirable. There are 

several reasons for this thinking. 

First, community banks have been conservative in their farmland lending, basing 

those decisions on the ability of the land to cash flow at much lower price levels 

than exist today. In addition, the down payment required is often fairly significant 

approaching levels of 40 percent or more. Many farmers, due to the current high 

commodity prices and abundant harvests of recent years, are flush with cash and 

have made farmland purchases with cash borrowing little if anything. Further, interest rates are at historic lows, making this an excellent time to lock in low-cost, 

fixed rate financing. 

Survey Results of ICBA’s Agriculture-Rural America Committee 

ICBA conducted a survey of its Agriculture-Rural America committee last summer 

to determine what the impact would be to the farm economy if commodity prices 

and farmland values began to fall. ICBA’s Agriculture-Rural America committee 

consists of twenty-five bankers from every geographical region of the U.S. representing most agricultural commodities produced in the United States. I used the 

results of this survey as the basis for my remarks at the Kansas City Federal Reserve Bank’s symposium ‘‘Recognizing Risks in Global Agriculture.’’ 4

Our committee’s bankers were asked at what price would corn and soybeans have 

to fall before farmers started showing signs of stress? The consensus from the various agricultural bankers was that it would stress the farmers’ cash flow if the price 

of corn was between $3.50 and $5 a bushel. Soybeans falling to the price of $8 per 

bushel would cause problems in most portfolios. 

Our bankers were also asked how far farmland values would have to fall before 

the farmers would face serious challenges. While responses varied depending on 

crop, location, and other factors, bankers said a decline of 30 percent or more would 

be significant. Their answers also depended on what land value farmers have on 

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5Kansas City Fed: symposium panel: Weathering Unexpected Downturns, pg. 43, http://

www.kansascityfed.org/publicat/rscp/Session3.pdf. 

their balance sheets or how much land they’ve bought recently with credit. Many 

of our borrowers have conservative land values in their calculations. 

I was invited to participate in a panel entitled ‘‘Weathering Unexpected Downturns 

in Agriculture.’’ 5 This panel discussed what degree of downturn it would take to 

cause financial distress in agriculture and I encourage the Committee to review this 

document to perhaps gain an even broader perspective on views of ag lenders on 

the rural economy. 

A few relevant observations:

• Each year our bank stress tests our customers’ land values to determine farmers’ ability to withstand ‘‘shocks’’ to the farm economy;

• With the infusion of cash from a strong farm economy, farmers have been working to reduce their debt loads;

• Most bankers feel the land values shown on their farmers’ financial statements 

are conservative;

• Most bankers feel their farm customers can handle a modest correction in both 

commodity prices and farmland values;

• Farmers have been updating their equipment over the past couple years;

• These considerations should serve to help make farmers more efficient during 

future times of potential stress. 

Potential Factors Negatively Influencing Farmland Values 

Factors that could come into play that would negatively impact farmland prices 

would be if the Federal Reserve began to raise interest rates sharply to deal with 

rising inflation in the general economy. This would particularly affect those borrowers who may be highly leveraged, although the number of these borrowers 

should hopefully be relatively low. 

Also, rising production expenses and falling commodity prices would squeeze the 

ability of producers to have positive cash flows. 

There may be particular problems in store for farmers whose non-bank lenders 

have conducted their own internal farmland appraisals and raised the appraised 

values of farmland on loan applications just to justify extending loans to farmers. 

The House Agriculture Committee should not allow lenders under their jurisdiction to continue making in-house appraisals on loans above $250,000 but should 

rather require farmland appraisals to be made by outside, independent appraisers. 

Community banks use independent appraisers on loans over $250,000 as a prudent 

and sound underwriting practice. 

We should also closely watch what is happening in other countries that are major 

purchasers of U.S. farm commodities. China has been a big influence on our domestic farm prices. Its economy is slowing and some suggest it could be in for a hard 

landing economically. The Euro zone countries, a larger cumulative economic base 

than the U.S. economy, has also witnessed many of its countries slipping into recession, as has the United Kingdom, a member of the European Union but not the 

Euro zone. European countries purchase 20 percent of overall U.S. exports. 

In addition, many of the ten largest global economies outside of the U.S. and Europe, including China, Japan, Russia, Brazil, and India, are already in significant 

market corrections although their economies are not slowing as significantly as the 

European countries. If the world’s economic problems persist and deepen, the stage 

could be set for much lower demand for U.S. farm commodities. Significantly lower 

demand could lower commodity prices and farmland values. The issues warrant 

close monitoring and Congressional attention where appropriate. 

Comparisons to the 1980s Implosion in Farmland Values 

Most ag economists and ag bankers view the current strong farmland values as 

quite different from the situation that existed in the 1980’s farm credit crisis for 

the reasons stated above. 

One question that lenders were asked to be prepared to answer for the symposium 

mentioned previously was ‘‘how would banks respond to smaller profits in agriculture?’’ I asked a follow up question that I suggest many banks would view as 

more important: ‘‘How would regulators respond to smaller profits in agriculture?’’

The regulators are really the tail that wags the dog. The banker’s ability to work 

with his customer is influenced—and heavily at times—by the examiner’s position 

and decisions on the banks farm loan portfolios. 

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During the 1980s agricultural credit crisis, we were able to restructure debt for 

farmers when they needed help. The banking examiners at that time were willing 

to work along with the banker who was working along with the farmer. 

The question we ask ourselves is whether a loan will be classified even though 

it has been rewritten to accommodate a more realistic cash flow and repayment 

plan. If individual loans are classified, those decisions will do the most damage in 

the quickest timeframe to a bank’s farm loan portfolio. 

If there are times of stress in the farm economy in the future, it will be essential 

for the regulatory environment to acknowledge bankers’ ability to work through 

problem loans as was done in the 1980’s farm credit crisis so that bankers can see 

farmers through tough times. 

The 1980s agricultural crisis was our bank’s toughest time since the Great Depression. It was also the toughest time for our farmers. Together we worked through 

those challenges. Our bank was fortunate not to lose any farmers through bankruptcy or foreclosure during those years. Many banks were not so fortunate. 

I still remember the day that one of the first agricultural banks in Nebraska 

failed and was closed. Because I knew the family, I looked in the mirror and reminded myself that, if we weren’t careful, this could happen to us. 

Between bankers and farmers, there were many sleepless nights—and also for the 

local agribusinesses. In the end, working together, we worked through the challenges surrounding us. 

If Members of Congress wonder how some banking examiners are treating banks 

today, simply ask community bankers in your district if bank examiners are being 

overly harsh or overly accommodative or just right with bank examinations. You’ll 

no doubt get an earful. 

Farm Credit System (FCS) Abuses 

Although the Farm Credit System is under the authority of the Farm Credit Act 

(Act), and is therefore not part of the credit title of the farm bill, many bankers are 

complaining about the abuses being facilitated by the FCS and its captive regulator, 

the Farm Credit Administration (FCA). These abuses include predatory pricing 

practices and cherry picking of prime customers utilizing their tax and funding advantages as a government sponsored enterprise (GSE). They also include allowing 

FCS institutions to skirt the legal constraints of the Act through various ‘‘pilot programs’’ to engage in non-farm lending or simply turning a blind eye to instances 

where System institutions are engaging in activities not authorized by the Act. 

ICBA would strongly oppose any farm bill provisions that allow either the FCS 

or the FCA to further expand the powers of the FCS. ICBA believes that Congress 

should thoroughly investigate the activities of the FCS and shed light on attempts 

to circumvent the law and their activities in general. Such investigations would be 

extremely appropriate at a time when Congress is considering reforming the housing GSE. The FCS is also a GSE that is greatly in need of reform, transparency 

and accountability. A number of reforms targeting the FCS should be considered. 

We respect the Committee’s desire not to get into a heated debate on this topic 

as part of this hearing. However, we believe future Congressional hearings devoted 

to this topic are warranted. ICBA would be happy to work with the Committee towards this end. 

Conclusion 

Mr. Chairman and Subcommittee Members, thank you again for devoting time 

today to discuss the important topic of agricultural credit and its role in the development of the 2012 Farm Bill. We believe there are a number of ways the Committee 

could adjust USDA authorities under the CONACT and/or through the farm bill 

that would stretch existing dollars further, resulting in more loans and more credit 

extended without increasing Federal budget outlays. The result would be more jobs 

in rural America and a healthier rural economy. We urge your support for the recommendations made in our testimony. 

Thank you. I would be pleased to answer any questions. 

ATTACHMENT A 

Detailed Recommendations for USDA Guaranteed Loan Programs (Further 

Explanation of Testimony Recommendations) 

Guaranteed Farm Loans—The U.S. Department of Agriculture’s (USDA) Farm 

Service Agency (FSA) has increased user fees in order to essentially make guaranteed farm ownership (FO) program self funding and the operating loan (OL) program much closer to a self-funding level. Therefore, we support the following 

changes:

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• Remove Term Limits—ICBA supports removing term limits on guaranteed 

farm operating loans. Whether a producer needs a guaranteed loan or not is a 

decision best made between the farmer and his local lender and should not be 

based on arbitrary timeframes established in Washington. The program is now 

self-funding due to higher fees. Other farm programs do not have term limits 

even though they have significant costs in terms of budget outlays.

• It has been estimated that over 4,500 farmers and ranchers nationwide have 

become ineligible for loan guarantees. An additional 1,500 producers are expected to lose eligibility in 2012 followed by an additional 2,200 operators in 

2013. Over 8,200 family farmers and ranchers either have lost or will lose access to FO loans since January 1, 2011.

• Significantly Increase the Size of Guaranteed Loan Limits—ICBA would 

support significantly increasing the size of the current loan limits, now $1.214 

million, to accommodate larger-sized family farmers and to meet rising farmland and production expenses. Land values have risen substantially in recent 

years. For example, farmland values for 2011 escalated 22 percent in the sevenstate Seventh Federal Reserve District (Chicago Fed)—the biggest annual increase since 1976. Similarly, cropland values increased 25 percent in 2011 from 

2010 levels in the ten-state Kansas City Federal Reserve District.

• In addition, USDA estimated farm production expenses increased by $32.5 billion in 2011, reaching a record of $318 billion. The higher level of production 

expenses in 2011 represented an increase of over 11 percent from the previous 

year. Increases in the current loan limit are pegged to the ‘‘Prices Paid by 

Farmers Index’’ as of the end of August each year. Current projections based 

on March numbers would increase the loan limit to $1.288 million, a 6% increase.

• The current rate of increase in the loan size of guaranteed farm loan programs 

does not appear adequate to keep pace with sharp upward spikes in land values 

or production expenses. This situation, if continued throughout the life of the 

farm bill, combined with the potential for lower farm income in some years, 

would exacerbate the potential higher demand for credit as producers seek to 

keep pace with higher costs.

• Providing USDA the flexibility to raise the loan limit size as necessary would 

have no budgetary impact on program costs for the FO loan program at this 

time. However, there may also be ways to increase the size limit for OL loans 

as discussed below without budgetary costs and for FO loans in a year(s) where 

there may otherwise be a cost due to a rise in the default rate.

• Since the OL loan program is not totally self-funding, Congress could direct 

USDA to develop a pilot program to enable individual producers, at their option, 

to choose a higher loan limit above the regular loan limit for both FO and OL 

loans if they are willing to pay higher fees, if necessary in a particular year, 

to offset any additional program costs. This approach could allow some family 

farmers a choice of a larger loan size to fit their individual farm needs without 

imposing higher fees on the overall universe of borrowers using the programs. 

This approach could also be combined with the ability to transfer funds into 

these programs, if needed, from other FSA farm loan programs with unused or 

surplus funds.

• Larger loans should target family farmers and the fees should not be unduly 

burdensome. Additional fees should be a voluntary option to the borrower based 

on their needs.

• However, if the loan sizes were increased to better reflect rising production costs and farmland values, USDA would also need a simultaneous increase in the volume of loans they can guarantee. This is necessary to keep pace with the demand for the same number of loans as currently 

provided. Therefore, ICBA recommends a significant increase in the volume 

caps for USDA guaranteed loans (see below).

• Significantly Increase Guaranteed Loan Volume Caps—Congress should 

stipulate that USDA’s guaranteed loan programs that are self-funding should 

either not have volume caps or USDA should have flexibility to raise them significantly above current levels. This will ensure greater credit availability in 

rural America without unnecessary limitations. Since the guaranteed farm ownership program is now self-funding in terms of program costs, it provides no 

budget savings to cap the loan volume for this program. In fact, the program 

may make money in some years. Last year the FSA farm ownership program 

guaranteed almost $2 billion in loans. With this change, a higher volume could 

2058

be achieved to satisfy loan demand without having to transfer funds from other 

programs.

• Expanding Eligible Borrowers to Meet Planning Needs—We urge the 

Committee to expand who is eligible for guaranteed FO (ownership/real estate) 

loans from the FSA while ensuring such loans continue to go to family farmers. 

Currently, a borrower must be both the owner and operator of the family farm 

to be eligible for guaranteed FO loans. This requirement does not reflect the 

evolving structures of how some family farms are managed today for tax planning, inheritance, asset transfers and other managerial purposes.

• For example, the real estate of the family farm may be owned in a trust by the 

parent(s), while the equipment and other farm assets may be owned in a limited 

liability company (LLC) with the children. This family farm would be ineligible 

for a real estate loan even if the children were totally responsible for operating 

the family farm and would one day receive the assets of the farm—simply because the children do not currently both own and operate the farm.

• This situation also can cause a problem when a child or children want to purchase the farm from a parent but are unable to qualify for a farm ownership 

loan even though they have been operating the farm and will continue to do 

so. By contrast, individuals are eligible for guaranteed farm operating loans if 

they are either owners or operators of a family farm.

• Eligibility should be expanded to allow instances where operating entities of 

family sized farms may receive a real estate loan when the real estate is owned 

by family members who are directly or indirectly members of the operating entity. Protections should ensure that large corporations which own various farm 

entities do not hide behind vaguely worded family farm, ownership or control 

definitions.

Guaranteed Business and Industry (B&I) Loans—The OMB’s subsidy rate 

calculations appear to over inflate the costs of administering USDA’s B&I loan program which reduces the loan volume available for lenders and their customers. For 

example, OMB calculates the subsidy rate for B&I loans based on failed loans no 

longer made (i.e., 1980’s ethanol loans of $50 to $100 million) and in size increments 

no longer permitted. OMB also calculates losses over the entire history of the B&I 

program dating back to 1974 even though USDA has significantly altered programs 

during that time to minimize risks. For example, USDA now limits its ethanol loan 

guarantees for the B&I program to $10 million. 

In addition, several loan categories within the B&I program have never had defaults or losses and they therefore amount to ‘‘zero-subsidy’’ loan programs. If USDA 

were provided flexibility under the CONACT to raise or remove volume caps on 

these zero-subsidy categories of loan programs, more loans could be made in these 

no-risk categories. This would allow USDA to apply fees towards other important 

economic sectors or loan types resulting in an overall increase of guaranteed loan 

volume without any costs to the Federal Government. This would also increase the 

number of jobs provided in rural America. 

Therefore, our recommendations would be as follows:

• Amend the CONACT to mandate the B&I subsidy rate calculation not include 

loans with size limits above those currently being made by USDA (to address 

the old ethanol loan issues);

• Require subsidy calculations be based on loans and loan types extended no 

longer than 2 decades ago. A fifteen to twenty year timeframe would be more 

relevant to USDA’s current activities and would reflect adjustments that USDA 

has made to minimize risks;

• Provide USDA flexibility to increase or remove volume caps for ‘‘zero-subsidy’’ 

loan categories within the B&I program with a track record of having no defaults or loan losses. This change will increase fee revenue to USDA and allow 

for new loans in other categories, thus increasing the amount of lending made 

in rural America through the B&I program.

2059

ATTACHMENT B 

U.S. Commercial Banks Ag Operating Loans

U.S. Commercial Banks Farmland Loans


11230136.eps 11230137.eps
2060

The CHAIRMAN. Thank you for your testimony. 

Mr. Williams. 

STATEMENT OF MATTHEW H. WILLIAMS, CHAIRMAN AND 

PRESIDENT, GOTHENBURG STATE BANK; CHAIRMAN-ELECT, 

AMERICAN BANKERS ASSOCIATION, GOTHENBURG, NE 

Mr. WILLIAMS. Chairman Fortenberry, Ranking Member Fudge, 

Members of the Committee, my name is Matt Williams, and I am 

Chairman and President of the Gothenburg State Bank in Gothenburg, Nebraska. We are over 100 years old, and we have $120 million in total as- sets and nearly $87 million in total loans, 75 percent of which are 

devoted to either direct or indirect ag lendings. 

I am also Chairman-elect of the American Bankers Association, 

and I appreciate the opportunity to present the views of the ABA 

on future farm policy. Over 5,500 banks, nearly 75 percent of all 

banks in our country, reported agriculture loans on their books at 

the end of last year, with a total outstanding portfolio of $130 billion. 

More farmers and ranchers receive credit from the banking industry than any other source. The outcome of the next farm bill is 

extremely important to my customers in Gothenburg, to my bank 

and to bankers throughout our country who provide the credit that 

American agriculture needs and depends on. 

The banking industry and the USDA have worked cooperatively 

for decades to provide access to credit to those farmers and ranchers who have some deficiency in their operation that makes them 

ineligible for bank credit. Many of these farmers and ranchers who 

borrow are young and still acquiring the asset base they need to 

qualify for bank loans. Most of these farmers operate small farms, 

and the average loan is over $200,000, which is not a large loan 

by today’s farm standards. 

I am referring to the farmers and ranchers who borrow money 

from banks through the guaranteed farm loan programs offered by 

USDA’s Farm Service Agency. Since this is a credit guarantee, 

banks underwrite and fund the loans, and the USDA provides the 

bank with a guarantee against potential loss. Over 35,000 farmers 

and ranchers access credit through this program. 

In the 1990s, Congress introduced term limits in the program 

that limit the eligibility period for farmers and ranchers to participate. I do not know of any comparable eligibility requirements on 

other Federal loan guarantee programs. Given the volatile nature 

of agriculture, FSA term limits have caused hardship to those 

farmers and ranchers who can least weather a financial setback. 

An increasing number of farmers and ranchers will no longer be eligible for additional credit under the program as the years go by, 

which will make access to credit more difficult. 

ABA recommends the repeal of term limits on the FSA guaranteed loan program. 

I have asked many of my farm customers what they really want 

in the next farm bill. Overwhelmingly, they have told me the Federal Crop Insurance Program must be preserved. In addition to 

protecting against acts of nature, farmers have the confidence in 

crop insurance to utilize price hedging and forward contracting beVerDate 0ct 09 2002 12:54 Dec 11, 2012 Jkt 041481 PO 00000 Frm 00472 Fmt 6601 Sfmt 6601 I:\DOCS\112-30\74372.TXT BRIAN
2061

cause they know that a percentage of their crop is guaranteed. 

Without this key risk management element, few farmers would be 

able to hedge or forward contract their crop, thereby eliminating an 

important aspect of risk reduction through good marketing. 

Crop insurance provides my customers with the certainty they 

need to make a responsible planting and marketing decision and 

provides my bank with the confidence we need to extend credit. 

Crop insurance is an important tool that our customers use to manage the enormous risk of agriculture. If Federal Crop Insurance 

was in some way diminished our ability to lend in many cases 

would be reduced. 

ABA urges this Committee to preserve the Federal Crop Insurance Program. 

As we all know, for the past decade, U.S. agriculture has enjoyed 

one of the longest periods of financial prosperity. The balance sheet 

for U.S. agriculture is the strongest it has ever been with debt-toasset ratio of less than ten percent. Farm and ranch net worth is 

in excess of $2 trillion. A truly strong ag economy helps guarantee 

a safe and secure supply of food, something all Americans deserve 

and demand. 

The ABA has worked with Congress on every farm bill. We are 

proud of what we have contributed to the debate and look forward 

to working with Congress in the future, and we as an industry are 

very concerned about the young and beginning farmers and being 

sure that they are a part of the solution. Thank you. I look forward 

to addressing your questions. 

[The prepared statement of Mr. Williams follows:]

PREPARED STATEMENT OF MATTHEW H. WILLIAMS, CHAIRMAN AND PRESIDENT,

GOTHENBURG STATE BANK; CHAIRMAN-ELECT, AMERICAN BANKERS ASSOCIATION, 

GOTHENBURG, NE 

Chairman Fortenberry, Ranking Member Fudge, and Members of the Subcommittee, my name is Matthew H. Williams, and I am the Chairman and President of Gothenburg State Bank in Gothenburg, Nebraska. My great grandfather 

founded the bank in 1902 and our family has operated it since then. My grandfather 

served as President of the bank and my father followed him in the job. Since it was 

founded, Gothenburg State Bank and my family have survived many economic catastrophes including the farm crisis of the 1920s, the Great Depression, the farm 

crisis of the 1980s, and the Great Recession of 2008/2009. We plan to continue to 

serve the citizens of central Nebraska for the next 100 years or more. Our bank’s 

tag line is ‘‘Still Pioneering’’ and it is a core value of our company. Today, Gothenburg State Bank has two office locations, assets of $125 million, and employs 28 

people. Our loans total nearly $87 million with about 75% of our portfolio connected 

to agriculture in a direct or indirect way. 

I also serve as Chairman-Elect of the American Bankers Association (ABA), and 

I appreciate the opportunity to present the views of the ABA on future farm policy. 

The ABA represents banks of all sizes and charters and is the voice of the nation’s 

$13 trillion banking industry and its two million employees. ABA is uniquely qualified to comment on agricultural credit issues as banks have provided credit to agriculture since the founding of our country. Over 5,500 banks—nearly 75% of all 

banks—reported agricultural loans on their books at year end 2011 with a total outstanding portfolio of nearly $130 billion. More farmers and ranchers receive credit 

from the banking industry than from any other source. Banks are also major providers of credit to small farms and ranches—banks held over 1.1 million small farm 

loans, with almost 781,000 loans made for $100,000 or less. In addition to our commitments to farmers and ranchers, thousands of farm dependent businesses—food 

processors, retailers, transportation companies, storage facilities, manufacturers, 

etc.—receive financing from the banking industry as well.

2062

Banks are Healthy and are Providing the Credit Agriculture Needs 

I mentioned earlier in my statement that over 5,700 banks have agricultural loans 

on their books. The ABA produces an annual study of banks that have a concentration in agricultural loans—banks that have over 14% of their total loan portfolio in 

agricultural loans, which includes Gothenburg State Bank. At year end 2011, there 

were 2,185 banks in this group. ABA defines these banks as ‘‘Farm Banks.’’ I would 

like to share a few of the findings from the 2011 study:

• Farm Banks are generally small institutions. The median sized farm bank had 

$90.6 million in assets.

• Farm Banks operate over 7,534 locations throughout rural America.


11230138.eps 11230139.eps
2063

The Farm Economy is Strong 

2011 was a record breaking year for my customers and for most farmers in the 

country. USDA reported that net cash income in 2011 was $110 billion, nearly a 

20% increase over 2010. While the USDA forecast for 2012 is not quite as good as 

2011, net cash income is projected to reach $96.3 billion, well above the average set 

over the past 10 years. Prosperity has transformed the balance sheets of many of 

my customers and of many farmers and ranchers throughout the country. 

Agricultural Real Estate Values Have Increased Due to Farm Prosperity, 

Not Leveraged Speculation 

There has been a great deal of focus by many on what has been happening with 

farmland values. The question most asked is, ‘‘Are we looking at another asset bubble?’’ There is no doubt that farmland values have escalated dramatically over the 

past several years. There are many factors behind this significant increase in land 

values, and fortunately, excessive lending by banks is not one of them. 

Managing agricultural loan risk is what we do at Gothenburg State Bank, and 

what bankers do all over the country. To give you a sense of our posture towards 

farm real estate lending, please consider some of the standards at our bank:

• We have very conservative underwriting standards for real estate lending and 

these have not changed for a decade or more.

• Repayment—ability is the primary driver of our underwriting—if the request 

does not cash flow, we do not do it—regardless of the collateral position of the 

customer.

• We only lend a maximum of 60% of the appraised value of the land (loan-tovalue).

• In our current farmland loan portfolio, our average loan-to-value is about 40%.

• Even though land values have increased to $6,000 per acre in our service area, 

we use $3,500 per acre for credit analysis purposes when calculating net worth 

position, debt to assets, and other key ratios.

• I cannot overstate the value of the technology that my bank and that most 

banks have invested in that allows us to do credit analysis and run ‘‘what if’’ 

scenarios almost instantaneously. In a recent exercise at our bank, we projected 

that a 40% drop in real estate values would reduce the balance sheet net worth 

of our customers, but it had very little or no effect on the quality of our loan 

portfolio. Our bank’s risk to the FDIC insurance fund would not change.

Our farm and ranch customers, and the farm and ranch customers of many other 

banks, have enormous skin in the game in their operations. Many are paying cash 

for real estate. Leverage levels are at or near a historic low. Prosperity is driving 

the demand for farmland and retained earnings are providing the cash to purchase 

it. 


11230140.eps
2064

ABA’s Recommendations to Congress for the next Farm Bill 

Repeal Term Limits on the USDA Farm Service Agency Guaranteed Loan Program 

I have spoken about the prosperity that many farmers and ranchers have enjoyed 

over the past decade. However, for many reasons, that prosperity has not benefited 

all farmers or ranchers. For over forty years the banking industry and the USDA 

have worked cooperatively to provide access to credit to those farmers and ranchers 

who have some deficiency in their operation that makes them ineligible for bank 

credit. Many of these farmers and ranchers who borrow are young and are still acquiring the asset base they need to be able to qualify for bank loans. Most of these 

farmers operate small farms because the average loan is under $200,000 which is 

not a large farm loan today given the capital that modern agriculture demands. Despite the challenges these young and small farmers and ranchers face, they are conscientious customers who handle their credit obligations very well. 

I am referring to the farmers and ranchers who borrow money from banks 

through the guaranteed farm loan programs offered by the USDA’s Farm Service 

Agency (FSA). Since it is a credit guaranty, banks like mine underwrite and fund 

the loan and the USDA provides the bank with a guaranty against loss on the loan. 

Over 35,000 farmers and ranchers access credit through this program. Banks are 

not the only participants as Farm Credit System lenders, credit unions, state agricultural credit programs, and others work with USDA to provide credit to these 

farmers and ranchers. 

The program has been a resounding success. Each year a limited appropriation 

is leveraged into a significant program that, in many cases, is the only way these 

farmers and ranchers can access credit. At the end of FY 2011, the portfolio of guaranteed farm and ranch loans exceeded $10 billion. Even though these customers 

have some financial statement or operating deficiency, they are very conscientious 

borrowers. FY 2011 year-end loan delinquencies were 1.43% and losses in the program were .50% of outstanding loans. From a delinquency and loan loss perspective, 

this is a very sound portfolio of loans. 

In the early 1990s, Congress inserted ‘‘term limits’’ into the program that only allowed farmers and ranchers a limited period of eligibility for the program. While 

the goal of term limits was understandable, it has created uncertainty for many 

farmers and ranchers. I should also note that I do not know of any comparable eligibility limitation in other Federal loan guaranty programs. Given the volatile nature 

of the agricultural economy, the practical application of FSA term limits has caused 

hardship to those farmers and ranchers who can least weather a financial setback. 

As a result of term limits, an increasing number of farmers and ranchers are no 

longer eligible for additional credit under the program, which could make access to 

credit in the future very difficult, if not impossible, for these producers. 

For this reason, the American Bankers Association (and many other lender and 

farm organizations) recommends the repeal of term limits on the USDA, Farm Service Agency Guaranteed Loan Program. 

Preserve the Federal Crop Insurance Program 

As this Committee seeks ways to craft a new farm bill that is responsible to the 

budgetary needs of our country, as well as to continue to provide farmers and ranchers with some measure of protection against catastrophic losses, I want to remind 

you that Federal Crop Insurance provides my customers with the certainty they 

need to make responsible planting decisions and provides my bank with the confidence we need to extend credit to our customers. Our job at the bank is to manage 

risk and Federal Crop Insurance is an important tool that we use to manage the 

enormous risk in today’s agriculture. Input costs to plant crops today are staggering. 

My customers use credit from the bank to help them get a crop planted and harvested. If Federal Crop Insurance was in some way diminished, our ability to lend—

in some cases—would be curtailed. 

In preparation for this hearing I spoke to many of my farm customers about what 

they would seek in the next farm bill. Overwhelmingly they said the current crop 

insurance program should be preserved and strengthened. My customers, and all 

farmers and ranchers, are extremely confident and self-sufficient people. It takes a 

great optimist to plant a crop, work on it all year, harvest it, and then sell it. But, 

no matter how optimistic farmers are, they can not control the risks presented to 

them by weather. In addition to protecting against acts of nature, farmers have the 

confidence in Crop Insurance to utilize price risk hedging techniques because they 

know that a percentage of their crop is guaranteed. Without this key risk management element, fewer farmers would hedge their crop prices and more of them would 

be restricted to selling at harvest, when prices are typically at their lowest. 

2065

For these reasons, the ABA urges this Committee to preserve the Federal Crop 

Insurance program. The program is widely accepted by farmers as a key element 

of a solid risk management program that they can take to the bank. 

The Banking Industry is Concerned about the Risk a Government Sponsored Enterprise Poses to the Rural Economy 

The market for agricultural credit is very competitive. I compete with several 

other banks in my service area, finance companies from all of the major farm equipment manufacturers, several international banks, credit unions, life insurance companies, and finance companies owned by seed and other supply companies to name 

a few. However, the most troublesome competitor I face is the taxpayer-backed and 

tax-advantaged Federal Farm Credit System (FCS). The FCS was chartered by Congress in 1916 as a borrower-owned cooperative farm lender at a time when banks 

did not have the legal authority to make farm real estate loans. 

Today the FCS is a large and complex financial services business with over $230 

billion in assets. It is profitable—it earned $3.9 billion in 2011. It is tax-advantaged 

and enjoyed a combined local, state, and Federal tax rate in 2011 of 6.4%. In spite 

of their size, current profitability and tax advantages, the Farm Credit System presents the same kind of liability to the American taxpayer as Fannie Mae and 

Freddie Mac. As a Government Sponsored Enterprise (GSE) like Fannie Mae and 

Freddie Mac, the American taxpayer is the ultimate backstop should the Farm 

Credit System develop financial problems. The potential liability that GSEs pose to 

taxpayers became very real in 2008 when the Federal Government seized Fannie 

Mae and Freddie Mac. An earlier near collapse of the Federal Farm Credit System 

in the late 1980s, as a result of their irresponsible farm lending, foreshadowed what 

taxpayers would confront more than twenty years later with the housing GSEs. 

Congress will take up the question about what to do with the housing GSEs in an 

effort to restructure home mortgage finance in the United States. I urge this Committee to include the Federal Farm Credit System in those discussions as there is 

no difference between the risk the housing GSEs pose to our economy and the risk 

the Farm Credit System poses to our rural economy. 

The Banking Industry is Well Positioned to Meet Agriculture’s Needs 

For the past decade, U.S. agriculture has enjoyed one of the longest periods of financial prosperity in history. It has been an exciting time in farm country. Financially, American agriculture has never been stronger. In 2011, many American farmers and ranchers enjoyed their most profitable year ever. The balance sheet for U.S. 

agriculture is the strongest it has ever been with a debt-to-asset ratio of less than 

ten percent. Farm and ranch net worth is in excess of $2 trillion. This unprecedented high net worth is due in part to a robust increase in farm asset values 

(mainly farm real estate), but is equally due to solid earned net worth as farmers 

have used their excess cash profits to retire debt and to acquire additional equipment and additional land. As a result, farmers and ranchers today have the capacity 

to tap their equity should there be a significant decline in farm profitability resulting in diminished cash flows. While no farmer or rancher wants to take on additional debt, the strength of the U.S. farm and ranch balance sheet gives producers 

options to do so if the need arises. 

When the agricultural economy collapsed in the middle 1980s, the banking industry worked with farmers and ranchers to restructure their businesses and to rebuild 

the agricultural economy. Since that time banks have provided the majority of agricultural credit to farmers and ranchers. While other lenders shrank their portfolios 

or exited the business altogether, banks gained market share by expanding lending, 

just as we did following the economic crisis of 2008/2009. We saw opportunity where 

others did not. 

The American Bankers Association has worked with Congress on every farm bill 

ever passed. We are proud of what we have contributed to the debate in the past 

and we look forward to working with Congress in the future as you craft the next 

farm legislation. 

Thank you for the opportunity to express the views of the American Bankers Association. I would be happy to answer any questions that you may have.

The CHAIRMAN. Thank you, Mr. Williams, for your testimony. 

Mr. Walton. 

I will remind the panel that we have been called for votes, and 

I believe we can get through the entire panel’s testimony before we 

have to leave, but then we will come back for questions. 

Mr. Walton. 

2066

STATEMENT OF MICHAEL G. WALTON, URBAN FARMER; 

OWNER, TUNNEL VISION HOOPS; CO-FOUNDER, NEO

RESTORATION ALLIANCE, SOUTH EUCLID, OH 

Mr. WALTON. Chairman Fortenberry, Ranking Member Fudge, 

and Committee Members, thank you for inviting me to testify 

today. 

I am Michael Walton from Cleveland. I am a trainer, facilitator, 

counselor and urban farmer. I am a Co-Founder, with my wife 

Veronica, of NEO Restoration Alliance, an environmental justice 

and education organization. 

I am also Founding partner of Tunnel Vision Hoops, a local hoop 

house, design, fabrication and installation company. 

I am the son of a steelworker, and I remember growing up in the 

1960s, when greater Cleveland had over one million residents and 

my father and all of his neighbors had jobs. 

Now our population is less than half a million, and many are unemployed or under employed. We have more than 15,000 vacant 

parcels or abandoned houses in our community. 

To address these issues, Veronica and I hosted a Green Jobs 

Now! event, a nationwide call to action spearheaded by Van Jones 

back in 2008. During that time, we explored job creation in the 

green industry, jobs that required people, not machines, sustainability, and those that could not be shipped overseas or across the 

border. 

Urban agriculture and storm water management became our 

focus. I completed a market gardener training course at the Ohio 

State Extension, and attended workshops with Will Allen of Growing Power in Milwaukee. 

In the spring of 2009, we began our first urban agriculture venture called ClearLake Farm. We financed our farm with grants we 

received because we focus on job training, social justice and community building. We see urban agriculture as an effective way to 

restore lives and land in our community. We invested much of our 

own time and money farming before work, at lunch, evenings and 

weekends. We have to support the agriculture business until it produces enough to be self-sustaining. 

We measure our success by a triple bottom line in which sustainability of people, planet and profit are indicators to determine success. We have been successful with job training programs for 

women living in a drug treatment center, urban youth summer job 

programs and community building and beautification, but this hard 

work has not yet produced a profit. 

A major obstacle for greater Cleveland farmers is land ownership. Current policies are not beneficial for urban agriculture. 

Many farmers, myself included, are not land owners. Most have 

nonbinding agreements or 5 year leases. Because of the lack of 

ownership, general infrastructure needs become high risk and 

sometimes a poor investment. 

For example, our initial farm, ClearLake Farm, was located on 

the private property of the drug treatment center where I work as 

a counselor. The board of the organization initially agreed to support the development of a farm on their property as part of a green 

initiative. The first few years of farming yielded bountiful crops, 

bigger than the demand for the product. This scenario of high yield 

2067

with little distribution created a low-income farm, and the property 

owners decided it was unreasonable to keep the farm because they 

did not see the value in the triple bottom line. As a result, a hoop 

house with a rain harvesting system was removed along with 

raised beds, compost bins, irrigation system, herb gardens, rain 

gardens and dozens of crops. 

Another roadblock is insurance, because insurance companies 

lack information and policies for insuring urban farmers. We called 

the national leader in farm insurance, and the agent called back 

and told us we would be pioneers because her company was not 

prepared to insure small plot urban agriculture, farms without 

buildings or substantial equipment for them to insure or without 

purchase agreements to bank on. 

Many restaurants and chain grocery stores require product liability insurance for the vendors, and without this insurance, we can’t 

go to lenders or insurance agents with purchase agreements as collateral. 

Obtaining USDA loans and benefitting from credit programs 

would be useful to urban farmers with sufficient land and crop 

value. Urban farmers in greater Cleveland have benefitted from 

Federal grant programs that have been managed and created 

urban incubators or given $2,000 start-up grants. 

Congresswoman Fudge introduced us to FSA and USDA loan and 

credit programs in March of 2012. Prior to the introductory workshop, the two financing programs we had knowledge of were not 

suitable for the needs of new small farmers. The first, a City of 

Cleveland tool and equipment reimbursement program, and secondly the USDA EQIP program. The criteria for obtaining funds 

are too restrictive, requiring income in advance or construction 

prior to distribution of funds. 

Urban farmers need access to larger plots of land that we can 

own so that we can create the scale that will generate enough income that we could be legitimately considered a credit risk. We 

need simplified loan applications and programs targeted to farmers 

who are mostly part-time and bi-vocational. We need loans made 

to farmers’ collectives or cooperatives so we can purchase and share 

large tools, like tractors. To service large-scale customers, we need 

coolers, and storage space and refrigerated trucks would be too 

costly for an individual but reasonable for a collective. If these programs already exist, we need to know about them in specific detail. 

If not, they are what we need you to create. 

Please consider urban farmers and our credit needs as you develop the next farm bill. Urban farmers are real farmers who create real jobs and grow fresh produce to help our cities. We need 

and deserve the same assistance given to rural farmers so that we 

can grow and thrive. Thank you. 

[The prepared statement of Mr. Walton follows:]

PREPARED STATEMENT OF MICHAEL G. WALTON, URBAN FARMER; OWNER, TUNNEL

VISION HOOPS; CO-FOUNDER, NEO RESTORATION ALLIANCE, SOUTH EUCLID, OH 

Chairman Fortenberry, Ranking Member Fudge and Committee Members, thank 

you for inviting me to testify today. 

I am Michael Walton from Cleveland, Ohio. I am a trainer, facilitator, counselor 

and urban farmer. I am the co-founder, with my wife Veronica, of NEO Restoration 

Alliance, an Environmental Justice and Education organization. I am also a foundVerDate 0ct 09 2002 12:54 Dec 11, 2012 Jkt 041481 PO 00000 Frm 00479 Fmt 6601 Sfmt 6621 I:\DOCS\112-30\74372.TXT BRIAN
2068

ing partner of Tunnel Vision Hoops, a local Hoop House, design, fabrication and installation company. 

I am the son of a steelworker, and I remember growing up in the 1960s when 

Greater Cleveland had over a million residents, and my father and all of our neighbors had jobs. Now our population is less than half a million and many are unemployed or under-employed. We have more than 15,000 vacant parcels or abandoned 

houses in our county. 

To address these issues, Veronica and I hosted a ‘‘Green Jobs Now!’’ event, a nationwide call to action spearheaded by Van Jones. During that time we explored job 

creation in the Green Industry. Jobs that required people, not machines, sustainability, and those that could not be shipped overseas or across the border. Urban 

agriculture and storm-water management became our focus. 

I completed a Market Gardner training course at The Ohio State Extension and 

attended workshops with Will Allen of Growing Power in Milwaukee. While attending, I learned aquaponics and intensive growing techniques, and in the spring of 

2009, we began our first urban agriculture venture, ClearLake Farm. 

We have financed our farm business with grants we received because we focus 

on job training, social justice, and community building. We see urban agriculture 

as an effective way to restore lives and land in our community. These funding 

sources are appreciated and needed; however, they are not enough. We invested 

much of our time and money, farming before work, at lunch time, evenings and 

weekends. Our family has suffered great hardship because we need to work other 

jobs for 20 to 40 hours a week to survive. We must support the agriculture business 

until it produces enough to be self-sustaining. 

We measure our success by a triple bottom line in which sustainability of people, 

planet and profit are indicators to determine success. We have been successful with 

job training programs for women living in a drug treatment center, urban youth 

summer jobs programs, and community building and beautification. This hard work 

has yet to produce a profit. 

A major obstacle for Cleveland farmers is land ownership. Current policies are not 

beneficial for urban agriculture. Many farmers, myself included, are not land owners. Most have non-binding arrangements or 5 year leases. Because of the lack of 

ownership, general infrastructure needs become high risk and sometimes a poor investment. For example, our initial farm, Clearlake Farm was located on the private 

property of the drug treatment center where I work. The Board for the organization 

initially agreed to support the development of a farm on their property as part of 

a green initiative. The first 2 years of farming yielded bountiful crops, bigger than 

the demand for the product. This scenario of high yield with little distribution created a low income farm. The property owners found it unreasonable to keep the 

farm because they did not see the value in the triple bottom line. As a result, a hoop 

house with a rain harvesting system was removed, along with raised beds, compost 

bins, irrigation systems, herb gardens, rain gardens and dozens of crops. This nonbinding agreement was a great loss to the community and the land. 

Another roadblock is insurance, because the insurance companies lack information 

and policies for insuring urban farmers. We called a national leader in farm insurance, and their agent called back to tell us we would be pioneers, because her company was not prepared to insure small plot urban agriculture, farms without buildings or substantial equipment for them to insure, or without purchase agreements 

to bank on. Many restaurants and chain grocery stores require product liability insurance from their vendors. With out this insurance, we can’t go to lenders or insurance agents with purchase agreements as collateral. 

Obtaining USDA loans and benefiting from credit programs would be useful to 

urban farmers with sufficient land and crop value. Being able to grow and sell 

enough produce to secure and repay a loan is another major obstacle for small 

urban farms. Urban farmers in Greater Cleveland have benefitted more from Federal grant programs that have been managed by local land management organizations and The Ohio State Extension. These programs have granted up to $20,000 

for year one start-ups, or creating an urban agriculture incubator for urban farmers. 

Regrettably, none of these programs have produced individual farms of 2 acres or 

more. Farm size is still too small to reasonably use a $30,000 40 horsepower tractor 

with earth moving and farming attachments like the ones used by rural farmers. 

Congresswoman Fudge introduced us to the FSA and USDA loan and credit programs in March 2012. Prior to the introductory workshop, the two financing programs we had knowledge of were not suitable for the needs of new small farmers. 

The first, a City of Cleveland tool and equipment reimbursement program and second, the USDA EQIP program. Their criteria for obtaining funds are too restrictive; 

requiring income in advance, or construction prior to distribution of funds. 

2069

Urban farmers also need access to larger plots of land that we can own, so that 

we can create the scale that will generate enough income that we could be legitimately considered a reasonable credit risk. We need simplified loan applications and 

programs targeted to farmers who are mostly part-time and bi-vocational. 

We need loans made to farmers collectives or cooperatives so we can purchase and 

share large tools like tractors. To service large scale customers, we need coolers and 

storage space and refrigerated trucks that would be too costly for an individual but 

reasonable for a collective. 

If these programs already exist, we need to know about them in specific detail. 

If not, they are what we need you to create. Please consider urban farmers and our 

credit needs as you develop the next farm bill. Urban farmers are real farmers who 

can create jobs and grow fresh produce to help our cities. We need and deserve the 

same assistance given to rural farmers so we can grow and thrive. 

Thank you.

The CHAIRMAN. Thank you, Mr. Walton. 

Mr. Doerr. 

STATEMENT OF JUSTIN D. DOERR, BEGINNING FARMER, 

PLAINVIEW, NE 

Mr. DOERR. Good morning, Chairman Fortenberry, Ranking 

Member Fudge, and Members of the House Agriculture Subcommittee. 

Thank you for the opportunity to testify about the value of Federal credit programs that are absolutely critical in helping beginning farmers get started in agriculture. 

I believe these credit programs and other programs targeted specifically at new farmers are very important investments the farm 

bill can make in ensuring that young farmers like myself have the 

tools and resources they need so we can successfully contribute to 

our local farm communities, spur local economic development, preserve our natural resource base and do our part in ensuring our 

nation’s food security. 

I would also like to thank the National Sustainable Agriculture 

Coalition and the Center for Rural Affairs for helping me make the 

trip out here to speak with you today. 

My name is Justin door Doerr. I am a beginning farmer from Nebraska and an Iraq war veteran. I grew up on a small farm in 

Plainview, where we raised hogs, cattle and hay. After high school, 

I joined the Army and moved to Texas. During this time, things got 

tough on the farm, so dad sold the livestock and rented out the 

farm ground. 

When I got back from the service, I wanted to move home and 

farm. What I found later was I had the desire to farm but did not 

have the means, as I lacked the capital and resources to begin 

farming after the folks sold their operation. Accessibility to land is 

likely the first obstacle that many who wish to farm will face. With 

current land prices skyrocketing, coupled with uncertain guarantees, such as revenue protection for beginners, it is often extremely 

difficult to find affordable farmable ground that you can rent at a 

price you can cash flow. 

When I was looking for ground to add to my operation, one program I was interested in using was the Conservation Reserve Program Transition Incentive Program. Unfortunately, as of early this 

spring, all the funding for this program has been allocated, so even 

if I was able to find acres to rent, I would be unable to encourage 

that landowner to work with me through this incentive because all 

2070

of the $25 million provided to this program in the last farm bill has 

already been obligated. 

I also found that it was hard to find ground that was eligible for 

the program. The Farm Service Agency needs to improve outreach 

in this regard and find a localized and direct way to bring beginning farmers and CRP landowners together. As a beginning farmer, 

access to capital is very important and crucial to the success of almost any farming operation, and oftentimes access to farmland 

hinges on whether or not a new farmer is able to get a loan to buy 

land, if and when that farmland comes up for sale. The down payment by itself immediately prices me out of almost every farmland 

real estate market, especially for a young farmer who is just starting out and lacks the accrued savings necessary to be able to put 

money towards a down payment. 

One Federal program that can be extremely helpful to young 

farmers like myself who are unable to make a substantial down 

payment is the Down Payment Loan Program, which is a joint financing direct farm ownership loan program administered by the 

Farm Service Agency. This Federal program makes loans specifically to beginning and socially disadvantaged farmers and ranchers 

and requires a lower down payment than most commercial farm 

ownership loans. 

In addition to the rising value of farmland across the country, 

the current rise in the cost of livestock and farm equipment can 

also be very cost prohibitive to new farmers looking to purchase additional breeding stock or crucial pieces of equipment for their 

farming operation. Oftentimes the same or very similar inputs in 

equipment are needed by a beginning farmer as are needed by a 

more established operation. The beginning farmer, however, often 

purchases the inputs and equipment at a higher price than a larger 

established operation that can buy in larger quantities. 

The Beginning Farmer and Rancher Individual Development Accounts Program is another farm bill credit program that can offer 

a solution to these types of financial obstacles. This innovative 

matched savings program has been around since the 2008 Farm 

Bill, but despite funding being requested by the USDA, it unfortunately has yet to receive an appropriations and thus has not been 

available as a potential resource for young farmers who lack the 

capital to purchase inputs or save up on a down payment for their 

first farm. 

At the moment, my farm is fragile. If land values continue to 

climb and if commodity prices begin to slip, things will get real 

hard. That is why it is important to include the provisions from the 

Beginning Farmer and Rancher Opportunity Act in the 2012 Farm 

Bill. As a beginning farmer our needs are great and the competition is stiff and heavily subsidized. These provisions are cross-cutting and address access to credit, land, conservation programs, 

training programs and more. These provisions will give me the 

tools necessary to strengthen my farm and make it more viable 

during my early years. 

[The prepared statement of Mr. Doerr follows:]

2071

PREPARED STATEMENT OF JUSTIN D. DOERR, BEGINNING FARMER, PLAINVIEW, NE 

Good morning, Chairman Fortenberry, Ranking Member Fudge, and Members of 

the House Agriculture Subcommittee on Department Operations, Oversight, and 

Credit. Thank you for the opportunity to testify about the value of Federal credit 

programs that are absolutely critical in helping beginning farmers get started in agriculture. I believe these credit programs and other programs targeted specifically 

at new farmers are very important investments the farm bill can make in ensuring 

that young farmers like myself have the tools and resources they need so we can 

successfully contribute to our local farm economies, spur rural economic development, preserve our natural resource base, and do our part in ensuring our nation’s 

food security. 

My name is Justin Doerr, and I am a beginning farmer from Nebraska and an 

Iraq WarVeteran. I grew up on a small farm in Plainview where we raised hogs, 

cattle, and some hay. After high school I joined the Army and moved to Texas. During this time, things got tough on the farm so Dad sold the livestock and rented 

out the farm ground. When I got back from the service I wanted to move home and 

farm. What I found later was I had the desire to farm but did not have the means, 

as I lacked the capital and resources to begin farming after the folks sold their operation. 

Instead of immediately pursuing my plan of farming, I went to college and began 

working for a hospital as a CAD Designer. During this time I began laying the foundation for my future farming operation. My farm got its start after I found 40 acres 

of hay ground to rent from a neighbor. I borrowed equipment from Dad to harvest 

the hay; then sold it to a local cattle feeder. With the money I made from the sale, 

I was able to rent an additional 10 acres from my parents and sow it to alfalfa hay. 

With the revenue I made from the new alfalfa field, I was able to purchase 30 sheep 

and feed them through the winter. This spring, I was able to rent an additional 80 

acres of farm ground that I will be planting to corn and soybeans. 

CRP–TIP 

When I finally decided I wanted to make a career out of farming over 6 years ago, 

I ran into several obstacles as a beginning farmer, despite the fact that I came from 

a farm background. Accessibility to land is likely the first obstacle that many who 

wish to farm will face. With current land prices skyrocketing in my area, and in 

most farming regions across the country, it is often extremely difficult to find affordable farmable ground that you can rent at a price that will cash flow. 

When I was looking for ground to add to my operation, one farm bill program I 

was interested in using was the Conservation Reserve Program—Transition Incentive Program (CRP–TIP). The aim of this Federal program is to connect beginning farmers with retiring farmers who own farmland that is coming out of the Conservation Reserve Program. The program also requires good conservation on the 

part of the new farmer or rancher. 

Since starting in 2010, demand for this program has grown tremendously and 

over 1,600 beginning farmers have used this program to access over 260,000 acres 

of farmland to begin or expand their farming operation, including 145 farmers on 

over 15,000 acres in my own state of Nebraska. 

Unfortunately, as of early this spring, all of the funding provided by the 2008 

Farm Bill for this program has been obligated, so even if I was able to find acres 

to rent, I would be unable to encourage that landowner to work with me through 

this incentive. Demand for this program will only continue to increase in the coming 

years, as more land begins to come out of the CRP and back into production. In 

order to make sure funds for this program continue to be available for any beginner 

that wants to take advantage of this program to access land to start their farming 

operation, Congress needs to ensure adequate funding is secured in the upcoming 

farm bill so that FSA does not run out of funding midway through the next 5 year 

farm bill cycle. 

I also found that it was hard to find ground that was eligible for the program. 

Although there are some Federal efforts to provide searchable databases to connect 

retiring landowners with beginning farmers, there isn’t an efficient way to find the 

CRP land that is under a contract about to expire. While you can look at a plat map 

to determine who owns the land, there is no way of knowing when the CRP contract 

expires. The FSA needs to improve outreach in this regard and find a localized and 

direct way to bring beginning farmers and CRP landowners together. 

Down Payment Loans 

As a beginning farmer, access to capital is also very important and crucial to the 

success of almost any farming operation, and oftentimes access to farm land hinges 

on whether or not a new farmer is able to get a loan to buy land if and when farm 

2072

land comes up for sale. After speaking with my local commercial banker, I was told 

if I was interested in purchasing land I would need to put have at least a 30 percent 

down payment on the purchase price of the land. The down payment, by itself, immediately prices me out of almost every farm land real estate market. This will 

prove true for most young farmers who are just starting out and lack the accrued 

savings necessary to be able to put money down towards a down payment. 

One Federal program that can be extremely helpful to young farmers like myself 

who are unable to make a substantial down payment is the Down Payment Loan 

Program, which is a joint-financing direct farm ownership loan program administered by the Farm Service Agency. This Federal program makes loans specifically 

to beginning and socially disadvantaged farmers and ranchers and requires a lower 

down payment than most commercial farm ownership loans. 

Under this program, a beginning farmer provides a five percent (rather than the 

more typical 30 percent) down payment, and the rest of the loan principal is split 

between the Farm Service Agency and a private lender. This excellent farm bill program helps beginning farmers enter the real estate market that otherwise is more 

often than not beyond their reach. 

Since 1994, the Down Payment Loan Program has helped over 5,000 new farmers 

across the country purchase farms. Given scarce Federal resources, it would be extremely helpful if priority be given to these and other joint financing loans, thereby 

allowing the Farm Service Agency to provide the greatest amount of financial assistance to beginning farmers for a given amount of Federal funding. By leveraging 

commercial loans with Federal dollars, the taxpayer would get the most ‘‘bang for 

the buck’’ by helping the most number of farmers access credit needed to purchase 

farm land. 

The Beginning Farmer and Rancher Opportunity Act includes such a priority for 

participation loans and it would be very helpful for this Committee to include that 

provision in the new farm bill. The Opportunity Act also increases the value of 

farmland that may be financed through Down Payment loans, another provision 

that should be incorporated into the new farm bill. 

Individual Development Accounts 

In addition to the rising value of farm land across the country, the current rise 

in the cost of livestock and farm equipment can also become cost prohibitive to new 

farmers looking to purchase additional breeding stock or crucial pieces of equipment 

for their farming operations. Often times the same or very similar inputs and equipment are needed by a beginning farmer as are needed by a more established operation. The beginning farmer, however, often purchases the inputs and equipment at 

a higher price than a larger established operation that can buy in larger quantities. 

The Beginning Farmer and Rancher Individual Development Accounts program is another farm bill credit program that can offer a solution to these types 

of financial obstacles. This innovative matched savings program has been around 

since the 2008 Farm Bill, but despite annual funding requests by USDA, it unfortunately has yet to receive an appropriation and thus has not been available as a potential resource for young farmers who lack the capital to purchase inputs or save 

up for a down payment for their first farm. 

This matched savings account, modeled after a similar program that has been successful in helping urban and rural residents save up for a down payment on their 

first home, would help beginning farmers save and accrue capital needed to purchase additional livestock, farm inputs or that crucial piece of equipment when their 

operations need it. I would urge this Committee to include farm bill funding for this 

innovative IDA program. 

FSA Microloans 

When I needed an operating loan to cover some of the daily expenses associated 

with operating a farm, I first applied for a loan through the Farm Service Agency. 

The paperwork during the application process was almost overbearing, but the biggest thing that was keeping me from getting a loan through FSA was the uncertainty of whether Federal financing would even be available. Even if my application 

had been approved as a beginning farmer loan applicant, Federal appropriations 

had not yet been passed and the amount and timing of funds available for Federal 

loan programs were unclear. 

If I had been working with a landlord and negotiated a fair rental payment, the 

last thing I want to tell them is to wait additional months for their first rent check 

because my operating loan hadn’t been funded yet. The landlord already assumes 

risk when they choose to rent to a beginning farmer and are doing a great service 

to the next generation of farmers. It would most certainly be easier and involve less 

2073

risk for landowners to simply rent to a larger, well-capitalized operation that can 

spread its expenses over many acres. 

While there may not be an easy cure for appropriations bills being passed well 

after the start of the fiscal year, one important item in the Beginning Farmer and 

Rancher Opportunity Act that could help people in my position is the proposed new 

Microloan program. Under this provision, smaller loans could be made, with less 

delay and less paperwork, to assist young and beginning farmers whose credit needs 

may often be more urgent but also considerably more modest than other borrowers. 

Authorizing microloans within the direct operating loan program is a simple but important step this Committee could take to improve credit availability for new farmers. 

Whole Farm Crop Insurance 

Another obstacle I have run into with my operation is the availability of crop insurance for beginners and particularly for beginners with diversified operations. 

One way I’ve found I can keep my operation financially viable in these crucial first 

few years is to participate in niche markets that command a higher price premium, 

such as sheep and forage production. I would like to expand my alfalfa hay acres 

but I am unable to cover my risk with the current array of crop insurance policies 

available in my area. 

Producers of diversified, non-commodity crops and livestock need to be able to 

manage their risks just the same as commodity producers do under the current 

suite of farm safety net programs. A crop insurance policy that offers a whole farm 

revenue protection plan to protect against low revenue due to unavoidable natural 

disasters and market fluctuations would allow me to insure all the crops I grow on 

my farm, including my alfalfa for which I’m currently not able to buy coverage. 

Although there are some products that are currently available for diversified operations, they are not available nationwide. A whole farm revenue insurance policy 

that is available universally across the country would allow me to cover my risk in 

the event of loss. Adequate risk management strategies are especially critical for beginning farmers, as they have limited equity to back them up when they suffer a 

loss. I understand there is a proposal for Whole Farm Risk Management Insur- ance in the Senate Committee-passed farm bill, which I would urge you to support. 

Veterans 

I mentioned earlier, when I finished my time with the Army I wanted to come 

home and farm, and what I found was I did not have the means. To find resources, 

government programs, and organizations that were available to help me get started 

I relied heavily on Google. Having a dedicated staff within the Department of Agriculture—such as the Veterans Agricultural Liaison proposal in the Beginning 

Farmer and Rancher Opportunity Act—would have helped someone in my position 

to access the tools and resources necessary to begin my farm business plan. I would 

have had someone who could have helped me navigate the web of Federal programs 

that might assist military veterans who are interested in farming, and who would 

advocate for programs and policies that serve the interests of our nation’s veterans. 

The Senate Agriculture Committee’s farm bill wisely includes a position charged 

with educating returning veterans about new farmer training and education programs and how they interface with veterans programs. 

Beginning Farmer and Rancher Development Program 

The Beginning Farmer and Rancher Development Program (BFRDP) is the 

centerpiece of farm bill support for the next generation of farmers. BFRDP provides 

grants to institutions and organizations that provide training, education, and outreach programs to beginning farmers across the country. Projects can include financial and business training programs, risk management education, marketing strategies, mentoring and apprenticeship programs, and ‘‘land link’’ programs that connect beginning farmers with retiring landowners. 

To date, the program has enabled 105 educational institutions and organizations 

to assist new farmers in 48 states across the country, and has been incredibly successful in ensuring that the next generation of farmers is armed with the knowledge, training, and resources they need to establish financial viable farming operations. 

I am pleased to hear that the farm bill approved by the Senate Agriculture Committee includes a new priority on veteran farmers to ensure training and agricultural rehabilitation programs are targeted to our specific needs as veterans. This 

is a welcome addition. 

Funding for the program needs to keep pace with demand. The Senate Committee-passed farm bill would unfortunately cut funding in half from current levels. 

There could be no higher priority in my opinion than for this Committee to increase 

2074

rather than decrease funding for the Beginning Farmer and Rancher Development 

Program. 

The good news is more young people are interested in farming careers now than 

in quite some time, and I am pleased to say that number includes quite a few returning veterans. Now is not the time to close the door on the training and linking 

programs these young farmers need. I urge you to grasp the opportunity to not only 

continue the BFRDP, but to modestly increase its funding per year so that more 

young farmers can be served and we can begin to reverse the ongoing aging of 

American agriculture before it is too late. 

Conclusion 

When I decided I wanted to farm, the prospects looked rather dire. When I looked 

across the landscape all I saw was large equipment and even larger farms. I wasn’t 

sure if there would be room in the farm environment for me. How was I going to 

be able to compete? I have found through hard work, determination, and creativity 

there is still some room for a beginner. It isn’t easy. I am working three jobs to help 

get my operation going. I am slowly building capital, paying off expenses and investing sweat equity into my farm. At the moment my farm is fragile. If land values 

continue to climb and if commodity prices begin to slip, things will get real hard 

for me. And it will not matter how many jobs I am working to get my farm a start. 

That is why it is important to include the provisions from the Beginning 

Farmer and Rancher Opportunity Act into the 2012 Farm Bill. I congratulate 

Representative Walz and Chairman Fortenberry for introducing this important legislation, and for so many other Members of the Committee for cosponsoring it. As 

beginning farmers, our needs are great and the competition is stiff and heavily subsidized. The provisions in the bill are cross-cutting and address access to credit, 

land, conservation programs, training programs and more. Together, these provisions will provide many of the necessary tools to strengthen my farm and make it 

more viable during my early years.

The CHAIRMAN. Thank you Mr. Doerr. 

This would probably be an appropriate time to recess for approximately 20 minutes as we have votes that are pending right now. 

We should be able to return shortly. 

If you will be patient, we will return with our questions. Thank 

you. 

[Recess.] 

The CHAIRMAN. The Subcommittee will come to order. 

Again, thank you for your opening statements. We will start the 

questions, and I will begin. 

Several of you mentioned, I believe Mr. Gerhart and Mr. Williams, specifically you mentioned in your testimony the importance 

of the crop insurance program. Do you require crop insurance from 

your farm loan applicants? 

Mr. GERHART. Mr. Chairman, we don’t require, but we strongly 

advise it. And for the most part, most of our customers utilize the 

Federal Crop Insurance Program. Of course it has been around for 

a good number of years. It has had a couple different routes that 

it has gone, but over the years, it has been a good program that 

has evolved as we go. If you are looking at FSA guarantees, in 

some cases, they are going to require that. But very, very few farmers are out there without a safety net, so it has been a good program. It allows them not only to make sure they are properly covering their crops, but it allows them to secure that financing, and 

it also gives them a good risk management tool to be in the market 

if they want to price their grain ahead of time. 

Mr. WILLIAMS. Chairman Fortenberry, farming and agriculture 

has changed substantially over the years. 

And when you look back at the 1980s with the farm crisis and 

many farmers going broke, the advent of many risk management 

tools have been implemented to protect the farmers from that hapVerDate 0ct 09 2002 12:54 Dec 11, 2012 Jkt 041481 PO 00000 Frm 00486 Fmt 6601 Sfmt 6601 I:\DOCS\112-30\74372.TXT BRIAN
2075

pening again, not the least of which is the Federal Crop Insurance 

Program. We do not require that at our bank, but we rarely find 

an ag producer that doesn’t use the program. 

The CHAIRMAN. It has almost become a de facto aspect of entering into the Farm Credit System. 

Mr. WILLIAMS. I don’t believe there is a de facto, no, I don’t. 

The CHAIRMAN. Mr. Frazee, what about your requirements in 

that regard? 

Mr. FRAZEE. We don’t require it in all cases. 

We look at each customer on an individual basis, so we look at 

the risk profile and either recommend it or, in some cases, may require it. But we, too, find it to be an extremely important and essential tool in a farmer’s ability to manage their risk. 

The CHAIRMAN. If there were recommendations that you would 

give, as all of you have pointed to the need for a robust Federal 

Crop Insurance Program, if there were recommendations for shifts 

in that program, what would they be from your perspective? 

Mr. WILLIAMS. Well, the program has worked extremely well 

where it is at this point. I think the ideas of placing limits refuses 

to recognize that agriculture again has changed and has expanded. 

And rather than simply having limits that put people in boxes, we 

have smaller farmers, young beginning farmers, and we have large 

farming operations, all of which need to take advantage of risk 

mitigation opportunities. Crop insurance is one of those. 

The CHAIRMAN. You mentioned young and beginning farmers. Do 

you sense the industry is becoming more aggressive toward seeking 

new customers who are the next generation of farming who may 

not have capital assets that are going to be inherited. In other 

words they are outside the traditional farm family network, but 

nonetheless have sound business ideas, perhaps entrepreneurial 

spirit, some level of capital? Has the—is the banking industry adjusting to what is potentially a new set of customers coming along 

that is a little bit out of the framework of what we have been dealing with for the last 40 years? 

Mr. WILLIAMS. I think that is happening. And I look at our community and the change in average age of farmers that we have 

today versus the average age of farmers in our particular bank 10 

to 15 years ago. That average age has continued to come down. 

Now, there are areas of the country and bankers that I talked to 

where it is the reverse of that. But what we have seen happen is 

many younger people, highly educated people, coming back, wanting to be on the farm. As long as there is that opportunity for them 

to do that, and that is what the banking industry’s obligation is, 

and that is what we are trying to do. 

The CHAIRMAN. So you do see that as a market trend? 

Mr. WILLIAMS. Yes, sir. 

The CHAIRMAN. As a part of your business forecast, if you will? 

Mr. WILLIAMS. Yes. 

Mr. GERHART. Congressman, I would echo what Matt has said. 

I was thinking on the plane ride in last night that I would imagine 

that our customer base of farm customers has probably in the last 

I would say 5 to 10 years, we probably are financing about 20 percent of our total loan portfolio with new or beginning farmers that 

are getting up and going. Many of those have utilized the Farm 

2076

Services Agency, so they have grown up—getting back to the Federal Crop Insurance Program, they have grown up utilizing that 

tool. 

But yes, we are seeing more young farmers wanting to come into 

it these last couple of years. The farm economy being better off has 

certainly been helpful. I have also in the last 10 years sat across 

the desk from fathers who said my son or my daughter is never 

coming back because profits just aren’t there. Maybe we are going 

to see some good things happen because of where the farm prices 

are, and that will benefit the future. 

The CHAIRMAN. That is helpful news. Anecdotally, you don’t hear 

a lot of those stories: Don’t go into this line of work. 

Mr. Frazee, if you will hold your comment, I am going to turn 

to the Ranking Member now for her questions and we will return 

to the issue of young farmers and ranchers, particularly with you, 

Mr. Doerr, and get your perspective as well as Mr. Walton, shortly. 

Ms. FUDGE. Thank you very much, Mr. Chairman. 

Mr. Walton, again, thank you for being here. Your testimony expresses a real and valid frustration with USDA, especially as it relates to urban farmers. And I share your frustration. And it is clear 

to me that USDA does not consider nontraditional farmers when 

it develops its credit programs. 

My question to you, sir, is if you could develop a program that 

would meet the needs of your small operation which would account 

for job training, or makes use of undeveloped or abandoned urban 

space, what would that program look like to you? 

Mr. WALTON. Well, a couple of things that I have mentioned in 

my testimony, that for small plot farmers, the real benefit would 

be developing cooperatives so that we can have the scale to service 

larger clients and employ more people. So if I was able to become 

part of a group of ten other farmers and get a loan as that entity, 

which again is outside the scope of the family farm, that would be 

viable and very important. 

Ms. FUDGE. Thank you. 

And I would like to ask the lenders, how would you respond to 

the needs of someone like Mr. Walton? 

Mr. WILLIAMS. I think what Mike is bringing to the table is a legitimate question that we need to look at. And we have—and he 

and I were talking about this during the break. We have a situation where we are here today, we are looking at a situation where 

we have small beginning urban farmers, and then you have the 

traditional farming that Jeff, Bob, and I finance that are the large 

farmers that are really working to try to deliver a safe and secure 

supply of food to the American people, which is what they clearly 

deserve and demand. 

We have diverse views on that of how to do that. 

Congresswoman Fudge, the problem with the issue, under the 

legal system and the compliance issues that we have now, if Michael and a group would come in with a request like that, it would 

be very difficult for us to fit them in the box that we are required 

to be in right now to qualify them with the capital, the income history and all of those kind of documents. 

Ms. FUDGE. What do we need to do to expand the box? 

2077

Mr. WILLIAMS. I think to expand the box, you have to look extremely hard at the FSA program and fit something that can work 

with that that we can agree on. 

And we also, along with FSA, you have to further educate the 

traditional lenders and bring them along the way with that so that 

they are willing to open their doors to that also. 

Mr. GERHART. I think the other issue that you have is, and I am 

not familiar with the lenders in his area, whether commercial, 

Farm Credit, et cetera, but you don’t have to get too far out of the 

Midwest that bankers will look at me, and I am sure they look at 

Matt and say, how do you finance agriculture? What in the world 

is that all about? So maybe there are some opportunities for a pilot 

program of some sort in order to give something a try. And I realize it is all budget driven, so you want to be careful how you allocate our resources as taxpayers and be in a position to try something out. 

It probably wouldn’t take Matt and I very long to go in and take 

a look at what he is trying to do, what others are trying to do and 

feel comfortable or not. But if you are a city bank or a suburban 

bank and you are not dealing with agriculture, that is foreign to 

you. Just like residential, or not residential, but commercial real 

estate in Florida or something like that might be for me. It is not 

what I do every day. And so maybe the trick is to get some expertise in the farm lending area to folks like Mr. Walton. 

Ms. FUDGE. And I am sure that would be most helpful. 

But I also think that some of the requirements, the eligibility requirements for any of these loans for people like Mr. Doerr or Mr. 

Walton are going to be a barrier somewhere down the line, even 

if they are dealing with institutions who have some real knowledge 

and history with loaning to farmers. 

Do you have a comment, Mr. Frazee? 

Mr. FRAZEE. Yes I do. I think the situation Mr. Walton described 

really describes well what we are seeing in the City of Baltimore 

in the program that we are working to create there. 

I think, as the other gentlemen have indicated, there is a need 

for credit guarantees. As we have explored the program and the opportunities there, we see certainly a need for capital. We see a need 

for training, expertise in terms of just a technical side of production. And it is one that I think does take a partnership, both public 

and private, and that is one that we are working on. 

The CHAIRMAN. Thank you. 

And we will now turn to the gentleman from Arkansas, Mr. 

Crawford, for any questions. 

Mr. CRAWFORD. Thank you, Mr. Chairman. In general, I just 

want to address this to the ag lenders. My district in Arkansas is 

in the Mid-South, and we grow a lot of rice. And as you can imagine, rice is very irrigation intensive. And the primary safety net 

program that farmers in the Mid-South particularly engaged in rice 

production that has benefitted our producers is the Direct and 

Counter-Cyclical Program. And that of course, protects against lowyield scenarios. And the biggest threat that they face is low price 

swings and obviously input costs. And that is probably consistent 

across the country, but there are some things that are unique to 

the Mid-South and particularly rice production. 

2078

But let me ask you this. Understanding that scenario as ag lenders, how important do you think the direct and countercyclical payment would be in that scenario as an ag lender in evaluating risk 

before you are making a production loan? 

Mr. GERHART. Congressman, I think it has historically been very 

important. I won’t pretend to know anything about rice farming, financing rice. I eat it, and that is about my experience. 

Mr. CRAWFORD. I am glad you eat it. 

Mr. GERHART. But we have utilized those programs in years past, 

and there were times when they were very important. Not always 

have they been needed. Right now, not so much. But those prices 

continue to drop. It is certainly something that you need to have 

some careful consideration before you change that too much, would 

be my thoughts. 

Mr. WILLIAMS. I totally agree with that, Congressman. I think 

those payments are critical. I think right now, very honestly, is a 

difficult time to be looking at the reauthorization of the farm bill 

because we have been through this period of prosperity with agriculture, and everybody is looking at some way to save the government some money. 

The bottom line is that agriculture is a volatile and cyclical business, and the countercyclical nature of that is really something 

that needs to continue to be built into the program, and we would 

totally support that. 

Mr. FRAZEE. Congressman, we don’t grow rice in Maryland either, but I would say that any of the support programs you provide 

are something that all of us look at in terms of our underwriting 

and assessment of the risk. So any changes that are made would 

affect that balance in terms of how we would approach the risk assessment of credit. 

Mr. CRAWFORD. Well, as the Committee just heard from you all, 

eliminating these critical safety net programs doesn’t just affect the 

farmer’s bottom line; obviously, it is a component of how you make 

your decision on evaluating risk on a farm loan. But I am hopeful 

that this Committee will keep that in mind as we move through 

the farm bill process, and I thank you for your input on that. 

In the time that I have left, let me ask Mr. Gerhart, you discussed in detail several interesting points about farmland values 

and the potential bubble in farmland real estate, and we are experiencing that or seeing that in our neck of the woods as well. Would 

you give us some brief examples as to what you think might take 

place if the bottom falls out, and land values begin to fall? Would 

you see some similarities in the housing crisis of 2008 and 2009 

and why? 

Mr. GERHART. You potentially could see some similarities. The 

question out here is, do we have a bubble? I think, yes, there is 

a bubble. How much of a bubble? Time will tell. My concern as an 

ag lender is that if the air comes out of a bubble too fast and we 

have land prices fall like they did in the 1980s, and part of the 

1980s, the ag crisis that we all went through, that is where I cut 

my teeth. And these land values, they went from X amount to 1⁄2

of that. The farmers still had to make the cash flow. That is the 

other component, is that right now we are having historically good 

incomes on the farm. But as I said, it wasn’t too many years ago, 

2079

farmers were talking about they are not going to have their kids 

come back because they knew that they couldn’t bring them into 

their existing operation. 

I think that there is a lot of consideration for what might happen, how fast it might happen. Hopefully we are not skating on 

thin ice, but as bankers, we are very concerned about what these 

land prices are doing. A lot of our customers have bought some of 

this. They are doing it with a degree of financing. They are doing 

it with a degree of their own cash. 

But at the same time, I just hope we are not going to have a repeat from several years ago. But that would be my biggest concern. 

The other part of that is what will the regulatory agencies, what 

will our regulators, what will they do as far as how harsh they will 

come down on us? If they are going to make us mark down land 

prices like we have seen in the commercial real estate or the mortgage family homes, that will be a killer if they come down on us 

hard. 

Now, a piece of land is going to be in a position where it will constantly have the potential to raise a profit. If you don’t have somebody renting out that strip mall, then you have no income coming 

in. 

But ag land is different, and I would encourage the Committee 

to keep an eye on that, too, because nobody really knows what is 

going to happen. But, hopefully if the air is going to come out, I 

hope too much doesn’t come out. Certainly that is something we 

are watching very, very close. 

Mr. CRAWFORD. Thank you, gentlemen. 

Mr. WILLIAMS. Congressman, if I could add something to that 

with your permission, Mr. Chairman. 

The CHAIRMAN. Mr. Williams, why don’t we come back to you? 

And I will turn to the gentleman from Iowa now, and perhaps 

we will get to your comments momentarily. 

I recognize the gentleman from Iowa. 

Mr. KING. Thank you, Mr. Chairman. 

I thank the witnesses. First, I would like to direct two or three 

questions to our financial people, Mr. Frazee, Mr. Gerhart and Mr. 

Williams, and in particular, I hope I can come back to our producers with a couple of questions. 

But have you given thought to and have an opinion on, Mr. 

Frazee, what direct payments might do to distort market prices? 

Mr. FRAZEE. That is something we have given some consideration 

to. There has to be some element of influence on those. It is not 

something, though, that we have gotten to the point of being able 

to quantify. 

Mr. KING. So we could I guess draw a conclusion that there is 

a supply that is altered in some way, but it is not quantified, and 

then that supply affects, of course, the market prices, that some 

crops might not be planted if we didn’t have direct payments and 

others might be? 

Mr. FRAZEE. It potentially could. 

Mr. KING. Thank you. 

Mr. Gerhart, do you have any way to illuminate that a little 

more for us? 

2080

Mr. GERHART. Well, if I could illuminate it with the crop insurance program. I was in Washington——

Mr. KING. Actually, Mr. Gerhart, I do want to come back with 

a crop insurance question, but could we confine it to direct payments first and then come back to the crop insurance piece? 

Mr. GERHART. Sure. The direct payments in that case would certainly be important for the farmers out there now, tie it to crop insurance when you want to. 

Mr. KING. Mr. Williams? 

Mr. WILLIAMS. I don’t know that I have anything in particular 

to add there. I would certainly not hold myself out as being an expert. I personally think the countercyclical payments are more important than direct payments as far as maintaining the stability of 

agriculture. 

Mr. KING. I will go back then to Mr. Frazee and work our way 

down the line again. 

Crop insurance, how does crop insurance, the programs that we 

have had, how does it affect our commodity prices? 

Mr. FRAZEE. I can’t speak to how they affect commodity prices. 

I can say that they have certainly been a substantial benefit from 

the standpoint of a farmer’s risk management program. 

Mr. KING. Mr. Gerhart, all you want to say about insurance, I 

would like to hear now. 

Mr. GERHART. What I was going to say is we were in Washington. I had a chance to visit with some bankers from Texas who 

were up in the Lubbock area, Amarillo area, the Panhandle, where 

it has been very dry the last couple of years. I asked them how in 

the world are your farmers making it? And the answer was Federal 

Crop Insurance Program. And I am sure that goes along with 

whatever they are raising, corn or wheat or cotton or whatever; 

and maybe the countercyclical and direct payments also come into 

play. But if we didn’t have these programs we have would see probably quite a bit of devastation in an area that is getting along pretty well. So crop insurance is certainly important for anything we 

do. 

And, as I said earlier, our customers, our farmers, young and old, 

have gotten very used to that risk tool. And they are using it effectively. I tell you it is like pulling teeth sometimes to get these guys 

to even forward contracts on corn or beans, but once they step in 

the water a little bit they will add more and do that. But their dad 

didn’t do it. Their grandfather didn’t do it. So sometimes they have 

been hesitant. But, for the most part, the Crop Insurance Program 

has helped them manage their risk much better. 

Mr. KING. Do you have operating loans of producers that do not 

have crop insurance? 

Mr. GERHART. If they do, they are not probably borrowing too 

much. We are enough down the road where we are dealing with 

second, third, fourth, and fifth generation farmers. So the program 

has been in place long enough that most all of them are using it 

or we certainly strongly encourage them to do. 

We have three insurance agencies in our community. We also 

have one, too. They don’t have to buy it from us. I would like them 

to, but they don’t have to buy it from us. 

Mr. KING. Thank you. 

2081

Mr. Williams. 

Mr. WILLIAMS. Congressman, the Federal Crop Insurance Program does a couple of really important things. The number one 

thing, it provides that safety net if there is the disaster that Jeff 

mentioned, the drought, the flood like you had close to you last 

year in Arkansas, those kinds of things. 

But the other thing it does, it opens up the opportunities for ag 

producers to market. And your question is about what does crop insurance do to the market. 

Well, in our area, the largest single purchaser of corn is Frito 

Lay for all those salty snacks all of us love to eat, the Frito chips, 

the Dorito chips, the Tostito chips. Frito Lay very rarely buys the 

product from the farmer during the fall period of time when the 

farmer is harvesting their crop. So the farmer has to have the ability to contract in advance to guarantee to Frito Lay that we are 

going to fulfill our contract and sell you this many thousand bushels of corn, and it is not at harvest time. 

Federal Crop Insurance is the catch-all in there that allows them 

to be able to have the risk mitigation to do that, not knowing when 

they are signing that contract with Frito Lay if they are going to 

have that hailstorm or that windstorm or that drought. So it is a 

necessary program. 

Now whether it actually affects the market price of the corn, I 

would have to leave that to some economist beyond me. 

Mr. KING. I ask unanimous consent for an 30 seconds to wrap 

it up. 

The CHAIRMAN. The gentleman is recognized. 

Mr. KING. I thank the Chairman. 

There is more I wanted to say and probe into, but I just wanted 

to lay these two subject matters out on the table, that we have 

commodities prices that are in supply and demand and the supply 

is affected by the policies we have, be they direct payments, be they 

countercyclical, be they crop insurance. And the balance of these 

things make a difference not just in our market prices but also in 

the acres that get planted and the crops that get planted on those 

acres. 

I don’t know that we spend a lot of time thinking about what 

crops might be planted if there was a different policy in place for 

crop insurance or how we really need to think about what crops 

might be planted if, and what we all expect, there will be no direct 

payments. 

I think that is a pretty big equation that we should be examining 

as we go forward, and I appreciate your testimony. 

And, Mr. Chairman, I yield back the balance of my time. 

The CHAIRMAN. I thank the gentleman from Iowa. 

I will begin a second round of questions. 

Let me turn to our urban farmer and our young farmer, Mr. 

Doerr. 

Mr. Walton, you had talked about in your testimony a fascinating concept of using abandoned land to turn into an urban 

farmstead. Clearly, there was a significant capital investment, but 

then you did not find a market for the product, as I understood 

your testimony to indicate. Could you explain a little bit more the 

dynamics of that? Why with the involvement undertaken, I assume 

2082

you foresaw a market need. But your intensity of production outcome apparently was quite good, and you couldn’t sell everything 

you had and didn’t turn a fair enough profit, and now it is plowed 

back under. Is my understanding correct? 

Mr. WALTON. Correct. Two things. 

It is different today than it was then, which was about 2 years 

ago, primarily because we have had some restaurant salespeople 

sort of retire and then start working for urban agriculture. So just 

this year, literally today, my wife was talking to me on the phone 

this morning that we have a professional salesperson who is now 

representing us and some others to restaurants. So that is new for 

us. 

The CHAIRMAN. So it was an internal difficulty with your own 

business plan and not necessarily the lack of a potential for the 

broader use of your product, is that what you are saying? 

Mr. WALTON. Correct. And we sort of went into the market early. 

When we started, there were only two other commercial farms in 

Cleveland in 2009, and we did it to be in the forefront. 

The CHAIRMAN. If I could interrupt you right quick, one of the 

reasons that we have agricultural policy in the first place is that 

the individual farmer cannot control his own outcomes. In other 

words, because of the nature of commodities, if he works hard or 

she works hard and produces an abundant supply of crops, because 

of the nature of the interchangeability of the commodity, the price 

could collapse, and it is not the individual farmers fault. 

It appears, though, that this is a bit of good news, even though 

you encountered difficulty, in that you didn’t flood the market, if 

you will, due to your hard work with an overabundance of supply, 

that the market is potentially there if we all learn how to exercise 

these options a bit better. Is that a fair summary? 

Mr. WALTON. Perfectly stated. 

The CHAIRMAN. I don’t hear that much around here. Thank you. 

Let me turn quickly to Mr. Doerr. I would like to understand a 

little bit better as well what your current situation is and the pathway in which you overcame those hurdles that you talked about in 

your opening statement. 

Mr. DOERR. I come from a farming background, which is already 

ahead of urban farming. I already have a background, so that 

helped me out a lot or just gave me a little bit of an edge. 

The folks sold their operation. I had to basically start from 

scratch when it came from the land and equipment standpoint, but 

just working with some neighbors and relatives in the area, I was 

able to get my foothold in. I rented some acres from a neighbor of 

mine and borrowed some equipment that my dad had that my 

grandpa used, and just slowly but surely, just through some marketing and whatnot, I was able to get a foothold and build up some 

assets. 

The CHAIRMAN. So you scrapped it together. 

Mr. DOERR. That would be a perfect summary. 

The CHAIRMAN. You didn’t have any participation in any of the 

beginning farmer rancher program elements? 

Mr. DOERR. I did work a little it bit with the FSA on working 

with an operating loan to cover my day-to-day expenses. 

The CHAIRMAN. You were able to obtain that? 

2083

Mr. DOERR. I went through the application process. I didn’t complete it for the sole reason that I would have been approved for it, 

but the problem I ran into is funding. The funding was very uncertain through the FSA. And just because funds were being allocated, 

and I was working on some land rent agreements, I didn’t want to 

go through the whole process and work with a landlord that is already taking on risk renting to me. I didn’t want to work with 

them and come up with a fair land rent and then have to come 

back to him in March and say, hey, funding wasn’t available. Can 

you wait another month for my operating loan to be funded? 

The CHAIRMAN. So how long—what has the time horizon been 

here? How long have you been piecing the operation together and 

building it up and attempting to stabilize it? I recall you said you 

are still in a fragile period. 

Mr. DOERR. Yes, a fragile period. 

I have been working full time off the farm for a number of years 

and working weekends and nights just as much time as I had to 

get started. I have been doing that probably for the last 4 years, 

and for the last 2 years I have been just getting a little more serious. And then this last year I quit working my 40 hours a week 

away in the city and moved closer to the farm. And now I work for 

another farmer, and so together and through my own work, we are 

making it work. 

The CHAIRMAN. Both of you have provided great American stories 

of entrepreneurial spirit here. So we thank you for plowing through 

the difficulties. Maybe we will have a little bit more time later to 

discuss this. 

I will turn to the Ranking Member now for her questions. 

Ms. FUDGE. Thank you, Mr. Chairman. 

Mr. Frazee, just a question. Do you charge different interest 

rates for small and minority farmers than you do for the big guys? 

Mr. FRAZEE. Yes, we do, Ms. Fudge. We actually have a program, 

our StartRight Program that I referred to in my testimony, which 

one of the components of that is to offer interest rates concessions 

to these young, beginning, small, minority farmers. 

Ms. FUDGE. So what would those rates be, just in general? Give 

me a ballpark. 

Mr. FRAZEE. It would typically be a half a percent or less than 

what we would charge our regular customers. 

Ms. FUDGE. Thank you. 

To anyone on the panel, if you could change one thing about the 

Farm Service Agency Guaranteed Loan Program or its operation, 

what would that be? 

Mr. GERHART. There are probably many things. But to allude to 

what Justin was talking about, he was interested and applied for 

a guarantee loan, but the funds were used up, is that right, Justin? 

Or there weren’t enough funds to go around. 

We run into that year in and year out. We probably don’t speak 

up about that, but the amount of dollars that could be put toward 

the programs that are already out there would benefit—would benefit us quite a bit and allow for folks like Justin to get in and many 

customers like ours. But, many times, they can’t go forward because the funding isn’t guaranteed. 

2084

Ms. FUDGE. So would you venture to guess that the funds are 

used so quickly because they continue to go to the same people 

year after year? 

Mr. GERHART. Now that I don’t know, but I would think—we 

have seen farmland prices skyrocket in the last couple years, so the 

farm ownership loan of a $1.2 million isn’t really as practical as it 

used to be. I wouldn’t know. I think that is a question for FSA. 

Ms. FUDGE. I think we need to look into that. Because I would 

almost venture a guess that a significant portion of those loans go 

to the same farms year after year. 

Mr. GERHART. But you want them also to go out to the new farmers out there, the new folks like Justin that are coming out or the 

urban farmers, if they qualify, most certainly. So it is certainly 

something to consider. 

Mr. WILLIAMS. Congresswoman, that leads right into the issue of 

term limits on the FSA loans, and both Justin and Mike could be 

good examples of where the term limits are going to cause them 

problems at some point in time. 

Smaller ag businesses take a long time to build, to build the capital on the balance sheet, to build the income statement that is 

going to allow them to qualify for normal bank lending at a point 

in time. And it may take longer than the term limit of 15 years 

to get that done when you are young and starting out very slowly 

like this. 

So we have kind of counter values here. Yes, we want to continue 

finding a way to pass the money around to some different people. 

But if we cut them off too soon, if we take Mike’s operation and 

get him halfway through this process and the term limits terminate the ability for FSA to continue, we haven’t really solved the 

problem. 

Mr. FUDGE. I agree, Mr. Williams. But I can very honestly tell 

you, I would rather get them in the program—right now, they can’t 

get in the program—than worry about somebody who has been in 

there 15 years. I think you may be right for smaller businesses, but 

I am more concerned about them getting in the program and getting started and getting them in than somebody that has been 

there for 15 years. 

Mr. FRAZEE. Congresswoman, if I could offer a suggestion as 

well. 

One of the areas that we see is the need for eligibility to follow 

the evolving legal structures that farmers are entering into. LLCs, 

for example, are one way they organize but wouldn’t be eligible. So 

if we could see the FSA requirements adjust to the realities of what 

is happening in the marketplace it would be helpful. 

Mr. FUDGE. Thank you very much. 

Mr. Chairman, I yield back. 

The CHAIRMAN. The gentleman from Iowa, Mr. King. 

Mr. KING. Thank you, Mr. Chairman. 

Again, I thank the witnesses. 

I wanted to go one more place with my questions and on down 

the line to our producers, too, and starting again with Mr. Frazee. 

What would you have to say to this Committee about conservation 

compliance? Should that be something tied into these programs we 

are talking about? 

2085

Mr. FRAZEE. We think conservation compliance is important, but 

we do not believe that it should be tied to crop insurance requirements. That is such an important risk mitigation tool that we think 

that it shouldn’t be—it shouldn’t have other requirements placed 

on it. 

Mr. KING. And not a recommendation on how to do that, just how 

not to do that? 

Mr. FRAZEE. That is right. 

Mr. KING. Thank you. 

Mr. Gerhart? 

Mr. GERHART. I would agree. 

Mr. KING. Mr. Williams? 

Mr. WILLIAMS. Well, conservation is second to none in agriculture. The most recent Fortune 500 company that we have been 

able to recruit to our community of 3,500 people in Nebraska is 

Monsanto. They are working tirelessly in agriculture right now to 

be able to have us grow double the acreage—the production per 

acre on the soil that we have and use less inputs, less water, less 

chemicals. So conservation is absolutely necessary, but tying it this 

way I would agree that that is something we would like to see left 

out. 

Mr. KING. Do you have a recommendation on how to do that? It 

is important. Do you believe it needs to be tied into this upcoming 

farm bill regardless of how we might do that? 

Mr. WILLIAMS. My experience to date is that I don’t believe it 

would necessarily need to be tied into the farm bill. Because I tell 

you, the producers that we deal with, conservation is there, and 

they are using the techniques to take care of those issues. 

Mr. KING. Thank you. 

Mr. Walton, did you have a comment on that? 

Mr. WALTON. The land in urban areas is so un-farm-like that 

conservation is almost the beginning. In one of the areas that I 

farm—I have two plots in Cleveland, and in one it is actually a 

neighborhood that I grew up in. My grandparents live there. They 

call it their forgotten triangle because there was a fire in the 1970s 

that burned down most of the houses. 

The community ended up being three houses on 20 acres. So they 

knocked down the three that were there and designated that area 

as an urban agriculture site and literally cleaned off 18 inches of 

the land, got a $750,000 Federal grant to turn it into an urban agriculture incubator, and we are still consistently working on turning that plot into farmable land. So for us——

Mr. KING. It is not so relevant. 

Mr. WALTON. It is not so relevant. We have to conserve, we have 

to input, we have to modify the soil just to make it work. 

Mr. KING. Thank you. 

Mr. Doerr. 

Mr. DOERR. I certainly believe conservation is very important in 

agriculture. It is for me, because I need to take care of the land 

so it can take care of me. 

I also believe crop insurance is very important. For me having 

limited assets and capital, having that safety net is very crucial to 

my operation. 

2086

But as far as tying the two together, I am not an expert in how 

that would affect farm policy or how it would affect the two separately, but they are both very important to my operation. 

Mr. KING. I just want to say to you that, as a beginning farmer 

and always in a precarious situation, that sometimes goes on for 

generations, that precarious situation, you well know. How do you 

get in entry level when we are looking at land that in my neighborhood might be $10,000 to $20,000 an acre. 

Historically, the best way to get started farming was always 

marry the farmer’s daughter. So that is access to capital that can’t 

be compared with the things that will be offered by the three gentlemen on the left side of the panel. 

However, I would like to circle back there in the little bit of time 

that we have, and I wanted to ask Mr. Williams and Mr. Gerhart 

and then Mr. Frazee, when you look at the Farm Credit System 

that we have, and I know you are competing against each other. 

I look at the some of the states where there is a large market share 

by Farm Credit, Michigan would be one of those comes to mind 

with around a 65 or six percent market share. What is the market 

share in your state, in Nebraska, Mr. Williams and Mr. Gerhart, 

and what do you think strikes an appropriate balance? I wouldn’t 

be for legislating anything like that, but what is a healthy balance 

that might be achieved by reasonable competition? 

Mr. WILLIAMS. The largest competitor that we have for ag loans 

in the banking industry in Nebraska is Farm Credit, and their 

untaxed situation with that causes us great angst, and everybody 

knows that. 

Farm Credit was put together many years ago to help create 

farm financing in areas where there were not financial institutions 

to do that. Today, at least in my state, we have financial institutions everywhere that are trying to do that thing of competing for 

those farm loans. 

I think it is really important that agriculture have enough financing available, and if it takes the availability of a Federal program to do that, then I think that is fine. But I would tell you 

today, with the liquidity in the banking system, we don’t have the 

same areas of interest that we had at one point in time. I can’t tell 

you the exact market share of what Farm Credit Services of America, the Omaha operation, has in Nebraska, but it is significant. 

They are our number one competitor. 

Mr. KING. Thank you. 

I see we have run out of time. I would just ask both gentlemen 

to answer quickly, if you could, out of deference to the Chairman’s 

anxiety. 

Mr. GERHART. I would agree with Matt on that, and we have 

some funding differences, too. Their funds are on the national market. There have been different studies that say how much of a difference that is. We still do it the old-fashioned way with deposits, 

checking accounts, savings accounts, et cetera. So there is a discrepancy out there. 

They are very good competitors, and for the most part we are 

able to compete heads-up with them. But the tax advantage certainly has historically been an issue for us to deal with. 

Mr. KING. Mr. Frazee will notice that he has the last word. 

2087

Mr. FRAZEE. Certainly. 

Well, it has been well documented that we all have advantages. 

There are advantages that the banking system has, that the Farm 

Credit System has. There are advantages that the Farm Credit 

System has that the banking system doesn’t have. At the end of 

the day, we all seem to be successful. Loans are growing. We are 

all profitable. So I don’t know that either of us can say that the 

advantages we have disadvantage one over the other. 

I think what is most important is that farmers have an access 

to a reliable source of steady credit, they have competitive credit, 

and we think it is important that there be a source of that credit 

that is owned by and controlled by the farmers, and that is why 

the Farm Credit System is here. 

Mr. KING. I thank all you gentlemen. 

Thank you, Mr. Chairman. 

The CHAIRMAN. I thank the gentleman from Iowa. 

Before we adjourn, I will turn to the Ranking Member for any 

closing remarks she has. 

Ms. FUDGE. Thank you so much, Mr. Chairman. 

And I want just say to our panelists thank you for testifying 

today. You provided important background information that will 

hopefully be used by this Committee as we develop the credit portion of the farm bill. 

Again, I appreciate your testimony, and I thank you all. 

I yield back, Mr. Chairman. 

The CHAIRMAN. I thank the Ranking Member, and let me add my 

thanks as well for your willingness to testify today. I think you 

have given us valuable insights, and we appreciate all of your efforts as an important part of the broad agricultural family to ensure that we are providing a safe and abundant food supply for our 

fellow citizens. 

Under the rules of the Committee, the record of today’s hearing 

will remain open for 10 calendar days to receive additional material and supplementary written responses from the witness to any 

question posed by a Member. 

The hearing of the Subcommittee on Department Operations, 

Oversight, and Credit is adjourned. 

[Whereupon, at 11:40 a.m., the Subcommittee was adjourned.] 

[Material submitted for inclusion in the record follows:] 

2088

2089

SUBMITTED STATEMENT BY MICHAEL A. GERBER, PRESIDENT AND CHIEF EXECUTIVE

OFFICER, FEDERAL AGRICULTURAL MORTGAGE CORPORATION (FARMER MAC) 

Chairman Fortenberry, Ranking Member Fudge, and Members of the Subcommittee, thank you for the opportunity to provide the Subcommittee with a statement for the record on behalf of the Federal Agricultural Mortgage Corporation, also 

known as Farmer Mac, which is a stockholder-owned, federally-chartered instrumentality of the United States and part of the Farm Credit System. 

Farmer Mac provides a secondary market for agricultural real estate and rural 

utilities loans and certain loans guaranteed by the U.S. Department of Agriculture 

(USDA). This secondary market increases the availability of long-term credit at stable interest rates to America’s rural communities, including farmers, ranchers, rural 

residents, and rural utilities. It provides these borrowers with the benefits of capital 

markets pricing and product innovation. 

Congress created Farmer Mac in the aftermath of the agricultural credit crisis of 

the 1980s, a time when land values fell as interest rates rose sharply, credit tightened, and farm foreclosures became painfully common. Today, Farmer Mac interacts 

with all categories of rural lenders including banks, Farm Credit System institutions, insurance companies, and cooperative rural utilities lenders. Every day, our 

secondary market functions to help ensure that liquidity and lending capacity is 

available for lenders to support rural America. Farmer Mac serves as an essential 

bridge between investment capital and main street rural America. 

Rural communities need access to all the tools available, including the secondary 

market tools offered by Farmer Mac, to compete effectively and attract the types of 

economic activity that allow rural businesses to grow and prosper. Since 1996, 

Farmer Mac has purchased or guaranteed over $31 billion in rural loans, providing 

significant liquidity and capital to rural lenders across the country. This function 

ultimately benefits all rural borrowers and fosters economic activity in all sectors 

of rural America. Farmer Mac’s effectiveness has only been possible because Congress has been willing to update Farmer Mac’s statutory charter on several occasions (most recently in the 2008 Farm Bill) to meet the ever-changing needs of rural 

economies. 

For instance, the 2008 Farm Bill added to Farmer Mac’s charter the ability to 

purchase and securitize loans for rural utilities. Since that time, Farmer Mac has 

infused over $5 billion into the rural utility marketplace. This access to capital at 

competitive rates has enabled rural electric cooperatives across the nation to enhance their service in providing affordable and reliable electricity to businesses and 

rural residents. 

The needs of agriculture and rural America have changed dramatically over the 

last 5 to 10 years. We would ask Congress to consider updating Farmer Mac’s charter to allow us to better serve the diverse needs of rural America. Rural communities could benefit significantly, for instance, if Farmer Mac were able to provide 

its secondary market activities to additional forms of rural lending such as farm operating loans, intermediate term loans, as well as additional types of USDA-guaranteed loans. Rural communities would also benefit from Congress addressing certain 

technical points that have hindered access to Farmer Mac’s programs in the past, 

such as removing the ‘‘1,000 acre rule’’ that limits the dollar amount of loans secured by more than 1,000 acres of agricultural real estate and including trusts as 

eligible borrowers. We have a complete proposal for your review and would welcome 

the opportunity to discuss it in greater detail at your convenience. 

The engine of rural America is found in the millions of hard-working farmers, 

ranchers, and small business owners who call it home. For them to compete in the 

global marketplace, they need access to capital and credit on an equal footing with 

their urban neighbors. Particularly today, as budget pressure inevitably will reduce 

the availability of Federal rural development support from Washington, mechanisms 

like Farmer Mac must be relied on to fill the gap. 

Rural Americans account for nearly 1⁄3 of our nation’s population and just as the 

economies in urban areas change and develop over time, so do those in rural areas. 

Federal policies must keep pace with the changing needs in rural America; that is 

one of the reasons we revisit our farm bills every 5 years or so. Now is a critical 

time for Congress, with the Committee’s leadership, to ensure that the changing 

needs of rural America are met. Farmer Mac is well positioned to take on these new 

authorities and stands ready to assist rural lenders in meeting the needs of their 

customers into the future. 

Thank you for the opportunity to submit this statement for the record. 

Sincerely,

MICHAEL A. GERBER.

2090

SUBMITTED STATEMENT BY DAVID W. NIKLAS, PRESIDENT, CLACKAMAS GREENHOUSES

INC.; ON BEHALF OF SOCIETY OF AMERICAN FLORISTS

Chairman Fortenberry, Ranking Member Fudge, and Members of the Subcommittee, thank you for the opportunity to submit testimony for the hearing record 

on this important subject as Congress considers reauthorization of our nation’s agricultural programs. 

The financial crisis that our nation experienced in 2008 has had a profound effect 

on many industries and small businesses across the country. The resulting credit 

crunch acutely impacted agricultural production here in Oregon, claiming familyowned and nearly century old businesses like ours in its wake. I share our 

business’s story with the Subcommittee in the hopes that all reasonable opportunities to expand access to affordable loans and lines of credit are examined as Congress addresses ongoing challenges with rural development and small farm production. 

Background 

Clackamas Greenhouses began as a partnership in July 1911. My great grandfather, Fritz, and my grandfather, Hans, were two of the early partners. In 1922, 

Clackamas incorporated with both of them as founding shareholders. In 1955, my 

father purchased the remaining 50% share from the retiring manager of the operation, making Clackamas 100% family-owned and operated. I became President in 

1986, growing the company to a peak of $4 million in gross sales with a full-time 

workforce of between 38 and 40 employees in 1995. 

Clackamas Greenhouses Inc. was a regional grower of flowers and plants supplying retail flower shops, garden centers, regional grocery chains and other mass 

merchants. Our primary market was in the segment of the industry known as ‘‘indoor floral.’’ We grew and sold holiday plants like Easter lilies and poinsettias, as 

well as everyday plants like pot chrysanthemums, African violets and cyclamen. 

These crops constituted approximately 75% of our sales. The remaining share was 

in garden plants like geraniums, petunias and impatiens. 

In the mid to late 1990’s, major changes began to develop in the regional grocery 

business. Driven by the emergence of Wal-Mart as a major retailer, and fueled by 

low interest rates, a wave of consolidation crested over the grocery industry. In 

1998, the Kroger Company acquired our regional Fred Meyer chain, our largest single customer. We had done business with them for almost 50 years. Sales to the 

Fred Meyer floral, garden center and grocery departments constituted 42 percent of 

our annual sales. 

At first, little changed while Kroger was assimilating Fred Meyers with other regional chains that it had acquired en route to becoming a more prominent national 

company. Clackamas dedicated itself to being the very best regional supplier of flowers for Kroger. For a while, we were quite successful. Soon we were the only local 

suppliers of flowers and plants for Kroger’s floral departments. Then in late 2003, 

Kroger dismissed three of its four buyers for the Fred Meyer Floral Department. 

Our regional contacts were replaced by individuals subordinate to the national 

Kroger buyers out of Cincinnati, OH and Vero Beach, FL. 

For the next 2 years our business model shifted. We became suppliers of products 

from other operations. In time, the demands on turnaround came on increasingly 

short notice and costs began to skyrocket. In 2005, Kroger approached Clackamas 

to compete with another operation to serve as purchaser/distributor for its operations in the Northwest. 

To ‘‘win this business,’’ Clackamas was asked to purchase flowers from California 

producers that Kroger had arranged. The winning bidder was to take possession of 

these products and deliver them to the Kroger/Fred Meyer stores in the region. I 

was told to do this at only a 10% markup from the deflated mass purchase price. 

My 25 years of experience in the industry told me that this was not a good proposition for the company. Our proposal suggested a newer distribution model that had 

been successfully implemented by other local nursery and floral industries. 

In February 2006, Kroger notified Clackamas Greenhouses that we would be 

delisted as a supplier. Overnight, we lost more than 40% of our sales and had a 

huge loss for the year. Incidentally, the company that Kroger selected as its regional 

purchaser/distributor went out of business not too long thereafter. 

A New Model 

It did not take a scholar of macroeconomics to see the writing on the wall. Despite 

having done everything that had been asked of our company, there was little that 

a business of our size could do to combat the market forces of mass consolidation 

and acquisition. Experience told me that a deteriorating market segment coupled 

2091

with projected revenue losses meant that Clackamas Greenhouses would need to undertake a new business model in order to survive. 

In July 2005, 6 months prior to Kroger’s decision, I prepared a report for the 

Board of Directors stating that I had lost all faith in our relationship with Fred 

Meyers. In that report, we outlined a plan to dramatically shift our production from 

indoor floral to garden plants over the next 12 to 24 months. This timing would 

allow Clackamas to take advantage of the booming housing construction market and 

put the company back on solid financial footing. We also felt it was time to expand 

on a recent trial business. 

Since 2001, Clackamas had been running a trial program of vendor-managed inventory (VMI) for a local small drugstore chain. We had purchased 20 self-watering 

display and sales tables. We would set these tables up on sidewalks in front of the 

drug stores and stock them with garden plants. Clackamas received 80% of the retail cost, while providing maintenance for the plants and being liable for any loss 

due to plant death or theft. Fortunately, the use of the self-watering tables kept our 

shrink to a minimum and the trials had proven to be a great success. 

The company with whom we had conducted the trials was a local chain of 14 

drugstores. In 2005, the owner of the local chain sold seven stores to Walgreen’s. 

Noting the program’s potential, Walgreen’s contacted Clackamas to inquire about 

expanding the VMI program to most of its stores in Oregon and Washington state. 

With more than 100 Walgreen’s locations in both states, we were excited about the 

opportunity to forge a new partnership and continue to grow our business in a new 

market. 

To expand our business and adapt our operation accordingly, it was time for 

Clackamas Greenhouses to sit with our current community bankers to discuss alternatives for financing this new venture. 

Our Community Banks: It’s Not Us, It’s You 

As FY 2005 closed, Clackamas Greenhouses had banking relationships with two 

different regional banks. We had a long-term capital loan with Silver Falls State 

Bank in Silverton, OR. This loan was backed by a first position on our land and 

buildings. We also had an operating loan with Columbia River Bank in The Dalles, 

OR. This loan had second position on the land and buildings and first position on 

our inventory and machinery. Clackamas had been with these banks for only a short 

time. Our prior lender exited the agricultural loan market 2 years prior. 

In order to expand our VMI business to fulfill Walgreen’s proposed partnership, 

we had to invest in more tables. Clackamas first approached Silver Falls State 

Bank, but our loan officer there immediately indicated that Silver Falls did not underwrite this type of operating loan. We then approached Columbia River Bank. 

Although Clackamas had only banked with Columbia River for 3 years, we were 

already on our third loan officer in that span of time. The current loan officer did 

not have a background in agricultural lending. Nevertheless, we put the final touches on our business plan and our projections and set up the meeting. After our presentation, I was told they would get back to me. After 6 weeks with no word, I again 

contacted our loan officer who said they were still analyzing the proposal. The bank 

asked for more detailed information on the trial program and we happily obliged. 

By October, as we were fast approaching the point at which we needed to book 

plant inventories to support our business projections, we still had not heard anything. When contacted again, the loan officer told us that our proposal would need 

to be reviewed by the bank’s loan committee. It was suggested that I host the committee at our greenhouse and that I should conduct our presentation again. I agreed 

and the loan officer scheduled the visit . . . for December. 

We began developing a contingency plan in the event that Clackamas was unable 

to successfully secure a loan. Sure enough, my presentation to the Columbia River 

loan committee in December did not go well. The director of agricultural lending 

said that our market had deserted us and advised us to cease operating. The shifting market was the basis of our proposal in the first place, so I countered by indicating that this loan would help our company expand into a new market that we 

had been actively developing. Our locally owned, 90 something year old business 

was not ready to give up. After years of developing a new market and months of 

waiting for the bank’s response, we were informed that Columbia River Bank was 

not interested. 

The delayed response from Columbia River had a detrimental effect. Clackamas 

immediately began to roll back production but was only partially successful because 

of the needed lead-time needed for production. Now, with a reduced sales plan, we 

knew that meeting obligations to our vendors would be quite difficult. FY 2006–2007 

ended poorly. We made substantial cuts to our company’s scope and workforce, but 

2092

we could not cut fast enough or deep enough. Despite all of this we remained determined to make it through the storm. 

‘‘If at first you don’t succeed . . .’’

Clackamas Greenhouses started looking for a new lending partner. Given the 

losses of the previous 2 years and our now defunct relationship with Kroger, we 

knew that we would need help finding a financial backer. We reconfigured our new 

business plan to make it more bite-sized. We hired a local accountant to help transition our finances to an asset management based system. Upon our CPA’s advice, 

we searched for a bank that worked closely with the Small Business Administration 

on guaranteed loan programs. 

In September, we began a dialogue with the Portland, OR based Temecula Valley 

Bank that specialized in SBA lending. Our conversations with their lending officer 

revealed a very similar situation with a potato processor the year before. The loan 

officer assured us that they knew just how to structure the deal. Temecula asked 

us to meet with them in 3 weeks, as their small office was in the final stages of 

processing three other loans. We agreed to wait until October 2007 to begin the application process. 

On October 7th at 4:30 p.m., Temecula Valley called to inform us that the bank 

was suspending all lending authority from its loan officers. I did not know it then, 

but I was witnessing the first tremors of the financial meltdown of 2008. We went 

back to our referrals list and spoke with two additional banks (to no avail) before 

finding a broker that agreed to work with us. The broker recommended that we update our cash flow forecasting model, so we contracted with a consultant to customize one for our company. It took 2 months. By January 2008, it became very difficult to meet with our local banks. Despite these challenges, we presented our plan 

to eight or nine banks between January and July, all to no avail. 

Now desperate, we began approaching private lenders. In July 2008 we received 

an offer from a private source that indicated they would be willing to back us. After 

examining their offer sheet and plugging their terms, fees and interest into my cash 

flow model, it became clear that this offer was ‘‘predatory.’’ We respectively declined 

their offer. 

Farm Credit: A Last Resort? 

When we originally met with Northwest Farm Credit Services in 2008, they indicated that they were focused on existing customers and that they would not consider 

new customers. In 2009, we hired a bankruptcy attorney with experience in Chapter 

12 proceedings. On the lawyer’s advice, we switched financial advisors to a local 

woman with extensive banking experience and a history in agriculture and problem 

loans. She informed us of a program that might help us obtain a Farm Services 

Loan for our troubled farm. 

The fall and winter of 2009 was devoted to attempting to secure a Farm Services 

Loan. The paperwork for this program was extensive, eventually filling two 3 inch 

thick notebooks. Despite this effort, we were initially rejected for the loan. Upon review it was clear to our advisor that the notice of rejection was full of faulty analysis. We went through the reconsideration process, but learned that the reconsideration officer was also the lending officer that rendered the initial decision. He 

upheld his original decision. 

We requested an official review of our application and I provided phone testimony 

to an administrative judge. The testimony was sent to Colorado for the final appeal. 

In the meantime, our need for working capital in February 2010 was critical. We 

continued to solicit local community banks as we waited for the judge’s decision. 

When we contacted Clackamas County Bank about the possibility of meeting to 

present our business plan, the loan officer said that if he even spoke with an ornamental horticultural business, the FDIC would shut his bank down. 

In May, the administrative judge informed us that the FSA office in Colorado had 

‘‘misplaced’’ our case. The judge asked if we wanted to proceed further with our appeal. Since our season was over, we dropped our appeal. 

One Last Ray of Light 

In June 2010, Clackamas again tweaked our strategy and decided to broaden our 

approach. We found a private equity company that was willing to work with us if 

we got blended some state/Federal aid and got a commercial bank involved. 

We met with the state of Oregon development agency that was overseeing recovery funds for local businesses. We learned that we qualified and that the agency 

would look favorably upon our effort, particularly if we had a diversified group of 

financiers. All Clackamas Greenhouses needed was to find a bank that would work 

with us. 

2093

Whatever luck we had seemed to be making an upward turn. In June 2010, we 

received a call from the national buyer from Safeway. They invited me to 

Pleasanton, CA. for a meeting. I flew down in early July and was informed that 

Safeway wanted to make my company their supplier in the Northwest. They were 

planning on running a ‘‘Buy Local’’ campaign similar to the ‘‘California Grown’’ test 

market they had been running in that state during the previous 2 years. They started sending me contracts with delivery dates in January 2011. 

With contracts in hand, we doubled our efforts to find a bank that would work 

with us. We worked feverishly, meeting with eight bank representatives in an 8 

week period. Not one would entertain us. 

On Nov. 1, 2010 I announced that Clackamas Greenhouses was ceasing operations 

effective Dec. 31, 2010. Providentially, a local firm that produces reforestation tree 

seedling was in need of extra greenhouse space. Our facility is now leased for 5 

years to that firm. 

Can Congress Restore Credit? 

My Representative and a current Member of the House Committee on Agriculture, 

Rep. Kurt Schrader, did everything he possibly have could to help me find access 

to affordable loans and lines of credit so that I could execute my plan and continue 

operating our family’s business. His office and staff were instrumental in connecting 

us with the appropriate personnel at the development agency and other local officials in our continued quest. But there was only so much that his office could do 

to help. 

I cannot help but think that the memory of our Clackamas Greenhouse Easter 

lilies were on Rep. Schrader’s mind on March 28, 2012 when he introduced H.R. 

4293, the Restore Main Street’s Credit Act. This legislation would exempt loans and 

extensions of credit made by credit unions specifically targeted to brick-and-mortar 

businesses with 20 or fewer full-time employees from current limitations on member 

business lending. 

This bill would provide another option for lending to the smallest of small businesses in our local community. Best of all, it would do it at no cost to the American 

taxpayer. H.R. 4293 is a sensible, no-cost, non-partisan solution that has been endorsed by 27 national and state organizations including: the National Farmers 

Union, the Society of American Florists, the American Nursery & Landscape Association, OFA—the Association of Horticulture Professionals and the Florida Nursery, Growers and Landscape Association (FNGLA). 

Conclusion 

After nursery and floriculture became Oregon’s first ‘‘billion dollar commodity’’ in 

2007 (the state’s top agricultural commodity), farm gate dropped off by 36% to $667 

million in 2011. The pain felt in our local community extends beyond the farm. According to County Business Pattern data from the U.S. Census Bureau, between 

2002–2009, Oregon lost: 9.6% of its nursery, garden center and farm supply stores, 

74.3% of its retail bakeries, 25.4% of its bookstores, 17.3% of its florists, 30.8% of 

its gift stores and 12% of its dry cleaners. 

Just as no one event presented in my testimony caused our family’s business to 

close, no one reform of Federal policy will single-handedly allow us to start-up 

again. Rep. Schrader’s Restore Main Street’s Credit Act may not solve every credit 

access problem for every business, but at least it is something. H.R. 4293 is a good 

start. 

It is impossible for me to say that a credit union would have been able to offer 

a local lending option would have allowed Clackamas Greenhouses to stay in business. It is just as difficult to say what reforms of the current farm credit system 

may have allowed us to pursue new business ventures. I do know, however, that 

my businesses and others throughout our local community may have had a better 

chance if given more options for local financial services. 

Clearly our family does not give up easily when it comes to our livelihood and 

the family farm. Four years from now when our property lease is up, I would appreciate any additional options that Congress might afford for our next search. 

Thank you again for the opportunity to submit this testimony for the hearing 

record.

DAVID W. NIKLAS,

President, 

Clackamas Greenhouses Inc. 

2094

SUBMITTED LETTER BY KENNETH A. SPEARMAN, CHAIRMAN, FARM CREDIT SYSTEM

INSURANCE CORPORATION

May 11, 2012

Hon. JEFF FORTENBERRY, Chairman,

Subcommittee on Department Operations, Oversight, and Credit, 

House Committee on Agriculture, 

Washington, D.C.;

Hon. MARCIA L. FUDGE, Ranking Minority Member,

Subcommittee on Department Operations, Oversight, and Credit, 

House Committee on Agriculture, 

Washington, D.C.

Re: House Agriculture Subcommittee on Department Operations, Oversight, and 

Credit Hearing on May 10, 2012

Dear Mr. Fortenberry and Ms. Fudge:

As Chairman of the Farm Credit System Insurance Corporation (FCSIC or Corporation), I am writing to request important changes to the Farm Credit Act of 1971 

(Act), as amended, that would enhance our ability to protect investors while reducing costs for the Farm Credit System (System or FCS). Such changes would improve 

our ability to serve as receiver or conservator for a System institution, should the 

need arise, and give us other key powers for dealing with troubled institutions. The 

changes would ensure that FCSIC has express statutory receivership and conservatorship powers that are comparable to powers of other Federal receivers and 

conservators, so that FCSIC receiverships and conservatorships can be more economical and efficient, with less potential for uncertainty, litigation, and delay. I request that this letter be included in the record for the May 10, 2012 House Agriculture Subcommittee hearing referenced above. 

The Farm Credit System obtains funds for lending primarily from the sale of insured debt obligations issued by the FCS banks. FCSIC, a government-controlled 

corporation, insures the $186 billion in FCS bank debt and provides protection for 

the investors who purchase FCS debt obligations by administering the $3.4 billion 

Farm Credit Insurance Fund (Insurance Fund). If an FCS bank failed to pay the 

principal and interest due on its debt, FCSIC is required to use the Insurance Fund 

to satisfy the default. Recognizing the importance of minimizing defaults, Congress 

also gave FCSIC the power to provide various types of financial assistance to stabilize troubled FCS banks and associations, as long as the statutory least-cost test 

is met. Another significant FCSIC role is serving as the receiver or conservator for 

troubled FCS institutions. Under existing law, if the conditions warrant, the Farm 

Credit Administration (FCA) appoints the Farm Credit System Insurance Corporation as conservator or receiver of any FCS bank. The statute also provides that 

FCSIC serve as conservator or receiver for any FCS association that is placed in 

a conservatorship or receivership. FCA can also ask FCSIC to serve as conservator 

or receiver for the Federal Agricultural Mortgage Corporation or can choose to appoint another party. 

FCSIC has not had to use its statutory receivership or conservatorship authority 

since it became operational in 1993. At this time the Farm Credit System is in a 

safe and sound condition and no institutions are in danger of failing. FCSIC has 

been reviewing its authorities and comparing them to the powers and authorities 

of other Federal insurers that operate Congressionally mandated receiverships. In 

contrast to our powers and authorities, which have not been substantially updated 

since FCSIC’s creation in 1987, statutory amendments have enhanced the receivership and conservatorship authorities of the Federal Deposit Insurance Corporation 

(FDIC), which serves as the receiver/conservator for commercial banks and thrifts, 

and the Federal Housing Finance Agency (FHFA), which serves as the receiver/conservator for the housing government-sponsored enterprises. 

It appears that Congress authorized the Federal receivership powers in an effort 

to minimize the ultimate cost of financial institution failures and to provide for an 

efficient resolution process to liquidate assets and satisfy claims, while maintaining 

public and investor confidence. To accomplish these goals, Congress has given the 

FDIC and FHFA receivership powers and authorities that the FCSIC does not have 

expressly. Accordingly, FCSIC is requesting that Congress consider whether to 

amend the Farm Credit Act to add language generally modeled on statutory provisions applicable to other Federal receivers for financial institutions, but tailored for 

the Farm Credit System. For example, it would be helpful if provisions could be 

2095

added that would clarify FCSIC’s authority to repudiate or enforce contracts entered 

into before appointment of the conservator or receiver, depending on whether FCSIC 

determines that performance would be beneficial or that repudiation would promote 

the orderly administration of the institution’s affairs. We believe there is a need to 

add provisions to clarify FCSIC’s treatment of ‘‘qualified financial contracts’’ (including securities contracts, commodity contracts, swap agreements, and derivatives). It 

may also be appropriate to add an authorization for the FCSIC, once it is appointed 

receiver, to organize and the FCA to charter a bridge bank. A bridge bank is a temporary stabilizing solution that can receive the assets and liabilities of the troubled 

bank and perform other functions authorized in the Act. We hope that Congress will 

consider these and other options to clarify FCSIC’s receivership and conservatorship 

powers. 

Our goal in making these recommendations is to bring FCSIC’s statutory powers 

more in line with those of other Federal receivers and conservators in order to ensure that the Corporation can function more effectively as receiver or conservator 

for FCS institutions in the future. By enabling FCSIC to act in an economical and 

efficient manner, with less uncertainty, litigation, and delay, the changes would ultimately contribute to the economic and financial stability of the Farm Credit System. 

We appreciate your leadership on these issues and look forward to working with 

the Subcommittee’s Members this year. I would be happy to visit with you or your 

staff if you need any additional information about this proposal. 

Sincerely,

KENNETH A. SPEARMAN,

Chairman. 


112301127.eps
(2097)

FORMULATION OF THE 2012 FARM BILL 

(COMMODITY PROGRAMS AND CROP 

INSURANCE) 

WEDNESDAY, MAY 16, 2012

HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON GENERAL FARM COMMODITIES AND

RISK MANAGEMENT, 

COMMITTEE ON AGRICULTURE, 

Washington, D.C. 

The Subcommittee met, pursuant to call, at 10:04 a.m., in Room 

1300, Longworth House Office Building, Hon. K. Michael Conaway 

[Chairman of the Subcommittee] presiding. 

Members present: Representatives Conaway, King, Neugebauer, 

Schmidt, Austin Scott of Georgia, Crawford, Huelskamp, Ellmers, 

Gibson, Hartzler, Schilling, Lucas (ex officio), Boswell, McIntyre, 

Walz, Kissell, David Scott of Georgia, Courtney, and Peterson (ex 

officio). 

Staff present: Bart Fischer, Tamara Hinton, Kevin Kramp, Alan 

Mackey, Matt Schertz, Nicole Scott, Wyatt Swinford, Suzanne Watson, John Konya, Craig Jagger, C. Clark Ogilvie, Anne Simmons, 

Jamie Mitchell, and Caleb Crosswhite. 

OPENING STATEMENT OF HON. K. MICHAEL CONAWAY, A 

REPRESENTATIVE IN CONGRESS FROM TEXAS 

The CHAIRMAN. This hearing of the Subcommittee on General 

Farm Commodities and Risk Management to discuss commodity 

programs and crop insurance in advance of the 2012 Farm Bill will 

now come to order. 

Thanks to everybody for being here this morning. I want to 

thank our witnesses from both panels, and we will get to you here 

shortly. I would like to make my opening statement. 

Through a series of hearings conducted both in the field and here 

in Washington, the House Agriculture Committee has extensively 

audited the cost-effectiveness of each of the policies under the Committee’s jurisdiction. The hearings today and tomorrow will conclude this Subcommittee’s part in that process. In fact, in a few 

weeks, the full Committee expects to take into consideration all 

that we have learned from these hearings and we will mark up this 

year’s version of the farm bill. 

When this Subcommittee’s role in the audit hearing process 

began last summer, I laid out five measures by which I would 

judge any farm policy proposal. First, does the policy undermine 

crop insurance? Second, is the policy bankable? Third, is the policy 

2098

tailored to producer risk? Fourth, are the crops covered under the 

commodities title treated equitably? And fifth, can producers and 

their lenders understand the policy? In my view, these are still the 

essential measures of a good farm bill. 

Although I come from farm country and serve on the Agriculture 

Committee, I still believe our greatest responsibility as Members of 

Congress is to our taxpayers and the future generations of Americans that Washington has managed over the years to saddle with 

an excessive amount of debt. In keeping faith with that primary responsibility, I firmly believe that the farm bill should be better for 

farmers while at the same time being cheaper for our taxpayers. 

This is going to mean achieving real reform and real cuts while 

not cutting the legs out from underneath a critical sector of the 

U.S. economy. This is going to be a tough needle to thread. But if 

a farm bill measures up to the five criteria I just laid out, I am 

confident that we can get there. 

That said, I do not believe that our counterparts in the Senate 

have made passing a farm bill this year any easier. Frankly, by all 

five measures, the Senate bill fails our test. The Senate bill undermines crop insurance by setting up a revenue program that competes with and duplicates crop insurance. In fact, CBO indicates 

that the budget for crop insurance declines by about $2.4 billion as 

producers reduce their coverage they now have in favor of free coverage. Plus, when you leave out money carried over from the commodity title of the crop insurance to pay for the STAX Program, the 

net cut to crop insurance is over $700 million. 

Crop insurance has also taken a drubbing in the press as editorial boards and everyone else confuses successful crop insurance 

with the Senate’s new revenue program. To be clear, I am not opposed to a farm policy that helps producers cover a portion of their 

deductibles, which can be very high, but I am convinced that the 

Senate’s approach is the wrong way to do it. I think my colleague, 

Randy Neugebauer, is on the right track in this regard with a supplemental coverage option. If a producer wants to cover losses, he 

can buy that coverage. 

Beyond trying to duplicate what crop insurance is for, the Senate 

bill fails to address the one risk that crop insurance is not designed 

to do, and that is to help get producers through prolonged periods 

of low prices without the need for Congress to come in and pass 

expensive and unbudgeted ad hoc disaster assistance. I believe the 

days of ad hoc disaster assistance should be behind us. 

In short, the Senate bill has no price protection and is therefore 

not bankable to farmers and not fiscally responsible to taxpayers. 

So far, this problem has been misreported as a North-South issue, 

but let me just say this. If we have a few more weeks of commodity 

prices taking the kind of thumping they took last week, the importance of meaningful price protection in a farm bill will become clear 

to everyone. 

Crafting a farm bill that sends out payments in relatively good 

times but leaves farmers shorted in bad times does not make sense. 

The equivalent is to buy health insurance that covers your annual 

physical but does not cover you when you actually get sick. The 

one-size-fits-all approach taken by the Senate also means that 

farmers are unable to tailor policies to meet their unique risk manVerDate 0ct 09 2002 12:54 Dec 11, 2012 Jkt 041481 PO 00000 Frm 00510 Fmt 6601 Sfmt 6601 I:\DOCS\112-30\74372.TXT BRIAN
2099

agement needs. As a result, these producers for whom the Senate’s 

policy is specifically designed and tailored would reap too rich a 

benefit while the rest would receive little, if any, benefit at all. In 

my view, perhaps one thing worse than writing a farm bill that is 

inadequate to deal with a crisis is writing a farm bill that at least 

for some removes the risk to farming entirely. Neither is good for 

U.S. agriculture and neither is good for our taxpayers. 

In closing my remarks on the commodity title, let me state the 

obvious: Washington over thinks things. While my farmers tell me 

that the farm bill needs to address only that which crop insurance 

does not address, some in Washington are busy duplicating crop insurance while ignoring the hole in the safety net that they are supposed to be closing. This has not only drawn fire from critics but 

has also confused producers and bankers to the point they can’t understand what is happening with the farm bill. 

Finally, I would like to note that while the four principles of the 

House Agriculture and Senate Agriculture, Nutrition, and Forestry 

Committees had all agreed last fall to a specific policy that would 

have generated $4 billion in savings from the Food Stamp Program, the Senate did not include the full change in its bill because 

they later learned that CBO now assumes that that same policy 

would achieve $8 billion in savings instead. Meanwhile, the Senate 

increased the share of deficit reduction that the commodity title 

and crop insurance would bear from $15 billion agreed to last year 

to roughly $18 billion today. This and all the rest leads me to conclude that what the Senate has before it cannot be called a farm 

bill. Fortunately, I am confident that in the House process, we will 

cut spending, we will reform and streamline the policies and we 

will eliminate duplication and achieve regulatory reform, and in 

this process we will restore balance and equity and put the farm 

back in the farm bill. 

I look forward to hearing our witnesses this morning and Members of the Subcommittee on how we can make this happen. 

[The prepared statement of Mr. Conaway follows:]

PREPARED STATEMENT OF HON. K. MICHAEL CONAWAY, A REPRESENTATIVE IN

CONGRESS FROM TEXAS

Through a series of hearings, conducted both in the field and here in Washington, 

the House Agriculture Committee has extensively audited the cost-effectiveness of 

each and every one of the policies under the Committee’s jurisdiction. The hearings 

today and tomorrow will conclude this Subcommittee’s part in that process. In fact, 

in a few weeks, the Committee expects to take into consideration all that we have 

learned from these hearings and mark-up a new farm bill. 

When this Subcommittee’s role in the audit hearing process began last summer, 

I laid out five measures by which I would judge any farm policy proposal. First, does 

the policy undermine crop insurance? Second, is the policy bankable? Third, is the 

policy tailored to producer risk? Fourth, are the crops covered under the commodity 

title treated equitably? And, fifth, can producers and their lenders understand what 

the policy is? 

In my view, these are still the essential measures of a good farm bill. 

Although I come from farm country and serve on the Agriculture Committee, I 

still believe our greatest responsibility as Members of Congress is to the taxpayer 

and to the future generations of Americans that Washington has managed over the 

years to saddle with debt. In keeping faith with that primary responsibility of ours, 

I firmly believe that the farm bill needs to be a lot better for farmers while being 

a lot cheaper for taxpayers. That is going to mean achieving real reform and real 

cuts while not cutting the legs out from underneath a critical sector of the U.S. 

2100

economy. This is a tough needle to thread. But, if a farm bill measures up to the 

five criteria that I just laid out, I am confident we can get there. 

That said, I do not believe that our counterparts in the Senate have made passing 

a farm bill this year any easier. Frankly, by all five measures the Senate farm bill 

fails the test. The Senate bill undermines crop insurance by setting up a revenue 

program that competes with and duplicates crop insurance. In fact, CBO indicates 

that the budget for crop insurance declines by about $2.4 billion as producers reduce 

the coverage they now buy in favor of free coverage. Plus, when you leave out money 

carried over from the commodity title to crop insurance to pay for STAX, the net 

cut to crop insurance is over $700 million. Crop insurance is also taking a drubbing 

in the press as editorial boards and everyone else confuses successful crop insurance 

with the Senate’s new revenue program. To be clear, I am not opposed to a farm 

policy that helps producers cover a portion of their deductibles, which can be very 

high, but I am convinced the Senate’s approach is the wrong way to do it. I think 

my colleague, Congressman Neugebauer, is on the right track in this regard with 

his supplemental coverage option. If a producer wants to cover shallow losses, he 

can buy coverage to do that. 

Beyond trying to duplicate what crop insurance is for, the Senate farm bill fails 

to address the one risk that crop insurance is not designed to do and that is to help 

get producers through prolonged periods of low prices without the need for Congress 

to come in and pass expensive and unbudgeted bailouts. The days of ad hoc disaster 

assistance are over. In short, the Senate bill has no price protection and is, therefore, not bankable to farmers and not fiscally responsible to taxpayers. So far, this 

problem has been misreported as a North-South issue. But, let me just say this: if 

we have a few more weeks of commodity prices taking the kind of thumping that 

they took last week, the importance of meaningful price protection in a farm bill 

will become clearer to everyone. Crafting a farm bill that sends out payments in relatively good times but leaves farmers shorted in bad times does not make sense. 

The equivalent is to buy health care that covers your annual physicals but does not 

cover you when you actually get sick. 

The one-size-fits-all approach taken by the Senate also means that farmers are 

unable to tailor policies to meet their unique risk management needs. As a result, 

those producers for whom the Senate’s policy was specially designed and tailored 

would reap too rich a benefit while the rest would receive little if any benefit at 

all. In my view, perhaps the one thing worse than writing a farm bill that is inadequate to deal with a crisis is writing a farm bill that, at least for some, removes 

the risk of farming entirely. Neither is good for U.S. agriculture. Neither is good 

for the taxpayer. 

In closing my remarks on the commodity title, let me just state the obvious. 

Washington over thinks things. While my farmers tell me that the farm bill needs 

to address only that which crop insurance does not address, some in Washington 

are busy duplicating crop insurance while ignoring the hole in the farm safety net 

that they are supposed to be closing. This has not only drawn fire from critics, but 

it has also confused producers and bankers to the point that they cannot make 

heads or tails of their farm bill. 

Finally, I would note that while the four principals of the House and Senate Agriculture Committee had all agreed last fall to a specific policy that would have generated $4 billion in savings from the Food Stamp program, the Senate did not include the full change in its bill because they later learned that CBO now assumes 

that same policy would achieve $8 billion in savings instead. Meanwhile, the Senate 

increased the share of deficit reduction the commodity title and crop insurance 

would bear from $15 billion agreed to last year up to roughly $18 billion this year. 

This and all the rest leads me to conclude that what the Senate has before it cannot be called a farm bill at all. Fortunately, I am confident that in the House process we will cut spending, we will reform and streamline policies, we will eliminate 

duplication and achieve regulatory reform, and in this process we will restore balance and equity and put the ‘‘farm’’ back in the farm bill. 

I look forward to hearing the views of our witnesses and Members of the Subcommittee on how we can make this happen. But, first, I would recognize my good 

friend, the Ranking Member, for any opening statement that he may have.

The CHAIRMAN. First, I would like to recognize the full Ranking 

Member for any statement that he might have. 

2101

OPENING STATEMENT OF HON. COLLIN C. PETERSON, A 

REPRESENTATIVE IN CONGRESS FROM MINNESOTA 

Mr. PETERSON. Thank you, Mr. Chairman, and thank you for 

holding today’s hearing and for the witnesses that are with us. 

As everybody knows, the Senate Agriculture Committee has 

passed a bill, and I am hopeful that after the next recess, this 

Committee will be able to do the same. The Senate bill builds on 

a lot of the work that we did last fall in the Super Committee, and 

a lot of it they got right but I share the Chairman’s concerns about 

the commodity title, and we need to sort through that. 

As I said before, I don’t think it is possible that we have the resources that we can have one program that fits all commodities, all 

regions of the country. I just don’t think it is going to work that 

may. And I know there is a lot of interest in the Shallow Loss Program but, if prices were to collapse today which some people say 

we are in a zone here where the prices are never going to go down 

again. Well, this is the same thing we heard in 1996, the Freedom 

to Farm, and I just want to remind everybody, we spent quite a 

bit more money than we saved with the Freedom to Farm to bail 

everybody out. 

The thing that people need to understand this time, if this happens, there is no money coming from Washington. You can forget 

about getting bailed out. So if we get this thing wrong, good luck. 

So what I am concerned about is what happens if that plays out, 

and that is why I have been a supporter of target prices. I think 

it solves some of the problems we have in some of the regional 

areas. Frankly, with the crop insurance, I don’t think we should 

change that. I think at this point we have made significant 

changes. We had a re-rating. We had an SRA. We have had reductions. And we don’t know the effects of those changes, and I don’t 

think we should do anything until we actually get hard data about 

what happened before we go off on doing something with crop insurance. 

But what I am concerned about crop insurance is working well 

today with the prices being what they are and with these enterprise unit revenue coverage with 80 percent subsidies, it is a heck 

of a deal. The problem is, though, it will protect you this year, but 

if these prices go down and we end up with $3 corn, you are going 

to be buying insurance for a loss. I am not sure the revenue coverage is going to be enough to make up for that. So that is why 

I am interested in the target prices and putting some kind of floor 

under this in cases these prices do go down. 

I am going out next week and meet with my farmers all over my 

district and talk about this, but it just seems to me that with the 

subsidy that we have on these enterprise units, which a lot of people in my area are going to, I don’t know why you wouldn’t. If we 

had a target price system why you wouldn’t take the insurance because it is relatively cheap and then take the target price so you 

have some protection. I don’t know why you need the revenue when 

you can buy 85 percent coverage for $15 an acre, I have people in 

my area that are doing that. 

We need to really work through this commodity title to make 

sure that what we do here is going to stand the test of time, that 

it is going to work if we get a collapse in these prices, which seems 

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we always do at some point. And frankly, in order to get this bill 

done, we have to take care of the concerns of cotton, and once we 

have that resolved, then rice and peanuts, which don’t have a crop 

insurance system that works for them at this point. Rice is getting 

close to putting something together. I think we are finally making 

some progress on getting a reference price or some kind of a price 

we can rely on for peanuts, but they are not going to be ready for 

this year. I think that is another thing that argues for using a target price concept to get through this. 

So I look forward to working with everybody on this and I have 

no doubt that this Committee is going to work in a bipartisan fashion and we are going to come up with something that is going to 

work for all parts of the country, and hopefully continue the tremendous success that we have had in agriculture. It is the one part 

of the economy that is working. It is the one part of the economy 

that has maintained jobs, created jobs and we certainly don’t want 

to screw it up. 

So with that, Mr. Chairman, I will yield back. 

[The prepared statement of Mr. Peterson follows:]

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

CONGRESS FROM MINNESOTA

Thank you Chairman Conaway and Ranking Member Boswell for holding today’s 

hearing. 

As everyone knows the Senate Agriculture Committee has already passed a farm 

bill and I’m hopeful that after this next recess this Committee will be able to do 

the same. 

The Senate bill builds on a lot of the work that we did last fall as part of the 

Super Committee process and, for the most part, they got it right. What I’m concerned about though is that it seems they’ve tried to create a one-size-fits-all commodity program. As I’ve said before, I don’t think that’s possible; we simply don’t 

have the necessary resources to create a single program that will work for all commodities in all regions. 

I know there’s a lot of interest in a shallow loss program; if prices were to collapse 

today, the various proposed shallow loss programs would provide a fair safety net 

for this year. But my concern is with what happens when these prices go down—

which they will—and stay down as has happened in the past. This occurred after 

Freedom to Farm in 1996 and we ended up spending even more money to bail people out. We know that won’t be an option this time around. It’s all good to look at 

this when the prices are good and everybody has been making a lot of money but 

I have been around long enough to know that it is going to eventually go the other 

way. 

I think we need to take a look at raising target prices. I’ve always been a big fan 

of target prices because it gives farmers a price floor on which they can rely. I think 

this is most likely our best bet for a safety net when prices collapse and take time 

to rebound. Critics of raising target prices argue that this will mean farmers planting for the marketplace. But if you look at target prices in relation to the market 

and the cost of production, I just don’t see how this is going to affect what people 

plant. 

Crop insurance is widely supported across the countryside and is a key farm safety net feature. But, as Keith Collins will later testify, crop insurance provides protection for the risk of price decline within a crop year, not across crop years. If 

prices go down and stay low, the revenue insurance will become less appealing and 

farmers are going to find themselves insuring for a loss. Again, that is why I am 

interested in target prices. 

I’m hesitant to make any cuts to crop insurance though because we don’t know 

the full effects of the SRA and the changes that were part of the last farm bill. 

We’ve also got the southern growers—peanuts and rice—who haven’t been able to 

figure out a way to make crop insurance work for them. I’ve had discussions about 

this whole issue of tying conservation compliance to crop insurance and frankly I 

don’t see how it can work without doing serious damage to the crop insurance system. 

2103

Before I finish, we all know that to get our budget under control everyone is going 

to have to do their part; everything has to be on the table. I think we can reduce 

farm bill spending in a responsible way. I remain concerned, however, about the 

pressures to make unreasonable cuts that could potentially blow this whole process 

up. The Ryan budget, which was supported by the majority on this Committee, calls 

for an unrealistic $33 billion cut to the commodity and crop insurance programs 

that we are discussing today. 

Now, the Agriculture Committee has a strong tradition of being reasonable and 

working together in the best interests of our constituents. It’s my hope that when 

the time comes to actually sit down and take up a new farm bill, we’ll be able to 

get beyond this ideology and all this partisanship to pass a good bill. 

And with that, Mr. Chairman, I yield back.

The CHAIRMAN. Thank you, Mr. Peterson. 

Mr. Lucas, any comments you would like to make, the full Chairman? 

OPENING STATEMENT OF HON. FRANK D. LUCAS, A 

REPRESENTATIVE IN CONGRESS FROM OKLAHOMA 

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

Chairman Conaway and Ranking Member Boswell for holding today’s hearing to review the commodity programs and crop insurance as we prepare for the next farm bill. 

Last June, the Committee started the farm bill process by holding 11 audit hearings focusing our attention on the U.S. Department of Agriculture to look for ways to improve programs for farmers, increase efficiency and reduce spending. We then went to the 

countryside this spring to hear directly from producers in the field, 

and now we are in the midst of wrapping up our final hearing series in Washington before we begin writing legislation. 

Along with crop insurance, Title I programs establish the very 

fabric of the farm safety net. They ensure that dramatic swings in 

commodity prices and volatile weather don’t put farmers and 

ranchers out of business. Further, they ensure that we as consumers always have a stable food and fiber supply. That safety net 

has to exist for all regions and all crops and it has to be written 

with bad times in mind. These programs should not guarantee that 

the good times are the best but rather that the bad times are manageable. 

Like many of the farmers we heard from during our field hearings, I know firsthand about the challenges we are trying to mitigate with sound farm policy. I started my farming operation with 

a wheat crop that put me in what could politely be described as a 

financial squeeze 35 years ago. The second wheat crop performed 

better. It matched the historic record for the farm, and the difference between those two crops simply was rain. It rained at the 

right time on the second crop; did not on the first. And I’ll also note 

to anyone who is a young farmer, it is a good thing to match your 

landlord’s best year but it is also a good thing not to exceed his 

best crop ever. So I survived that test. 

And you have to remember, I come from the Southern Plains. I 

live in a community in western Oklahoma where the historic average rainfall is somewhere between 24 and 28 inches a year. It is 

great when it comes over 7 different nights. Occasionally it comes 

in 3 nights. But that is a part of the challenge. And I know personally that if Mother Nature cooperates, you make a wheat crop. If 

Mother Nature doesn’t, then you spend a lot of hours with your 

2104

banker discussing how to get around the option of having a second 

crop. 

So these early experiences, yes, 35 years ago, and by the way, 

that is why my freshman year was spent at Sayre Junior College 

instead of Oklahoma State, was the effect of that first attempt at 

wheat farming on my personal finances, have given me an appreciate for just how challenging agriculture can be. And it gave me 

an appreciation for an effective safety net and crop insurance and 

all the other matters that this Committee considers. 

Our farmers and ranchers have to deal with the uncertainties of 

weather, the insecurities of market and many times dramatically 

unfair foreign competition. So it is critical that we get the policy 

right. With all the challenges that our farmers face, farm policy 

can’t be one of them. 

And to that end, I have said many times, and it is a reflection 

of what my colleagues have just noted, the farm bill that we craft 

has to recognize the diversity of agriculture in America. It has to 

work for all regions and all commodities, and that is why it is vitally important that the commodity title provide producers with options so they can choose the program that works best for them, 

whether it is protecting revenue or price. 

Additionally, the Agriculture Committee has heard very clearly 

from producers the importance of crop insurance, and I am committed to providing a strong crop insurance program for them. 

Today and tomorrow, we will hear from economists and a variety 

of agricultural leaders. I thank you for sharing your insights with 

us. The road ahead of us won’t be easy, and I am confident that 

working together we can craft a farm bill that continues to support 

the success story that is American agriculture, and thank goodness, 

once again, let me say without any hesitation, the comity, the civility of the relationship that I think all Members of the House Agriculture Committee have with each other. We want to get the policy 

right, we want to make it happen, and we are working together 

Again, thank you, Mr. Chairman, thank you, Mr. Ranking Member for this hearing today. 

[The prepared statement of Mr. Lucas follows:]

PREPARED STATEMENT OF HON. FRANK D. LUCAS, A REPRESENTATIVE IN CONGRESS

FROM OKLAHOMA

Good morning. 

I want to thank Chairman Conaway and Ranking Member Boswell for holding today’s hearing to review commodity programs and crop insurance as we prepare for 

the next farm bill. 

Last June, the Committee started the farm bill process by holding 11 audit hearings—focusing our attention on the U.S. Department of Agriculture—to look for 

ways to improve programs for farmers, increase efficiency and reduce spending. 

We then went out to the countryside this spring to hear directly from producers 

in the field. Now we are in the midst of wrapping up our final hearing series in 

Washington before we begin writing legislation. 

Along with crop insurance, Title I programs establish the very fabric of the farm 

safety net. They ensure that dramatic swings in commodity prices and volatile 

weather don’t put farmers and ranchers out of business. Further, they ensure that 

we—as consumers—always have a stable food and fiber supply. 

That safety net has to exist for all regions and all crops, and it has to be written 

with bad times in mind. These programs should not guarantee that the good times 

are the best, but rather that the bad times are manageable. 

Like the many farmers we heard from during our field hearings, I know firsthand 

about the challenges we’re trying to mitigate with sound farm policy. 

2105

I started my first farming operation with a wheat crop that put me in a financial 

squeeze. The second wheat crop performed better. It matched the historic record for 

the farm. The difference between those two crop seasons was rain. It rained at the 

right time for the second crop; it didn’t for the first. 

Remember, I’m from the Southern Plains in a community where the historic rain 

average is somewhere between 24 and 28 inches. It usually comes in 4 nights. I 

know personally that if Mother Nature cooperates, you make a wheat crop. If Mother Nature doesn’t, you sort out your finances. 

This early experience gave me an appreciation for just how challenging agriculture can be. It gave me an appreciation for an effective safety net and crop insurance, and all the other matters this Committee considers. 

Our farmers and ranchers have to deal with the uncertainties of weather, the insecurities of markets, and many times dramatically unfair foreign competition, so 

it’s critical that we get policy right. With all the challenges that our producers face, 

farm policy can’t be one of them. 

To that end, as I have said many times, farm policy has to be equitable. The farm 

bill that we craft has to recognize the diversity of agriculture in America. It has to 

work for all regions and all commodities. 

That’s why it is vitally important that the commodity title provide producers with 

options so they can choose the program that works best for them whether it is protecting revenue or price. 

Additionally, the Agriculture Committee has heard very clearly from producers 

the importance of crop insurance. I am committed to providing a strong crop insurance program for them. 

Today and tomorrow, we’ll hear from economists and a variety of agricultural 

leaders. I thank you for sharing your valuable insight with us. The road ahead of 

us won’t be easy. But I’m confident that by working together, we can craft a farm 

bill that continues to support the success story that is American agriculture.

The CHAIRMAN. Thank you, Mr. Chairman. 

I now turn to my good friend, Leonard Boswell, for any comments he has to make. 

OPENING STATEMENT OF HON. LEONARD L. BOSWELL, A 

REPRESENTATIVE IN CONGRESS FROM IOWA 

Mr. BOSWELL. I will be short. I think I will just summarize. I appreciate that I was able to get through traffic and hear some of 

what Congressmen Peterson and Lucas had to say. And I missed 

yours, Mike, but I am sure it was good, and I would probably associate myself with it. 

Congressman Lucas, you have caused me to reflect a little bit. I 

left a career in the military and came back to continue my dream 

about that time, that many years ago, and walked right into the 

ag crisis we had in the late 1970s, early 1980s. Mr. King, you remember some of that. 

Mr. KING. Oh, yes. 

Mr. BOSWELL. And I got through it. 

But I just concur with what you have said. I think we have to 

do those things. And I go back to my three A’s, if you will, the safety net has to be Federal Crop Insurance that is available, accessible and affordable. And so with that, I would like to submit my 

formal notes for the record, if I could, and let us get moving along. 

Thank you so much. 

[The prepared statement of Mr. Boswell follows:]

PREPARED STATEMENT OF HON. LEONARD L. BOSWELL, A REPRESENTATIVE IN

CONGRESS FROM IOWA

I would like to thank everyone for joining us here today as we discuss America’s 

commodity programs and crop insurance. I would especially like to thank our witnesses today. This Committee looks forward to hearing your valuable insight as we 

work to craft the Food, Conservation, and Energy Act of 2012. 

2106

Being from Iowa, one of the largest agricultural states in the country, I understand the challenges that farmers and those in the agriculture business are facing 

today. With Iowa ranking number one in the nation in pork, egg, corn and soybean 

production, the farm bill affects a great deal of my home state. Much of Iowa’s economy is directly or indirectly tied to agriculture and bioscience in some fashion and 

we are proud of our strong tradition of feeding and fueling, the world. 

I believe that is why it is so important for us to construct a bill that will not only 

help Iowa move forward but the rest of the country as well. 

Now more than ever an adequate safety net is essential to ensure that we maintain the safest, most plentiful and most affordable food supply in the world. Each 

year approximately 90 million people are added to the world population. Although 

it is a daunting task, I am confident that America’s producers will acclimate and 

innovate to produce the nutrition that is needed across the world. 

Unfortunately, doing more with less is something this Committee is all too familiar with. That is just one reason we must come together and complete farm bill this 

summer to avoid further reductions to farm programs. 

This legislation is critical to programs that conserve land, invest in local economies, and provide risk mitigation for producers. A big reason our producers succeed 

in an industry that relies on uncontrollable forces—the rain, sun, and soil—is because we provide a support system. In return, they have given Americans the most 

abundant, safe, and affordable food on the planet. 

Thank you again to the witnesses testifying before the Subcommittee. Your testimony will be an essential means for us as we continue to move forward with the 

2012 Farm Bill.

The CHAIRMAN. Thanks, Mr. Boswell. 

The chair would request that other Members who have opening 

statements that you would submit those for the record so that we 

can now begin our testimony. 

The first panel is distinguished economists, and I am tickled to 

death that they chose to come here this morning. First off, we will 

have Dr. Joe Outlaw, Professor and Extension Economist, Department of Agricultural Economics, and Co-Director, Agricultural and 

Food Policy Center for Texas A&M University, College Station. We 

have Dr. Gary Schnitkey, Professor, Department of Agriculture and 

Consumer Economics, University of Illinois, Urbana, Illinois, and 

Dr. Keith Collins, Economic Advisor to the National Crop Insurance Services, NCIS, or the Naval Criminal Investigative Service, 

depending on how you want to associate yourself, former USDA 

Chief Economist from Centreville, Virginia. Thank you, gentlemen, 

for being here. 

Dr. Outlaw, you may begin. 

STATEMENT OF JOE L. OUTLAW, PH.D., PROFESSOR AND

EXTENSION ECONOMIST-FARM MANAGEMENT & POLICY,

DEPARTMENT OF AGRICULTURAL ECONOMICS, TEXAS A&M 

UNIVERSITY; CO-DIRECTOR, AGRICULTURAL AND FOOD 

POLICY CENTER, COLLEGE STATION, TX 

Dr. OUTLAW. Chairman Conaway, Members of the Committee, 

thank you for the opportunity to testify on behalf of the Agricultural and Food Policy Center at Texas A&M University as you 

begin to formulate the commodity and risk management provisions 

of the next farm bill. 

As many of you know, our primary focus has been on analyzing 

the likely consequences of policy changes at the farm level with our 

one-of-a-kind data set of information that we collect from commercial farmers and ranchers located across the United States. For 29 

years, we have worked with the Agriculture Committees in both 

the U.S. Senate and House of Representative, providing Members 

2107

and Committee staff objective research regarding the potential 

farm-level effects of agricultural policy changes. Working closely 

with commercial producers has provided our group with a unique 

perspective on agricultural policy. While we normally provide the 

results of policy analysis to your staff without commentary, I was 

specifically asked to provide some preliminary analysis and perspective today. 

The results I am going to discuss were developed with FAPRI at 

Missouri’s recently completed January 2012 10 year baseline projections, and we will focus on 64 crop farms located in 19 states. 

For this hearing, we conducted a preliminary analysis of the PLC 

Program as defined in the farm bill proposal to the Super Committee and the ARC as defined in the Senate Agriculture Committee passed language. We applied these options to the representative farms under the current prices and a low-price scenario. 

In the low-price scenario, commodity prices were decreased each 

year by the same percentage for all commodities until they were 

roughly 1⁄2 of the 2011 baseline price. In general, we found the following: The ARC program provided higher Title I safety net support than PLC under the baseline price projections. That was 43 

out of 64 farms. I would note that three farms are 100 percent cotton, would be in STAX, so the rest of the numbers I am going to 

give you are basically out of 61. However, when you combine SCO, 

the overall net cash farm income would be highest for PLC and 

SCO for 60 out of 61 farms compared to ARC SCO. Under the lowprice scenario, the results were 51 out of 64 farms would prefer the 

PLC, and again, the net income would be protected greater under 

the PLC SCO program under low prices. 

Additionally, a few points come to mind out of this analysis. The 

producer safety net has been an important part of agriculture policy for many years, not a guaranteed profit or a guaranteed portion 

of the baseline, but a minimum level of support that will allow a 

producer to withstand the occasional setback due to poor yields, 

prices or adverse effects from world events. Second, most would 

agree that the safety net should provide assistance when producers 

need it and not provide assistance when producers don’t need it. 

Obviously, deciding when and how much assistance producers need 

is a key. 

The discussion surrounding the price loss coverage alternative 

and ARC alternative has been interesting. Most of the attention 

has been placed on the potential problems that a fixed reference 

price in the PLC Program could create in terms of driving planting 

decisions. In reality, a reference price will not drive planting decisions if the reference price is set below the cost of production, especially with the relatively high current prices for some crops. In the 

event of a price decline, producers will never receive the actual reference price for their crop due to the payment fraction and the difference between the countercyclical payment yields and actual 

yields. 

There is a standard complaint that some commodities would not 

get their fair share of baseline dollars with the PLC Program. My 

answer is that if the reference price of the commodity is taken into 

account, cost of production, then if the commodity didn’t receive 

any government payments, then the commodity didn’t warrant any 

2108

because market prices were greater than the effective reference 

price. 

What I find most interesting is that no one is talking about the 

ARC Program’s ability to enable some commodities to nearly lock 

in a profit for at least a few years because ARC uses market prices 

and a revenue benchmark that are near their all-time high. Figures 

2 through 6 provide a 37 year look at the 5 year Olympic average 

market prices that would be used in the revenue benchmark for selected program crops. The vertical line on each graph indicates the 

break between historical prices and CBO March baseline prices. 

The horizontal line across each graph is our estimate of the average cost of production for producing the commodity in our representative farms in 2011. You will notice that corn, soybeans, 

wheat and grain sorghum are projected to have 5 year Olympic average prices that are above 2011 production costs. If paid on planted acres, the revenue safety net program could nearly guarantee a 

profit to these crops, depending on the final payment fraction, 

while others protected a loss. 

And finally, the days of one safety net program for all program 

commodities are likely over. It is apparent that many would like 

to see a revenue-based plan that does not work for everyone the 

same. In this situation, it would seem reasonable to allow producers a choice. 

Mr. Chairman, this completes my statement. 

[The prepared statement of Dr. Outlaw follows:]

PREPARED STATEMENT OF JOE L. OUTLAW, PH.D., PROFESSOR AND EXTENSION

ECONOMIST-FARM MANAGEMENT & POLICY, DEPARTMENT OF AGRICULTURAL

ECONOMICS, TEXAS A&M UNIVERSITY; CO-DIRECTOR, AGRICULTURAL AND FOOD

POLICY CENTER, COLLEGE STATION, TX 

Chairman Conaway and Members of the Committee, thank you for the opportunity to testify on behalf of the Agricultural and Food Policy Center at Texas A&M 

University as you begin to formulate the commodity and risk management provisions of the next farm bill. As many of you know, our primary focus as been on analyzing the likely consequences of policy changes at the farm level with our one-ofa-kind dataset of information that we collect from commercial farmers and ranchers 

located across the United States. 

Our Center was formed by our Dean of Agriculture at the request of Congressman 

Charlie Stenholm to provide Congress with objective research regarding the financial health of agriculture operations across the United States. For 29 years we have 

worked with the Agriculture Committees in both the U.S. Senate and House of Representatives providing Members and Committee staff objective research regarding 

the potential farm level affects of agricultural policy changes. 

Working closely with commercial producers has provided our group with a unique 

perspective on agricultural policy. While we normally provide the results of policy 

analyses to your staff without commentary, I was specifically asked to provide some 

preliminary analysis and perspective today. 

In 1983 we began collecting information from panels of four to six farmers or 

ranchers that make up what we call representative farms located in the primary 

production regions of the United States for most of the major agricultural commodities (feedgrain, oilseed, wheat, cotton, rice, cow/calf and dairy). Often, two farms are 

developed in each region using separate panels of producers: one is representative 

of moderate size full-time farm operations, and the second panel usually represents 

farms two to three times larger. 

Currently we maintain the information to describe and simulate 98 representative 

crop and livestock operations in 28 states. We have several panels that continue to 

have the original farmer members we started with back in 1983. We update the 

data to describe each representative farm relying on a face-to-face meeting with the 

panels every 2 to 3 years. We partner with FAPRI at the University of Missouri 

who provides projected prices, policy variables, and input inflation rates. The proVerDate 0ct 09 2002 12:54 Dec 11, 2012 Jkt 041481 PO 00000 Frm 00520 Fmt 6601 Sfmt 6621 I:\DOCS\112-30\74372.TXT BRIAN
2109

ducer panels are provided pro forma financial statements for their representative 

farm and are asked to verify the accuracy of our simulated results for the past year 

and the reasonableness of a 6 year projection. Each panel must approve the model’s 

ability to reasonably reflect the economic activity on their representative farm prior 

to using the farm for policy analyses. 

The results I am going to discuss today were developed with FAPRI’s recently 

completed January 2012 10 year baseline projections and will focus on the 64 crop 

farms located in 19 states. 

For this hearing we conducted a preliminary analysis of the PLC program as defined in the farm bill proposal to the Super Committee and the ARC as defined in 

the Senate Agriculture Committee passed language. We applied these options to the 

representative farms under the current prices and a low price scenario. In the low 

price scenario, commodity prices were decreased each year by the same percent for 

all commodities until they were roughly 1⁄2 of the 2011 baseline price. In general, 

we found the following:

• The ARC program provided higher Title I safety net support than PLC under 

the Baseline price projections. (43 out of 64 farms)

• The PLC program provided higher safety net support from SCO (Title XI) under 

the Baseline price projections. (61 out of 61 farms) (three farms are 100% cotton 

and would be in STAX)

• Overall, net cash farm income is highest for PLC and SCO for 60 out of 61 

farms.

• Under the low price scenario, PLC provided higher Title I safety net support 

than the ARC program. (51 out of 64 farms)

• The low price and baseline scenario indicated similar net cash farm income results for PLC and SCO.

Additionally, a few points come to mind out of this analysis. 

The producer safety net has been an important part of agricultural policy for 

many years. Not a guaranteed profit or a guaranteed portion of the baseline, but 

a minimum level of support that will allow a producer to withstand the occasional 

setback due to poor yields, prices or adverse effects from world events. A lot of attention is being paid to relative payouts under the current CBO baseline, but it is 

much more important to understand how the safety net works when prices fall. 

Second, most would agree that the safety net should provide assistance when producers need it and not provide assistance when producers don’t need it. Obviously, 

deciding when and how much assistance producer’s need is the key. The discussion 

surrounding the price loss coverage (PLC) alternative and the agriculture risk coverage (ARC) alternative has been interesting. Most of the attention has been placed 

on the potential problems that a fixed reference price in the PLC program could create in terms of driving planting decisions. In reality, a reference price will not drive 

planting decisions if the reference price is set below the cost of production, especially 

with the relatively high current prices. In the event of a price decline, producers 

will never receive the actual reference price for their crop due to the 0.85 payment 

fraction (85%) and the difference between countercyclical payment yields and actual 

yields. 

Prior to the 1990s the safety net included target prices, deficiency payments, base 

acres, and acreage reduction programs. At that time, the safety net did drive planting decisions because program participation required planting on those base acres. 

This is not the case with currently discussed options as producers are allowed to 

choose the crop that is expected to be the most profitable for them. 

There is the standard complaint that some commodities would not get their ‘‘fair 

share’’ of baseline dollars with the PLC program. My answer is that if the reference 

price for the commodity is set taking into account cost of production, then if a commodity didn’t receive any government payments then that commodity didn’t warrant 

any because market prices were greater than the effective reference price. 

What I find most interesting is that no one is talking about the ARC program’s 

ability to enable some commodities to nearly lock in a profit (for at least a few 

years) because ARC uses market prices in the revenue benchmark that are near 

their all-time high. Figures 2–6 provide a 37 year look at the 5 year Olympic average market prices that would be used in the revenue benchmark for selected program crops. The vertical line on each graph indicates the break between historical 

prices and where CBO March 2012 Baseline prices were used to develop the 5 year 

average for future years. The horizontal line across each graph is our estimate of 

the average cost of production for producing the commodity on our representative 

farms in 2011. You will notice that corn, soybeans, wheat and grain sorghum are 

projected to have 5 year Olympic average prices that are above 2011 production 

2110

costs. If paid on planted acres, the revenue safety net program could nearly guarantee a profit to these crops, depending on the final payment fraction while others 

protected a loss. This disparity in initial protection levels makes it difficult to provide similar levels of support to commodities with low benchmarks when using recent prices to set the revenue benchmark. 

And finally, the days of one safety net program for all program commodities are 

likely over. Starting with the ACRE program, groups have attempted to capture the 

recent high market prices by using them to establish the revenue benchmark from 

which losses would be measured. In reality, this just doesn’t provide every commodity with the same level of safety net protection. It is apparent that many would 

like to see a revenue based plan that does not work for everyone the same. In this 

situation, it would seem reasonable to allow producers a choice. 

Mr. Chairman, that completes my statement.

2111

CHARTS

Figure 1. Representative Farms and Ranches

Figure 2. Comparison of 5 year Olympic average prices and Average Cost 

of Production Across AFPC Farms in 2011

Corn

Uses March 2012 CBO estimate for future price in Olympic average calculation. 


11230141.eps 11230142.eps
2112

Figure 3. Comparison of 5 year Olympic average prices and Average Cost 

of Production Across AFPC Farms in 2011

Soybeans

Uses March 2012 CBO estimate for future price in Olympic average calculation. 

Figure 4. Comparison of 5 year Olympic average prices and Average Cost 

of Production Across AFPC Farms in 2011

Rice

Uses March 2012 CBO estimate for future price in Olympic average calculation. 


11230143.eps 11230144.eps
2113

Figure 5. Comparison of 5 year Olympic average prices and Average Cost 

of Production Across AFPC Farms in 2011

Wheat

Uses March 2012 CBO estimate for future price in Olympic average calculation. 

Figure 6. Comparison of 5 year Olympic average prices and Average Cost 

of Production Across AFPC Farms in 2011

Grain Sorghum

Uses March 2012 CBO estimate for future price in Olympic average calculation. 


11230145.eps 11230146.eps
2114

Figure 7. Comparison of 5 year Olympic average prices and Average Cost 

of Production Across AFPC Farms in 2011

Upland Cotton

Uses March 2012 CBO estimate for future price in Olympic average calculation.


11230147.eps

1.00 

0.90 

0.80 

0.70 

0.60 ..c 

.::::::. 0.50 <II-

~ 

L.. ........... /""\. I -

" ./ 

"---/", 

0.40 

0.30 

0.20 

0.10 

- 5 YR Oly Avg Price - Avg. Cost of Production Across AFPC Farms 
2115

The CHAIRMAN. Thank you, Dr. Outlaw. 

Dr. Schnitkey. 

STATEMENT OF GARY D. SCHNITKEY, PH.D., FULL AND

ASSOCIATE PROFESSOR, DEPARTMENT OF AGRICULTURAL 

AND CONSUMER ECONOMICS, UNIVERSITY OF ILLINOIS,

URBANA, IL 

Dr. SCHNITKEY. Chairman Conaway, Ranking Member Boswell, 

and Members of the Subcommittee on General Farm Commodities 

and Risk Management, I thank you for this opportunity to speak 

with you today. 

Much of the focus on the 2012 Farm Bill has been on risk management, and that is going to be the subject of my comments, and 

I have three of those. 

First, as has already been mentioned here today, crop insurance 

is an important risk management program, and many farmers view 

it as their most important risk management program. We see very 

high use rates on crops. Corn, soybeans, wheat, cotton and peanuts 

have 80 percent of their acres on buy-up. Rice is lagging. But given 

the importance of crop insurance, it is important to keep improving 

crop insurance and meeting the needs equitably and efficiently for 

those crops such that crop insurance continues to be an important 

program. 

The second thing related to crop insurance is that there are gaps 

in what crop insurance will provide. Crop insurance does a very 

good job of protecting against revenue within a year but if something happens that causes multi-year revenue to decline across 

years, there are gaps. One of the big ones that cause those are 

price declines. We saw that in both the 1980s and 1990s when 

many crop prices fell below their long-run averages. These are situations in which crop insurance wouldn’t have covered those losses 

during those years. 

The second point is that revenue-based programs can fill that 

gap if properly designed. Agricultural risk coverage, the policy or 

the program included in the Senate bill, does fill those gaps. In 

looking at corn in Illinois, if it had existed from 1977 through 2010, 

would have made payments in the 1980s and the late 1990s, both 

periods in which financial stress occurred because of low prices. 

Again, those risk management programs based on average prices 

and average yields react to the market and can provide useful coverage in those situations. 

My third point is that payments on these revenue programs such 

as ARC will be relatively even when compared to the crop revenue. 

According to CBO estimates, corn, soybeans, wheat, cotton, rice 

and peanuts all fall within a two to five percent range, meaning 

according to CBO estimates, spending would be between two and 

five percent of the crop revenue projected over 2004 to 2012. That 

narrow range suggests that these programs will protect risk across 

those crops. We don’t see one crop having a one percent range and 

ten percent range but it will provide protection. Obviously, there 

are other methods for doing that but risk revenue programs are 

one of those alternatives. 

I thank the Committee for this opportunity to speak with you 

today. 

2116

[The prepared statement of Dr. Schnitkey follows:]

PREPARED STATEMENT OF GARY D. SCHNITKEY, PH.D., FULL AND ASSOCIATE

PROFESSOR, DEPARTMENT OF AGRICULTURAL AND CONSUMER ECONOMICS,

UNIVERSITY OF ILLINOIS, URBANA, IL 

Chairman Conaway, Ranking Member Boswell, and Members of the Subcommittee on General Farm Commodity’s and Risk Management, thank you for this 

opportunity to address you as deliberations continue on the commodity and crop insurance titles of the 2012 Farm Bill. I am a professor in the Department of Agricultural and Consumer Economics at the University of Illinois at Urbana-Champaign. 

My work focuses on risk and management issues related to farms. Much of this 

work has dealt with evaluating crop insurance and farm policy alternatives. I hold 

a research, extension, and teaching position, working extensively with farmers and 

farm groups. 

Thus far, deliberations on the 2012 Farm Bill have taken a risk management 

focus. Related to that focus, I have six points which I wish to make. These points 

suggest that commodity programs focusing on revenue can complement widely used 

crop insurance programs. 

Prices have increased for many crops since 2006: Between 1975 through 

2006, corn prices average $2.35 per bushel (see Table 1). Since 2006, corn prices 

have average $4.64 per bushel, 1.97 times the price average from 1975 through 

2006. Since 2006, soybean prices have been 1.77 times higher than from 1975 

through 2006, wheat 1.89 times higher, cotton 1.22 times higher, and rice 1.83 times 

higher. Of the program crops shown in Table 1, peanuts are the only crop that did 

not have a price increase.

Table 1. National Crop Year Prices by Period 

Unit 

Period 2007–11 Divided 

by 1975–06 1975–2006 2007–2011P 

Corn Bushel 2.35 4.64 1.97

Soybeans Bushel 5.97 10.53 1.77

Wheat Bushel 3.29 6.23 1.89

Cotton pound 0.58 0.71 1.22

Rice cwt. 7.74 14.18 1.83

Peanuts lbs. 0.25 0.23 0.92

Source: National Agricultural Statistical Service. 

Many agricultural economists believe that new long-run price averages have been 

reached since 2006. For example, Irwin and Good suggest that corn prices will average approximately $4.60 until some structural change occurs in the agricultural sector (see Marketing in a New Era, a March 29, 2011 entry on farmdocDaily

http://www.farmdocdaily.illinois.edu/2011/03/

alnewleralinlcroplprices.html). Of course, there will be periods in which 

prices are $4.60, as has occurred in the last 2 years. There will also be periods in 

which prices average below $4.60. These low price periods could be extend and result in financial stress. 

Higher commodity prices impact policy for three reasons. First, target prices and 

loan rates contained in the 2008 Farm Bill are relatively low compared to current 

prices for a number of commodities including corn, soybeans, and wheat. Hence, the 

traditional countercyclical and marketing loan programs provide little risk protection for these commodities. Second, determining appropriate target prices and loan 

rates in a volatile price environment is difficult. While many believe prices have 

reached new levels for some crops, there is no guarantee that those long-run price 

levels will not change again, leading to the need to again change target prices and 

loan rates. Third, the higher long-run averages for commodity prices do not mean 

an end to the boom to bust nature of agriculture. In the early to middle 1970s, commodity prices reached higher levels, leading to strong financial performance for 

many farms during the middle to late 1970s. This was followed by the 1980s, a period in which many farms faced financial stress. Similar events could happen again 

because production costs have risen, leading to my second point. 

Production costs have risen. Production costs on crop farms have increased. 

This is illustrated in Figure 1, which shows per acre non-land costs to grow corn 

and soybeans on central Illinois farms with high-productivity farmland. This data 

comes from farms enrolled in Illinois Farm Business Farm Management (FBFM), 

2117

a farm record-keeping and financial service offered to Illinois farmers. These costs 

are illustrative of overall cost trends faced in U.S. crop production. 

Figure 1. Non-Land Costs for Corn, Central Illinois High Productivity 

Farmland

Source: Illinois Farm Business Farm Management.

For corn on these central Illinois farms, non-land costs have increased from an 

average of $262 per acre from 2000 through 2005 to projected levels of over $500 

per acre in 2011 and 2012. These costs do not include land costs. An average cash 

rent for land of this productivity is about $300 per acre in 2012, with many cash 

rents being significantly higher than $300 per acre. Adding non-land costs of $500 

per acre and land costs of $300 per acre gives total costs of $800 per acre. Given 

an expected yield of 195 bushels per acre, the breakeven corn price is $4.10 per 

bushel. These higher break-even prices illustrate that financial stress will occur at 

prices that are much higher post 2006. Prices below $4.00 without high yields to 

offset those lower prices would result in low and negative incomes on Illinois farms. 

The high levels of costs also illustrate the risks that exist. Low prices and yields 

can quickly lead to very large losses on farms. 

Crop insurance has become a prime crop insurance program. Crop insurance use has increased over as illustrated in Figure 1. This figure shows acres insured using buy-up policies divided by acres planted as reported by the National Agricultural Statistical Services (NASS). As can be seen, insurance use has increased 

over time. In 2011, percent of acres insured using buy-up coverage were 81% for 

corn, 80% for soybeans, 82% for wheat, 82% for cotton, 80% for peanuts, and 48% 

for rice. Of these crops, the one lagging in participation is rice. 


11230148.eps
2118

Figure 2. Crop Insurance Use as Percent of Planted Acres

Source: Risk Management Agency, National Agricultural Statistics Service.

On many farms, crop insurance has become the most important risk management 

tool. The importance of crop insurance as a risk management tool holds implications 

for the design of commodity title programs. First, commodity programs focusing on 

risks not covered by crop insurance would provide an important benefit. Crop insurance will cover yield and price losses that occur within a year. If, for example, yields 

are much lower than historic Actual Production History (APH) yields, those losses 

will be covered by crop insurance. Effectively, crop insurance provides disaster protection on those farms that purchase crop insurance. 

Second, efforts should continue to ensure that crop insurance provides an equitable and effective safety net for all crops across all regions. In terms of equity, premium setting becomes an important issue. The Risk Management Agency (RMA) is 

charged with setting premiums such that total premiums roughly equal expected 

losses. Over time, this should result in total premiums equaling payments causing 

insurance payments divided by total premiums—the loss ratio—to roughly equal 

one. Table 2 shows loss experience from 1995 through 2010 by crop. As can be seen 

loss ratios vary by crop with corn, soybeans, and rice having low loss ratios compared to other crops. This means that total premiums exceeded insurance payments. 

RMA conducts a study, finding that premiums were too high for corn and soybeans 

in the Midwest. Lower premiums are being implemented, with the first portion of 

the premium reduction implemented in 2012. Implementing the remaining reductions in future years is important in terms of equity. Other efforts to strengthen 

crop insurance should continue.

Table 2. Loss Ratio by Crop, 1995–2011

Crop Loss Ratio 

Corn 0.59

Soybeans 0.65

Wheat 0.97

Cotton 1.05

Rice 0.71

Peanuts 1.20

Source: Risk Management Agency. 

Gaps exist in crop insurance coverage. Crop insurance provides effective coverage for yield and price declines that occur within the year. For revenue insurance, 

a price at the beginning of the growing season is set using futures contacts. This 

price is reflective of market conductions at that point in time and yields are based 

on historical yields. If prices or yields fall during the year, crop insurance will make 


11230149.eps
2119

payments. Hence, insurance provides coverage for yield and price declines that occur 

during the year. 

The gap in coverage occurs when revenue declines across years. In the past, price 

declines would have caused these gaps. Crop insurance will not protect when prices 

decline across years, leading to lower guarantees at the beginning of the year. To 

illustrate, Figure 1 shows price histories for corn, soybeans, wheat, cotton, rice, and 

peanuts; six crops that receive commodity program payments. Each year’s price is 

stated as the current year price divided by the average of the five previous prices. 

A ratio below one indicates that that the current year’s price is below the previous 

5 year average. As can be seen in Figure 3, all crops have had periods in which crop 

revenue is below the 5 year average. 

During two periods, a number of the commodities had prices below their 5 year 

averages: (1) in the mid-1980s and (2) in the late 1990s and early 2000s. Both of 

these periods were times of financial stress in agriculture. Lost revenue due to low 

prices during the mid-1980s and late 1990s would not have been covered by crop 

insurance, because projected prices would have adjusted downward. Not covering 

these losses suggests an important role for farm bill commodity programs. Farm bill 

commodity programs can cover revenue declines of a multi-year nature due to declining prices or other factors. These have been labeled ‘‘shallow losses’’ because 

they occur before crop insurance pays, but these shallow losses are what have 

caused financial stress in the agricultural sector in the past. 

Figure 3. Current Price Divided by Five-Year Average, National Season Average Prices

Farm Bill commodity programs based on revenue can aid in covering 

multi-year revenue declines. The Aggregate Risk and Revenue Management 

(ARRM) program sponsored by Senators Brown, Thune, Durbin, and Lugar is an example of such a program. The Agricultural Risk Coverage (ARC) program passed 

by the Senate Agriculture Committee is another example of such a program. 

These programs typically have a higher coverage level. For example, ARC has a 

coverage level of 89% of benchmark revenue, where benchmark revenue is the 5 

year Olympic average of prices times the 5 year Olympic average of county or farm 

yields, depending on a choice made by the farmer. These programs also have a maximum payment to reduce overlap with crop insurance. 

Simulated historical payments suggest that payments occur in years in which revenues are low. Figure 4 shows simulated ARC payments had it existed from 1977 

through 2010 (More detail on this approach is given in a farmdocDaily blog post entitled Comparison of ARRM versus SRRP Proposal at http://


11230150.eps
2120

www.farmdocdaily.illinois.edu/2011/10/comparisonloflarrmlversuslsrrp.html.) 

Had it existed, ARC would have made payments in 7 years. Six of those years would 

have occurred in 1986 through 1988 and 1999 through 2001. These two periods correspond to the years of financial stress in Midwest agriculture. 

Figure 4. Simulated Payments from ARC, DeKalb County, Illinois

Note: Payments are stated in today’s terms, not in historical terms.

ARC would make payments when prices fall below long-run averages. If ARC 

were implemented under today’s conditions, payments would occur if corn prices fell 

below $4.00, given that yields are close to expectations (see ARC and Multi-year 

Price Declines in farmdocDaily http://www.farmdocdaily.illinois.edu/2012/05/

arclandlmultiyearlpriceldeclin.html). These ARC payments would cover a portion of the loss in revenue that occurred if prices decline and remain low over several years. 

Revenue-based commodity program spending will be roughly proportional to crop value. According to Congressional Budget Office (CBO) projections, 

payments as a percent of crop revenue are likely to be within a narrow range of 

one another across crops. This suggests that costs relative to the value of the crop 

are near one another. For example, if projected costs are 2.5% of crop value for two 

crops, this suggests that the risk protection offered by the revenue programs have 

the same relative value. Having roughly the same percentages is one indicator that 

revenue-based programs will perform relative similarly across crops. Stated alternatively, revenue risks across crops result roughly in the same outlays as a percent 

of crop value. 

Projected costs as a percent of crop revenue are shown in Table 3, which contains 

Congressional Budget Offices (CBO) spending projections under the farm bill contained in the Senate Manager’s Amendment. The CBO score for this final Senate 

Agriculture Committee farm bill was not available when this testimony was written. 

There will be differences in projections in the farm bill passed by the Senate Agriculture Committee from those shown in Table 3.


11230151.eps
2121

Table 3. Congressional Budget Office Estimates under 2008 Farm Bill and 

Senate Manager’s Amendment 

Congressional Budget Office (CBO) Spending 

Estimates (2014–2022) Manager’s 

Amendment 

Divided by 

Planted 

Acres 4

Manager’s 

Amendment 

as a Percent 

of Crop

Revenue 5

2008 Farm 

Bill 1

Senate

Manager’s

Amendment 2–3

Change 

($Million) $/acre

Corn 20,199 14,335 ¥29% 17.70 2.13%

Soybeans 6,974 8,137 17% 11.78 2.31%

Wheat 10,058 3,614 ¥64% 7.64 2.70%

Upland Cotton 6,252 3,227 ¥48% 32.79 5.39%

Rice 3,913 963 ¥75% 35.08 3.52%

Peanuts 939 646 ¥31% 53.70 5.87%

1 Based on CBO baseline released on March 13, 2012 (www.cbo.gov/topics/agriculture). 2 Based on CBO baseline and April 26, 2012 estimates of Senate Manager’s Amendment 

(www.cbo.gov/topics/agriculture). 3 Includes STAX payments for cotton, and peanut revenue insurance for peanuts. 

4Senate Manager’s Amendment spending stated on a yearly basis divided by projected planted 

acres in March 13, 2012 CBO baseline projections. 5Planted acres divided by projected crop revenue in CBO March 2012 baseline. 

CBO projected spending estimates are shown for 2014 through 2022, the period 

after the transition out of the 2008 Farm Bill and the full implementation of 2012 

Farm Bill. On a per acre basis, projected spending is $17.70 per acre for corn, 

$11.78 for soybeans, $7.64 for wheat, $32.79 for upland cotton, $35.08 for rice, and 

$53.70 for peanuts. 

Spending stated as a percent of crop revenue are near each other. Projected 

spending as a percent of crop revenue is 2.13 percent for corn, 2.31 percent for soybeans, 2.70 percent of wheat, 5.39 percent for upland cotton, 3.52 percent for rice, 

and 5.87 percent for peanuts (see Table 3). Corn, soybeans, and wheat payments are 

almost all ARC payments while the remaining crops have additional payments. Cotton, rice, and peanuts have significant projected marketing loan payments, peanuts 

include a new revenue product, and cotton is not in ARC but is in STAX. If rice 

and peanuts did not include programs other than ARC, the five crops with ARC programs would have spending as a percent of gross revenue to be relatively near one 

another. This suggests that there are not wide divergences in spending relative to 

crop value across crops. 

Spending on a program like ARC will be different than under the current farm 

bill, where payments predominately arise from direct payments. According to CBO 

estimates, corn spending would decrease by 29% under the Senate Managers 

Amendment compared to the 2008 Farm Bill, soybeans would increase 17%, wheat 

decrease by 64%, upland cotton would decrease by 48 percent, rice by 75%, and peanut by 31% (see Table 3). Changes occur for two primary reasons. First, there are 

differences in base acres relative to planted acres. Most of the 2008 Farm Bill payments are direct payments, which are made on base acres. ARC, on the other hand, 

would make payments on a planted acre basis. Corn and soybeans have more planted acres than base acres (see Table 4). Soybean planted acres are 53% higher than 

base acres, resulting in the higher payments for soybeans. Wheat, cotton, rice, and 

peanuts are projected to have lower planted acres compared to base acres, leading 

to lower payments. Second, there are differences in average direct payment rates 

per acre compared to per acre spending projected for the manager’s amendment. According to values in CBO baseline spending, corn has an average direct payment 

rate of $23 per acre, soybeans of $11 per acre, wheat of $14 per acre, cotton of $32 

per acre, rice of $95 per acre, and peanuts are $54 per acre. Relative to per acre 

amendment spending, rice loses $60 per acre ($35 amendment spending in Table 

3—$95 direct payment spending), wheat loss $6 per acre, corn losses $5 per acre. 

Soybeans, cotton, and peanuts have roughly the same spending per acre in the Manager’s Amendment as compared to direct payments.

2122

Table 4. Base and Planted Acres by Crop 

Crop Base Acres Planted Acres Planted as a % of 

Base 

Million acres

Corn 84.1 90.0 107%

Soybeans 50.1 76.7 153%

Wheat 73.8 52.5 71%

Upland Cotton 18.1 10.9 60%

Rice 4.4 3.1 69%

Peanuts 1.5 1.3 91%

Source: Base and planted acres taken from March 2012 Baseline Spending from 

Congressional Budget Office. 

Summary. A program that bases its payments on revenue can provide effective 

coverage that will mitigate risk. Designed properly, these programs can complement 

protection by crop insurance, and result in expenditures roughly proportional to crop 

value.

The CHAIRMAN. Thank you, Doctor. 

Dr. Collins, your statement. 

STATEMENT OF HON. KEITH COLLINS, PH.D., ECONOMIC

ADVISOR, NATIONAL CROP INSURANCE SERVICES; FORMER 

USDA CHIEF ECONOMIST, CENTREVILLE, VA 

Dr. COLLINS. Chairman Conaway, Mr. Boswell, Mr. Lucas and 

Mr. Peterson and other Members of the Subcommittee, thank you 

very much for the invitation to participate in today’s hearing. I am 

going to focus my comments on crop insurance, given my former 

role as Chairman of the Board of Directors of the Federal Crop Insurance Corporation and given my current role as Advisor to National Crop Insurance Services. NCIS is a trade association that 

represents all 15 companies that sell crop insurance, and our business is provision of information, data, statistics and research. 

The Subcommittee has heard a lot about crop insurance in the 

lead-up to the 2012 Farm Bill, and it is obvious why crop insurance 

is in the news and why producers want to protect the program in 

the 2012 Farm Bill. It has grown dramatically in importance over 

the last couple of decades. 

To quantify that growth, in 2011, we had 84 percent of the 315 

million acres in the United States that were planted, the principal 

crops. Eighty-four percent of that was enrolled in the crop insurance program, and that compares with only 12 percent back in 

1981 when the modern program was born. 

Coverage levels are up substantially. Actuarial performance is 

excellent and new products are steadily being introduced. This 

growth reflects Congressional objectives and actions. Incentives to 

private companies to sell and service policies have been crucial for 

expanding participation. Premium subsidy increases, new products, 

improved ratemaking, higher and more volatile commodity prices, 

education programs, public and private risk sharing have all contributed to the program growth. 

Insurance is fundamental to managing risks across all areas of 

our economy. I think the popularity of crop insurance, the fact that 

farmers share in the cost of the program, the fact that companies 

share in the taxpayer risk of the program make crop insurance a 

2123

rational policy choice to be the primary vehicle farmers use to manage production and price risks now and in the future. 

However, there are challenges. One is the cost of the program. 

Congressional action to achieve high coverage to protect the farm 

infrastructure and to deter ad hoc disaster assistance is succeeding, and that success, and it is no surprise, comes with a higher Federal cost. But crop insurance cost should not be viewed in 

isolation of other programs. Crop insurance spending has been replacing farm program spending. The combined cost of farm programs and crop insurance is trending down and the farm bill is 

going to reduce those combined costs further. 

Another challenge is risks that most crop insurance products do 

not cover such as multiple years of low prices or the uninsurable 

part of production such as the deductible part of a policy, and of 

course, it is these risks that have led to the proposals to supplement crop insurance with new farm revenue programs. Such supplemental farm programs would be free, and a free program can 

crowd out a program that farmers have to pay a cost for in the 

same way that ad hoc disaster assistance in early years crowded 

out crop insurance. 

In thinking about this supplemental coverage issue, I think it is 

important to recognize that crop insurance coverage levels are 

steadily increasing. In 2011, over 70 percent of the acres in crop 

insurance were insured at 70 percent or higher coverage level. Consequently, supplemental programs need to be structured to avoid 

excessive coverage of losses and to minimize their interaction with 

crop insurance. 

Finally, if crop insurance is to be the centerpiece of the farm 

safety net, the government, companies and farmers need to work 

together to continue improving and expanding the availability and 

the effectiveness of the portfolio of products. 

The nature of crop insurance a decade from now is not possible 

to predict but the trends and characteristics discussed today 

strongly suggest crop insurance will have an increasing role in production agriculture and agricultural policy. 

That completes my remarks, Mr. Chairman. 

[The prepared statement of Dr. Collins follows:]

PREPARED STATEMENT OF HON. KEITH COLLINS, PH.D., ECONOMIC ADVISOR,

NATIONAL CROP INSURANCE SERVICES; FORMER USDA CHIEF ECONOMIST,

CENTREVILLE, VA 

Chairman Conaway, Ranking Member Boswell, and Members of the Subcommittee, thank you for the invitation to appear at today’s hearing to discuss farm 

programs and crop insurance as you continue the development of the 2012 Farm 

Bill. 

I served as USDA’s Chief Economist from 1993 to the start of 2008. In that capacity I chaired the Board of Directors of the Federal Crop Insurance Corporation for 

7 years. Today, I serve as an economic and policy advisor to National Crop Insurance Services. NCIS is a nonprofit organization representing all 15 companies that 

sell crop insurance. Its activities involve collection and management of information, 

analysis and reporting of data, research, and education. My comments reflect my 

views as an economist with some experience in market behavior, farm programs, 

and crop insurance. 

Today, I will discuss the current state of crop insurance and its key features, discuss the adequacy of crop insurance to serve as the central part of the farm safety 

net, and provide my view of the challenges the Subcommittee faces in designing effective farm financial safeguards as part of the 2012 Farm Bill. 

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The Growth of Crop Insurance and the Features Driving Growth 

The use of crop insurance by U.S. farmers has grown sharply, increasing from 45 

million insured acres in 1981 to over 265 million in 2011 (Figure 1). Insured liability 

has increased even faster, rising from $6 billion in 1981 to more than $114 billion 

in 2011. More insured acreage, higher crop prices, and farmers buying higher coverage levels explain the sharp rise in liability. Several factors explain the strong 

growth in the use of crop insurance by farmers over time. Private sector delivery, 

which began with the Federal Crop Insurance Act of 1980, has provided strong incentives to sell and effectively service policies. Private sector compensation, subject 

to a cap, is tied to the value of premium sold, incentivizing companies and agents 

to bring crop insurance to producers. Increases in premium subsidies and government payment of insurance company delivery costs made crop insurance increasingly affordable over time, boosting participation and coverage levels. 

Fig. 1. Acres Enrolled in Crop Insurance

Sources: USDA/RMA Summary of Business; USDA/NASS Acreage.

Other factors also contributed to higher demand for crop insurance. The Federal 

Crop Insurance Reform Act of 1994 required producers to have crop insurance to 

be eligible for farm program benefits. While short lived, this requirement introduced 

many producers to crop insurance. Reductions in the level of protection provided by 

farm programs and requirements to have crop insurance in order to be eligible for 

the receipt of ad hoc disaster payments encouraged participation and higher coverage levels. An environment of higher and more volatile commodity prices has 

meant farmers have more to lose, a likely factor spurring coverage. Education efforts to acquaint producers with risk management strategies may have also increased demand. Program improvements have also attracted producer participation. 

These improvements, introduced especially during the late 1990’s and later, included more appropriate premium rates for some crops; reduction of waste, fraud, 

and abuse; and new and better plans of insurance, such as revenue plans. Today, 

crop insurance is a risk-based program that does not make annual subsidy payments to farmers. When crop insurance does provide monetary benefits to farmers, 

the benefits are made available in the form of an indemnity payment that restores 

only a portion of an actual annual loss. Many farmers pay crop insurance premium 

costs for a number of years without receiving indemnity payments because they 

have not experienced an actual loss. 

Meanwhile, farm programs have evolved from very market intervening programs 

that focused on offsetting low prices by using price supports, acreage controls, and 

price-based deficiency payments to programs that let market forces operate more 

fully, with producers shouldering greater responsibility to manage risks. This evolution has been facilitated by rising commodity prices. It has led to increased use 


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of revenue concepts in government-delivered farm programs, such as the Average 

Crop Revenue Election (ACRE) and the Supplemental Revenue Assistance Payments (SURE) programs in the 2008 Farm Bill. While this evolution in farm programs reflects efforts to reduce the consequences of government intervention in markets and to reduce farm program spending, the shift also has been partly a consequence of policy decisions to improve and rely more on crop insurance as well as 

the demonstration by the crop insurance program that it could meet such a responsibility by delivering products that farmers value. This transition in programs is illustrated in Figure 2, which shows the trend in lower farm program spending and 

greater crop insurance spending. An important observation is that the sum of farm 

program and crop insurance program spending has been trending down. While crop 

insurance outlays have grown and substituted for farm program spending, the net 

taxpayer obligation for the farm safety net has been declining.

Fig. 2. Outlays on Crop Insurance and CCC Commodity Programs, Fiscal 

Years

Sources: CCC from 2012 President’s Budget. Crop insurance, 1999–2009 

from USDA/RMA; 2010–12 from CBO 2012 March Baseline.

The expanding role of crop insurance in the farm safety net signals several key 

features that farmers and policymakers find attractive. These include: the requirement that a producer has to consciously elect to manage risks, insurance plans that 

can be designed to fit individual farm risks, producers share in the program costs, 

and accountability that comes with cost sharing. In addition, the private sector delivers the program as part of a public-private partnership that involves risk sharing 

between the government and the private companies. This arrangement means competition among private companies to deliver the program, producer choice among 

companies and agents, greater accountability by companies to ensure program integrity, lower reinsurance losses by the government, and efficiency and quality in delivery service. Private delivery and the structure of the program also enable producer 

losses to be adjusted accurately and indemnities paid promptly. In addition, USDA 

has wide latitude to establish program provisions, including new product development, premium rate setting, and compliance. This flexibility enables the program 

to adjust to producer needs and address program parameters to reduce costs and 

inefficiencies without the need for Congressional action. Crop insurance also allows 

many producers to secure credit, as an insurance policy serves as collateral, and 

aids forward marketing by providing resources to meet delivery obligations in the 

event of a production loss. This access to credit may be particularly important for 

new and beginning farmers. Insurance is the fundamental method for managing risk 

across personal and business activities. Given the above attributes, there are many 

compelling reasons to conclude that insurance should be the fundamental way to 

manage production, price, and income risk for farmers in the future.


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Crop Insurance as the Central Part of the Future Farm Safety Net 

If crop insurance is to be the central part of the farm safety net, then a reasonable 

question is: does crop insurance serve all risks, all crops, and all regions well in a 

cost-effective way? With regard to risk, it is clear that farmers today face many 

risks that are addressed by farm programs and crop insurance only partly or not 

at all. The shocks that may disrupt a farm operation may come from many sources: 

the macroeconomy, natural disasters, person-made disasters, input availability and 

quality, trade policy, energy policy, climate policy, food policy, technology policy, and 

environmental policy. These shocks can affect production, quality, prices, costs, loss 

of markets, the environment, income, wealth, and health. While some have proposed 

modest expansions in what risks crop insurance can cover, crop insurance today is 

focused on protecting against the impacts of natural disasters on production and 

production quality and on output price declines. 

Price risk covered. The major field crops rely heavily on individual revenue insurance. The insurance price for most of these products that is used to establish the 

insurance guarantee is the price of a futures contract averaged during a period just 

before planting. The settlement price is the price of the same futures contract averaged during a harvest period. Thus, the price protection provided is for a drop in 

a futures price between planting and harvesting. Most crop insurance products do 

not provide protection for a price drop from an average of historical prices or from 

a fixed benchmark price (exceptions are AGR, AGR-Lite, and Actual Revenue History plans of insurance). Crop insurance provides protection for the risk of a price 

decline within a crop year, not across crop years. If markets are in surplus and futures prices are low, the protection afforded by crop insurance will be low. The market is signaling supply contraction.

To offset the income prospect of low prices, some have proposed using historical 

average prices or fixed prices to set the guarantee. The objective of the crop insurance program is to protect against the decline in the current value of an asset, so 

using a price to set the guarantee that exceeds the expected market price creates 

problems. If the expected harvest price is below the guaranteed price, an expected 

loss would be ‘‘built in’’ and adverse selection would result, unless the premium rate 

reflects the difference between the expected price and the average or fixed price. 

Building in an expected loss also creates the issue of who is responsible for covering 

that loss, if realized. Historical average prices and fixed prices are more appropriately used in farm revenue programs that are directed at supporting income above 

market-based levels, rather than in crop insurance, which is directed at protecting 

assets at current market values.

Production risk covered. An issue is whether something should be done for the 

uninsurable portion of production, or the deductible component of crop insurance. 

The deductible exists to prevent moral hazard—actions by the insured that increase 

the chance of loss. The deductible also serves to address the uncertainty about the 

relationship between underwriting standards and production outcomes, that is, the 

inability to accurately estimate appropriate premiums. Most major crops in most 

areas have an 85 percent maximum coverage level for individual policies and a 90 

percent maximum coverage level for county-based policies. Some have suggested 

that crop insurance deductibles, combined with the 10 year Actual Production History yield, which lags trend yields, do not provide high enough coverage. The argument is that small losses, so-called ‘‘shallow losses,’’ year after year may not trigger 

a crop insurance indemnity but may drive a farm to financial ruin. There is merit 

in this argument. However, the key question is: how much risk should producers 

bear and how much risk should taxpayers bear? Deductibles are common in most 

forms of insurance, such as health or automobile and are appropriate in crop insurance. As long as the price guarantee is an expected market price, if insurance were 

to provide too high a level of coverage, the main risk is moral hazard. But if the price 

guarantee were to exceed the expected market price and coverage level is too high, 

such a program risks interfering with market price signals and distorting production.

Crops/regions covered and coverage levels. Some have argued crop insurance 

does not work well for some crops and some regions, compared with others. There 

is truth in the claim, but the data suggest that crop insurance is working very well 

for much of the country and can be improved further. Figure 1 shows that of the 

315 million acres planted to principal crops in 2011, 84 percent, or over 265 million 

acres, were in the crop insurance program. Participation by crop does vary, but it 

is high for the major program crops and for many specialty crops. Since many crops 

are regional, data on participation by crop is suggestive of participation by crop and 

region. Figure 3 shows the percentage of planted acres participating in the crop insurance program in 2011 by major crop, which ranges from 78 percent for sorghum 

to 93 percent for cotton. Figure 4 shows the participation for insurable specialty 

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crops during 2009, which ranges from less than 20 percent for cabbage to more than 

80 percent for a number of crops. There have been substantial efforts made by the 

Risk Management Agency (RMA) and private interests to increase the number of 

crop insurance products and features to expand coverage. Since 2000, we count over 

50 new product introductions. In 2012, there will be new products for popcorn, 

strawberries, tangerine trees, Texas citrus trees, camelina, pistachios, and olives. 

Fig. 3. Share of Major Program Crop Acres. in Crop Insurance, 2011

Source: USDA/RMA Summary of Business. 

Fig. 4. Share of Specialty Crop Acres in Crop Insurance, 2009

Source: RMA Specialty Crops Report, 2010.

While many crops show participating acres are at high levels, an issue is whether 

the acres are protected at low or high coverage levels. Table 1 shows the share of 

acres and total premium at 75 percent or greater coverage levels for major program 

crops. The acreage share ranges from 16 percent for rice to 63 percent for corn. The 

premium share ranges from 23 percent for upland cotton to 72 percent for corn. 

There are many reasons for such differences. They range from the risks producers 

face or perceive they face; to the alternatives available to manage risks, such as irrigation, variety selection, and other practices; to the premium rates charged. In 

many cases, a producer opting for lower coverage is making a rational choice given 


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costs and alternatives, and that choice does not represent a failure of the crop insurance program. 

The issue of providing some protection for uninsured production is partly an issue 

of farmers choosing less than full insurance and partly an issue of coverage limited 

by the deductible and the APH yield. One observation is that over time producers 

are choosing to increase their coverage levels. In 1996, only 12 percent of the premium sold for buy-up coverage for all commodities was for policies with 75 percent 

or higher coverage. By 2002, that figure was 39 percent and by 20 11, it reached 

57 percent. Higher premium subsidies and, recently, the use of enterprise units 

have been important factors in the coverage increases. For 2012, RMA has announced premium reductions for corn and soybeans and a pilot program that uses 

trend yields to adjust up a producer’s APH. Both of these developments are likely 

to increase average coverage levels again in 2012.

Table 1. Share of Insured Acres and Premium at 75% or Higher Coverage Levels, 2011

Coverage Wheat Rice Corn Sorghum Soybeans Peanuts Cotton 

Percent of Insured Acres

75–90% 29 16 63 18 60 18 17

Percent of Total Premium

75–90% 36 38 72 25 70 30 23

Program costs. As crop insurance has grown in participation and coverage, the 

Federal cost of the program has increased. A major factor has been the increase in 

commodity prices, which raises the insured value of crops and increases the value 

of any quantity of production lost to natural disasters. There are several factors to 

consider when looking at crop insurance program costs. As noted earlier, the combined spending on crop insurance and farm programs has been trending down as 

crop insurance has taken on a greater role in protecting farm revenue, with farm 

programs taking a lesser role. The new farm bill will lower agricultural spending 

further and should do so by prioritizing programs. The crop insurance program was 

cut in the 2008 Farm Bill and in the 2011 Standard Reinsurance Agreement, which 

now means administrative and operating payments to companies are capped, agent 

commissions are capped, and company returns have been reduced. Premium rate reductions in 2012 should further reduce spending and company rates of return. Company rates of return in 2011 and expected for 2012 are well below those of recent 

years. Finally, Congressional baseline projections of crop insurance program costs 

have consistently been overestimated in recent years. Projections are highly uncertain and depend on market price projections. If prices turn out lower and yields are 

good, program costs could be substantially lower. 

Recently, there has been some discussion of premium subsidy limits applied to 

producers. Such limits make some sense for payments that are made to enhance income, such as Direct Payments. Payment limits may make less sense for a program 

where producers share the cost and where receipt of the program benefits—the indemnities—require producers to incur losses. Crop insurance is structured to treat 

farmers equally regardless of size and value of commodities produced. Weather disasters do not happen in just some counties or on just small farms or large farms. 

They happen everywhere and anywhere. A consideration is that subsidy limits 

would affect farms differently, depending on the number of operators, use of share 

versus cash rent, value of crops produced, and risk of crops produced. With subsidy 

limits, large, lower risk farmers are likely to be those who choose not to participate 

in crop insurance. The result would be that the remaining pool of insured farmers 

would be higher risk, leading to higher loss ratios over time and increased premium 

rates for those that remain in the program. 

Meeting the Challenge of a Farm Bill Safety Net 

I will end my comments with a few thoughts on the design of the farm safety net. 

The prospect of eliminating the Direct Payment program frees up sufficient funding 

to meaningfully contribute to deficit reduction. If other programs are cut as well, 

there may be ample funding for new or expanded farm programs that could complement crop insurance. It is important to understand what would be the objectives 

of these new programs. Several observations about crop insurance and possible new 

farm programs include:

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• Crop Insurance should be the core risk management tool. My statement 

today has identified many reasons why crop insurance is attractive, has grown, 

and is the prime candidate to be the central part of the farm safety net. Today’s 

crop insurance program has fulfilled long-term Congressional goals for a program that has high participation, provides high coverage levels, reduces ad hoc

assistance, functions efficiently and that farmers share in the cost. Design of 

amended or new farm safety net programs should start with the current crop 

insurance program as the basis and include making crop insurance even more 

responsive to producers’ needs.

• Private sector delivery should be maintained. The benefits of private competition and efficiency have been proven in the delivery of crop insurance 

through the history of today’s public-private partnership. Risks borne by crop 

insurance companies, incentivized sales and service, and compliance programs 

and penalties have resulted in high levels of service to producers and very low 

incidences of waste, fraud and abuse.

• Government farm programs should aim to augment crop insurance not 

substitute for it. Farm programs are free and providing a free good or service 

has the potential to crowd out one that has a cost. In the same way that ad 

hoc disaster programs crowded out crop insurance, a free farm program that 

replicates some or all of what crop insurance does is likely to displace crop insurance. Any supplemental program should focus on risks that crop insurance 

does not cover, such as multi-year depressed prices or uninsurable (as distinguished from uninsured) production. Supplemental programs that are based on 

area yields may reduce the interaction effect with individual crop insurance 

plans but may significantly crowd out county-based crop insurance plans, depending on how the supplemental plan is structured. The narrower the share 

of expected revenue that a supplemental program covers, the less would be the 

interaction effect with crop insurance. Supplemental programs that use payment reduction factors applied to payment acres may reduce the interaction effect with crop insurance. Ensuring that crop insurance indemnities are not part 

of the payment calculation for any supplemental revenue program would also 

reduce the interaction effect on crop insurance.

• The portfolio of crop insurance products should be improved. A policy 

goal should be to make crop insurance as widely and equitably available as possible for most commodities. To the extent possible and practical, the portfolio 

of insurance plans should be improved for small producers, socially disadvantaged producers, specialty crops, and other crops that may not be covered or 

have atypical or specific risks or lack transparent pricing.

Mr. Chairman, that completes my statement. Thank you for the invitation and I 

am pleased to respond to any questions.

The CHAIRMAN. Thank you, gentlemen. 

I would like the record to reflect that the three of you got your 

opening statements in in less than 15 minutes. That is an impressive start to the hearing, and I appreciate that. We will now go on 

the 5 minute clock and I will start. 

Dr. Outlaw, I will rehash some of your opening statement. In 

looking at the shallow loss program provided in the Senate bill 

versus the price-based countercyclical program that we developed 

last fall, which do you think has a better option for multi-year price 

declines and which would trigger more often. In your professional 

view, what do you think is the better safety net for production agriculture? 

Dr. OUTLAW. Well, obviously that question is very complicated, 

but I look at it, as I said in my statement, when I work with farmers, my whole thing is trying to keep them in business so they get 

to try again like the Chairman mentioned when he was younger. 

I think that our research shows that the ARC plan would pay more 

often because it pays on shallower losses, and the PLC plan, the 

price loss coverage, is obviously going to pay when prices are below 

a target price. The most important part of that is reference price. 

The most important part is where you set the reference prices and 

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if you do that accurately or fairly across commodities. There is no 

question in my mind that you can provide each commodity assistance, similar assistance with the PLC program. 

The counter to that is, I don’t believe you can provide every commodity a fair shake with the ARC program. It is not because it is 

designed wrong, it is because the way the benchmark prices are 

set. The government would be ensuring a loss for some commodities while others would be ensuring a profit, or near profit. So to 

me, it is just not fair. 

The CHAIRMAN. Thank you, Dr. Outlaw. 

Dr. Schnitkey, I don’t want to belabor this too much, but in your 

opening statement you walked through an example on a breakeven analysis for corn that corn breaks even at $4.10 a bushel and 

then the average, I guess the Olympic average for the past 5 years 

has been $4.64 a bushel, which appears to be a 54¢ profit or margin on corn. A 195 bushel per acre farm times 54¢ would be $105 

per acre profit. And there are some folks who say that the cost of 

production is even lower so you would have a bigger number. But 

with those facts, some producers will be above. Where is the shallow loss in that bracket that you are talking about. 

Dr. SCHNITKEY. Obviously, we have to make some assumptions here, but $4.10 is the cost of production and if we have something 

along the $4.50 price just for round numbers for a benchmark 

price, assuming that nothing happens with yields, a ten percent reduction in $4.50 would be 45¢. After that, as it is currently designed, ARC would begin to make payments but it wouldn’t make 

payments on the entire loss for anything below $4. 

The CHAIRMAN. Help me understand that word loss that you just 

used. Where in that 54¢ is the loss? 

Dr. SCHNITKEY. Well, $4.50 minus 45¢, which would be $4.05, 

and let us say that the market price then is below that $4.05 price, 

that $4.15 below that was——

The CHAIRMAN. I clearly understand when the market price is 

below cost of production there is a loss, but in this example, there 

appears to be—and again, maybe we are belaboring this too much 

but I am a CPA and you got me jammed up. 

Dr. SCHNITKEY. All right. So again, $4.10 cost of production, $4.50 benchmark price, minus 45¢ from that would be $4.05. 

The CHAIRMAN. What is the 45¢? 

Dr. SCHNITKEY. The 45¢ would necessarily be the fall given 

roughly where ARC is set at, the ten percent decline, so we would 

below $4.05, which is already below the cost of production. But 

even then, the losses between $4.05 and below that would be the 

payments from $4.05 to 10¢ to 20¢ below that currently would be 

compensated, if you are using ARC, something like 80 percent for 

cotton, or county, 65 percent for farm. Having said that, also, those 

prices will—those benchmark prices will obviously adjust over time 

to whatever the market conditions are at that time, and we have 

been fortunate in corn that the last couple years have been good. 

The CHAIRMAN. All right. Mr. Boswell for 5 minutes. 

Mr. BOSWELL. Thank you, Mr. Chairman. 

Along that same line, Dr. Schnitkey, and if it is a little redundant, I apologize, but I just want to make sure we understand. 

How does the ARC program in the Senate Agriculture Reform, 

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Food, and Jobs Act of 2012 create equitable protection across the 

regions? Would you comment about that? Then I have a follow-up. 

Dr. SCHNITKEY. Equitable distribution of payments across a region from ARC, is that the question more or less? Again, this is according to Congressional Budget Office numbers. Payments on ARC 

would be roughly proportionate to the crop value, two to five percent. That obviously is different from the way payments are made 

now based on base acres and direct payment rates. So it would differ, and whether or not that is equitable or not is something for 

you all to decide. I can describe the impacts but it is your decision 

of whether that is equitable or not. 

Mr. BOSWELL. Okay. Do you think that the cost savings from any 

of these potential revenue programs, do you think there are cost 

savings? And if you do, which revenue program would yield the 

greatest efficiency and cost savings and still provide assurance and 

sustainability to the producer? 

Dr. SCHNITKEY. The CBO scores for the Senate markup bill, 

which isn’t the same as the final bill passed, had the cost of the 

program at 62 percent of 2008 spending, so it would be a cost savings. Obviously, that is based on assumptions of what prices are 

going to do, and those could vary obviously. I would tend to agree 

with CBO that those cost estimates are below the 2008 Farm Bill. 

You know, what program, it depends a lot on the specific design 

of the program, and it is difficult for me to guess. You could design 

a target price program with target prices that are very low and you 

wouldn’t make any payments and you could design a target price 

program that has very high target prices and make large payments. So I would have to have a specific set of policies to answer 

that second question. 

The CHAIRMAN. The gentleman yields back. 

Mr. Lucas for 5 minutes. 

Mr. LUCAS. Thank you, Mr. Chairman. 

Dr. Outlaw, how do the reference prices developed for the package last fall compare to the cost of production on the farms that 

your folks study? 

Dr. OUTLAW. It is my understanding that those reference prices 

are very close. I provided the staff some of our cost information, 

and I know they used some of the USDA cost information as well, 

as well as about 25 years of previous target prices so that those relationships could try to maintain the same relationships. There is 

a lot of discussion, when you say the phrase target price, people always say that theirs is low relative to their other commodities. In 

developing those, I know they used some historical relationships to 

try to keep them approximately the same and then cost of production, to try to move those up when those historical relationships 

were not appropriate anymore. 

Mr. LUCAS. Do you agree with those who say that these prices 

would drive planting decisions? 

Dr. OUTLAW. No, and that is probably the one question I have 

gotten more often than any other question this farm bill is that 

one. It all goes back to, if you have a target price set, what I would 

call fairly, where there is not a profit guaranteed, and because of 

the mechanism of how those things get paid—they are paid on 

countercyclical payment acres—those yields are lower for most 

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crops than their average yield would be. There is a payment fraction in there, they are not going to get that level of protection, they 

are going to get something less. And so you are already talking 

about setting it below the cost of production, and then they are 

going to get less than that. All it is, is the deep loss coverage that 

I think most of you are talking about. All it would provide is, when 

things go really bad, there is going to be a payment to help them 

stay in business. I don’t think there is anything wrong with that. 

Mr. LUCAS. Dr. Outlaw, I have said from the beginning that we 

have to craft policies that work for all commodities and all regions, 

and many have expressed concern that the Senate Agriculture 

Committee-passed bill shifts baseline from one commodity to another, from one region to another. In other words, the Senate bill 

picks winners and losers. Give me your thoughts on that statement. 

Dr. OUTLAW. Well, you know——

Mr. LUCAS. Based on the analysis you have done so far, the information available. 

Dr. OUTLAW. Based on our analysis, when you pay—most of the 

new programs that have been discussed would be paying on planted acres, and when you move to paying on planted acres, you are 

going to increase the amount of money paid to corn and soybean 

producers in this country, and so that will be moving that money 

that way. Each commodity ought to have an opportunity to stay in 

business if there is a loss, and the way the Senate plan is crafted 

right now, I can’t say that they can. 

Mr. LUCAS. Thank you. 

Dr. Collins, I know much of the growth and the success of crop 

insurance came over the years during your tenure as Chief Economist at USDA, and thank you for that, for the success of the program. And you acknowledge that crop insurance is not yet working 

as it should for some crops and regions. Given our current budget 

constraints, the reality we deal with in the United States House, 

what do you think are the most significant things we should consider that would improve crop insurance for those crops in those regions that have in effect fallen behind? 

Dr. COLLINS. Thank you, Mr. Lucas, for your acknowledgment. I 

appreciate that. 

This issue about whether crop insurance works or not is a phrase 

you hear a lot in the discussion of supplemental programs. Usually 

that refers to the fact that either coverage is low or the coverage 

level is low in certain crops for certain regions of the country. I 

would just first say that that doesn’t necessarily mean that crop insurance is not working and is not a problem because sometimes 

producers face risks that are not in a crop insurance policy, to be 

covered by a crop insurance policy. Also, producers have alternative 

ways to protect themselves and so it can be a rational choice to 

participate at a low level in crop insurance. You can look at some 

of the southern States—Arkansas, 80 percent of crop production 

areas irrigated. Yield is not the risk that it is in other states. And 

if you have protection such as we have just been discussing with 

target price protection, direct payment protection, so you have 

some price protection already and therefore you don’t necessarily 

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need to buy high levels of crop insurance coverage. So there is not 

necessarily a failure of crop insurance in those instances. 

However, having said that, we can look at particular risks that 

aren’t well covered by crop insurance. Rice has already been mentioned by Mr. Peterson where we have the lodging issue, we have 

concern over input costs. They are working on a lodging optional 

endorsement, a margin product. That is a difficult product to develop, I know from my own work in cost of production insurance, 

but I have hope that that will happen and that will help. Peanut 

producers want a revenue product, and they have already started 

themselves on a path toward achieving a revenue product, so I 

think that will help participation. Specialty crops are another matter altogether because they represent small acreages. Sometimes 

pricing is not transparent. There is a lot of cultural practice issues 

that making underwriting standards difficult. 

And so there is work that probably still needs to be done in that 

area. I think the 508(h) approval process and RMA’s ability to 

produce products is the right way to go. I think we have a good 

product development program right now. We have seven new products, for example, coming online in 2012, and so I don’t think that 

Congress needs to specify lots of new products that need to be developed by the Risk Management Agency. I think that the existing 

process for product development is working and continues to work, 

but it is a slow process. 

Mr. LUCAS. So you believe inevitably it is possible to overcome 

these real challenges but there are real challenges at the present 

time under a number of scenarios? 

Dr. COLLINS. There are real challenges, and the record has 

shown they have been overcome over time. You can even look at 

specialty crops where we have over 70 percent of the acreage of 

specialty crops participating in crop insurance. So crop insurance 

has been a success in new product development but more work 

needs to be done. 

Mr. LUCAS. Thank you, Dr. Collins. 

Thank you, Mr. Chairman. My time has expired. 

The CHAIRMAN. Thank you, Mr. Chairman. 

Mr. Peterson for 5 minutes. 

Mr. PETERSON. Thank you, Mr. Chairman. 

I don’t know who wants to answer this, but say the way the Senate bill is structured with this revenue the way they—I am not 

sure I understand it completely—no countercyclical payments. So 

say that corn goes to $3 and it stays at $3 for 3, 4 years. The revenue thing will protect you against that decline somewhat but 

eventually that is going to go down to $3 too. So you are going to 

have a situation where you have crop insurance where you are not 

able to protect your price where you need to and then your revenue 

gets down to the same level. Am I right about that? What happens 

at that point? We are going to plant for the marketplace but, corn 

kind of drives the price for soybeans and wheat and so forth. I 

mean, if corn goes down, it is going to be all the way across the 

board and I don’t see people necessarily shifting crops from one loss 

to another. They are going to plant based on what is best for the 

farm. 

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Dr. SCHNITKEY. No, you are absolutely right. If something like 

the program passed by the Senate came into being and we have 

$4.50 price for corn now and we have a series of years of $3, benchmark revenue and benchmark price would go down to $3 and the 

ARC would make less payments as we move through time. 

And you are also right that other crops, that those crops are correlated, and soybeans and wheat and others would also be going 

down at the same time. ARC, the purpose of ARC in that case 

would be to give producers the opportunity to make decisions on 

their farm to react to that marketplace. There would likely be leads 

and lags in cost and production but they would also likely decline 

as well as cash rents would also come down if we saw that situation. So it would be a buffer for that period, and yes——

Mr. PETERSON. But how much of a buffer is it? I was reading it 

is only 6 percent or 71⁄2 percent or something. It is not significant. 

Why wouldn’t you buy this enterprise insurance that has 80 percent coverage and buy that at 80 percent subsidy and buy that at 

85 percent? Why wouldn’t you do that? 

Dr. SCHNITKEY. The point is, you probably would. You probably 

would do both. You would continue in crop insurance and also be 

in a revenue base. 

Mr. PETERSON. Yes, but if you have a revenue that is covering 

between 78 and 88 or whatever the—I don’t know what the number 

is—but the guys that are buying 85 percent are going to go to 75, 

if they have that other coverage that is going to be free. I mean, 

am I wrong about that? I don’t know. 

Dr. SCHNITKEY. There could potentially be some reduction in crop 

insurance coverage levels, although in my personal opinion, it 

would be minimal because of the differences in what is being protected. Again, most of the revenue programs that I have seen protect a very narrow band. 

Mr. PETERSON. Yes, and so it doesn’t—I just don’t see where if 

these prices collapse where this is going to help you a heck of a 

lot. You are going to be okay the year it collapses, probably, but 

the next year I just think you have a big problem. We are going 

to have people camped out out here and we are not going to be able 

to do anything about it. 

Dr. SCHNITKEY. Again, yes, the prices would come down, although in the Senate program, it is a 5 year Olympic average so 

the first year——

Mr. PETERSON. Yes, I mean, it buffers you somewhat. 

Dr. Collins, before my time runs out, I have been meaning to get 

Bill Murphy up here so I probably shouldn’t ask you this, but we 

put some money in the 2008 bill to try to move people to enterprise 

units, so that is how the subsidy got up to 80 percent, right? I 

mean, they use that extra money to encourage people to move to 

enterprise units, and I assume what was going on, they were trying 

to get the farmers to take more of the risk themselves by moving 

from field to field to a broader coverage. That appears to be working because we have a lot of people shifting, it seems like, to that. 

Am I right about that? 

Dr. COLLINS. That has worked big time. Enterprise unit subsidy 

is 80 percent, I think for 75 percent coverage. At 85 percent coverage, it is only 53 percent. 

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Mr. PETERSON. Oh, is it? 

Dr. COLLINS. Yes, but that is a lot higher than basic and optional 

units. Basic and optional units, it is 38 percent. So it jumps from 

38 percent to 53 percent at the highest levels of coverage. So you 

get a higher subsidy. You also get a second effect because producers take on more of the risk because they have a bigger area 

that is being insured. There is an opportunity for some diversification so the premium rate is lower. So you get a double effect when 

you go to enterprise units, and in the late 2000s, we were running 

almost no enterprise units in corn, and by the second year after 

this 2008 Farm Bill provision was implemented, we had something 

like 400,000 enterprise units in the United States. So there has 

been a big shift to enterprise units and it has made—it has helped 

coverage levels. This whole question about supplemental programs 

filling the gap that crop insurance might not be covering, most of 

our discussions with agents, they have told us that people that 

have shifted to enterprise units have increased their coverage levels by about five percent, and so you see that coverage level increasing as well. So crop insurance is doing a better job than it had 

been, which is part of this shallow loss issue. 

Mr. PETERSON. Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you, Mr. Peterson. 

The chair would like to remind Members that they will be recognized for questioning in order of seniority for Members who were 

here at the start of the hearing. After that, Members will be recognized in order of arrival. I appreciate the Member’s understanding. 

With that, I recognize Mr. King for 5 minutes. 

Mr. KING. I thank you, Mr. Chairman, and I note that I meet 

both those qualifications this morning unusually, and I appreciate 

the testimony of the witnesses. 

I would go first to Dr. Schnitkey. As you discussed the 5 year 

Olympic average, is there some average or some basis within ARC 

that you would recommend other than a 5 year Olympic average? 

How do you think that works, and is there something that you 

would suggest that you might prefer? 

Dr. SCHNITKEY. Picking out the length of the period is always a 

problematic one, but a 5 year average is perfectly acceptable, particularly when you throw out the high and the low. 

Mr. KING. And that is my reaction towards it as well. But before 

I turn to Dr. Outlaw for his comments, his testimony points out 

that there are a number of commodities that can almost perhaps 

lock in a profit, and that was listed as corn, soybeans, wheat and 

grain sorghum. Are there any suggestions that you might make for 

some of the other crops? 

Dr. SCHNITKEY. One, I am not sure that I would necessarily 

agree with those lock-in profits because costs also have risen dramatically on those farms. 

You know, the beauty of using market prices and those benchmarks is it does react to the market. If you are concerned that 

those market prices are below what you want, you would have to 

do something like a reference price within that or a target price. 

Obviously that brings up a whole lot of other issues. 

Mr. KING. But what if Mr. Peterson’s scenario of grain prices 

dropping down to, say, $3 for corn for a 5 year period of time, what 

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else gets adjusted in this, I mean, with regard to say, input costs? 

What kind of reverberations would take place through the balance 

of the input costs? 

Dr. SCHNITKEY. One I would expect if we are looking at commodity prices to be declining, you would also see energy prices declining so those energy-related costs would be coming down, in particular, fertilizer, and I would also be expecting cash rents and 

other items to be coming down as well. 

Mr. KING. Probably not seed corn? 

Dr. SCHNITKEY. Probably not. 

Mr. KING. Dr. Outlaw, what would you have to say to illuminate 

this subject matter and flesh out your point here that some of these 

commodities could nearly lock in a profit? How do you view that 

scenario of Mr. Peterson’s of $3 corn for 5 years, and do you have 

a recommendation on 5 year Olympic average that is proposed in 

ARC? See, if we stick within the concept of ARC, how would you 

overhaul that to meet your qualifications? 

Dr. OUTLAW. Well, first, I must have done a really poor job describing because the scenario he asked about was exactly our lowprice scenario, which favored the House program on all but one of 

our farms. 

What Gary mentioned not agreeing with, when I did this, and I 

said nearly lock in a profit, if you look at—I hate to single out 

crops but if you look at the soybean graph specifically, there is a 

substantial margin there, and even taking into consideration the 

deductible, there would be a potential to come really close to locking in a profit. I only bring this up not that I have anything 

against them, but I only bring this up to say you cannot do that 

for every other commodity. So to me, there is a question of 

equitability as you look across this. 

And to answer your question, I said it in testimony and I will say 

it again, the only way that I can see—you can’t do a 5 year Olympic average for rice and get them to where they are protecting a 

profit. There is no way to do that. The prices are too low. So the 

next question is, how do you augment that, and that is with some 

sort of reference price put in that formula. 

Mr. KING. Okay. Thank you. 

Dr. Collins, as we discuss some of the decisions that drive planting decisions, it is a given here that direct payments will be gone, 

but a number of these things that go into driving pricing decisions, 

one would be the direct payments. I would ask you to comment on 

that. And then if you could comment on the return on investment 

for crop insurance premiums, which states come closest to meeting 

a one-to-one ratio and what the standards are on that and how 

that ratio might drive planting decisions? 

Dr. COLLINS. Mr. King, there has been a lot of economic research 

on direct payments and to what extent direct payments affect 

planting decisions, and most of that research shows that it is minimally influencing planting decisions. There is some minor wealth 

effect that comes from direct payments, but aside from the fruits 

and vegetables and wild rice issue, they are fundamentally decoupled from planting decisions. That is why we notify the WTO that 

they are green box payments and so they are not production distorting. One of the benefits of direct payments has been lost in the 

2137

big debate about direct payments, probably the primary benefit. 

And I forgot the second half. 

Mr. KING. The crop insurance premium. 

Dr. COLLINS. Yes. The issue here is the loss ratio. There are two 

loss ratios. There is indemnities divided by the gross premium, 

which is what normally reported. The Risk Management Agency 

has by law a target of 1.0. That is, the total premium has to equal 

total indemnities. That is how they set rates. There is a second loss 

ratio. That is the indemnity divided by what the farmer actually 

pays, and sometimes that is referred to as the investment return 

in crop insurance. I don’t like that concept personally. I don’t think 

you buy crop insurance for an investment. I think you buy it for 

protection and risk management. You should buy it regardless of 

what that ratio is. Actually, I don’t think that ratio has a big effect 

on planting. It has some because it is reducing risk, and anything 

that reduces risk can encourage investment, encourage area expansion. The body of work, and there has been—I have looked at probably at least ten articles on this question. The body of work shows 

that they are pretty small effects from crop insurance. 

Mr. KING. I am going to say thank you there. I ran past my time. 

Thank you, Mr. Chairman. I appreciate it. 

The CHAIRMAN. Thank you, Mr. King. 

Congressman Tim Walz, for 5 minutes. 

Mr. WALZ. Thank you, Mr. Chairman, and thank you to the witnesses for helping us understand this. 

I would have to say, I really appreciate the questions, the complexity of this issue. I am very proud of the work we did on the 

2008 Farm Bill. I think again we can run the numbers and we can 

get the empirical data but I can tell you anecdotally, farm country 

is doing pretty well. The implement dealers are stocked. The cars 

and trucks are selling. We see our small communities flourishing 

and folks are there, and I certainly don’t put all that credit on the 

farm bill we showed a proper balance for the most part, and that 

is why this issue is really important, and each of you mentioned 

very clearly, I do think we have to be careful. We are trying to be 

all things to all people, which we should with all the different commodities, the vast diversity of commodities and geography and 

other things in this country make this is a challenge. 

So I am going to go one step further into the weeds and get even 

a narrower focus of picking out a group here because it is an issue 

I am personally interested in but it matters in the long run, and 

that is the aging population of our farmers. We are trying to get 

new folks on the land, and obviously these programs are going to 

have an impact whether those new farmers and ranchers have the 

opportunity to succeed. I want to draw on your expertise, how 

these programs or how do we structure this to hit these folks that 

don’t have a production history, are early in on this. I know that 

the Senate side, they looked at the ten percent premium discount. 

I want to know, is that the right way to go, in your opinion, or is 

there a way looking specifically at crop insurance that we can 

structure it in a way to compensate a bit for these new farmers. 

I know that is pretty broad in terms of a question and very narrow 

in focus, but it is critical. 

2138

Dr. COLLINS. Congressman, I agree with you. I think it is critical 

as well. In fact, the crop insurance companies meet regularly, quarterly now, with the Under Secretary for Farm and Foreign Agricultural Services. At the first such meeting, he threw that out as a 

challenge to the crop insurance companies: what can we do to promote insurance coverage for new and beginning farms. We haven’t 

answered that question yet. But you referred to the Senate provision, which would increase the premium subsidy for new and beginning farms. It would also increase the T-yield, that is, the yield 

that gets assigned when then they don’t have a production history, 

and that would be the yield that they can insure for. It would seem 

to me those are two positive things. 

I don’t have a better suggestion at the moment. I think crop insurance is pretty critical for new and beginning farmers. Many of 

them have debt. They need to take on loans to get equipment, even 

buy land, and crop insurance is indispensable for them to access 

the credit. And so if we can make crop insurance more affordable 

for new and beginning farmers, that seems like a reasonable strategy. 

Dr. SCHNITKEY. I would also concur with you that the beginning 

farmer issue particularly related to APH is a real one. Fortunately, 

there has been, at least in Illinois, more younger people in the recent years becoming more involved in the farming operation. What 

we have been doing or suggesting in those cases where they don’t 

have an APH and would have to rely on T-yields is to into something like GRIP, which isn’t the optimal but it is a product that 

is available now within the Midwest states for corn and soybeans. 

Dr. OUTLAW. I would agree with the previous two answers. I 

guess I would just throw out there that there is no question from 

working with beginning producers now that make no mistake, their 

lenders require them to buy crop insurance. Anything we can do to 

increase the protection that that forced purchase of insurance, not 

that they wouldn’t do it anyway, but some of them might not buy 

at certain levels. Anything we can do to make the yield higher for 

those beginning producers is probably a good thing. 

Mr. WALZ. Thank you. I appreciate that. 

I yield back, Mr. Chairman. 

The CHAIRMAN. Thank you. I appreciate it. 

Austin Scott for 5 minutes. 

Mr. AUSTIN SCOTT of Georgia. Thank you, Mr. Chairman, and a 

lot of my questions have been asked already, but Dr. Collins, you 

talked about loss ratios, and I majored in risk management at the 

University of Georgia, which I might add, is the finest risk management school in the country. A couple of quick questions. The 

numbers I have seen indicate the overall loss ratio of the crop insurance program was somewhere between 78 and 80 percent over 

the course of about 10 years. Is that consistent with the numbers 

that you have seen? 

Dr. COLLINS. That is a number that would be in my head, yes. 

Mr. AUSTIN SCOTT of Georgia. Is there a significant difference in 

the loss ratios of irrigated versus non-irrigated cropland? 

Dr. COLLINS. I wish I knew the answer to that off the top of my 

head. My guess would be that irrigated cropland would have a 

lower loss ratio. 

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Mr. AUSTIN SCOTT of Georgia. I would think that as well. And 

I guess my question then is, is a higher premium charged for nonirrigated land since that probably has a higher loss ratio? 

Dr. COLLINS. Well, this issue of irrigated versus non-irrigated 

does exist. You can specify by practice under a lot of insurance policies irrigated versus non-irrigated and get quoted separate yields, 

which should reflect the loss experience of irrigated versus non-irrigated. However, we also have situations where a producer buys insurance and there is not the ability to separate out irrigated versus

non-irrigated. In that case, then you are sort of pooling the experience of irrigated and non-irrigated under the one unit that is insured and so the premium rate might be high for part of it, it 

might be low for part of it. That is one of the issues, separation 

of irrigated versus non-irrigated has come up in this farm bill, and 

that is something that the Senate proposed, separating irrigated 

and non-irrigated for enterprise units. 

Mr. AUSTIN SCOTT of Georgia. I guess, Mr. Chairman, if I may, 

as we go forward with this, there is, coming from the South and 

the ag belt, if it is not broken, don’t fix it. I just want to make sure 

that as we move forward that we fix the things that aren’t working 

but not at the expense of what is working. If I walk in my ASC 

office, I am pretty confident that I can ask the ladies and the men 

who work there who they thought was going to have a claim, and 

they would get it pretty accurate. I mean, there is some consistency 

with who files some claims. The ag bill, we should not drive the 

planting decisions and we should make sure that we are protecting 

the good farmers and making sure that they are able to move forward through the bad years. 

I would like each of the gentlemen to comment on one thing. You 

have all pretty much testified that you don’t believe that this will 

drive the planting decisions. It might drive the banks on their lending decisions and what they are willing to lend the money to the 

farmer to plant, and that in my mind—and certainly you are the 

experts and I respect that, but that in my mind might drive what 

the banks are willing to lend on, what the farmers can and can’t 

plant. Would each of you speak to that briefly? 

Dr. COLLINS. I would agree with that. That would not be a direct 

effect. That wouldn’t be something where the producer is looking 

at the net returns of crop A versus crop B. That would be an overall 

effect on their access to capital and, for example, their investment 

position, which would affect production and yield over time. That 

is a way in which taking away the direct payments could work. 

That could affect the capital position of the business over time. 

That could affect the credit position of the business over time. I 

think your logic is correct. I think credit could be affected. But I 

can’t tell you to what extent at this point. 

Mr. AUSTIN SCOTT of Georgia. We have about 30 seconds. Could 

each of you speak briefly on that? 

Dr. SCHNITKEY. I concur with Dr. Collins. 

Dr. OUTLAW. That is the number one issue as we travel around 

the country with our representative farms, whether it has been 

Georgia or Iowa, it doesn’t matter where. Some producers are selffinanced and a number of them have to rely on lenders, and to the 

extent the lender can’t understand a program, it is too complicated 

2140

for them like the ACRE program was in this last farm bill, they 

might be defaulting back for something else. So I do think that the 

lenders are very critical to moving forward and hopefully they will 

find that whatever you all do is bankable for themselves. 

Mr. AUSTIN SCOTT of Georgia. Mr. Chairman, my time has expired. 

The CHAIRMAN. The gentleman’s time has expired, and it does fit 

with one of our five criteria that I set out, that whatever we do, 

it needs to be bankable. 

Mr. Kissell for 5 minutes. 

Mr. KISSELL. Thank you, Mr. Chairman. Thank you, gentlemen, 

for being here. 

If there is one common theme that I have heard in the discussions for the new farm bill, it is that we must have that safety net. 

And following up a little bit on the general course of conversation 

that we have heard today, and discussions about the fairness, not 

trying to make winners and losers. There are a lot of factors that 

we have talked about today in terms of the crops, the regions, the 

irrigated, non-irrigated, things like this. You gentlemen are from 

different parts of the country—Texas, Virginia, Illinois. From what 

you are hearing and what you see with the combination of all the 

factors we have talked about, is there any one section of the country—because one of the things we see on the Committee sometimes 

is the interest of the Midwest versus the South versus California, 

whatever. But when you consider all the combinations of crops, 

weather, everything else, is there one section of the country that 

we as a Committee might be hearing from hey, this thing is really 

horrible for us? For whatever reason, the combinations that you 

would think this is problematic for a particular area of the country. 

Dr. SCHNITKEY. Again, that does depend on what the final bill is, 

but just looking at what the Senate passed, it moved from base 

acres to planted acres so movement—any crop or region that lost 

base acres will be relatively more disadvantaged by a program that 

moves from base to planted acres. Then you would have to look at 

what the projected relative payments are on the crops and you 

could look at those regional sorts of analysis. I don’t have those 

numbers in the top of my head. Overall, corn, as was mentioned 

before, planted acres of corn and soybeans have increased while 

wheat and other crops have declined. Having said that, that would 

likely mean that the Midwest where corn and soybeans are grown 

would have more acres. Having said that, corn and soybeans have 

spread out over the Great Plains and other areas, so it is not altogether clear to me what happens. 

Dr. COLLINS. If I can comment on this, I do have a figure in my 

head and it is the percent that direct payments represent of recent 

average market prices. For corn, it is roughly five percent. For rice, 

it is over 15 percent. And what is going on in this farm bill is a 

redistribution of government benefits. With the elimination of direct payments, there is going to be a redistribution depending on 

what mechanism is in place. If it is market prices and planted 

acres, that makes a big difference for crops that get a lot of their 

benefits out of direct payments which were based on prices a long 

time ago and based on base acreages which were calculated a long 

time ago. 

2141

So if we are going to transition away from those concepts to a 

new concept, there is going to involve some redistribution and it 

looks to me like the biggest redistribution comes from where direct 

payments represent the highest proportion of income for the commodity. 

Mr. KISSELL. So any regional situations really goes back to the 

crops. 

Dr. COLLINS. Crops. That is what I would say, yes. 

Mr. KISSELL. And we talked about the winners and losers there, 

so if there is something that we need to really look for in our home 

regions is talk to our folks on the particular crops and try to see 

if we can balance this thing out a little bit better if this is the way 

coming from the Senate that we see. 

Thank you, Mr. Chairman. I yield back. 

The CHAIRMAN. The gentleman yields back. 

Congressman Tim Huelskamp for 5 minutes. 

Mr. HUELSKAMP. Thank you, Mr. Chairman. 

Looking here at the CBO March baseline prices and comments 

from each of you, how confident are you all on each of those projections? Do you have a confidence level with those that you can share 

with the Committee? 

Dr. OUTLAW. You know very well that we work very closely with 

our colleagues at the University of Missouri that do the long-term 

projections as well, and all I can say is, these people spend every 

waking moment trying to get it right, whether it is CBO or FAPRI, 

and they do the best there is. So I don’t know that they are right 

and probably never have been right. 

Mr. HUELSKAMP. So how right do you think they are? I understand that there is uncertainty here. I am just curious about your 

expert opinion. 

Dr. OUTLAW. If you were to tell me what was going to happen 

with ethanol policy going forward, I could probably be more accurate about that. 

Mr. HUELSKAMP. So you have——

Dr. OUTLAW. If the ethanol policy stays the same, then I don’t 

have any reason to believe right now that corn prices are going to 

dive, but if something were to change there, in my opinion, there 

might be some changes with those prices. 

Mr. HUELSKAMP. What happens with the wheat price, for example, though, that doesn’t work very well and obviously in that environment and does not have an impact, a renewable mandate? 

Dr. OUTLAW. I didn’t understand the question. 

Mr. HUELSKAMP. The price of wheat obviously is impacted indirectly by the mandate on the other crops. 

Dr. OUTLAW. Absolutely. 

Mr. HUELSKAMP. My question is, how confident are you on the 

wheat price projection? 

Dr. OUTLAW. About like all the rest of them. You have strong 

feelings that those trends could happen unless something major 

changes. 

Mr. HUELSKAMP. Dr. Schnitkey? 

Dr. SCHNITKEY. If I had to peg a long-run price, I would agree 

with what is published by USDA and CBO. I believe they do a very 

good job at predicting things that are difficult to predict, and as Dr. 

2142

Outlaw mentioned, if something does change, and you can list a 

whole host of things, prices will vary from those. 

Dr. COLLINS. I agree with that. I used to run the forecasting program at USDA, and what you have is a contingent projection. It 

is based on a whole bunch of assumptions. One of the advances in 

price forecasting is that some of the groups that do it like Food and 

Agricultural Policy Research Institute, they put confidence intervals around it. They will tell you the probability of the price being 

below $4 or above $6. 

You mentioned wheat in particular. The CBO 10 year projection 

in their current baseline for wheat prices, the 10 year average is 

$5.94 a bushel. You ask me whether I think that is going to be the 

average price or not, I will tell you no, it is not, but I don’t know 

whether it is going to be higher or it is going to be lower than that. 

Mr. HUELSKAMP. Five years ago, what was the prediction for the 

price today? 

Dr. COLLINS. Probably lower. That would be my guess. 

Mr. HUELSKAMP. How much lower, Dr. Collins? 

Dr. COLLINS. I don’t know off the top of my head. I should know 

but I don’t, but probably lower. I would say wheat does face different challenges. It certainly benefits from something like ethanol 

because as land goes into corn and soybeans, it comes out of wheat, 

but we are also reducing the size of the Conservation Reserve Program. There is probably more wheat land that is going to come into 

production out of the smaller CRP that we have seen. Wheat of 

course has a different global market competition environment than 

corn does where we are the dominant exporter in the world. Wheat 

has a lot of competitors in the world so it is very difficult to forecast what will happen with wheat. 

Mr. HUELSKAMP. And that is one of the other concerns I have, 

and maybe, Dr. Outlaw, if I could ask you and the other folks to 

provide for the Committee the cost of production for each of these 

other commodities for our worldwide competitors, how close we are 

to those. That has not been part of this discussion at all, what is 

happening outside of the United States in terms of our ability to 

compete. Do you have those figures, or each one of you sometime 

can provide that later to the Committee? 

Dr. OUTLAW. We would have to provide them for you, but in essence—well, hopefully Keith knows the answers off the top of his 

head. I sure don’t. 

[The information referred to is located on p. 2305.] 

Mr. HUELSKAMP. I am not expecting off the top of your head. I 

am just wondering if you can provide those to us. 

And then in follow-up, Dr. Schnitkey, the price of corn as it goes 

down, some of the inputs would decrease as well. I am wondering 

if you can provide that information for the Committee as well that 

you answered in an earlier question if you would, please. You do 

have those? 

Dr. SCHNITKEY. I don’t have those in front of me. 

Mr. HUELSKAMP. But you can provide those to us? Thank you. 

And the last one, the bigger question for Dr. Collins, we are talking about risk management. There is obviously an entire marketplace for price risk management in the private sector. What is happening there, the impact, the better crop insurance products, are 

2143

folks less likely to be using the private sector, the commodity markets and the future markets for that type of risk management outside the government control? 

Dr. COLLINS. I have not seen any data on that but I really don’t 

think that is a problem. I will give you an example. When we started livestock price insurance products, and I was one of the people 

that made the decision to do that at USDA, I was very worried that 

that was going to cause lower futures and options purchases on the 

Chicago Mercantile Exchange. Well, actually the officials from the 

CME came to see me and they said we want you to go ahead with 

that product, we want you to offer price insurance, if anything, we 

think it might help us over time, it might help us because crop insurance companies or re-insurance companies would buy products 

on the exchange. So a lot of the products on the exchange may not 

be coming from farmers but farmers are forward contracting more 

and more because of crop insurance. The people they forward contract with are operating on the exchanges to use futures and options. 

Mr. HUELSKAMP. Thank you. 

The CHAIRMAN. Mr. Courtney for 5 minutes. 

Mr. COURTNEY. Thank you, Mr. Chairman. 

I just have a quick question to follow up. Dr. Outlaw, you mentioned that ethanol policy changes could have an impact on corn 

prices. Well, there was one change that just happened in January 

when the tax credit expired. I was wondering if you could give us 

a little more detail about, first, did that really change much of anything; and second, what policies would you identify or specify that 

might have an impact? 

Dr. OUTLAW. Yes. There has been quite a bit of research done on 

this issue, and basically most people felt that the expiration of the 

VTEC was not going to have a big impact on the markets. It is the 

mandate that has the driving impact. If something happens to the 

mandate or we—and again, I use ethanol as an example because 

everyone is aware of it but there could be trade issues we would 

have within a foreign country that could have just as big of effects. 

But those are some of the things that I think would change the picture substantially. 

Mr. COURTNEY. So the analysis or study that has been done that 

you mentioned, I mean, have they actually kind of quantified what 

the impact of repealing the mandate would be? 

Dr. OUTLAW. Most of that work actually has, well, a lot of it has 

come out of Iowa State and maybe a couple of other places, and 

they have quantified it. I could get those numbers for you but I 

don’t them off the top of my head. There are some pretty recent articles on that. 

[The information referred to is located on p. 2305.] 

Mr. COURTNEY. Thank you. I yield back. 

The CHAIRMAN. Thank you, Mr. Courtney. 

Mrs. Hartzler for 5 minutes. 

Mrs. HARTZLER. Thank you, Mr. Chairman. 

Dr. Collins, I was interested in your testimony in that you said 

that the free programs to supplement the crop insurance can drive 

out the crop insurance and ultimately increase overall cost. I was 

wondering if you could expound on that. 

2144

Dr. COLLINS. Congresswoman, what I was referring to was that 

when you design a program to supplement crop insurance, if it 

looks like crop insurance, if it functions like crop insurance and it 

is free, then farmers are going to choose that program, depending 

on other factors as well. This is a challenge that the Senate had, 

for example, in constructing their ARC program. They had many 

interests there that wanted a program that would cover 70 to 90 

percent of expected revenue on an individual farm basis. Crop insurance covers individual farms. Crop insurance covers up to 85 

percent. So those kinds of proposals which came from some groups 

had the potential to crowd out crop insurance. I think the Senate 

did a good job in trying to minimize those effects. They shrunk that 

coverage band down to 79 to 89 percent. They made producers have 

a copay like in health insurance, the so-called 65 and 80 percent 

payment factor. That functions like a copay in health insurance. 

There is a payment limit which is pretty stringent, $50,000 and 

new actively engaged requirements. So there are a lot of reasons 

why even though that program is out there, producers are going to 

still buy crop insurance. 

But there still would be some reduction at the highest levels of 

coverage, and I believe that is where CBO looked when they scored 

this ARC proposal. Mr. Conaway, at the outset, mentioned a savings of $2.4 billion. That comes from participation effects in crop 

insurance due to that program. So that is what I was referring to. 

There is that risk when you design a supplemental program that 

walks and talks like crop insurance, and my urging to the Subcommittee is to try to do as much as possible to—if you go that 

route, do as much as possible to mitigate those interaction effects. 

Mrs. HARTZLER. That makes a lot of sense. 

Some have expressed that shallow loss programs or proposals either guarantee a profit, which you have all addressed, you maybe 

disagree that that is the case. Some say that it takes out the risk 

of farming, implying that you are going to have farmers perhaps 

take on more land than they should or make some business decisions that actually aren’t wise that otherwise they wouldn’t make. 

They will put themselves in a precarious position down the road if 

something were to happen. What do you think are the consequences of taking the risk out of farming, and do you think the 

proposals that are discussed would do that in fact? 

Dr. COLLINS. I don’t think the proposals generally take all the 

risk out of farming. They are reducing some of the risk in farming. 

As you pointed out, there are some serious adverse consequences 

to taking out too much risk in farming. You encourage risk-taking 

behavior. You encourage over-investment, the possibility of surplus 

production and chronically lower prices and so you want to avoid 

that. This is a difficult thing, this whole target price discussion 

that I listen to as to whether they will distort or not distort production. You know, that is a tough issue. Target prices as they exist 

today are essentially, ‘‘decoupled.’’ They don’t influence production 

because they are paid on base acres and they are paid on a fixed 

yield, so they have little impact on the production decision. If you 

recouple them, if you break those decoupled links and you set target prices high, then you have a chance of taking too much risk out 

of production. So if you move in that direction of breaking the base 

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acres and breaking the countercyclical yields and go to target 

prices, you need to make sure that you don’t set them too high. 

Mrs. HARTZLER. Exactly. Would either one of you like to comment on that as well? Just quickly. I have 16 seconds. 

Dr. OUTLAW. In my testimony, I mentioned if they are set below 

the cost of production, which is what I said, I think that wouldn’t 

be a problem. 

Mrs. HARTZLER. Great. Thank you very much. Yield back. 

The CHAIRMAN. The gentlelady yields back. 

Congressman David Scott for 5 minutes. 

Mr. DAVID SCOTT of Georgia. Mr. Chairman, I will just yield my 

time and speed along so we can get to the next panel, and I will 

be first in line to ask questions then, if you don’t mind. 

The CHAIRMAN. All right. Mr. Scott, thank you. 

One real quick one. Dr. Collins, to kind of follow up on what Mrs. 

Hartzler was talking about, would a crop insurance-administered 

product in your view do a better job of covering shallow losses? 

Dr. COLLINS. You could design a crop insurance-administered 

product to cover shallow losses. The issue is that crop insurance, 

using the standards of insurability requires certain things. You 

have to have underwriting standards. You have to have actuarial 

soundness, which means there is a premium rate that has to be 

paid. So a crop insurance product if it went through the development process with the goal of providing, ‘‘shallow loss protection,’’ 

would probably look different than anything we are looking at 

today. Do I think crop insurance companies could deliver that? Yes, 

I have great faith in the ability of agents and companies to sell and 

service the product. 

But if I look at the products that are on the table, crop insurance 

products use an expected market price. You are ensuring the current value of the asset, not the average value over the last 5 years, 

not the benchmark value of the asset, the current value of the 

asset. So these programs that have benchmark prices in them and 

that cover about 85 percent, there is a reason policies don’t go beyond 85 percent. It is a moral hazard. So to design a crop insurance—I don’t think you can have a crop insurance product that 

would look like ACR, for example, because of the price and because 

it is covering up to 89 percent, which raises questions about moral 

hazard. I think they have tried to reduce that effect with the coshare, the copayment, but to answer your question in one sentence, 

it could be done but it would look like a different product. 

The CHAIRMAN. Thank you. 

Gentlemen, great panel today. Thank you so very much. I appreciate each of you being here. 

We will now turn to the second panel, and I will introduce them 

while they are repositioning to trim a little time out. We will have 

Mr. Chip Bowling, who is a Board Member, National Corn Growers 

Association, from Newburg, Maryland. We will have Ms. Linda 

Raun, Partner, LR Farms, Chairwoman, USA Rice Producers’ 

Group, El Campo, Texas. We will have Mr. Bob Stallman, President of American Farm Bureau Federation from Columbus, Texas. 

We will have Mr. Dee Vaughan, President, Southwest Council of 

Agribusiness from Dumas, Texas. Half the panel is from Texas, let 

the record reflect. Mr. Chuck Coley, President, Coley Gin and FerVerDate 0ct 09 2002 12:54 Dec 11, 2012 Jkt 041481 PO 00000 Frm 00557 Fmt 6601 Sfmt 6601 I:\DOCS\112-30\74372.TXT BRIAN
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tilizer, Chairman of the National Cotton Council of Vienna, Georgia, and Mr. Scott Brown, President of National Barley Growers 

Association, Soda Springs, Idaho. 

Mr. Bowling, your opening statement, please. 

STATEMENT OF CHIP BOWLING, MEMBER, BOARD OF

DIRECTORS, NATIONAL CORN GROWERS ASSOCIATION, 

NEWBURG, MD 

Mr. BOWLING. Thank you. Chairman Conaway, Ranking Member 

Boswell, and the Members of the House Agriculture Subcommittee 

on General Commodities and Risk Management, on behalf of the 

National Corn Growers Association, I thank you for the opportunity 

to share our views and importance of sound risk management programs for family farmers. 

My name is Chip Bowling. I am a third-generation farmer from 

Newburg, Maryland, where I grow corn, soybeans, wheat and sorghum. I currently serve on NCGA’s Board of Directors. I also serve 

on the NCGA Public Policy Action Team, which is comprised of representatives from a variety of regions across the country. 

As planting is in full swing, farmers are putting many dollars, 

a whole year’s work and our entire yearly income at risk. Traditionally, we have worried about the risk from drought, floods, plant 

disease and pests, but now the risks are broader, deeper and larger. We are all connected on a global scale. Risks to agriculture 

come from many unexpected and diverse places—international incidents, economic crises around the world, trade policies, embargos, 

the price of a barrel of oil, and the list goes on. We may do everything right with decisions that are within our control on the farm, 

but there are still years when we cannot cover our losses from all 

risk. These threats are hard on farmers but even more devastating 

to young farm families like mine. The ability to purchase Federal 

crop insurance and have access to a flexible revenue-based risk 

management program to mitigate these risks is even more critical 

today. 

The context of the 2012 Farm Bill in strong risk management in 

this: U.S. agriculture must be prepared to take on an even greater 

role in meeting the growing demands of consumers both here and 

abroad. Billions of people in the world remain hungry and the 

numbers are rising. We simply cannot afford to underestimate 

these challenges as well as our ability to help respond to meeting 

the needs for food and energy. 

NCGA’s Public Policy Action Team has spent the past 3 years 

working on new options for the 2012 Farm Bill that would simplify 

enrollment, streamline administrative procedures and eliminate 

overlapping coverage. Our organization has also made a commitment to being responsive to taxpayer dollars. Through our research, we have learned that risk management is the number one 

priority and that Federal crop insurance is the cornerstone of a 

sound farm safety net for the future. 

We were pleased with the Department of Agriculture’s decision 

late last year to begin a phase-in of long-overdue changes in the 

rating methodology of crop insurance that better reflects the actual 

loss experienced by corn growers. It is important that this process 

move forward so corn farmers will no longer be facing the widening 

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gap between the loss ratio for corn and the premiums charged to 

growers for policy coverage. For example, a loss ratio on corn policies over the last 15 years has averaged .59 as compared to the established 1.0 loss ratio. 

We recognize the need to provide a risk management tool that 

protects against revenue losses due to conditions not adequately 

covered by crop insurance. Such examples would include the 1980s 

farm crisis, the Asian economic collapse and most recently, the decline in European financial stability. 

NCGA has also called for a transition away from direct payments. Our growers recognize it is time to move forward to a farm 

policy that better addresses today’s production and volatile market 

risk. We believe that the agricultural risk coverage program and 

the Senate Agriculture Committee’s-passed language reflects the 

NCGA principle that government programs should not encourage 

producers to take unnecessary risk. The program is designed to 

partially offset losses, and I want to emphasis partially, not covered by crop insurance to alleviate sharp year-to-year declines in 

price. NCGA understands farmers need to be able to endure a certain amount of loss in any 1 year. However, we are trying to protect farmers from depleting their emergency funds when they encounter revenue losses over multiple years. 

While NCGA supports an area-wide revenue program, we realize 

producers in every region of the country face different risks. We 

look forward to working with other commodity organizations to develop a revenue protection program for all areas of the country. 

There are certain things the Federal Government must do for 

citizens. Providing food security is one of them. Countries around 

the world understand the important role that agriculture plays in 

their economies. The 2012 Farm Bill presents an opportunity to advance needed improvements in the commodity title that could work 

more effectively with a strong Federal Crop Insurance Program. 

NCGA appreciates the difficult task before your Committee to 

write a comprehensive and balanced farm bill, especially under the 

current budget restraints, but we urge Congress to pass a farm bill 

this year. 

I thank you for your time today and your consideration of our 

policy recommendations. 

[The prepared statement of Mr. Bowling follows:]

PREPARED STATEMENT OF CHIP BOWLING, MEMBER, BOARD OF DIRECTORS, NATIONAL

CORN GROWERS ASSOCIATION, NEWBURG, MD 

Chairman Conaway, Ranking Member Boswell, and Members of the House Agriculture Subcommittee on General Commodities and Risk Management, on behalf 

the National Corn Growers Association (NCGA), I appreciate the opportunity to 

share with you our views on the importance of sound risk management programs 

to family farms as you begin your deliberations on writing the 2012 Farm Bill. My 

name is Chip Bowling. I am the third generation on our family farm in Newburg, 

Maryland about 45 miles south of Washington, D.C. I raise corn, soybeans, wheat 

and grain sorghum. I currently serve on NCGA board of directors and am a member 

of the public policy action team. 

The National Corn Growers Association represents more than 37,000 corn farmers 

from 48 states. NCGA also represents more than 300,000 corn growers who contribute to check off programs and 27 affiliated state corn organizations across the 

nation for the purpose of creating new opportunities and markets for corn growers. 

First, I want to state that NCGA believes it is very important to remember that 

U.S. agriculture must be prepared to take on an even greater role in meeting the 

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growing demands of world consumers. The harsh reality is that billions of people 

in the world today remain hungry and the numbers are rising, a trend the Food 

and Agriculture Organization of the United Nations reports will continue for another 30 years. We simply cannot afford to underestimate these challenges as well 

as the market opportunities in a world where 95 percent of the population lives outside the United States. NCGA is confident that the U.S. agriculture sector can remain a vital bright spot in our nation’s economy and further contribute to its recovery. 

Fortunately, advances in seed technologies along with modern production and conservation practices have generated substantial increases in productivity that will 

help meet the pressing need for an expanding food supply. Investments in these new 

production technologies by America’s corn growers have resulted in major increases 

in bushels produced while reducing acres under cultivation. In fact, the average 

bushels per acre increased from 114 in 1995 to 153 in 2010, a productivity increase 

greater than 30 percent. These remarkable numbers and the promise of new production technologies on the horizon translate into U.S. corn growers’ ability to meet all 

our needs for food, feed and fuel. NCGA would argue that these investments in an 

industry fraught with financial and production risks have been made possible in 

large part by a reliable farm safety net with the cost-share Federal Crop Insurance 

Program as the foundation. 

In light of the extremely difficult fiscal and economic conditions that our nation 

faces today, NCGA recognizes the monumental task before this Subcommittee and 

the full Committee to advance a new farm bill that must address a broad range of 

nutrition and agriculture concerns across the country. Our growers also recognize 

they must be part of the solution to address our nation’s unsustainable budget deficits and are prepared to accept appropriate spending reductions in farm programs 

within the context of the overall Federal budget. In preparation for this new budget 

reality, NCGA initiated internal discussions over 2 years ago on how to improve 

upon the market oriented reforms in the commodity title. These ongoing discussions 

have been augmented by substantial independent analysis of suggested changes to 

existing farm programs and new concepts considered by our Public Policy Action 

Team. 

First and foremost, NCGA cannot overemphasize the consensus among our membership that the Federal crop insurance program is the most critical risk management tool for their farm operations. Why is Federal crop insurance important to me 

and other farmers? When we go to the field this year to plant, tend and harvest 

a crop, we are putting many dollars, a whole year’s work and our entire yearly income at risk. Traditionally, we worry about the risks from drought, floods, storms, 

plant disease, and pestilence to crops in the field, but now the risks are not just 

physical. Interconnected global markets that have benefited agriculture are now also 

a source of peril: international incidents, economic crises around the world, currency 

exchange rates, global monetary and trade policies, embargoes, the price of a barrel 

of oil and the list goes on. We may do everything right with our management practices and the decisions that are within our control on the farm, but there are years 

when we cannot adequately cover our losses from all the risks, seen and unseen. 

These threats are hard on farmers like me, but even more so for the young farm 

families who are just getting started in agriculture. Access to an affordable crop insurance plan is even more critical in times like these to help farmers face the agronomic perils and the uncertainty of the marketplace. We believe it is key to the 

foundation of a good farm bill. 

From a larger perspective, the extreme volatility in the commodity markets experienced over the past 5 years as well as the impact of major flooding in the Midwest 

and severe drought conditions in the South remind us that the risks in farming are 

expansive and immediate. The corn industry has certainly enjoyed considerable improvement in prices, but growers continue to confront the pressures of rising input 

costs and increasing land rents as competition for inputs bids up prices. Federal 

crop insurance, especially revenue protection coverage, has proven to be the most 

flexible and market oriented risk management tool for protecting family farm income; it has permitted growers to insure adequate revenue to cover that year’s cost 

of operation. 

For the 2011 crop year (as of May 7, 2012), 78.21 million acres of corn were insured under the Federal crop insurance program for liability protection of $51.57 

billion compared to 73.6 million acres for $31.7 billion of protection the previous 

year. The premiums paid to insurance providers for corn policies totaled $4.76 billion with producers responsible for an estimated 40 percent of the program’s total 

premium. In terms of sheer volume and total liability protection, it should be no 

surprise why NCGA is committed to working with the Risk Management Agency 

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1Summary of Business, Risk Management Agency, May 2012. 

2 Cooper, J. 2009. Economic Aspects of Revenue-Based Commodity Support, ERR–72, U.S. Department of Agriculture, Economic Research Service, April. p. 1. 

(RMA) to ensure that the program is administered as efficiently and equitably as 

possible. 

Consequently, we were pleased by the Department of Agriculture’s decision late 

last year to begin a phase-in of long overdue changes in the rating methodology to 

better reflect the actual loss experience in the premiums paid for corn policies. Full 

implementation of the rating methodology changes by the RMA is necessary for the 

rating of corn policies to more accurately reflect reduced yield variability, yield 

trend increases and appropriate weighting corrections. Otherwise, the rating system 

will continue to set premiums well above corn’s loss experience that has been documented over the past fifteen years. The loss ratio (indemnity payments divided by 

total premium) for corn over this period has averaged .59,1 a level well below the 

combined loss ratio of other major crops, and far below the program-wide statutory 

loss ratio 1.0. Moving forward with the necessary reforms to the rating methodology 

will not only help to address inequities for many corn and soybean growers, but ensures a more cost efficient Federal crop insurance program. 

While individual Federal crop insurance policy coverage provides very effective assistance if revenue or yield decline between planting and harvest, it is limited to 

each policy’s insurance year and is insufficient to insure adequate return on investment over the intermediate term, such as for equipment. Crop insurance is simply 

not designed to address price-induced declines in revenue that can last several 

years. Extended periods of low revenue can result from successive years of price declines or multiple years of below average production or ‘‘shallow losses’’ not covered 

by crop insurance. Recall the depressed markets from the grain demand collapse of 

the 1980’s and the Asian financial crisis of the late 1990s. These unfortunate events 

can and do result in a gradual, but serious erosion of a farmer’s equity. 

To address these gaps in protection against significant production shortfalls and 

volatile markets, NCGA has advocated for a more market-oriented, revenue-based 

risk management program that complements crop insurance. In our view, the ad 

hoc disaster assistance packages approved in the past in response to these situations were poorly targeted. A 2009 USDA Economic Research Report indicates that 

a revenue-based support program can ‘‘be more efficient than the traditional suite 

of uncoordinated commodity programs and disaster assistance programs in that payments are more closely aligned to actual changes in farm revenue. If prices and 

yields are inversely related, the revenue-based approach may offer less variable payment outlays from year to year than the long standing forms of support—even if 

mean total payments are the same between the two forms of support. In such a 

case, a high level of payments may also be less likely under revenue-support.’’ 2

The efficiency of revenue programs led NCGA to support the Average Crop Revenue Election Program (ACRE) adopted in the 2008 Farm Bill. ACRE represents a 

fundamental reform to the farm safety net; one that NCGA believes provides a more 

responsive risk management tool for rising input costs, improving yield trends and 

greater market volatility. To date, over 136,170 farms have enrolled in the program 

comprising almost 13 percent of base acres. Although the program’s design and administration has been subject to criticism, the fact is ACRE has delivered some 

much needed assistance to producers across the country. 

In response to grower concerns, NCGA has recommended that a new revenue 

based program include these proposed changes. (1) Set the revenue benchmark at 

the Crop Reporting District to better address area wide disaster related production 

losses closer to the farm. (2) Use a simple 5 year Olympic Average Revenue rather 

than separate price and yield formulas which cause considerable confusion. (3) Base 

payments on planted acres rather than base acres. (4) Lower the maximum payment 

level to ensure optimal protection against shallow losses and to eliminate overlap 

with crop insurance. Independent economic analysis of these recommended changes 

to ACRE indicates substantial savings for deficit reduction and a more effective revenue based risk management program for protection against multiple years of declines in revenue for most crops. 

NCGA believes the legislation introduced by Senators Sherrod Brown, John 

Thune, Richard Durbin, and Richard Lugar, the Aggregate Risk Revenue Management Program (ARRM), well incorporates the principles of a market-oriented, revenue-based risk management approach while addressing some of the noted problems 

experienced with the ACRE program. H.R. 3111, The REFRESH ACT, introduced 

by Rep. Marlin Stutzman, also includes the ARRM program as a key reform to the 

next farm bill’s commodity title. The Agricultural Risk Coverage (ARC) program in 

Title I of the Agriculture Reform, Food and Jobs Act recently reported by the Senate 

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3 Ibid. p. 12. 4 A measure of dispersion around a mean value of a distribution that is calculated by dividing 

the mean by the standard deviation of the distribution. 5 Cooper, 2009. op. cit. p. 12. 

6Dismukes, R., K.H. Coble, D. Ubilav, J. Cooper, and C. Arriola. 2011. Alternatives to a StateBased ACRE Program: Expected Payments Under a National, Crop District, or County Base,

ERR–126, U.S. Department of Agriculture, Economic Research Service, September. p. 2. 

Committee on Agriculture, Nutrition and Forestry also embodies similar elements 

as the ARRM program and includes a producer election for farm or county level revenue protection. These proposals reflect the NCGA principal that government programs should not encourage producers to take on unnecessary risk. The programs 

are designed to partially offset losses not covered by crop insurance and to mitigate 

sharp year-to-year declines in price that crop insurance does not. NCGA understands farmers need to be able to sustain a certain amount of loss in any 1 year. 

It is very important that we try to protect farmers from depleting their emergency 

funds when they encounter revenue losses over a period of multiple years. 

The revenue programs described in the 2009 USDA analysis are different from 

the current ACRE and other revenue based proposals for the 2012 Farm Bill and 

thus the specific provisions of revenue programs may result in significant differences in results. Nonetheless, the results illustrate the advantages of revenuebased programs over price-based programs such as the Counter Cyclical Payment 

(CCP) and Marketing Loan Assistance (MLB) programs in the 2008 Farm Bill. 

With respect to relative efficiency, the same research notes that ‘‘providing price 

and yield compensation separately means that producers may receive support when 

they do not need it, or not receive support when they need it most. For example, 

a farmer who suffers a complete yield loss will not receive a payment under a pricebased program that is tied to current production, (i.e., the MLB).’’ 3 Revenue and 

traditional programs are compared by simulating two revenue programs and the 

traditional programs over the 1975 to 2005 period and adjusting program parameters such that the average total costs are about equal ($3 billion per year). Using 

a coefficient of variation4 to compare the two revenue programs with the traditional 

programs, revenue variation in the revenue programs was about half that of the traditional programs (Appendix Table 1).5 The simulation results in Table 1, and also 

illustrated in Appendix Figure 1, show the high and low payments are less frequent 

in the revenue based program, with the revenue programs payments between about 

50% below ($1.6 billion) to 60% above ($5 billion) the average payment ($3 billion) 

within a 90% confidence interval. This compares to the traditional program variation 90% confidence interval of almost 90% below ($0.38 billion) to nearly 130% 

above ($7.1 billion) the average payment ($3 billion). 

In establishing an area or farm level revenue program, there is a primary issue 

to consider. For a limited budget environment, the area level for payment determination is the optimum for delivering assistance when the producer needs it the 

most. The 2011 USDA ACRE analysis examines the relationship of reducing the 

level of statistical aggregation from state to CRD to county to farm in Appendix 

Table 2.6 As shown, farm level variability ranges from about 140% of county level 

for rice to 290% for grain sorghum. 

This table suggests that a lowering of payment determination from county level 

to farm level would further increase costs. With a limited budget, the increase in 

payments at each level must be accompanied by a reduction in the amount of that 

payment that may be made on each acre, so that the total expenditure does not increase. Table 2 indicates that reduced payments for most would be made two to 

three times as frequently at the farm level as at the county level. This suggests that 

growers would receive the same total amount of payments, but more frequently and 

in smaller amounts and that they would be more related to farm yield variability 

than to price variability. The current crop insurance program already provides the 

means to manage this type of risk. Moreover, this trade-off, from greater payments 

at the county to lower payments at the farm, means that sudden and prolonged 

price downturns of the type that occurred from 1998 to 2001 would result in payments being reduced from the 80% payment factor in the ARC program to perhaps 

half of that amount. A second trade-off relates to land rents. Less variable, more 

frequent producer payments are more readily capitalized into land values and rents. 

As we have seen with Direct Payments, this does little to reduce the producer’s operating risk. 

As noted earlier, a national average for all crops for farm level revenue variability 

is about twice the county level variability. For the same level of revenue coverage, 

89% to 79% of benchmark revenue as is in the Senate bill, for example, two different 

2151

payment rates are used, 80% for the county and 65% for the farm level election. 

Now consider the revenue history of the 1985 to 1988 and 1998 to 2001 periods. 

The 1985 to 1988 period represents the collapse of world demand for grain and 

the farm financial crisis and also include significant drought in 1988. Over this period, national average corn yields recovered from the drought in 1983 to 106 bushels 

per acre to 120 bushels in 1987. Yields suffered another drought in 1988 and 

bounced back to 116 bushels in 1989. Prices, however, fell 53%, to $1.50, in 1986 

from 1983 highs of $3.21 and, by 1989, had only recovered to 27% below 1983 levels. 

National average corn revenue per acre declined 31% from 1983 to 1986, from $260 

per acre to $179 per acre; revenues recovered with the drought in 1988 to $232 per 

acre, but then dipped again in 1989 to $215 per acre. 

The 1998 to 2001 period, which began with the Asian financial crisis, saw national average corn yields increase from 134 bushels per acre in 1998 to 138 bushels 

in 2001 while prices fell 44% from $3.24 in 1995 to $1.82 in 1999. Even when prices 

rose, they were still 38% below 1995 levels in 2005. National corn revenue per acre 

fell 34% over the same 1995 to 1999 period, from $368 per acre to $244; by 2005, 

revenue was still 20% below 2005 levels. 

Figures 2 and 3 illustrate the response ARC would have over the 1977 to 2010 period for corn based on a $4.50 long-run corn price for McLean County Illinois. In 

particular, it illustrates how the revenue program could buffer the effects of significant yield loss in 1988 coupled with a collapse of world grain demand during the 

1985 to 1989 period, and the effects of price collapse from the Asian financial crisis 

over the 1998 to 2001 period. The 1977–2010 average per acre county payment of 

$17.64 is more impressive when it is concentrated in the years of significant revenue 

loss. The 1977 and 1986–88 projected payments of $67 to $62 per acre and 1998 

to 2000 projected payments of $67 per acre are more reassuring than the average 

payment. By contrast, the average per acre farm payment of $13.56 is less helpful 

in the difficult years of 1977 and 1986–88, when projected per-acre payments 

crested between $50 to $26 per acre and 1998 to 2000 when projected payments 

reached $42 to $39. 

Recall that this was a time when Congress added market loss assistance that averaged about $4.6 billion a year from 1998 to 2002. If more producers will seek 

farm level revenue protection, they will limit themselves to 60% of a revenue payment, as it was established in the Joint Committee recommendation, or to 65% as 

it is set in the current Senate bill. In contrast, the Senate bill’s county election payment rate is 80%. Paradoxically, the more growers elect the farm level program, the 

lower the payment rate will have to be to offset the more frequent payments. 

The more attractive a county wide program is, the less costly the two programs 

will be as growers elect the lower cost county program until, on average, the expected value of county and farm options approach one another. As the payment rate 

for the county election increases, the cost of the farm program election is expected 

to decrease more rapidly than the cost of the county program election increases. 

This will allow the farm election payment rate to be increased within the same limited budget. 

There are two exceptions to these arguments for county payment determination. 

First are those producers whose farm revenue correlation with the area is sufficiently low that even though an area program might provide adequate assistance 

over time, it would not reliably occur when the producer needed it on the farm. Second are producers, who because of premium expense, purchase individual levels of 

crop insurance coverage below the 79 percent level to which the Senate Agriculture 

Committee’s proposed ARC revenue program extends. This gap in coverage between 

ARC, the farm program, and individual crop insurance coverage has been referred 

to as the ‘‘doughnut hole’’. NCGA supports two means to address these types of circumstances. 

To address the first exception, allow farm-level election by growers who would 

prefer a farm level revenue program. Because farm-level revenue variability is 

greater than area level variability, a farm level ARC program would provide more 

payments to a producer than an area level determination. NCGA believes there 

should be an adjustment to the county and farm level payments such that a producer would receive the same expected value of payment at either farm or county 

level from the program. It is important to set the relative benefits so that the payment rates to producers in both county and farm program elections receive the maximum payment rates within the budget limit. 

In the second exception, NCGA supports a Supplemental Coverage Option (SCO) 

through the Federal Crop Insurance Program. SCO is similar to Gap Coverage that 

NCGA proposed in its testimony during the Senate Agriculture Committee’s hearing 

on March 15. Both would allow a producer to buy area coverage, at the county level 

in a GRIP or GRP policy, at coverage up to 75%, in the case of ARRM, or 79%, in 

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7Direct Payments are made on 85% of base acres. The Senate bill’s payments are made on 

80% of planted acres at the county level and 65% of planted acres at the farm level. This difference in payment acres in not included in the table. 8Tables 3 and 4 are based on CBO estimates of the Senate Committee’s Managers’ Amendment. The bill, as reported, was further modified, in particular the Baucus #12 amendment, 

which affected Title I. CBO estimates for the amended Managers’ Amendment were not available as of this writing. 

the case of ARC, and extend to the coverage of the individual insurance policy, as 

low as 50%. The higher the level of individual coverage is, the lower the premium 

on the Gap or Supplemental Coverage. The premium would effectively be the difference between the area 75% or 79% premium and the area premium calculated 

for the individual coverage, extending to 50%. The area premium could have an increased subsidy over that currently provided in the crop insurance statute, but 

NCGA did not specify one at that time. 

As this Subcommittee considers various policy proposals to meet the diverse risk 

management needs for producers throughout the country, NCGA recognizes the inherent difficulty of crafting legislation that provides a safety net that is widely effective as well as equitable in its approach. We understand commodity title reforms 

will be measured against ‘‘equity’’ considerations in the form of recent farm bills. 

One should not lose perspective, though, on appropriate relative funding levels that 

would first recognize significant changes in recent farm policy, particularly those 

changes that would move farm policy in a more market oriented, risk management 

direction. 

As a response to current fiscal constraints and diminished public support for the 

decoupled Direct Payment program, we have already seen provisions in House-Senate Agriculture Committees’ recommendation to the Joint Select Committee on Deficit Reduction and the Senate-reported bill to eliminate not only Direct Payments, 

but Counter-Counter Cyclical Payments and the ACRE program. These policy decisions have also called for using much of the reduced outlays to fund alternative programs and the rest to reduce the Federal deficit. 

Questions and concerns have been raised regarding the commodity and crop insurance titles’ provisions in the bill recently approved by the Senate Agriculture 

Committee. Programs designed as revenue support programs, either using producer 

payments or new, subsidized crop insurance policies have been proposed to replace 

the current suite of programs. In both cases, the new provisions are coupled to production; that is, as the volume of production increases, greater payments or indemnities will be made if market revenues are determined to qualify for assistance. We 

understand that the perceived fairness of the replacement program is likely to be 

viewed as relative shares of projected commodity program spending in the replacement programs compared to shares of projected spending in the CBO Baseline, 

which is based on a continuation of the 2008 Farm Bill policies. Almost 3⁄4 of Baseline spending is based on decoupled payments, which themselves are based on 

planting and price history dating back to 1978 and 1995, respectively. Using relative 

shares of decoupled spending to determine appropriate shares of re-coupled support 

does not reflect the change in policy that revenue programs provide. 

Decoupled payments, beginning as declining Production Flexibility Contract (PFC) 

payments in the 1996 Farm Bill, were designed to compensate producers when the 

primary programs providing crop producer income support were eliminated. They 

were continued in the 2002 Farm Bill as Direct Payments with the provision that 

producers could choose to retain their PFC Base payment acres or update their production history to reflect more recent practices from 1997 to 2001. The data show 

that producers were able to maximize their decoupled government payments and respond to market signals in planting decisions. The result was that many crops were 

planted well below their base acreage on which PFC/DP payments were received, 

as intended. Where decoupled payments were offsetting the higher production cost 

of high value crops, such as cotton, peanuts and rice, as some have characterized 

their purpose, some of the high value crop base acres were planted to other program 

crops where market returns were more attractive. 

To base projected current spending for new, coupled revenue programs on spending for past, decoupled programs, which should have adequately met their compensation objectives, would seem to have little relevance to protecting current gross 

revenues at current prices. 

An alternative comparison to baseline shares would first adjust expenditures for 

recent 2010–12 planted acres relative to 2011 Direct Payment Base Acres,7 as 

shown in Appendix Table 3.8 Thus, where planting has declined relative to base 

acres, the adjustment factor is less than one, as in the case of sorghum and barley, 

and where plantings have increased, the factor is greater than one, as is the case 

2153

9 Cooper. 2009. op. cit. p. 13. 

with soybeans. The adjusted share of baseline reflects a greater payment on planted 

acres than a producer has been receiving under the 2008 Farm Bill. 100% of Direct 

Payments for barley, for example, were effectively made on 2010–12 average acres 

planted to barley that are 1⁄3 2011 barley base acres. Consequently, its adjustment 

reflects a projected receipt on payments on planted acres equal to 82% of direct payments and other commodity support spending per base acre. Producers of crops on 

less than all base acres may be letting the land idle, in which case they have received compensation for their land’s value since 1996 or 2002. If the producer is 

planting the crop for which the base was established or another crop, he will receive 

revenue protection based on an Olympic average of price and yield. 

A more useful assessment is to compare a farm bill’s expenditures to each commodity’s market value. This comparison will indicate how much the production of 

each crop relies on government programs for a sustainable income in order to remain in production. Appendix Table 4 shows the value of expenditures for each 

commodity in the baseline and under the Senate bill as a share of 2009–11 average 

crop values of production. In this comparison, corn and soybeans, among the major 

crops judged to have benefited the most under the Senate bill as a relative share 

of baseline, are seen to have received only 3.5% and 2.2%, respectively, of market 

value from government transfers. Under the Senate bill, these share of market values change to 2.6% for each. These levels are well below the 14.4% to 8.8% of the 

other five major commodities in the baseline and still well below the 5.0% to 3.7% 

in the Senate bill. 

There are certain things our Federal Government must do for its citizens, providing food security is one of them. Countries around the world understand the important role that agriculture plays in their economies. They, too, provide assistance 

to farmers when needed along with resources for long term strategic investments 

in research and other priority programs. The 2012 Farm Bill presents an opportunity to advance needed improvements in the commodity title that can work more 

effectively with a strong Federal Crop Insurance Program. NCGA appreciates the 

difficult task before your Committee to write a comprehensive and balanced farm 

bill, especially under the current budget constraints. I thank you for your time today 

and your consideration of our policy recommendations. 

APPENDIX

Table 1 9

Stochastic Analysis of the Distribution of Corn Program Payments Under Alternative 

U.S. Programs (2005 Expected Prices and Yields) 

Target Revenue Program 

Payment type 

Total Extended 

Coverage 

Production 

Limited Basic 1

Mean payment ($ billion) 3.03 1.16 1.64 0.22 

Coefficient of variation 2 0.32 0.52 0.24 1.06

90% confidence interval (lower, 

upper) 1.62, 4.80 0.39, 2.28 1.06, 2.37 0.02, 0.73

Market Revenue Program Total National 3 Supplmental

Mean payment ($ billion) 3.17 2.33 0.85

Coefficient of variation 0.34 0.430 0.59

90% Confidence interval 1.55, 5.09 0.76, 4.06 0.37, 1.97

Traditional-Style Program otal P–MLB P–CCP Disaster

Mean payment ($ billion) 3.11 1.26 1.67 0.19

Coefficient of variation 0.68 1.35 0.53 1.46

90% confidence interval 0.38, 7.10 0.00, 4.78 0.00, 2.28 0.02, 0.83

1The ‘‘basic’’ payment covers shortfalls in county revenue per acre with respect to expected 

county revenue per acre. The ‘‘extended coverage’’ payment is based on a target revenue using a 

statutory price, and provides supplemental coverage over the basic payment. The ‘‘productionlimited’’ payment is similar to the extended coverage payment but applied to a fixed base acreage for the farmer, and provides supplemental coverage over the extended coverage payment. 

2154

2The coefficient of variation in this application is a measure of the dispersion of the probability distribution of revenue per acre that allows comparisons across populations with different 

means, and is the standard deviation of revenue per acre divided by the mean revenue per acre. 

The smaller the coefficient of variation, the lower the dispersion relative to the mean value of 

the distribution. 3The ‘‘national’’ revenue payment rate is based on the difference between national expected 

and actual revenue per acre, and the ‘‘supplemental’’ revenue payment provides additional coverage based on a county-level payment rate. 

2155

10 Ibid. p. 15. 

Figure 1 10

Figure 5a 

Frequency of commodity payments for corn—traditional-style program 

The traditional style programs more frequently have high payment

Figure 5b 

Frequency of commodity payments for corn—target revenue program 

The target revenue programs produces a tighter range of payments

Figure 5c 

Frequency of commodity payments for corn—market revenue program

Note: Each bar covers a $500 million range of payments. The taller the bar, 

the greater the number of payments falling in the associated range.


11230156.eps 11230157.eps 11230158.eps
2156

11Dismukes et al. 2011. op. cit. p. 2. 

Table 2 11

Yield and revenue variability at different levels of aggregation 

Item/Level Corn Soybeans Wheat Cotton Grain

sorghum 

Rice, longgrain 

Rice,

Medium/

short-grain 

Coefficient of Variation

Yield variability: 

National 0.069 0.058 0.056 0.076 0.099 0.037 0.061 

State 0.097 0.099 0.135 0.119 0.123 0.043 0.061

District 0.110 0.113 0.169 0.152 0.167 0.045 0.062

County 0.122 0.125 0.195 0.184 0.202 0.052 0.067

Farm 0.359 0.372 0.520 0.672 0.776 0.335 0.263

Revenue variability: 

National 0.195 0.188 0.185 0.197 0.214 0.272 0.288

State 0.207 0.205 0.215 0.225 0.230 0.275 0.288

District 0.214 0.213 0.240 0.250 0.256 0.275 0.288

County 0.221 0.220 0.261 0.274 0.283 0.276 0.289

Farm 0.413 0.425 0.558 0.715 0.829 0.440 0.395

Averages weighted by acres harvested in 2010. District = Crop Reporting District. Medium/short-grain rice is for 

a single State, California. Based on simulations. 

Figure 2

ARC-County 

Simulated History Payment Based on Today’s Dollars

Note: All past payments are stated in today’s terms, not in historical terms. 


11230159.eps
2157

Figure 3

ARC-County 

Simulated History Payment Based on Today’s Dollars

Note: All past payments are stated in today’s terms, not in historical terms.

Table 3

Comparison of CBO March Baseline to CBO Est. of Managers’ Amendment, FY 2013–22

CBO March 

Baseline 

Managers’ 

Amendment 

Share of 

Baseline 

(Avg 2010–12 

Planted A)/2011 

Base A 

Share/(Avg 

2010–12 Planted 

A/Base A)

$ millions

Title I:

Corn 22,179 ¥5,752 0.74 1.09 0.68

Sorghum 2,038 ¥505 0.75 0.48 1.56

Barley 852 ¥615 0.28 0.34 0.82

Oats 48 ¥11 0.77 0.94 0.82

Soybeans 7,618 1,459 1.19 1.50 0.79

Wheat 11,131 ¥6,409 0.42 0.74 0.57

Upland Cotton 6,843 ¥6,077 0.11 

Rice 4,336 ¥2,842 0.34 0.67 0.51

Peanuts 1,013 ¥314 0.69 

Other Oilseeds 270 50 1.19 1.21 0.98

Dairy 432 ¥59 0.86 

Wool 36 0 

Mohair 10 0 

Honey 32 0 

Dry Peas 25 17 1.68 

Lentils 29 25 1.86 

Small Chickpeas 0 0 

Large Chickpeas 0 0

Total 56,892 ¥21,033 0.63

Title XI: 

Cotton-STAX 3,224 

Supplemental Coverage Option 682 

Peanut Revenue Insurance 239 

Participation effects from Title I ¥2,487

Total Titles XI–I Effects 1,658

Total Upland Cotton 6,843 ¥2,853 0.58 0.71 0.83

Total Peanuts 1,013 ¥75 0.93 0.87 1.07

Total Commodities 56,892 ¥19,375 0.66 0.98 0.67


11230160.eps
2158

Table 4

Crop Values, 2009–11 Average, CBO March 2012 and Senate Managers’ Amendment 

Average Commodity Program Outlays 

Crop Crop Value 

2009–11 Average 

CBO March 2012 

Baseline 

Managers’ 

Amendment 

CBO March 2012 

Baseline 

Managers’ 

Amendment

$ millions % of 2011–12 Avg Value

Corn for grain 62,614 2,218 1,643 3.5% 2.6%

Sorghum for grain 1,370 204 153 14.9% 11.2%

Barley 829 85 24 10.3% 2.9%

Oats 204 5 4 2.3% 1.8%

Soybeans 35,159 762 908 2.2% 2.6%

Wheat, all 12,616 1,113 472 8.8% 3.7%

Upland Cotton 5,692 684 399 12.0% 7.0%

Rice 3,008 434 149 14.4% 5.0%

Peanuts 919 101 94 11.0% 10.2%

Other Oilseeds 565 27 32 4.8% 5.7%

References 

Cooper, J. 2009. Economic Aspects of Revenue-Based Commodity Support, ERR–

72, U.S. Department of Agriculture, Economic Research Service, April. 

Dismukes, R., K.H. Coble, D. Ubilav, J. Cooper, and C. Arriola. 2011. Alternatives 

to a State-Based ACRE Program: Expected Payments Under a National, Crop District, or County Base, ERR–126, U.S. Department of Agriculture, Economic Research 

Service, September.

The CHAIRMAN. Thank you, Mr. Bowling. 

Ms. Raun. 

STATEMENT OF LINDA C. RAUN, CHAIRWOMAN, USA RICE 

PRODUCERS’ GROUP; PARTNER, LR FARMS, EL CAMPO, TX; 

ON BEHALF OF USA RICE FEDERATION; U.S. RICE

PRODUCERS ASSOCIATION 

Ms. RAUN. Good morning, Chairman Conaway, Ranking Member 

Boswell, and Members of the Subcommittee. My name is Linda 

Raun. My husband LG and I are rice farmers from El Campo, 

Texas. I serve as Chairwoman of the USA Rice Producers’ Group 

and am testifying today on behalf of the USA Rice Federation and 

the U.S. Rice Producers Association. 

Members and staff may read about the rice industry’s contribution to the economy and jobs, to wildlife habitat and to a healthy 

balanced diet in my written testimony. I will focus my remarks on 

some key points. 

Throughout this farm bill process, rice farmers have made two 

reasonable requests. First is for the farm bill to provide farmers 

risk management options they can choose from based on the perils 

most relevant to their operations. Second is for the farm bill to ensure that there is real price protection in each of these options. We 

also joined our fellow commodity groups in asking that the farm 

bill protect and improve crop insurance so it works for all crops in 

regions, and we urge that the historic AGI reforms made in 2008 

and just implemented 2 years ago not be reopened. 

Towards this end, with a few modifications, we believe that the 

deficit reduction package put together last fall laid a solid framework for a successful farm bill. On behalf of the entire U.S. rice industry, we want to particularly thank Chairman Lucas and Ranking Member Peterson for their leadership and for their fairness in 

looking out for all of America’s farmers and are very grateful to the 

Members of this Subcommittee who supposed this important effort. 

Regrettably, the Senate Agriculture, Nutrition, and Forestry 

Committee has chosen a different path by denying producers a 

2159

choice of risk management options that meaningfully address the 

unique perils they face and instead forcing all farmers of all crops 

into a program tailor-made for two crops and one region of the 

country. Many producers of other crops and even producers of those 

two crops that are grown in other regions of the country are left 

with no safety net at all. 

Consider this: today there is a renewable fuel standard that 

greatly enhances the value of corn and beans. There is also Federal 

crop insurance that is tailor-made for corn and beans, and if some 

have their way, there will also be a farm bill that is tailor-made 

for corn and beans in one area of the country. Meanwhile, rice obviously does not participate in the RFS, and crop insurance does not 

work well for rice, so rice farmers find themselves being locked out 

of the farm bill because our risks do not match the kind of risks 

some in Washington think we should have. 

To be clear, I personally favor the RFS and I support crop insurance, which I hope against hope will some day work for rice. I sincerely support my fellow corn and bean producers and am proud 

to call many of them personal friends. All I ask is that rice farmers 

not be left out in the cold. So I ask the question: Why are some 

in Washington so afraid to trust farmers by giving them a choice? 

On the issue of price protection, which is the biggest risk we face 

as rice farmers, I am also disappointed in the Senate Agriculture 

Committee’s farm bill because it does not have price protection. We 

support having the choice of a price-only option, a countercyclical 

safety net that triggers only when prices decline. This is the only 

policy proposal that provides a safety net for crops that have had 

low prices going into this farm bill like rice, or will have experienced significant price declines over the next few years. For our 

California medium-grain rice farmers who have enjoyed higher 

prices, the revenue option might actually work. Under the revenue 

options in the Senate bill, the revenue guarantee is only as good 

as your previous 5 years’ revenue. Our goal is not to take this option away from producers but to add the option of a price-only protection. 

On crop insurance, we have worked for 4 years now with a private developer and RMA to develop two policies that might be useful to rice farmers, but after all our work, we continue to face potential impediments to getting final approval of the products, and 

even if approved, it will only be a pilot program for the first several 

years. Also, we are told that the new supplemental coverage option 

being discussed in the farm bill might not be available in many rice 

counties in the first year of the new farm bill. In short, despite our 

efforts, we still find doors closed on us on crop insurance. 

Finally, in changes made in the Senate bill to payment limits 

and actively engaged rules, I would just say they are totally unworkable for most family farmers, not just rice farmers, and Lord 

help us if they ever become law. Unfortunately, they hold the 

promise of being an accounting and paperwork nightmare for all 

producers. 

Mr. Chairman, in closing, let me just say a lot has been said 

about producer choices somehow causing planting distortions. I will 

remain silent on this issue in deference to fellow producers and 

farm groups and to not make your already difficult job any harder. 

2160

But as you might imagine, the mix of Federal policies in place 

today coupled with what the Senate has in mind may well influence planting decisions but I can assure you it is certainly not in 

the direction of rice. If we want only one or two crops grown in this 

country no matter what the market or agroeconomic conditions say, 

the Senate Agriculture Committee has written a bill for you but in 

the end such a lopsided approach is not good for those on either 

the winning or the losing side of this equation. Taking the risk out 

of farming for some while stripping away the safety net for others 

would ultimately hurt both. We hope to work with Members of the 

House Agriculture Committee to restore balance in this process. 

Thank you for the opportunity to be here today. 

[The prepared statement of Ms. Raun follows:]

PREPARED STATEMENT OF LINDA C. RAUN, CHAIRWOMAN, USA RICE PRODUCERS’ 

GROUP; PARTNER, LR FARMS, EL CAMPO, TX; ON BEHALF OF USA RICE

FEDERATION; U.S. RICE PRODUCERS ASSOCIATION

Introduction 

Chairman Conaway, Ranking Member Boswell, and Members of the Subcommittee, thank you for the opportunity to offer testimony on how commodity programs will affect producers in the 2012 Farm Bill. 

My name is Linda Raun. My husband LG and I raise 1,000 acres of rice in Wharton County near El Campo, Texas. We have been actively farming since 1976. I currently serve as Chairwoman of the USA Rice Producers’ Group and I also serve on 

the College of Agriculture Development Council at Texas A&M University. I have 

previously served as a Lower Colorado River Authority Director and served two 

terms on the Texas State Committee for the Farm Service Agency. My testimony 

here today is on behalf both the USA Rice Federation and the U.S. Rice Producers 

Association. 

U.S. Rice Industry Overview 

The U.S. rice industry contributes $34 billion in economic activity and provides 

jobs and income for not only producers and processors of rice, but for all involved 

in the value chain, contributing to 128,000 jobs. Much of this economic activity occurs in the rural areas of the Sacramento Valley in California, the Mississippi Delta 

region including Arkansas, Mississippi, and Missouri and in my home area, the Gulf 

Coast region of Texas and Louisiana. 

The U.S. rice industry is unique in its ability to produce all types of rice, from 

long grain, medium grain, and short grain, to aromatic and specialty varieties. Last 

year, U.S. farmers produced a rice crop of nearly $3 billion as measured in farm 

gate value. 

Today, about 86 percent of all the rice that is consumed in the U.S. is produced 

here at home. And, despite significant trade barriers to exports, the U.S. remains 

the largest non-Asian exporter of rice and the third largest exporter worldwide. On 

average, between 40 to 50 percent of the annual rice crop is exported as either 

rough or milled rice. The top U.S. export markets for rice include Mexico, Japan, 

Canada, and Haiti. In 2011 we exported over $2 billion in rice to markets around 

the world. 

Beyond the substantial economic benefits of rice is the environmental dividend 

from winter-flooded rice fields that provide critical habitat for migratory waterfowl 

and other wetland-dependant species. All of the major rice-production areas in the 

U.S. host important waterfowl activity during winter months. Rice-growing areas 

provide surrogate habitats for hundreds of wildlife species that rely on wetland conditions for species survival, some of which would be threatened but for the wetland 

environments provided by flooded rice fields. 

Without rice farming, wetland habitats in the U.S. would be vastly reduced. Maintaining U.S. rice acres provides conservation benefits of national significance that 

are vitally important because annually, anywhere from 2.5 to 3.0 million U.S. rice 

acres are an irreplaceable and invaluable conservation safety net for migratory waterfowl such as ducks and geese. 

In my home State of Texas, we are concerned with the lasting effects of the 

drought conditions in 2011. Because of a decision by the Lower Colorado River Authority to reserve back a portion of the water that would have been sold to farmers 

2161

for use in their rice fields, Texas will lose 1⁄3 of their rice acres for the 2012 crop 

year. The increased demand for water between consumers, agriculture, and other 

industries further emphasizes the need for strong farm policy in this country. 

Importance of Agriculture and Cost-Effective Farm Policy 

The U.S. agriculture sector is one of the few bright spots in the U.S. economy. 

In a time of economic downturn, agriculture producers have managed to remain 

profitable, create new jobs, and continue to provide consumers in the U.S. and all 

over the world with a safe and abundant supply of food and fiber. 

U.S. agriculture is vitally important to America and an effective farm policy safety 

net is critically important to U.S. agriculture. 

Following the recent passage of the Agriculture Reform, Food, and Jobs Act of 

2012 by the Senate Agriculture Committee, the rice industry remains concerned 

that the policy needs of many crops in many regions of the country were largely ignored in that bill. As you know, farm bills tend to have regional differences due to 

the needs of different crops grown in diverse regions. However, historically farm 

bills have been developed that took into account these differences and provided a 

workable policy for all crops and regions. We are discouraged to see a change in this 

practice as regards the Senate Agriculture Committee bill. All regions of the country 

experience risk in crop production. Therefore, one appropriate manner to judge effectiveness is to consider the amount of risk protection provided in the form of dollars spent. This is especially true when a farm bill involves new programs whose 

effectiveness is untested. Necessary mid-course adjustments are not inconceivable in 

this scenario. Estimates show that midwestern and northern farmers will have an 

increasingly disproportionate share of the baseline and Sunbelt crops will be left 

with a further shrinking baseline coupled with ineffective risk protection for many 

crops. (See Chart 1) 

With the House and Senate farm policy recommendations to the Joint Committee 

on Deficit last fall, Agriculture became the only industry to offer reductions in 

spending for the purposes of debt reduction. While farmers have always been willing 

to do their part for deficit reduction, I would urge lawmakers to reject cuts to U.S. 

farm policy that would exceed the levels recommended in the proposal that the 

House and Senate Agriculture Committee Chairs and Ranking Members had agreed 

to. 

I firmly believe that any cuts must also focus on areas of the budget outside of 

farm policy that have not yet contributed to deficit reduction yet comprise a significant share of the Federal budget and the farm bill baseline. 

2008 Farm Bill Review 

The 2008 Farm Bill continued the non-recourse marketing loan, loan deficiency 

payment, and the direct and counter cyclical payment policies. While the countercyclical payment and marketing loan have been helpful in the past, they have recently been overwhelmed by the cost of production. If crop prices drop sharply producers will be in dire financial straits by the time these policies make payments. 

The direct payment, whatever its imperfections, has assisted rice producers in meeting the ongoing and serious price risk of farming in today’s environment. We have 

come to understand and accept the political reality that direct payments will be 

eliminated, even though the Federal Government has long been consistently sending 

signals to the agriculture community that we should shift our policies towards those 

that are green box and WTO friendly. It is a bit ironic that the rice industry heeded 

those instructions in previous farm bills, and we, more than any other commodity, 

will be severely impacted by the loss of the direct payment unless Congress works 

with us to find a workable policy solution. 

The new policies created in the 2008 Farm Bill included the addition of Average 

Crop Revenue Election (ACRE) as an alternative to countercyclical payments for 

producers who agree to a reduction in direct payments and marketing loan benefits. 

The bill also added Supplemental Revenue Assurance (SURE) as a standing disaster 

assistance supplement to Federal crop insurance. 

Neither the ACRE nor the SURE policy has offered much value to rice farmers. 

Specifically, in the first year of ACRE signup, only eight rice farms representing less 

than 900 acres were enrolled nationwide. And SURE has provided little, if any, assistance to rice producers, including those producers in the Mid South who suffered 

significant monetary losses in 2009 due to heavy rains and flooding occurring prior 

to and during harvest, or the significant losses last year as a result of spring flooding in the Mid-South. SURE’s inability to provide disaster assistance for such catastrophic events further highlights the continuing gap in available programs to help 

rice producers manage or alleviate their risk. 

2162

The 2008 Farm Bill also made substantial changes to the payment eligibility provisions, establishing an aggressive adjusted gross income (AGI) means test and, albeit unintended by Congress, a very significant tightening of ‘‘actively engaged’’ requirements for eligibility. USDA was still in the process of implementing many of 

the provisions of the 2008 Farm Bill in 2010, and the final payment eligibility rules 

were only announced in January of that same year, a mere 2 years ago. Consequently, we are still adjusting to the many changes contained in the current farm 

bill, even as Congress writes the 2012 Farm Bill. 

2012 Farm Bill 

With the above mentioned as a backdrop, the U.S. rice industry developed a set 

of farm policy priorities in September of last year to guide us during consideration 

of the 2012 Farm Bill. The U.S. rice industry is unified in its firm belief that farm 

policy designed to support a strong and dynamic U.S. agriculture sector is absolutely 

vital. Although the different growing regions within our industry are interested in 

utilizing policy options in different ways, we remain united and committed to effective farm policy for all growing regions for all crops. Any rumors regarding a split 

in the rice industry or a difference of preferred policy for rice producers is inaccurate. We support a choice for rice producers because we recognize that a one-sizefits-all policy will not result in an effective risk management policy for all regions. 

The development of farm policy should be focused on providing producers with 

price protection, not just for price moves during the growing year, but for multiple 

years of price declines as we saw occur in the late 1990’s. Those that hold out crop 

insurance as the centerpiece of farm policy certainly don’t understand the nature 

of farming in my area. Crop insurance can’t, and it was not designed to, provide 

price protection across multiple years. Adequate price protection is the most critical 

component of the next farm bill and must be included in any policy option. 

Right now prices are decent for many crops, but we all know how cyclical commodity prices are, and every grower needs a policy that will provide some downside 

price protection if (and likely when) we see a steep decline in commodity prices. 

Without this type of certainty, farmers, like any businessperson, will take steps to 

minimize their exposure to risk, resulting in a pullback in investments for their 

farm. This pullback starts first with their suppliers of inputs (equipment, grain storage facilities, fertilizer) and then begins to impact the majority of businesses in 

rural America. We’ve seen this cycle play out over and over and I hope we will not 

repeat the mistakes of the past by putting in place a farm policy that assumes good 

prices are here to stay, and then we find out it is ill-equipped to deal with the decline in prices that is sure to come. (See Chart 2) 

Effective farm policy gives producers the confidence we need to continue to invest 

in our farms and the confidence that lenders need to extend the financing to producers to make these investments. 

I hear some contend that a revenue-based policy with no reference or floor price 

is the right approach to take in this farm bill and is all that is needed when coupled 

with crop insurance. It seems to me that this approach is flawed in several ways. 

First, this assumes that crop insurance works equally well for all crops and regions, 

which I can assure you is not the case today. Second, this assumes that we won’t 

face another 1998 through 2002 scenario where we had good commodity prices that 

quickly fell to catastrophic levels due to global factors. Third, this assumes that if 

commodity prices fall then input costs will decline in sync and proportional to the 

decline in prices. I have to say that if history is any guide, then I believe all three 

of these assumptions will prove wrong. And by not planning now for this type of 

scenario, we are setting ourselves up for another situation where farm policy will 

not be equipped to respond to this price decline. The result will be a significant economic downturn in rural America, followed by calls for Congress to provide additional economic assistance in a time of large Federal budget deficits and debt. 

In addition, what happens if the price of only one or two commodities decline 

sharply? I can’t imagine that input costs are going to decline in this scenario, so 

producers of these crops are forced to deal with a severely depressed price environment where our options are to either stop producing all together, or shift into the 

other crops with higher prices. This could have severe implications to the infrastructure for the crops with depressed prices and reduced production. We have seen this 

occur in some areas with rice infrastructure and I believe we can ill-afford a farm 

policy that would not provide us with effective down side price protection to forestall 

any further contraction of this industry. 

Given the budget pressures and other considerations facing Congress that have 

caused policymakers to consider altering the former policies in favor of more directed and conditioned assistance, we developed the following priorities:

2163

• First, we believe the triggering mechanism for assistance should be updated to 

provide tailored and reliable help should commodity prices decline below today’s 

production costs, and should include a floor or reference price to protect in 

multi-year low price scenarios.

• Second, as payments would only be made in loss situations, payment limits and 

means tests for producers should be eliminated, or at a minimum, not further 

tightened.

• Third, Federal crop insurance should be improved to provide more effective risk 

management for rice in all production regions, beginning with the policy development process.

More specifically relative to each of these points, we believe that: 

Price Protection is a Must 

Given price volatility for rice is the primary risk producers face and they do not 

have an effective means of protecting themselves against such price volatility, with 

price fluctuations largely driven by global supply and demand; given rice is one of 

the most protected and sensitive global commodities in trade negotiations, thus limiting access to a number of key markets (indeed we were excluded in the South 

Korea FTA); given costs of production have risen to a point where the current $6.50 

(loan rate)/$10.50 (target price) assistance triggers are largely irrelevant, we believe 

the first priority should be to concentrate on increasing the prices or revenue levels 

at which farm policy would trigger so that it is actually meaningful to producers, 

and would reliably trigger should prices decline sharply. (See Chart 3) 

The reference price for rice should be increased to $13.98/cwt ($6.30/bu). This level 

would more closely reflect the significant increases in production costs for rice. 

Ideally, this minimum could move upward over time should production costs also 

increase, this being of particular concern in the current regulatory environment. 

And this reference price should be a component of both a price-loss policy option and 

a revenue-loss policy option to ensure downside price protection. 

The existing price trigger levels have simply not kept pace with the significant 

increases in production costs. It is for this reason that I believe strengthening U.S. 

farm policy would be helpful in ensuring that producers have the ability to adequately manage their risks and access needed credit. 

Options for Different Production Regions 

We recognize that a one-size-fits-all approach to farm policy does not work effectively for all crops or even the same crop such as rice in different production regions. Using rice as an example, this is a crop grown in a fairly limited geographic 

area, yet there are distinctions between growing regions that make a difference in 

what policy will work best for rice. 

In the Mid-South and Gulf Coast production regions, a price-based loss policy is 

viewed as being most effective in meeting the risk management needs of producers. 

Specifically, this policy should include a price protection level that is more relevant 

to current cost of production; paid on planted acres or percentage of planted acres; 

paid on more current yields; and take into account the lack of effective crop insurance policies for rice. 

In the California production region, although the existing ACRE policy still does 

not provide effective risk management, efforts to analyze modifications which will 

increase its effectiveness continue. Since rice yields are highly correlated between 

the farm, county, crop reporting district, and state levels, we believe that a revenue 

plan should be administered for rice at either the county or crop reporting district 

level to reflect this situation rather than lowering guarantee levels to use farm level 

yields. Due to a host of differences in market prices, production costs, yields, marketing patterns, and uses, there is the potential for a properly designed revenuebased policy to work for rice growers in California, while I know that for my rice 

enterprise in Texas I need a price-based policy. Every crop has very different pricing 

and marketing options. 

While I have focused on the need for a choice for rice producers in different regions, this also applies for producers of most other grains. I support having policy 

options available for all crops, and believe that both a price-based policy and a revenue-based policy should be offered as options. 

My husband and I are not fortunate to farm in an area where we have the ability 

to rotate among several crops. Some production regions have that ability, but some 

do not and may be limited to just one or two crops that can be profitably produced. 

Because of this great diversity across American agriculture we need policy options 

that I can use to tailor the best risk management tools possible on my farm. 

2164

Future policies should be plain and bankable. The current ACRE program, 

while offering improved revenue-based protection, is complicated by requiring two 

loss triggers; providing payments nearly 2 years after a loss; and provides no minimum price protection—it is not bankable. The marketing loan and target prices are 

plain and bankable—unfortunately the trigger prices are no longer relevant to current costs and prices. 

Farm policy must be defendable. We believe it makes sense to provide assistance when factors beyond the producer’s control create losses for producers. We generally think more tailored farm policies are more defendable. For this reason, we 

like the thought of updating bases and yields or applying farm policies to planted 

acres/current production and their triggering based on prices or revenue, depending 

on the option a producer chooses. However, policy choices should not result in severe 

regional distortions in commodity policy budget baselines from which reauthorized 

commodity policies must be developed. In addition, care must be taken in order to 

ensure that producers who have utilized the flexibility of past farm bills are not disadvantaged in the construct of updating bases. We are particularly concerned with 

the effect this may have on small producers from the preliminary and incomplete 

data that we have seen. 

Protection to withstand a multi-year low price scenario. Whether in a revenue-based plan, or a price-based plan, reference prices should protect producer income in a relevant way in the event of a series of low price years. Ideally, this minimum could move upward over time should production costs also increase, this being 

of particular concern in the current regulatory environment. 

Whatever is done should not dictate or distort planting decisions. Direct 

payments were excellent in this regard. SURE or similar whole farm aggregations 

tend to discourage diversification, which could be a problem for crops like rice. Any 

commodity specific farm policy that is tied to planted acres must be designed with 

extreme care so as to not create payment scenarios that incentivize farmers to plant 

for a farm policy. Whatever is done should accommodate history and economics and 

allow for proportional reductions to the baseline among commodities. Some commodities are currently more reliant on countercyclical farm policies (ACRE/CCP) while 

others are receiving only Direct Payments in the baseline. Generally, the least disruptive and fairest way to achieve savings across commodities would be to apply a 

percentage reduction to each commodity baseline and restructure any new policy 

within the reduced baseline amounts. 

There have been concerns raised about higher reference prices distorting planting 

decisions and resulting in significant acreage shifts including for rice. We are unaware of any analysis that shows significant acreage shifts resulting from the reference price levels included in the 2011 Farm Bill package. In fact, for rice specifically, a reference price of $13.98/cwt that is paid on historic CCP payment yields 

and on 85% of planted acres results in a reference price level well below our average 

cost of production, so I find it hard to imagine why someone would plant simply due 

to this policy given these levels. 

As I have followed the current farm bill debate since last fall, I am amazed at 

some of the assertions about a price-based policy distorting planting decisions and 

resulting in large acreage shifts. The price levels that I understand were developed 

last year and how they were factored based on acreage and yield percentages would 

have meant they were well below our costs of production for all crops. This idea that 

maintaining a price-based policy is somehow distorting, and that a revenue-based 

policy that is based off historically high prices is non-distorting is misleading. In addition, it is incredibly naı ̈ve and inaccurate to believe that only reference prices/target prices in a countercyclical or similar policy have the ability to create planting 

distortions. Indeed, many of the planting shifts seen recently have resulted from 

pressures created by policies outside the farm bill—for example our energy policy. 

It is important to recognize that disproportionate regional distribution of farm programs benefits not only raise questions of equity, but also should be recognized as 

a portent for distortions in farm policy, particularly with regard to planting decisions. Commodities receiving a disproportionate share of benefits will entice producers to plant those crops. 

Pay Limits/Eligibility Tests Should Be Eliminated 

I strongly oppose any further reduction in the payment limit and adjusted gross 

income (AGI) levels provided under the current farm bill. One can understand the 

desire to limit former policies such as the direct payment policy. However, the disadvantages of payment limits must be acknowledged in the construct of any farm 

policy, particularly a countercyclical policy. Payment limits have the negative effect 

of penalizing viable commercial size, family farms the most when crop prices are 

the lowest and support is the most critical. To be a viable farm, we must use econoVerDate 0ct 09 2002 12:54 Dec 11, 2012 Jkt 041481 PO 00000 Frm 00576 Fmt 6601 Sfmt 6621 I:\DOCS\112-30\74372.TXT BRIAN
2165

mies of scale to justify the large capital investment costs associated with farming 

today. It is essential that producers maintain eligibility for all production to the 

non-recourse loan. Arbitrarily limiting payments results in farm sizes too small to 

be economically viable, particularly for rice, cotton, and grain farms across the Sunbelt. The current payment limit and AGI provisions have created significant paperwork burdens and costs to producers to comply and remain in compliance. This is 

particularly true for family farms that have reorganized not to take advantage of 

any payment limit concerns, but to protect themselves against estate tax liability. 

As oppressive as the current limits are, at a minimum Congress should not make 

any further reductions or limits that further penalize commercially viable farms. 

Farm policy should not be limited based on arbitrary dollar limits. Assistance 

should be tailored to the size of loss. A producer should not be precluded from participating in a farm policy because of past income experience. The Senate Agriculture Committee farm bill AGI test of $750,000 is an extraordinary reduction from 

current policy and can have a significant impact, particularly on tenant farmers who 

may be forced into cash rent situations due to the ineligibility of the landowner due 

to the further restrictive AGI rule. 

The actively engaged payment eligibility requirements included Senate Agriculture Committee farm bill would tighten these rules even further to the point that 

individuals responsible for very vital functions in the farm, i.e., marketing, could be 

deemed ineligible for farm policy. They contain the promise of a future mired in 

even more paperwork and accounting nightmares. They appear to be reforms foisted 

on unsuspecting producers by a leadership disconnected with the realities of everyday farming all in the name of program compliance. We would ask that you remember that many of these changes affect every single producer, not just those who may 

be in danger of approaching arbitrary payment limits or eligibility requirements. 

While we are still examining the effects of the changes, these highly technical proposals appear to change even the spousal eligibility rule. In short, we remain 

strongly concerned that the eligibility requirements and means tests would attempt 

to eliminate the way farms conduct their business. 

Crop Insurance Should Be Improved 

Risk management products offered under Federal Crop Insurance have been of 

very limited value to rice producers to date due to a number of factors, but primarily 

because the risks associated with rice production are unique from the risks of producing many other major crops. Indeed, it is quite ironic that the Senate in developing its crop insurance provisions recognizes the need to distinguish between irrigated and non-irrigated crops by having specific provisions to address the inequities 

that result in irrigated situations. Unfortunately, this recognition did not extend to 

their commodity policy proposal where they demand a one-size-fits-all policy. 

For example, since rice is a flood-irrigated crop, drought conditions rarely result 

in significant yield losses as growers simply pump additional irrigation water to 

maintain moisture levels to achieve relatively stable yields. However, drought conditions do result in very substantial production cost increases as a result of pumping 

additional water. 

Rice has traditionally been under-served by crop insurance and that is still largely 

the case today. (See Chart 4) As a result, we have on average lower coverage levels 

and, in some cases, higher premium costs for rice. 

I think it is inappropriate to believe that crop insurance can ever be the sole policy producers rely on for risk management. Crop insurance is designed to cover production shortfalls or price declines in a single year. It is not designed to protect 

against price declines over multiple years. And I find myself asking the question, 

and let me be clear I hope we don’t see this happen, but if crop prices decline again 

in a scenario like we saw in the late 1990’s how effective is crop insurance going 

to be then? If prices drop to those levels again it is clear that a crop insurance revenue policy is not going to be of much help to me as a producer with prices at these 

levels. 

From a rice grower’s perspective I have additional concerns about crop insurance. 

The risk management products offered under Federal Crop Insurance have been of 

very limited value due to a number of factors, including artificially depressed actual 

production history (APH) guarantees, which I understand is also a problem for 

many other producers; high premium costs for a relatively small insurance guarantee; a lack of convergence between the cash and futures prices for rice; and the 

fact that the risks associated with rice production are unique from the risks of producing many other major crops. What rice farmers like I need from Federal crop 

insurance are products that will help protect against increased production and input 

costs, particularly for energy and energy-related inputs. For example, fuel, fertilizer, 

and other energy related inputs represent about 70 percent of total variable costs. 

2166

In this vein, many in the rice industry have been working for over the past 4 

years now to develop a new generation of crop insurance product that might provide 

more meaningful risk management tools for rice producers in protecting against 

sharp, upward spikes in input costs. The objective was to gain approval from the 

Risk Management Agency (RMA) of at least two new products that could be available to growers in time for the 2012 crop year, but this has not materialized. We 

are still working on this effort, and hope to have a policy available for the 2013 crop. 

As with any new policy, there will be issues to work through so it is unrealistic to 

think rice can rely heavily on crop insurance for its risk management needs in the 

near future. But, it is important to stress that even if these products had become 

available this year, we do not believe that they would have put rice producers anywhere near on par with other crops in terms of the relevance that crop insurance 

has as a risk management tool. 

To further reinforce this, the new Supplemental Coverage Option (SCO) crop insurance provision included in the Senate farm bill may hold some value for rice producers in better utilizing crop insurance. However, we are again hearing from RMA 

that due to data availability there is uncertainty as to how broadly this policy can 

be offered for rice, and even when it can be made available. 

As such, rice producers enter the 2012 Farm Bill debate at a very serious disadvantage, having only a single farm policy that effectively works and that farm 

policy being singled out for elimination. 

We also support improvement to the product development processes. In no case 

should the crop insurance tools, which are purchased by the producer, be encumbered with environmental/conservation regulation or other conditions that fall outside the scope of insurance. 

Commodity Futures Market 

Another risk management tool that is becoming more important for all producers 

is the use of the commodity futures market to hedge price risks for the crops produced. As we see the coming changes in the farm bill, I think the ability to effectively use the futures market to price and market our crop will become imperative. 

Today growers have the ability to easily hedge corn, soybeans, and wheat, but with 

rice I am limited in the opportunity to hedge the crop due to issues with the rice 

futures contract. The contract has suffered from a lack of convergence between cash 

prices and the futures prices, and in some cases there has been a negative basis 

as wide as $4/cwt. While some of the price risk for other crops can be hedged, for 

the rice we grow, I am unable to do so on par with these other crops. 

2011 Budget Control Act Efforts 

Although the details of the 2011 Farm Bill package that was prepared by the 

House and Senate Agriculture Committees in response to the Budget Control Act 

were not fully disclosed, based on discussions and reports we believe that that package at least represents a good framework on which to build the 2012 Farm Bill. The 

2011 package included a choice of risk management tools that producers can tailor 

to the risks on their own farms, providing under each of those options more meaningful price protection that is actually relevant to today’s production costs and 

prices. It also included provisions to improve crop insurance and expedite product 

development for under-served crops such as rice. 

The U.S. rice industry very much appreciates the Members and staff who put 

enormous time and effort into what we believe represents a good blue print for ongoing farm bill deliberations and we thank you. 

Conclusion 

Again, thank you for this opportunity to offer my testimony. We certainly look forward to working with you as the 2012 Farm Bill process moves forward. I would 

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

2167

CHARTS

Chart 1

Rice Budget Baseline 

Billion $

Chart 2—Rice ARC Example 

ARC Coverage


11230161.eps 11230162.eps
2168

Chart 3—Yields vs. Price Risk by Crop 

Relative Risk Profile

Chart 4

Rice Insurance by Type


11230163.eps 11230164.eps

• , Gr~ln Sorghum 

" CO" on , .. Peanut • 

• " _.1. 

",., 

So-;be~ns. • 

~'" 

~ • " 

, .. 

, 

, ,. ,., ,., ,. ,., ,. ,., 

1,200,000 

53% CAT and 

1,000,000 Unisured Total 

"" 

,/ ,,,. 

I800,000 

600,000 

400,000 

, ... ,.,. I200,000 r- Io 
2169

The CHAIRMAN. Mrs. Raun, thank you. 

Mr. Stallman for 5 minutes. 

STATEMENT OF BOB STALLMAN, PRESIDENT, AMERICAN 

FARM BUREAU FEDERATION; RICE AND CATTLE PRODUCER, 

COLUMBUS, TX 

Mr. STALLMAN. Chairman Conaway, Ranking Member Boswell, 

and Members of the Committee, thank you for the opportunity to 

share the views of the American Farm Bureau Federation regarding the development of our new farm bill. 

While some take a simple view of the current agricultural economy and conclude farmers do not need a safety net, we all know 

that current market prices will not continue for some commodities. 

The challenge we all face is how to draft a farm program that provides a strong, consistently viable safety net that protects farmers 

against crippling revenue declines, whether caused by falling markets or Mother Nature, while at the same time remaining cognizant of budget deficit challenges and changing public sentiment. 

To help meet this challenge, the Farm Bureau proposes the following principles be considered when writing the 2012 Farm Bill. 

Any farm bill must be a fiscally responsible package that meets 

spending reduction targets and assures taxpayers that America’s 

farmers are making wise use of our tax dollars. Continuation of a 

multi-legged stool remains the best approach for providing a fair 

and effective safety net, which should consist of a strong crop insurance program, continuation of the current marketing loan provisions, and a catastrophic revenue loss program. Marketing loans 

and crop insurance provide individual risk protection at the farm 

level. Directing the third leg toward protecting area-wide risk coverage at the county or crop reporting district protects against deep 

losses while minimizing the potential for moral hazard, and at the 

same time decreasing administrative costs. 

A deep loss program such as what we have suggested would not 

provide producers with payments as often as other proposals contemplated. It would provide more coverage in times of catastrophic 

losses when assistance is most critical. Because the deep loss program would take some of the risk off the table for crop insurance 

providers, individual policies would be re-rated with crop insurance 

policy premiums paid by farmers decreasing by 9 to 23 percent per 

year every year regardless of the payout under the deep loss program. 

As a general farm organization, we place high priority on ensuring the new farm bill benefits all American agricultural commodity 

sectors in a balanced, coordinated manner. To highlight this, our 

proposal would include coverage for five fruits and vegetables: apples, tomatoes, grapes, potatoes and sweet corn. Conceptually, our 

proposal can cover all specialty crops that have crop insurance 

available but we thought it best to learn to walk before we run. 

The new farm bill must ensure that producers continue to take 

production signals from the marketplace rather than incentivizing 

them to chase Federal program benefits. Approaches that allow 

producers to pick and choose between various program options 

would impose severe challenges on U.S. lawmakers to ensure that 

2170

one option does not provide more government benefits than the 

next, thus driving production decisions. 

The new farm bill should not allow the benefits from the various 

safety net components to overlap. This is why our concept requires 

that any payment received from the deep loss area coverage offset 

any corresponding indemnity received under an individual crop insurance policy. 

The new farm bill should protect producers from deep loss events 

that typically are beyond any producer’s control. Our concept’s benefits would come into play only when they are needed rather than 

being an expected annual supplement to farm income, and it would 

eliminate the need for ad hoc disaster programs. There should be 

no changes to current farm bill payment limitations or means testing provisions. Conservation compliance should not be required as 

a condition for purchase of crop insurance, and the new farm bill 

should include the concept of Representative Peterson’s bill to reform and improve the dairy program. 

We recognize developing a new farm bill requires flexibility from 

all participants in order to achieve these principles. Given the difficulties inherent in this debate, our board did indicate an openness 

to discussing an approach that would combine the current crop insurance and marketing loan programs with a supplemental area 

insurance program that sits on top of individual crop insurance 

coverage. But I want to be clear that we do have a number of concerns about this type of approach. 

To summarize and close, our deep loss proposal is one leg of a 

three-legged safety net that includes existing crop insurance and 

marketing loan programs. It protects farmers from deep systemic 

risk from weather or markets and thus eliminates the need for ad 

hoc disaster assistance. It provides crop insurance premium reductions of 9 to 23 percent each and every year in addition to any indemnity payments. It would deliver policies through private crop 

insurance providers with payments occurring at the same time as 

other indemnity payments. It does not allow overlap of payments 

with individual insurance loss payments, and it provides coverage 

beyond program crops to specialty crops. It would likely be notified 

in the green box non-trade distorting category under the rules of 

the WTO, and it is a fiscally responsible package that providers 

taxpayers and America’s farmers with the maximum bang for the 

buck. 

Thank you for the opportunity to present our views. We look forward to working with this Committee to craft a new bill that meets 

the future needs of America’s farmers and ranchers. 

[The prepared statement of Mr. Stallman follows:]

PREPARED STATEMENT OF BOB STALLMAN, PRESIDENT, AMERICAN FARM BUREAU

FEDERATION; RICE AND CATTLE PRODUCER, COLUMBUS, TX 

My name is Bob Stallman. I am President of the American Farm Bureau Federation and a rice and cattle producer from Columbus, Texas. Farm Bureau is the nation’s largest farm organization, representing producers of virtually every commodity, in every state of the nation as well as Puerto Rico. We represent more than 

six million member families. 

I would like to thank Chairman Conaway and Ranking Member Boswell for holding this hearing and inviting me to testify. The farm bill touches the lives of every 

agricultural producer in this country. It was a long, hard road to passage of the 

2008 Farm Bill, and thanks to the hard work of the House and Senate Agriculture 

2171

Committees, the end product was a fiscally responsible compromise that served this 

nation’s farmers well. 

We all face many challenges in writing the 2012 Farm Bill, with the budget deficit 

at the top of the list. The baseline for many farm bill programs has decreased since 

passage of the last farm bill. Thirty-seven programs included in the last bill do not 

have a baseline because of tough choices made when it was created. The renegotiation of the Standard Reinsurance Agreement reduced the baseline even further, 

without any consideration to capture those savings. It is an extremely challenging 

environment in which to draft a bill that provides an adequate safety net, and we 

look forward to working with the Committee to ensure the final product is a fiscallyresponsible package that provides taxpayers and America’s farmers with the maximum bang for their buck. 

Farm Bureau’s testimony is based on the premise that the Committee will draft 

farm legislation that reduces spending by $23 billion over the next 10 years as was 

suggested to the Joint Committee on Deficit Reduction by the Chairs and Ranking 

Members of the House and Senate Agriculture Committees. In addition, we assume 

the same proportional cuts will be enacted—$15 billion in commodity program reductions, $4 billion in conservation program reductions and $4 billion in nutrition 

program reductions. Farm Bureau is pleased the Senate Committee on Agriculture, 

Nutrition and Forestry maintained the $23 billion in savings suggested last fall as 

the Committee’s reduction target in the bill passed last month. 

Beyond the budget reductions, Farm Bureau also prioritized (1) protecting and 

strengthening the Federal crop insurance funding and not reducing funding for that 

program; (2) developing a commodity title that encourages producers to follow market signals rather than making planting decisions in anticipation of government 

payments; and (3) refraining from basing any program on cost of production. 

As a general farm organization, we place high priority on ensuring the bill benefits all agricultural commodity sectors in a balanced, coordinated manner. While 

some interested parties can push Congress to allocate more funding for programs 

that benefit only their producers without worrying about the impact of that funding 

shift on other commodities, Farm Bureau does not have that luxury and will seek 

balance among all producers’ interests. 

While the bill passed by the Senate Agriculture Committee addresses many of our 

policy priorities, we believe several adjustments and refinements should be made to 

improve the legislation. We do not believe the Senate Agriculture Committee passed 

bill provides equity across all commodities. The variety of program options continues 

to raise concerns that some programs will cause planting decisions based on farm 

program benefits that accrue more beneficially to a particular crop. 

We are also concerned that the net effect of the ‘‘Agriculture Risk Coverage (ARC) 

Eligible Acres’’ provisions does not ensure a true ‘‘planted acres’’ approach and may 

effectively recreate the ‘‘base acres’’ issues that have given rise to equity and planting distortion concerns. While we support the requirements in the Senate Agriculture Committee passed bill to eliminate ‘‘double dipping’’ between ARC or 

Stacked Income Protection Plan (STAX) and crop insurance, we still have concerns 

regarding the potential for a 90 percent farm level coverage being so high as to induce fraud or abuse. We do not believe the Federal Government should be covering 

low-level losses that could be managed through the normal course of business. 

Last, Farm Bureau’s member-established policy opposes payment limits and 

means testing of farm program benefits in general. As such, we also oppose the Senate Committee’s proposed changes to make the current law’s payment limit and Adjusted Gross Income (AGI) provisions even more restrictive. 

Fundamentally, Farm Bureau continues to support a single program option for 

the commodity title that extends to all crops. We believe the safety net should be 

comprised of a strong crop insurance program, with continuation of the marketing 

loan program and a catastrophic revenue loss program based on county level losses 

for each crop. We are confident our approach can be easily tailored to meet the Committee’s goals to provide a safety net that meets regional and commodity differences, 

while also meeting the established savings target. 

We would like to specifically highlight two provisions of the Senate Agriculture 

Committee bill we hope you will incorporate in the House Agriculture Committee 

draft. The first is inclusion of the Supplemental Coverage Option (SCO) whereby 

program crop producers, as well as producers of specialty crops, could purchase a 

county-level revenue policy on top of their individual crop insurance coverage to 

cover all or part of a producer’s deductible portion of their individual insurance policy. Importantly, this program insures against area-wide losses rather than individual losses. This approach alleviates broad risk without undercutting an individual producer’s skill to competitively manage farm level risk. 

2172

The second is a restoration of the critical non-program crop disaster programs, 

such as the Livestock Indemnity Program, Livestock Forage Program and the Tree 

Assistance Program, to provide those producers with some basic risk management 

tools to help address catastrophic losses. 

Farm Policy Proposal 

While Farm Bureau believes a single program option should be extended to all 

crops, the program needs to include the continuation of a multi-legged stool approach to provide a fair, flexible and effective safety net. Two legs of that stool 

should consist of a strong crop insurance program and continuation of the marketing loan program with modifications to better reflect market conditions. Marketing loans and the crop insurance program provide protection at the individual 

farm level. 

We believe the third leg of the stool should provide catastrophic revenue loss protection at the county level, or at the crop reporting district level if county level data 

is unavailable, rather than the farm level. This approach not only protects against 

catastrophic area-wide losses, it also will go a long way toward addressing moral 

hazard concerns and keeping administrative costs down. 

These deep loss events that would endanger the financial survivability of the farm 

are typically beyond any producer’s control, and, in the past, have prompted enactment of ad hoc disaster programs. Our plan focuses on protecting farmers from 

these situations and brings program benefits into play only when they are needed, 

rather than being considered a supplemental source of annual income. 

Under our plan, each producer of a program crop, as well as producers of apples, 

potatoes, tomatoes, grapes and sweet corn, would be provided a coverage level equal 

to 75 percent of the last 5 years’ Olympic average revenue. This would be provided 

for the same fee charged for catastrophic crop insurance—$300 per commodity per 

county. Farmers can then supplement that coverage with one of the current crop 

insurance programs based on their own assessment of their farm’s risk management 

needs. 

There has been some recent criticism of farm program designs, such as this one, 

that incorporate a moving average guarantee for revenue or price. The concern is 

that if a price decline persists for a number of years, the guarantee may fall to an 

unacceptably low level. The solution to this situation, it is argued, is to establish 

fixed support prices. We do not support that approach. We have seen too many 

times in the past when fixed support prices discouraged adjustments to production 

that would have allowed markets to recover and instead contributed to chronically 

low market prices. A moving average guarantee allows farmers time to adjust to a 

changing market while still allowing market signals to direct production decisions. 

While our proposal is a deep loss program and would not provide producers with 

payments as often as other proposals contemplated, it would provide more coverage 

in times of catastrophic losses when assistance is most critical. In addition, because 

the deep loss program would take some of the risk off of the table, individual policies would be rerated. Our economic analysis shows a producer would receive crop 

insurance for 9 to 22 percent less per year than they are currently paying—that is 

money that stays in his or her pocket—and it is a benefit that a producer would 

see every year regardless of a payout under the deep loss program. 

The following table shows premium reductions per commodity and the amount of 

likely payout on an annual basis.

Farm Bureau’s Deep Loss Program Impacts for the U.S. 

(Premium Reduction based on 75% revenue protection) 

Average Payment/Acre Average Premium

Reduction 

Corn $11.60 8.7%

Sorghum $11.63 8.8% 

Cotton $22.10 10.0% 

Soybeans $7.97 10.8% 

Wheat $9.17 14.8% 

Rice $38.63 23.1% 

Payments under this program would be made on actual planted acres. While past 

transfer-type payments on planted acres have been problematic from a WTO standpoint, this program would be a true insurance program. As such, it only makes 

sense for farmers to be able to insure what they are actually planting—not some 

2173

far out-of-date average of what has been planted in the past. It is our opinion that 

payments under this program, the bulk of payments anyway, would likely qualify 

to be notified in the green box non-trade distorting category when the Doha negotiations are completed. Under the rules of the WTO, up to 70 percent of such payments 

qualify for that designation, so only the last five percent would need to be notified 

as non-product-specific amber box. 

Following is an example of how the deep loss plan works with an individual crop 

insurance policy wrap: 

Assume a corn farm located in a county with the following 5 year county average 

yields and harvest prices.

Yield (bu/ac) Price ($/bu) 

Year 1 193 $4.00

Year 2 187 $4.95

Year 3 180 $4.50

Year 4 168 $6.00

Year 5 172 $5.50

5-Year Olympic Average 180 $4.98

The 5 year Olympic average revenue for this county is 180 bushels times $4.98 

= $894. 

A 75 percent county-level revenue guarantee results in payments when county 

revenue falls below $670 (75 percent of $894). The revenue decline could be due to 

a decline in prices, county yields, or both. 

Assume the individual farm has an actual production history (APH) yield for corn 

of 185 bushels per acre. For the current crop year, the projected corn price for crop 

insurance purposes is $5.00 per bushel. The expected farm revenue is 185 bushels 

per acre times $5.00 = $925 per acre. 

A 75 percent revenue protection crop insurance policy would provide an insurance 

guarantee of $925 × 75% = $694 per acre. 

The following tables show calculated program payments for a number of price/

county yield outcomes and calculated crop insurance indemnities for a number of 

price/farm yield outcomes: 

It is important to keep in mind that the deep loss program is based on county 

yields while the individual crop insurance policy wrap is based on farm yields. It 

is also critical to note that the Farm Bureau deep loss program does not allow for 

deep loss program payments and individual insurance loss payments to overlap. Any 

payment received from the deep loss program would offset any indemnity occurring 

under the individual crop insurance policy. Following is an example of this point.

Deep Loss Payment Revenue Insurance Indemnity

Harvest Price Harvest Price

$4.00 $4.25 $4.50 $4.75 $5.00 $4.00 $4.25 $4.50 $4.75 $5.00

125 $170.41 $139.16 $107.91 $76.66 $45.41 134 $157.75 $124.25 $90.75 $57.25 $23.75

130 $150.41 $117.91 $85.41 $52.91 $20.41 135 $153.75 $120.00 $86.25 $52.50 $18.75

135 $130.41 $96 66 $62.91 $29.16 $— 140 $133.75 $98.75 $63.75 $28.75 $—

140 $110.41 $75.41 $40.41 $5.41 $— 145 $113.75 $77.50 $41.25 $5.00 $—

145 $90.41 $54.16 $17.91 $— $— 150 $93.75 $56.25 $18.75 $— $—

150 $70.41 $32.91 $— $— $— 155 $73.75 $35.00 $— $— $—

155 $50.41 $11.66 $— $— $— 160 $53.75 $13.75 $— $— $—

160 $30.41 $— $— $— $— 165 $33.75 $— $— $— $—

165 $10.41 $— $— $— $— 170 $13.75 $— $— $— $—

170 $— $— $— $— $— 175 $— $— $— $— $—

175 $— $— $— $— $— 180 $— $— $— $— $—

180 $— $— $— $— $— 185 $— $— $— $— $—

Assume the harvest price is $4.25 per bushel, county yield is 150 bushels per acre, 

and farm yield is 155 bushels per acre. This farmer would be eligible to receive a 

crop insurance payment as soon as is currently possible for the $35.00 per acre revenue insurance indemnity. 

In addition, because the county-based deep loss coverage also triggered, the crop 

insurance company would receive a reimbursement of $32.91 per acre for the previously-paid indemnity, and the producer would receive the balance. 

So even though the farmer would have received a reduction in premium rates, he 

or she would have the same coverage and timing of crop insurance payments as 

they do today. 

If a producer suffered an indemnity-triggering individual loss without a county 

loss, the full calculated indemnity would be received by the farmer. For example, 

assume a $4.25 price, a 160 bushel per acre county yield and a 150 bushel per acre 

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farm yield. The producer would receive an indemnity of $56.25 per acre from their 

individual insurance coverage. 

If a producer suffered a payment-triggering county loss without an individual loss, 

the farmer would receive the program payment only. For example, assume a $4.25 

harvest price, 155 bushel per acre county yield and 165 bushel per acre farm yield. 

The producer would receive a program payment of $11.66 per acre. 

Because our deep loss plan is based on the crop insurance program, we also believe some enhancements should be made to the current program. We note the high 

level of participation in the enterprise unit program following the pilot program that 

increased the premium subsidy available to that program. We strongly urge the enterprise unit program be permanently extended and that separate enterprise units 

be offered on irrigated and non-irrigated acreage. 

We also support looking at alternatives to rectify the declining Actual Production 

History (APH) issue. If direct payments are eliminated, crop insurance becomes the 

major safety net and it simply does not work when a farmer experiences several 

consecutive disaster years. We support re-evaluating the yield plugs used in disaster 

years, as well as the county T-yield. 

Last October, at our request, House Agriculture Committee Chairman Frank 

Lucas (R-Okla.) submitted our deep loss proposal to the Congressional Budget Office 

(CBO) to be scored. After receiving some numbers from the Congressional Budget 

Office recently for a 70 percent program, we now believe it is possible to provide 

support at the 80 percent revenue level of coverage for all program crops and the 

five fruits and vegetables. In addition, we believe there would be enough money to 

increase the coverage for those participating in the Noninsured Assistance Program 

(NAP) from 50 percent loss coverage to 70 percent. This would save $15 billion from 

the commodity title to apply towards budget deficit reduction. To be clear, this is 

based on the premise of utilizing the savings realized by eliminating authority for 

the direct payment program, the countercyclical program, Supplemental Revenue 

Assistance Payments (SURE) and Average Crop Revenue Election (ACRE) provisions, as has been indicated by Members of the Committee. 

We continue to believe that our deep loss concept is the best farm policy option, 

particularly in light of the budget realities that face the writing of a new farm bill. 

We believe it may even become a more viable choice down the road once all the 

numbers are in. 

The principles we will seek in any final outcome include:

• Basing the safety net on planted rather than base acres;

• Delivering the program through private crop insurance companies;

• No payment limitation in effect;

• Equitable treatment of all commodities by offering this to program crop commodities and to fruit and vegetables that have crop insurance coverage;

• Being easy for farmers to understand and for USDA to administer;

• Being scalable to meet budget requirements; and

• Keeping delivery and administrative costs low. 

Payment Limitations/Means Testing 

Farm Bureau opposes any changes in current farm bill payment limitations or 

means-testing provisions. Simply stated, payment limits bite hardest when commodity prices are lowest. Our Federal farm program, even one focused on deep 

losses, is based on production. Time and time again, this has proved to be the best 

manner for distributing assistance to those most responsible for producing the nation’s food and fiber. Farmers who produce more take more risk, have higher investments and face more losses in down years. To be viable, we must recognize realistic 

economies of scale to justify the large capital investment costs associated with farming. 

Conservation Compliance 

With the elimination of direct payments and other farm support programs, some 

have called for extending conservation compliance to crop insurance programs. We 

are adamantly opposed to this and believe crop insurance is vital to a farmer’s risk 

management strategy and must not come with government strings attached. When 

farmers make their annual crop insurance decisions, the only option is the Federal 

Crop Insurance Program—which could be denied as a result of a single unforeseen 

event if compliance is attached to it. 

Consider the situation where a huge rainstorm causes a gulley to appear in a 

farmer’s no-till field overnight. The right thing to do is repair it quickly to minimize 

further degradation. But doing so requires prior approval from the Natural ReVerDate 0ct 09 2002 12:54 Dec 11, 2012 Jkt 041481 PO 00000 Frm 00586 Fmt 6601 Sfmt 6621 I:\DOCS\112-30\74372.TXT BRIAN
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sources Conservation Service (NRCS), which is often a 2 or 3 day process. Farmers 

know that even 2 or 3 days can make the difference between making the planting 

window and missing it. If a producer didn’t have permission to repair the gulley 

prior to planting, he or she would be out of compliance and denied eligibility for crop 

insurance under the approved conservation plan. This is just one example of the difficulties that would be experienced if compliance was required for crop insurance. 

Dairy 

Farm Bureau supports Rep. Collin Peterson’s (D-Minn.) bill to eliminate the dairy 

price support program and the Milk Income Loss Contract program and to use the 

funding associated with those programs to offer a voluntary gross margin insurance 

program for dairy producers. 

Research 

Farm Bureau opposes any cuts to research funding. We recognize the key role 

that agricultural research plays in making and keeping the farm sector competitive, 

profitable and responsive to the country’s changing food, feed and fiber needs. However, with research costs rising faster than funding, USDA will have to increase its 

efforts to prioritize research. We encourage Congress to call for the establishment 

of clearer priorities for the agricultural research program based on increased input 

from key stakeholders such as farmers. 

Congress should increase funding for research on mechanical production, harvesting and handling techniques for the fruit and vegetable industry—to help specialty crop producers offset problems in securing a labor force sufficient to handle 

peak production stages. This growing problem makes this type of research imperative. 

Nutrition 

The School Fruit and Vegetable Snack Program should be expanded as it will promote healthy eating habits among children and provide increased market opportunities for fruit and vegetable producers. 

Specialty Crops 

The State Block Grants for Specialty Crops program should be continued and expanded if possible. 

Sugar 

Farm Bureau supports maintaining the current sugar program. 

Conservation 

We support the farm bill’s conservation programs. The 2008 Farm Bill is the 

‘‘greenest’’ farm bill in history in terms of providing conservation benefits that assist 

producers in their environmental enhancement efforts. However, with conservation 

programs also under budget pressure and projected over the next 10 years to cost 

even more than the commodity programs, we recommend prioritizing ‘‘working 

lands’’ programs over land retirement programs. 

We support provisions in the draft bill that reduce the number of conservation 

programs from 23 to 13. Fewer programs will be simpler and less expensive to administer, as well as less confusing for producers. If funding for conservation has to 

be reduced, we prefer it to come from administrative savings rather than out of the 

pockets of producers. 

The most popular conservation program has been the Environmental Quality Incentives Program. It provides landowners the planning and resources they need to 

conduct a myriad of conservation practices that help preserve soil and water and 

enhance wildlife. Importantly, it also provides them resources to deal with increasing regulatory requirements. 

Farm Bureau supports reducing the number of acres eligible for enrollment in the 

Conservation Reserve Program (CRP) as a way to reduce funding. We believe this 

should be undertaken gradually as Tier 1 and Tier 2 land currently enrolled in CRP 

contracts expire. That land should not be allowed to be enrolled in the program in 

the future. 

Rural Development 

Farm Bureau supports the United States Department of Agriculture developing, 

funding and improving programs that enhance the lives of rural Americans and foster development of robust rural communities. America’s farmers and ranchers need 

viable rural communities able to supply the services needed to support their families 

and agricultural operations. Congress and the Administration should seek ways to 

stimulate rural jobs and economic growth within rural communities. 

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As USDA encounters budget limitations, it is vital for USDA Rural Development 

to find innovative solutions to the issues facing rural America. Farm Bureau supports USDA implementing a regional approach to give its rural development programs greater flexibility in promoting and leveraging innovation in rural regions 

across the country. These regional partnerships, whether the efforts of just two communities in one county or a multi-county or multi-state effort, depend on a flexible 

statutory definition of a ‘‘region’’ to encompass the multiple ways that rural citizens 

and their communities partner. 

Farm Bureau supports rural development programs that help farmers and ranchers and the communities where they live capture more of the profit and jobs generated from the commodities they produce. 

In conclusion, we appreciate the hard work of this Committee to ensure that 

America’s farmers and ranchers have a practical safety net that provides protection 

against the vagaries of the market and weather and allows our farmers to continue 

to produce the safest, most abundant, and least expensive food supply in the world. 

We look forward to working with you toward that goal. It is vitally important that 

Congress complete a farm bill this year and Farm Bureau we will do everything we 

can to assist you in this effort. Thank you for considering our views.

The CHAIRMAN. Thank you, Mr. Stallman. 

Dee Vaughan, 5 minutes. 

STATEMENT OF DEE VAUGHAN, PRESIDENT, SOUTHWEST 

COUNCIL OF AGRIBUSINESS, DUMAS, TX 

Mr. VAUGHAN. Chairman Conaway, Ranking Member Boswell, 

Members of the Subcommittee, thank you for inviting me to testify 

today. My name is Dee Vaughan and I am a corn, soybean, wheat, 

cotton and sorghum farmer from Dumas in the northern Texas 

Panhandle. I am also the President of the Southwest Council of Agribusiness, a coalition of commodity groups, lending institutions 

and Main Street businesses located in Texas, Oklahoma, Kansas, 

New Mexico and Colorado. 

Given the diversity of those we represent, we appreciate all that 

Chairman Lucas, Representative Peterson as well as the leaders 

and Members of this Subcommittee have done to ensure the 2012 

Farm Bill is equitable and works for all producers in all parts of 

the country. In particular, I want to express the council’s gratitude 

for the work you did last fall in putting a deficit reduction package 

together that would have accomplished this important goal. 

Last fall, the council offered some policy principles, and these are 

expanded more in my written testimony, but briefly, first, the farm 

bill should provide meaningful price protection. Second, the farm 

bill should be equitable to all crops, producers and regions. Third, 

the farm bill should kick in only when it is needed. Fourth, the 

farm bill should do no harm to crop insurance. Fifth, the farm bill 

should not drive planting intentions. And sixth, the farm bill 

should not reopen payments limits unless it is to repeal them. 

The passage of the Senate Agriculture Committee’s farm bill and 

particularly the ARC plan has brought these issues into clearer 

focus. We commend the Senate Agriculture Committee’s passage of 

a bill and now offer the House Agriculture Committee vitally important ways to improve the final bill. 

Neither of the two revenue programs in the Senate bill offers 

meaningful price protection for any producer. I will tell you the 

thing that worries me most as a producer and what worries the 

business and lending members of our council is the threat of sustained lower prices over a long period of time. I will call your attention to the chart in my written testimony that shows how and 

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when ARC would have kicked in on my farm from 1996 through 

2011. We also show on that chart in there how the ribbon of shallow loss protection provided by ARC would fare if prices were to 

decline by 44 percent over 4 years as they did in 1996 through 

2000. This is not an adequate safety net. From my organization’s 

perspective, the farm bill simply must provide assistance when 

forces beyond the farmer’s control take prices down. This is fundamental. 

Another major issue with ARC is its recoupling or telling farmers 

that they must plant the crop to receive benefits. This is a dramatic retreat in farm policy and will cause planting distortions 

among commodities. For producers, there will be a pull toward 

planting those crops that are being protected or better protected by 

revenue coverage. Producers will know their revenue protection levels by crop and will tend to plant the crop that has the best revenue guarantee. 

Another major concern is that ARC replicates crop insurance. 

Crop insurance has proved its ability to cover crop losses. It also 

covers losses from in-season price declines for most commodities, 

peanuts being an exception. The one risk that crop insurance does 

not cover is sustained lower prices. Again, this is the risk that the 

farm bill should be covering. If producers need to cover the shallow 

losses associated with the deductible portion, that portion not covered by crop insurance, the fiscally responsible method will be to 

provide real price protection through the farm bill, and then also 

provide the supplemental coverage option under crop insurance. 

This approach ensures crop insurance is not harmed, that farmers 

have skin in the game, and price-based protection triggers only 

when the need is real. This seems to be a natural progression from 

the good work by the Committee last fall. It is fair to all producers, 

it is fair to the taxpayers, it is defensible. 

To address the concern of planting distortions, I suggest using 

historical bases that are updated. In addition to minimizing planting distortion, historical bases ensure we maintain the planning 

flexibility that was created under the 1996 Farm Bill, and they are 

also WTO friendly. 

Finally, on the issue of payment limits, I would just point out 

that the Senate bill payment limit of $50,000 is actually $5,000 less 

than the first payment limit enacted in the Agricultural Act of 

1970. This payment limit as well as the Senate bill’s new actively 

engaged rules will severely impact the ability of the farm bill to 

provide a solid policy foundation for the production of food and 

fiber in this country. 

Thank you for this opportunity to testify. 

[The prepared statement of Mr. Vaughan follows:]

PREPARED STATEMENT OF DEE VAUGHAN, PRESIDENT, SOUTHWEST COUNCIL OF

AGRIBUSINESS, DUMAS, TX 

Mr. Chairman, Ranking Member Boswell, Members of the Committee, thank you 

for holding this hearing, and the important work you are doing to craft a good farm 

bill. 

My name is Dee Vaughan and I farm in the northern Panhandle of Texas. I grow 

several of the major row crops—chiefly corn, cotton, sorghum, wheat and soybeans. 

I have been fortunate to serve in leadership with several farm organizations in 

the past, but am honored to appear before you today as President of the Southwest 

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Council of Agribusiness, which has members in Texas, New Mexico, Oklahoma, Colorado, and Kansas. Our diverse coalition brings together 17 regional producer 

groups of cotton, corn, wheat, grain sorghum, rice, peanuts and cattle feeders; more 

than 30 lending institutions including both banks and farm credits; and more than 

70 main street businesses. 

The SWCA is unique in that it is focused solely on agricultural policy and its impact on the overall economy of this region. 

Our business members—from farm implement dealers, to auto dealers, to irrigation companies, fuel suppliers and grocers—know that the foundation of their economy are we, the producers, who spend billions each year in our region alone to 

produce the crops and livestock that feed our nation and the world. 

Our lenders join the cause because they see first hand how important good farm 

policy is to give their borrowers confidence to take risks in the dynamic and exceptionally volatile business of agriculture. They know the farmers and cattlemen and 

have seen their financial standing demolished by adverse weather and brutal world 

markets—through no fault of their own. 

This is not my first time to appear before this Committee in the context of this 

farm bill, but it is the first time since the Senate Agriculture Committee marked 

up their bill so that we have something to analyze. I strongly commend Chairwoman 

Stabenow for getting out there and leading the Committee and the farm bill forward. But we are also grateful it is still early in the process, as the package needs 

improvement. 

The SWCA has been consistent in advocating for six core principles for the farm 

bill, and so I will spend the rest of my time today talking about our recommendations for your Committee in relation to the Senate package and those key principles.


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The red ribbon in the chart below represents the area of potential coverage under 

ARC. Note how the ribbon moves with the 5 year average such that the ‘‘safety net’’ 

provided is actually richer in good years than after a couple of bad years (this seems 

like it is working opposite of the way it should be to me). Nevertheless, ARC would 

have triggered on my farm five times out of the last 15 years, including this past 

year 2011 (this was due to the epic drought and yield losses). In reality under the 

current set of policies, the market loss or countercyclical portions of the current 

safety net provided assistance in 7 of those same 15 years (not triggering in 2011), 

and from my vantage point provided more meaningful and tailored assistance than 

ARC would have. 

On-Farm Revenue Protection Under ARC

Some might critique this analysis by saying the past is irrelevant. But from my 

standpoint, it is a more trustworthy guide than all the economic modelers in the 

world. The fact is none of us knows what is going to happen in the future. The 

SWCA understands this, and while we all might be tempted by fancy shallow loss 

offerings that could pay out even if times remain relatively good, what our organization has decided we really need is a safety net that will only pay out if times get 

really hard again.


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These are serious issues with big potential repercussions. Abandoning the decoupled base, which is the essential and positive element of ‘‘Freedom to Farm,’’ does 

not just have WTO implications, but will impact producers’ planting decisions. This 

is why the SWCA—though very supportive of the farm bill process generally—

signed onto a letter asking that the Senate Agriculture Committee slow down. We 

would urge you to take your time on this one as well and make sure to find the 

right balance.

This is not about keeping an outdated program—old program bases and yields—

but it is about slow change and considering the policies of the past when deciding 

where you go next. Micro-economies like land values and production rents do take 

into account the value of farm programs that are connected to the land. So the fact 

that rice or peanut farmers have larger direct payments than I do with my corn and 

wheat base is simply reality, and it should be taken into account in crafting the next 

farm bill. 

The Senate plan fails terribly on this front. In taking away direct payments in 

total, and replacing it with a free insurance-type product based on the last 5 years 

income, the Senate Bill essentially throws history out the window. Further, by abandoning old base that is oftentimes in conserving uses, the Senate bill shifts significant resources out of certain regions like the west and southwest and into the Istates. 

All this of course is reflected in the CBO’s score of the Senate Committee bill. Our 

point is simply that to shift resources in this fashion will create significant windfalls 

in some areas and significant financial pain in others. We don’t believe either of 

these results are what should be intended in crafting good farm policy.


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program, which pays farmers when they do not need it and does not pay them 

when they do need it. However, the House Committee is talking about this. Some 

of the House Members refuse to understand the basic economics of farm programs. 

They still have the ‘price, price, price’ mentality instead of revenue.’’ If this is 

true, if the House is focused on price, let me just say thank you, and that I think 

you have a better understanding of the basic economics of farming than the esteemed professor Flinchbaugh. 

Of the systemic risks (those beyond the control of the farmer) which farmers face, 

prolonged periods of low prices would be most devastating to the economy and is 

most worrisome to SWCA members—producers, lenders and agribusinesses alike. 

The fact is that production losses are being addressed well by crop insurance. Single 

year revenue losses are being addressed well by crop insurance. But if a series of 

events like a strengthened dollar, above average yield worldwide, and a slowdown 

of Asian economies struck, causing corn and sorghum prices to decline to $3.00, soybeans to $7.00, wheat to $4.00, rice to $11.00 and cotton to $.65, our current farm 

policy would be ineffective and rural economies would suffer. 

Within the ARC program, the Senate bill does offer some price protection, tying 

the revenue to the 5 year Olympic Average of price. But the SWCA does not, and 

I do not believe this provides adequate protection. A 5 year rolling average pricetrigger can offer assurance in the first and second year of a price decline, but by 

the third year the protection is severely eroded. And, of course, our experience from 

1997 to 2006 would confirm that prices can remain below cost of production for multiple years. 

In this way, the current debate reminds me of the 1995/1996 timeframe when 

economists (including the one quoted above) assured us all that we had hit a new 

plateau of prices and that growing world demand for food and fiber would keep 

prices high. In 1995, the season average price for corn hit $3.24—an all time high. 

But over the next 4 years, prices fell to $2.71 in 1996; to $2.43 in 1997; to $1.94 

in 1998; and to $1.82 in 1999—that is a 44% collapse in prices over 4 years that 

was absolutely devastating. 

How would a 5 year Olympic Average price safety net have fared during these 

times? Well it would have peaked in 1998 at $2.55, but then trailed off over the 

next 4 years to $2.07 in 2001, and then $1.92 in 2002 and 2003. That is not what 

I, or my banker, would have considered adequate price protection.


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The reality of this diminishing assistance is not lost on even its proponents. Indeed, Dr. Schnitkey, the University of Illinois professor who was on your previous 

panel, wrote an article last week where he stated, ‘‘If prices are persistently low for 

several years, ARC payments will decline over time as lower prices enter into the 

calculation of benchmark revenue. Hence, ARC will provide payments in early years 

of a multi-year price decline, eventually though farmers will need to fully adjust to 

price declines as ARC payment decline.’’

So no one is disputing that there is no bankable price protection in the Senate 

bill, therefore this is just a policy decision for you. Does the House Agriculture Committee think the best thing for farmers and the agricultural complex in this nation 

is a moving shallow loss ribbon of protection like ARC, or do you want to set a stable base or foundation that only pays if commodity prices sink and remain below 

cost of production? 

Now I can tell you I am thrilled prices are still relatively strong in the 2011 marketing year and 2012 planting season, and I am hopeful they remain this way—but 

with the prospect of a 15 billion bushel corn crop this year and international economic turmoil, I am not confident they will. Bottom line, I as a producer and we 

as an organization think building in more relevant protection in the 2012 Farm Bill 

is wise policy should prices go south again, as history has shown they most likely 

will. 

If one defines conservatism, fiscal responsibility, and market orientation by the 

traditional measures of how much something costs and how often it intervenes, 

price-based farm policy that only kicks in when it is absolutely necessary is also the 

conservative, fiscally responsible, and market-oriented approach.


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While ARC does not exactly duplicate what crop insurance does, there is at least 

some crossover and, in the minds of the public and especially the critics, any effort 

to say there is no duplication between the two will be regarded, however falsely, 

as merely parsing words. It is important to remember in this exercise that we must 

not just pass a farm bill but we must also one day defend it as well. 

Because crop insurance is working so well for production losses and in-season 

price losses, we believe it would be a far wiser use of limited Federal resources to 

address revenue issues that cannot be covered well by crop insurance—and this 

points us back to the problem of deep and systemic price losses. 

To the extent deductible-level losses are a problem that the Federal Government 

wants to help producers address, we believe it should be done through Federal crop 

insurance. In this vein, we are excited about RMA-initiated improvements to the 

APH like the Trend Yield Adjustment option, and the potential for expanded use 

of Personal T-yields, even potentially with a better 70% plug yield. We are also very 

supportive of the Supplemental Coverage Option (SCO) that has been considered 

and was at least partially included in the Senate plan. The SWCA believes that 

‘‘shallow-loss’’ policies such as this are better and more defendable to the extent 

they are actuarially sound and the producer has skin in the game. 

Finally, adding the SWCA’s voice to the chorus saying ‘‘do no harm’’ to crop insurance, let me just say that the proposals to link conservation compliance and/or to

For the FSA policy, we believe keeping a base, but updating it and preserving the 

baseline within each respective commodity would be a wise approach. In addition 

to promoting commodity-based and regional equity, leaving the FSA program decoupled would simplify administration, prevent unwanted market distortions, and provides WTO protection. 

Finally, I would simply note that in much of the area of the SWCA, there is a 

significant amount of base acres that are and have been in pasture for many years. 

To the extent that bases are updated, or benefits tied only to planted acres, then 

special care should be taken in Title I or in the conservation title to provide opportunity for these lands to remain in a good conserving use.


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payment limitation would be $50,000 per individual, and if corn payments max out 

at around $55 per acre, a farmer will reach his max on about 900 acres. This is 

goofy, and seems totally detached from the reality of today where full-time, at risk 

farmers cover thousands of acres. 

Going back to our theme, the SWCA believes our nation’s farm policy needs to 

act as a safety net that provides a bankable and reliable safety net for at risk farm 

families when forces beyond their control (weather, international markets, foreign 

government manipulations, etc.) would make harvesting the crop they have grown 

a losing proposition. Our nation and our world needs those crops, and our nation 

and this world needs those farmers. 

Payment limitations bind and hurt when the market is at its worst. They should 

be eliminated, or increased to reflect today’s market realities. Moreover, new rules 

or bureaucratic definitions for lawyers to interpret should be rejected. 

Conclusion 

I want to conclude by saying that, having been around this debate for many years, 

I think we often try to make it too complicated. In this farm bill, which you are 

writing during what we would all describe as the best of times in agriculture, I 

would urge you to keep it simple.

✓ Address the shallow losses, but do it through the incredibly successful and 

proven crop insurance system where the producer has skin in the game, or at 

least do it in a way that is simple to administer and does not undermine or 

compete with crop insurance. The SCO seems the best and easiest potential option here.

✓ Provide simple and bankable price protection that is reflective of today’s costs, 

and keep it on an updated but decoupled base so as to not distort the market. 

Hopefully market prices will remain high and it will never cost a dime.

✓ Keep your core crop insurance strong, and make improvements to the APH and 

other areas so that all producers can cover their yield risks and in-season price 

risks in this way.

It is our strong belief that if you pair such a straight-forward and bankable Title 

I and Federal Crop Insurance Program with similarly strong and progressive conservation and research titles, then you will lay a good foundation for continued 

growth in our nation’s agricultural sector. 

This is so important and fundamental. The stakes are so high for our world. 

Again, I thank you, and the SWCA thanks you for your thoughtful considerations 

of these matters.

The CHAIRMAN. Mr. Vaughn, thank you very much. 

Mr. Coley for 5 minutes. 


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STATEMENT OF C.B. ‘‘CHUCK’’ COLEY, CHAIRMAN, NATIONAL 

COTTON COUNCIL; PRESIDENT, COLEY GIN AND

FERTILIZER, VIENNA, GA 

Mr. COLEY. Chairman Conaway, Ranking Member Boswell, and 

Members of the Subcommittee, thank you for holding this hearing 

and allowing me to provide testimony on behalf of the U.S. cotton 

industry. My name is Chuck Coley and I am a farmer and ginner 

from Vienna, Georgia, and I currently serve as Chairman of the 

National Cotton Council. 

I will use my time to review the cotton industry’s proposal, which 

is a significant but necessary departure from policy that has served 

us so well. 

Mr. Chairman, the industry is most grateful that the cotton provisions we continue to strongly support were included in the recommendations to the Joint Committee on Deficit Reduction last 

year. 

The cotton industry has two challenges in developing future policy. The first is the necessity to reduce spending. The second, which 

is unique to cotton, is the need to include policy in the new farm 

law which serves as the basis to resolve the longstanding Brazil 

WTO case. 

To meet both challenges, the industry proposed an area-wide revenue insurance product that supplements the existing crop insurance product. We also recommend modification to the Marketing 

Assistance Loan Program. As originally proposed, STAX is a new 

insurance product that could be purchased to cover revenue losses 

greater than five percent and extending up the losses of 30 percent. 

The product is based on existing GRIP products, and like enterprise unit coverage, producers would pay 20 percent of the premium established by RMA. Calculations of expected and actual revenues would be based on the higher of a reference price or the relevant New York futures quotes and RMA’s national county yield 

data. Growers would not be required to purchase underlying insurance coverage to be able to purchase STAX but it would be highly 

recommended. 

As originally proposed, STAX would cost 30 percent less than extension of the current program and it would establish the policy 

structure necessary to resolve the Brazil WTO case and eliminate 

the threat of retaliation. We are very aware of recent criticisms of 

our proposal by Brazilian officials, even though STAX fits in 50 

percent of the WTO panel’s determination that crop insurance is 

not price distorting. STAX and the proposed changes to the marketing loan would have a reduced total support of cotton by more 

than 40 percent relative to the program that was in place during 

the period evaluated by the WTO panel. Looking forward, the cotton program reported by the Senate committee represents a 46 percent reduction in the cotton budget baseline but needs a significant 

session to resolve the case. 

Two of Brazil’s stated primary concerns of STAX were that the 

program offers too generous coverage and includes a reference 

price. We understand this is a negotiation and we believe we have 

provided USTR and USDA with significant reforms. We wish to 

work to resolve this case. 

2186

Mr. Chairman, we believe commodity policy should address the 

unique challenge of various commodities and regions. We support 

offering growers a choice. We want the choices of cotton producers 

to include STAX and the supplemental coverage option. Resolution 

of the WTO case will also require modifications of Export Credit 

Guarantee Program. We are prepared to work to address the WTO 

concerns while maintaining the value of this program. 

In addition to STAX and SCO, we support the continuation of 

Economic Adjustment Assistance Program for the domestic textile 

industry and the loan and competitiveness program for extra long 

staple cotton. We oppose the tests for program participation that 

have unreasonably low AGI levels. The 2008 farm law made significant reforms by eliminating the three-entity rule and modifying the 

actively engaged in farming rules. We oppose further modification 

to those provisions and the application of unreasonable limitations 

on program and benefits. We also strongly oppose applying limitations on eligibility requirements to crop insurance. 

Mr. Chairman, we share the concern the commodity program 

policies should be most effective when prices decline precipitously 

and unexpectedly. Market volatility is a tremendous challenge and 

a growing risk. I believe that STAX in combination with existing 

crop insurance products, the supplemental coverage option and adjusted marketing loan are the most effective recommendations we 

can offer to address the budget constraints and WTO compliance 

requirements. 

In closing, I ask that you and your colleagues support continuation of the United States-Brazil framework agreement until a new 

farm law is enacted. The industry’s proposal is significant and 

modifications to the programs successfully challenged by Brazil and 

offer a way towards resolution. Negotiations should proceed under 

the terms of the framework agreement. 

Thank you for your attention and I look forward to your questions. 

[The prepared statement of Mr. Coley follows:]

PREPARED STATEMENT OF C.B. ‘‘CHUCK’’ COLEY, CHAIRMAN, NATIONAL COTTON

COUNCIL; PRESIDENT COLEY GIN AND FERTILIZER COMPANY, VIENNA, GA 

Introduction 

I would like to thank Subcommittee Chairman Conaway, Ranking Member Boswell and Members of the Subcommittee for the opportunity to offer the views of the 

National Cotton Council regarding U.S. farm policy. My name is Chuck Coley, and 

I am a third generation cotton and peanut farmer from Vienna, Georgia. I also am 

President of Coley Gin and Fertilizer which includes a cotton gin and warehouse; 

a peanut buying point and warehouse; and a fertilizer and crop protection product 

distribution company. I am currently serving as Chairman of the National Cotton 

Council. 

The National Cotton Council (NCC) is the central organization of the United 

States cotton industry. Its members include producers, ginners, cottonseed processors and merchandisers, merchants, cooperatives, warehousers and textile manufacturers. Cotton is a cornerstone of the rural economy in the 17 cotton-producing 

states stretching from the Carolinas to California. The scope and economic impact 

extends well beyond the approximately 19 thousand farmers that plant between 9 

and 12 million acres of cotton each year. Taking into account diversified cropping 

patterns, cotton farmers cultivate more than 30 million acres of land each year. 

Processors and distributors of cotton fiber and downstream manufacturers of cotton 

apparel and home furnishings are located in virtually every state. Nationally, farms 

and businesses directly involved in the production, distribution and processing of 

cotton employ almost 200 thousand workers and produce direct business revenue of 

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more than $27 billion. Accounting for the ripple effect of cotton through the broader 

economy, direct and indirect employment surpasses 420 thousand workers with economic activity well in excess of $100 billion. 

The NCC believes that sound farm policy is essential to the economic viability of 

the cotton industry. We appreciate the dedication and diligent work of the leadership of the House Agriculture Committee during last fall’s efforts to achieve a joint 

deficit reduction package. While that effort did not advance a farm bill to conclusion, 

the U.S. cotton industry supports the commitment to conclude a farm bill in 2012. 

It is critically important to provide certainty to those involved in production agriculture since they make long-term investment decisions based in part on Federal 

farm policy. The NCC also strongly supports balanced commodity programs that address the specific needs of individual commodities across different regions of the 

country versus a one-size-fits-all approach. 

The combination of the marketing loan, Direct Payments (DP) and Counter-Cyclical Payments (CCP), as structured in the 2008 Farm Bill, has served the cotton industry extraordinarily well and, in recent years, has required minimal Federal outlays. However, deficit reduction efforts are placing unprecedented pressure on the 

existing structure of farm programs. We understand that the Agriculture committees are facing a daunting challenge of providing an adequate safety net with sharply reduced funding. 

The U.S. cotton industry faces the unique challenge of resolving the longstanding 

WTO dispute with Brazil. In developing new farm legislation, the U.S. cotton industry pledges to work with Congress and the Administration to resolve the Brazil 

WTO case and remove the imminent threat of retaliation against exports of U.S. 

goods, services and intellectual property. As you know, the case includes findings 

against parts of the upland cotton program as well as the export credit guarantee 

program used by cotton and many other commodities. We believe our proposal resolves the cotton portion of the dispute. However, the export credit guarantee program must also be addressed and we look forward to working with other agriculture 

groups to resolve that aspect of the case. 

In light of budget constraints and trade considerations, the industry recommends 

a revenue-based crop insurance program available for voluntary purchase which will 

strengthen growers’ ability to manage risk. By complementing existing products, the 

program would provide a tool for growers to manage that portion of their risks for 

which affordable options are not currently available. 

The revenue-based crop insurance safety net would be complemented by a modified marketing loan that is adjusted to satisfy the Brazil WTO case. This structure 

will best utilize reduced budget resources, respond to public criticism by directing 

benefits to growers who suffer losses resulting from factors beyond their control, and 

build on the existing crop insurance program, thus ensuring no duplication of coverage and allowing for program simplification. The revisions will provide confidence 

to lenders and ensure market-oriented production decisions that ultimately serve 

the long-term financial health of merchandizers, processors, related businesses and 

rural economies. 

Stacked Income Protection Plan 

The recent cotton market has been characterized by extremes. Cotton prices exhibited unprecedented volatility, essentially tripling between April 2010 and April 

2011. However, the exorbitant surge in prices, which was in part fueled by unexpected cotton export restrictions by India, placed tremendous pressure on textile 

manufacturers, and cotton demand suffered as a result. By the end of 2011, cotton 

prices had retreated, losing much of the gains of the earlier rally. As market prices 

experienced greater turbulence, portions of the U.S. Cotton Belt faced extreme 

weather conditions. The southwestern region, most notably Texas and Oklahoma, 

suffered through the worst drought conditions on record in 2011. Based on USDA 

data, the percentage of planted acres that were un-harvested reached an all-time 

high. Unpredictable and extreme weather conditions continue to afflict many parts 

of the country. Last year, portions of the Mississippi Delta region lost crops due to 

spring-time floods, while areas in the Southeast faced drought conditions. Unfortunately, unusual market and weather events have occurred when input costs are at 

an all-time high. As a result, operating margins are volatile and extremely tight. 

Farmers understand that agriculture is an extremely risky endeavor, but they 

also understand that effective risk management is the key to long-term viability. 

While the goal of farm programs is not to completely remove the risk associated 

with farming, farm programs should strive to provide opportunities for effective risk 

management. The Stacked Income Protection Plan (STAX) accomplishes that goal. 

STAX is designed to provide a fiscally responsible and effective safety net for upland 

cotton producers. The program will be administered in a manner consistent with 

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current crop insurance delivery systems and is designed to complement existing crop 

insurance programs. While this proposal does not change any features of existing 

insurance products, the STAX product is explicitly structured so as to avoid duplication of other insurance coverage. 

STAX is designed to address revenue losses on an area-wide basis, with a county 

being the designated area of coverage. In counties lacking sufficient data, larger geographical areas such as county groupings may be necessary in order to preserve the 

integrity of the program. The ‘‘stacked’’ feature of the program implies that the coverage would sit on top of the producer’s individual crop insurance product (Figure 

1). While designed to complement an individual’s buy-up coverage, a producer would 

not be required to purchase an individual buy-up policy in order to be eligible to 

purchase a STAX policy. 

Figure 1. Stacked Income Protection Plan

The STAX revenue product would be funded using available upland cotton baseline spending related to the CCP, DP and Average Crop Revenue Election (ACRE) 

programs. In addition, producers would bear a portion of the cost of the program 

by paying some part of the premium. However, producer premiums would be offset 

to the maximum extent possible through the use of available upland cotton spending 

authority for the CCP, DP and ACRE programs. The cotton industry believes that 

the premium offset should be no less than 80%, which is the current subsidy level 

for all enterprise unit policies. 

The basic design of the STAX product is similar to current Group Risk Income 

Protection (GRIP) plans offered through the Risk Management Agency (RMA). The 

U.S. cotton industry’s proposal includes two notable changes relative to the current 

GRIP plan. The first is the introduction of a reference price in the formula determining the expected or reference income. Secondly, the industry’s proposed STAX 

plan would cover only those losses at the upper end of the producer’s risk profile. 

Indemnities under the STAX plan would be paid on upland cotton planted acres 

purchasing the plan. 

The following table highlights the basic design of STAX. The description in Table 

1 is not an exhaustive list of the possible features of the program, but rather a general overview. Specific parameters and features of the program will in part be determined by budget considerations.

Table 1. Basic STAX Overview 

Relevant market prices for crop insurance products are determined 

based on futures markets

Projected Price Use same procedure as current insurance products. 

(For much of the Cotton Belt, the Projected Price is 

determined as the average closing value of the December contract for a relevant pre-planting period.) 

Harvest Price Use same procedure as current insurance products. 

(For much of the Cotton Belt, the Harvest Price is 

determined as the average closing value of the December contract for a relevant harvest period.)


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Table 1. Basic STAX Overview—Continued

Determine level of price and income 

protection under STAX policy 

Preliminary Price 

Protection 

Higher of the Projected Price and a Fixed Reference Price.

Area-wide Projected Income Preliminary Price Protection multiplied by the Expected County Yield. 

Area-wide Reference Income The higher of the Preliminary Price Protection and 

the Harvest Price multiplied by the Expected 

County Yield.

Determine if indemnity is paid 

under the policy 

Area-wide Realized Income The Harvest Price multiplied by the Actual County 

Yield. 

Area-wide Indemnity If the Realized Income falls below an Elected Percentage of the Reference Income, then an Indemnity equal to the difference is triggered. However, 

the Indemnity may not exceed a Defined Percentage of the Reference Income. 

The U.S. cotton industry proposes that growers should have the ability to purchase STAX coverage up to a 95% level. The higher coverage level is especially important in production areas that have made significant investments in irrigation. 

However, producers should have the ability to adjust their upper coverage level depending on their risk profile and their ability and willingness to pay the associated 

premium. Producers will have the flexibility to adjust the width of the STAX coverage by selecting a lower bound of coverage, thus establishing a maximum indemnity. Furthermore, if a producer purchases an individual or traditional area-wide 

buy-up policy, the STAX lower bound must be a number at least as large as the 

coverage level selected in the buy-up policy. For example, a producer who purchases 

an individual revenue or yield product at an 80% coverage level and also chooses 

to purchase a STAX policy, the lower bound of the STAX policy can be no lower than 

80%. STAX is designed to complement current insurance coverage and not overlap 

with that coverage. 

As previously mentioned, the industry’s STAX proposal includes a reference price 

in the determination of the county reference income. In a manner consistent with 

other crop insurance products, price protection under the STAX plan is based on cotton’s December futures contract during a relevant pre-planting period. In recent 

weeks, the December 2012 contract has traded between $0.78 and $0.95 per pound, 

and the nearby December contract has averaged $0.82 between 2008 and 2012. 

Price projections by USDA and the Congressional Budget Office (CBO) are consistent with futures markets trading in the 80¢ range. However, the industry understands the volatility of commodity markets and the importance of downside protection during times of low prices. As a result, the U.S. cotton industry believes that 

a reference price of $0.65 per pound provides important protection during those 

times of low prices, but this should trigger on an infrequent basis given current projections for commodity markets. Also, since STAX is an insurance product, premiums will adjust to reflect the likelihood of indemnities should the futures market 

fall below the reference price. In other words, the minimum price does not come 

without a cost to the producer. Also, it is important to remember that even with 

a reference price of $0.65, indemnities are not triggered until actual income falls 

below the selected trigger level. If a grower has purchased a 90% STAX policy, then 

futures must trade below $0.585 (i.e., 90% of $0.65) before indemnification occurs, 

assuming actual yields are in line with expectations. At this level, the cotton industry is confident that the reference price is set at a level that will offer protection 

against sharply lower prices, but do so in a manner that does not induce additional 

acres of cotton. 

As a final point regarding STAX, the industry is urging that the product be fully 

available beginning with the 2013 crop. We certainly appreciate the efforts of this 

Subcommittee and the full Committee to advance the farm bill process as quickly 

as possible. However, if unforeseen circumstances should delay the legislation and 

the subsequent implementation of STAX, a transition program would be needed for 

2013 if STAX were unavailable until the 2014 crop. The cotton industry stands 

ready to work with Congress during the farm bill process to develop an acceptable 

transition. 

Other Crop Insurance Issues 

Across the Cotton Belt, crop insurance is an essential risk management tool for 

cotton producers, and the STAX plan will provide another viable option for producers to effectively address their risk profile. Given the diversity of weather and 

production practices, the menu of insurance choices should be diverse and 

customizable, thus allowing for the fullest participation and most effective coverage. 

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In 2008, the introduction of enterprise unit pricing gave producers one more option for insuring against those risks that are beyond their control. The U.S. cotton 

industry strongly supports the continuation of that option in the 2012 Farm Bill and 

urges Congress to provide for the availability of enterprise unit pricing for growers 

who separate their farms by irrigated and non-irrigated practices. 

The industry also supports crop insurance products that allow growers to insure 

the deductible of their underlying buy-up policy. 

Upland Cotton Marketing Loan 

The findings of the WTO Brazil case and the subsequent Framework Agreement 

between the U.S. and Brazilian governments require that changes be made to the 

marketing loan for upland cotton as part of the development of the 2012 Farm Bill. 

To address that requirement, the NCC proposes that the level of the upland cotton 

marketing loan be adjusted based on the historical Adjusted World Price (AWP). 

The loan rate for a crop will be determined in the fall prior to planting the crop 

and be set equal to the average of the AWP for the two most recently completed 

marketing years provided the 2 year moving average falls within a set maximum 

and minimum loan level. If the 2 year moving average exceeds $0.52, the loan rate 

is set at a maximum level of $0.52. If the 2 year moving average falls below $0.47, 

the loan rate is set at a minimum level of $0.47. All other features of marketing 

loan remain unchanged from current law. 

As an illustration, the loan rate for the 2013 crop would be announced in the fall 

of 2012 based on the average AWP prevailing over the 2010 and 2011 marketing 

years, which represent the two most recently completed marketing years. Once announced, the level of the loan remains fixed for the duration of the marketing year. 

The WTO dispute with Brazil focused on data and market developments during 

the early 2000s, which was a time of chronically weak prices with the AWP below 

the marketing loan for extended periods. Had the proposed formula been in place 

during those years, the marketing loan for upland cotton would have declined to 

$0.47 for much of the period. With a loan rate of $0.47, any marketing loan gains 

would have been substantially lower than actual levels—with reductions generally 

above 20% and in some cases, more than 70% lower than actual levels (Figure 2). 

As previously mentioned, existing features of the upland cotton marketing loan 

should be retained in the 2012 Farm Bill. These include an effective determination 

of the AWP for purposes of loan redemption in times of low prices, as well as the 

provision of storage credits should the loan redemption price fall below the loan 

rate. 

In order to be eligible for a marketing assistance loan, upland cotton must be 

stored in an approved warehouse. Unlike most bulk commodities, upland cotton cannot be farm stored, so to utilize the loan a producer has no option other than to 

enter cotton in a warehouse where storage and handling charges accrue until the 

cotton is marketed. Since cotton is stored in identity preserved units (each bale has 

a distinct identity), storage and shipment require more time, effort and expense 

than other crops. Storage credits allow the U.S. to remain competitive in times of 

low prices and should be maintained in new farm legislation. 

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Figure 2. % Change in Marketing Loan Gains with $0.47 Loan Rate

Resolution of the Brazil Dispute 

The NCC understands the importance of resolving the Brazil WTO dispute within 

the 2012 Farm Bill. Since the industry first unveiled the STAX proposal last fall 

and even following the actions by the Senate Agriculture Committee in late April, 

the Brazilian Government has repeatedly voiced their objections to STAX. In our 

opinion, those objections are unfounded and the industry believes that STAX, as 

originally proposed, addresses the concerns of the WTO panel. 

In this longstanding trade dispute, the WTO panel concluded that the combination of the marketing loan, target price and former Step 2 provision of the marketing loan combined to cause significant price suppression and serious prejudice to 

Brazil’s cotton industry. 

The Step 2 provision of the upland cotton marketing loan was eliminated in 2006. 

In the context of the current farm program, the only remaining provisions relevant 

to the Brazil dispute are the marketing loan and the target price. NCC’s farm policy 

proposal rectifies both of those programs by eliminating the upland cotton target 

price and introducing a formula that would lower the marketing loan rate in times 

of low prices. 

Moving upland cotton’s support into an insurance program is consistent with the 

determination of the WTO panel that found no trade distortion or price suppression 

related to insurance programs. The WTO panel essentially treated insurance programs in the same light as direct payments in terms of production and price impacts. Under the NCC’s proposed changes, coupled with past program eliminations, 

total support to upland cotton deemed to be trade-distorting by the WTO panel 

would have declined by 60% over the period 1999 to 2005, which is the period on 

which the Panel’s findings are based. Further, total support to cotton, including Direct Payments and insurance premium subsidies, would be down by 40% under the 

industry’s original proposal. 

The NCC believes the combination of STAX, as originally proposed by the industry, and the modified marketing loan significantly reduces U.S. trade-distorting support for upland cotton. It should be noted that the STAX included in the Senate 

package goes even further by eliminating the reference price and reducing the maximum coverage from 95% to 90%. These changes directly address the top concerns 

cited by Brazil. Further, NCC economists have estimated that total support to upland cotton for the 1999–2005 period under the provisions of the Senate package 

would be 52% lower than actual support. 

While 1999 through 2005 was the focus of the case, constraints on future support 

to upland cotton also are important to note. Under the Senate package, the combination of deficit reduction and program adjustments lead to a reduction in cotton’s 

projected support of more than 40% when compared to a continuation of current programs. It is abundantly clear that STAX and the modified marketing loan generate 

lower support for upland cotton and provide a sound basis for resolving the dispute. 

Insulation from market forces was a focal point of the WTO dispute. Brazil argued 

that traditional support programs provide a buffer to growers from the true signals 


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of the market. This is not the case in STAX or other insurance programs. Revenue 

triggers are directly related to the current level of futures markets. Fortunately, cotton prices have increased over the last 2 years, and as a result, price elections under 

crop insurance are higher. However, when the market moves lower, support under 

STAX and insurance programs will move lower as well. STAX does not ‘lock-in’ high 

revenues through artificial means such as moving averages of prices or limits on annual changes. STAX simply looks to the market and allows growers to buy a level 

of coverage based on market signals. Furthermore, the higher coverage levels are 

not based on individual experience but rather area-wide triggers. There is no guarantee for the producer’s individual income. 

Provisions of the upland cotton program are just one aspect of the WTO dispute 

with Brazil. Brazil also successfully challenged export credit programs for cotton 

and a number of other agricultural commodities. NCC remains committed to working with both Agriculture Committees, the Administration and other commodity organizations in an effort to resolve all aspects of the case. 

Economic Adjustment Assistance Program 

NCC also supports the continuation of the Economic Adjustment Assistance Program (EAAP) for domestic textile manufacturers. The EAAP, authorized in the 2008 

Farm Bill, is a success story that is revitalizing the U.S. textile manufacturing sector and adding jobs to the U.S. economy. The program provides a payment to U.S. 

textile manufacturers for all upland cotton consumed, whether U.S. grown or imported. The payment rate from August 1, 2008 through July 31, 2012, is 4¢ per 

pound of cotton used, and will be adjusted to 3¢ per pound beginning on August 

1, 2012. 

Recipients must agree to invest the proceeds in equipment and manufacturing 

plants, including construction of new facilities as well as modernization and expansion of existing facilities. The assistance program, which is consistent with WTO 

commitments, is modeled after trade adjustment assistance programs and is not designed to affect the price or competitiveness of raw cotton. 

The EAAP has led to higher employment and increased cotton consumption by 

U.S. textile mills. Over the past 18 months, the Bureau of Labor Statistics reports 

that U.S. textile mills have added more than six thousand jobs. Based on a recent 

survey of EAAP recipients, 70% of respondents cited increases in the number of employees while the remaining 30% noted that labor requirements had either stabilized or more hours were required of existing employees. 

The EAAP has allowed investments in new equipment and new technology. Survey responses indicated that companies had constructed new buildings, improved existing buildings, and invested in new spinning equipment and new technology for 

the purpose of expanding capacity and adding new product lines. 

The EAAP has also allowed companies to reduce costs, increase efficiency and increase competitiveness. U.S. textile companies cited an increased ability to be more 

competitive against foreign competition and opportunities to reclaim market share 

from Asian competitors were also noted by survey respondents. Other benefits include lower energy costs, greater efficiency in style changes enabling faster adaptability to market conditions, improved quality control, increased capacity, reduced 

water use and more flexibility to meet customers’ needs. 

Future investments funded by a continuation of the EAAP will allow further recovery by the U.S. textile industry. Companies have expressed their intent to build 

new plants, add additional spinning and weaving technology, and replace existing 

equipment with more efficient machinery. 

Payment Limits and Eligibility 

The NCC has always maintained that effective farm policy must maximize participation without regard to farm size or income. Artificially limiting benefits is a disincentive to economic efficiency and undermines the ability to compete with heavily 

subsidized foreign agricultural products. Artificially limited benefits are also incompatible with a market-oriented farm policy. 

While the cotton industry understands the pressures for even more restrictive limits, we would like to remind the Subcommittee that the 2008 Farm Bill contained 

significant changes with respect to payment limitations and payment eligibility. In 

fact, the 2008 farm law included the most comprehensive and far-reaching reform 

to payment limitations in 20 years. The limitations were made more restrictive, and 

the adjusted gross income test was substantially tightened. As part of the 2012 

Farm Bill, the NCC would oppose any further restrictions on payment eligibility including lower limits or income means tests. Likewise, we have serious concerns with 

any efforts to change the requirements that determine whether an individual is considered to be actively engaged in the farming operation. Arbitrary restrictions on the 

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contribution of management and labor are out of touch with today’s agricultural operations and would only contribute to inefficiencies. 

Extra Long Staple Cotton 

Extra Long Staple, or ‘‘Pima’’ cotton producers support continuation of a loan program with a competitiveness provision to ensure U.S. Pima cotton remains competitive in international markets. The balance between the upland and pima programs 

is important to ensure that acreage is planted in response to market signals and 

not program benefits. 

Export Promotion Programs 

Continuation of an adequately funded export promotion program, including the 

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

are important in an export-dependent agricultural economy. 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. 

We appreciate the opportunity to provide these comments and look forward to 

working with the House Agriculture Committee in the development of a 2012 farm 

law that effectively meets the needs of cotton producers while addressing the challenges posed by budget constraints and trade concerns.

The CHAIRMAN. Thank you, Mr. Coley. 

Mr. Brown for 5 minutes. 

STATEMENT OF SCOTT W. BROWN, PRESIDENT, NATIONAL 

BARLEY GROWERS ASSOCIATION, SODA SPRINGS, ID 

Mr. BROWN. On behalf of the National Barley Growers Association, I want to thank Chairman Conaway and Ranking Member 

Boswell, as well as Members of the Committee, for this opportunity 

to comment on the commodity and crop insurance programs. It is 

an honor to represent U.S. barley growers before you today. I am 

Scott Brown, President of the National Barley Growers Association. 

I operate a fourth-generation family farm in southeastern Idaho 

growing malt barley on 70 percent of the farm. 

Barley is a short-season crop grown on both irrigated and 

dryland production areas, primarily in the Northwest and the 

Northern Plains. The majority of the barley is grown for malting 

purposes because of malt’s price premium. In fact, about 90 percent 

of the annual 2 million acres planted in the United States today 

is now malting varieties, which is a marked departure from past 

history when livestock consumed most of the crop. In recent years, 

the crop’s total value has averaged $936 million per year. 

U.S. barley production and related industry continues to face significant economic market-driven and public policy challenges affecting the sustainability of domestic barley production. Annual U.S. 

barley acreage reached its peak in the 1940s at 20 million acres 

but has declined to less than 3 million acres today. This downward 

trend is alarming and must be address if the United States is to 

continue to meet the needs of its domestic industry, and this is a 

rather serious situation when you think about it because boiled 

down into a few words is the simple fact no barley, no beer. 

Our highest priority is preserving the Federal Crop Insurance 

Program as it provides a critical risk management tool to handle 

what we see as an increasingly volatile production climate for barley. Risk Management Agency data shows that crop insurance for 

barley is increasingly popular. From 2010 to 2011, RMA liabilities 

for barley insurance increased 41 percent in just 1 year. Likewise, 

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acres insured as well as premiums paid have increased in recent 

years as well. 

Our three policy priorities for crop insurance are number one, we 

oppose major crop insurance authorization changes within the context of the farm bill reauthorization. We strongly support the 

508(h) insurance policy development process as established in the 

2008 Farm Bill and we support enhancements to the 508(h) that 

provide grower organizations with a strong voice in implementing 

new crop insurance products in cooperation with developers and 

RMA. 

Second, we oppose conservation compliance and payments limits 

as a requirement for crop insurance. Any such mandates would 

provide a disincentive to participating in crop insurance and commodity support programs. 

Third, we support the expanded availability of revenue policies 

for barley which insure producers for yield, quality and price. We 

believe that these priorities would provide U.S. barley producers 

with a more effective risk management portfolio and likely increase 

participation by barley growers in the crop insurance program. 

We strongly urge Congress to reauthorize the farm bill this year. 

Farming is already one of the most risky enterprises in the economy and producers need the certainty provided by this legislation. 

We support a farm program safety net that would protect producers from a multi-year collapse in prices, which is something 

that crop insurance revenue programs do not adequately address. 

But farm programs must encourage producers to follow market 

signals rather than planting for the best available payment. The 

program must continue to allow and not impede planting flexibility, which by the way is one of the most innovative and important farm policy reforms adopted by Congress. 

The price component of any safety net should be equitable and 

based on historical price relationships between program costs. Historically, price supports have not been equitable. We believe that 

it is very difficult to achieve equality because the price relationships between crops continue to evolve. For instance, the current 

malting contracts have increased relative to wheat prices to the 

point that they are tracking 90 percent of wheat’s value, and as 

stated earlier, the majority of barley is planted for the malting industry. 

NBGA firmly believes that if rotational crops receive higher target prices compared to barley, and if they are tied to current year 

plantings, barley acres will fall if prices decline to levels near or 

below target prices. Given the already declining trend in barley 

acres, any trigger that causes a further decline in acreage could severely impact the critical mass supporting domestic barley production. The potential that a farm program could influence growers to 

plant competing crops with more lucrative support prices during a 

period of low prices is causing great concern for barley growers and 

the industry relying on the crop. 

Finally, NBGA supports a revenue program that covers shallow 

losses with payment triggers as close to farm level as feasibly possible. 

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In conclusion, barley growers understand and agree that a domestic farm safety net must be defensible to U.S. taxpayers and 

compliant with our existing trade agreements. 

Thank you, Chairman Conaway and Ranking Member Boswell. 

National Barley looks forward to working with you and your staff 

to develop a farm bill as soon as possible. Thank you. 

[The prepared statement of Mr. Brown follows:]

PREPARED STATEMENT OF SCOTT W. BROWN, PRESIDENT, NATIONAL BARLEY

GROWERS ASSOCIATION, SODA SPRINGS, ID 

On behalf of the National Barley Growers (NBGA), I want to thank Chairman 

Conaway and Chairman Lucas, Ranking Members Boswell and Peterson, as well as 

the Members of Committee, for the opportunity to testify for today’s hearing regarding the ‘‘Formulation of the 2012 Farm Bill: Commodity Programs & Crop Insurance.’’ 

I am Scott Brown, President of the National Barley Growers Association. I operate 

a fourth generation family farm in Soda Springs, Idaho in the southeast region of 

the state growing primarily malt barley on 70 percent of the acreage. It is an honor 

to represent U.S. barley growers today, and thank you for this opportunity to comment on the farm bill. 

Barley is a short-season, early maturing crop grown on both irrigated and dryland 

production areas in the United States. It is a versatile crop that is grown for malting, human food, and animal feed. Production is concentrated in the Northern 

Plains states and the Pacific Northwest in areas where the growing season is relatively short and climatic conditions are cool and dry. 

In 2011, over 2 million acres of barley was harvested nationwide. From 2008 to 

2011, U.S. farmers produced an annual average of 201 million bushels contributing 

over $936 million per year to the nation’s economy. 

The majority of barley is now grown for malting purposes because of the price premium it commands. Approximately 90 percent of U.S. barley acreage is now planted 

to malting varieties, a marked departure from past history when livestock consumed 

most domestically produced barley. 

Challenges 

U.S. barley producers and the related industry continue to face significant economic, market-driven, and public policy challenges affecting the sustainability of domestic barley production. 

Barley production in the United States continues to lose acreage to competing 

crops that offer more attractive pricing, stronger investment into public and private 

research and development, and advantageous public policy incentives. 

The chart below shows barley acres planted since 1928 and clearly demonstrates 

an alarming trend that must be addressed if the U.S. is to continue to meet the 

needs of its domestic industry. 

U.S. Barley—Acres Planted


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I. Risk Management 

The NBGA’s highest priority in the farm policy arena is the continuation of, and 

adequate funding support for, the Federal Crop Insurance Program. The program 

provides a critical risk management tool to handle what we see as an increasingly 

volatile marketplace. 

The 2011 crop year proved to be a disastrous one for key barley producing regions 

in the Northern Plains. Record snow fall followed by a long period of heavy moisture 

caused extreme flooding that wreaked havoc on farmers and crop production. 

North Dakota provides a strong example of the value of crop insurance to barley 

producers. In 2010, 720,000 acres were planted to barley and 650,000 of those acres 

were harvested. By contrast, in 2011 only 400,000 acres were planted; 350,000 acres 

harvested equating to a 44 percent (44%) reduction in planted barley acres statewide. 

This weather phenomenon in 2011 produced a record 211,000 barley acres designated as prevented plant and thus a 62 percent (62%) loss of production from 2010 

to 2011. Clearly a major disaster by any standard for one of the top barley producing states in the country. As you can see, crop insurance plays a vital role for 

barley producers in North Dakota and all major production regions in the United 

States. 

The USDA Risk Management Agency (RMA) numbers show that crop insurance 

for barley is increasingly popular. USDA RMA liability for barley crop insurance increased from $261 million in 2010 to $441 million in 2011—a 41 percent (41%) increase in just 1 year. Acres insured have increased in recent years as have the corresponding premiums paid ($65 million in 2011). 

As a bulk commodity, barley is not traded on any public exchange. RMA barley 

crop insurance policies use pricing derived from market data of competing crops like 

corn and wheat. The NBGA and its seven affiliate states has worked with the RMA 

to ensure that barley crop insurance policies adequately reflect the higher value of 

malt barley. With the help of the current USDA RMA Administrator and his staff, 

we have made progress to this end. More can be, and is being done to this regard. 

With regard to Federal crop insurance, the NBGA’s policy priorities are:

1. The NBGA opposes major crop insurance authorization changes 

within the context of the farm bill reauthorization.

The NBGA believes that, by and large, Federal crop insurance programs, regulations, and processes are beneficial to U.S. barley farmers. There are several 

efforts underway to modify specific areas of the crop insurance program to benefit barley producers. The NBGA enjoys a close partnership with the USDA 

RMA to address these initiatives and believes the current authorized process is 

working. NBGA in particular supports the 508(h) policy development process 

that was included in the 2008 Farm Bill.

2. The NBGA opposes ‘‘conservation compliance’’ and payment limits as 

a requirement for crop insurance.

Tying crop insurance to compliance with federally administered conservation 

programs and/or payment limitations is strongly opposed by U.S. barley growers. Any mandate to this end would provide a disincentive to participate in the 

crop insurance and commodity support programs while additionally causing 

undue additional risk to barley farmers producing in inherently high risk production regions.

3. The NBGA supports the expanded availability of revenue policies for 

barley which insure producers for yield, quality, and price risk.

The NBGA strongly supports crop insurance revenue policies available since authorization of the 2008 Farm Bill. Specific adjustments to expand the availability of revenue-based policies to barley producers are being addressed by the 

NBGA and we believe progress is being made.

The NBGA is also very concerned with the crop insurance premium billing dates 

authorized in the 2008 Farm Bill. Barley is a late-maturing crop and the August 

15th premium billing date puts barley producers in the difficult position of paying 

policy premiums in the middle of the harvest season and before receiving income 

for a barley crop. The NBGA asks the Committee to strongly consider language to 

adjust the current premium billing date taking into consideration the unique timing 

of barley harvest. 

The NBGA believes that risk management policy priorities outlined above would 

provide U.S. barley producers with a more effective risk management portfolio and 

thus result in sustained and likely increased participation by barley producers in 

the Federal Crop Insurance Program. 

2197

II. Commodity Title 

The NBGA strongly urges Congress to reauthorize the farm bill this year, before 

the September 30, 2012 expiration of the current legislation. Agriculture production 

is already one of the most risky enterprises in the economy and barley producers 

need the certainty provided through this legislation. We ask that the Committee 

and Congress work in a bipartisan fashion to complete this bill as soon as possible. 

The NBGA supports the continuation of a farm program safety net that would 

protect producers from a multi-year collapse of commodity prices. Although crop insurance revenue programs are able to mitigate price declines that occur during a 

single growing season, they cannot protect against a multi-year collapse in commodity prices. 

However, any authorized farm program must allow and encourage producers to 

follow market signals rather than planting for the best available farm program payment. And the program must continue to allow and not impede planting flexibility, 

which has been the most innovative and important farm policy reform ever adopted 

by Congress. 

Planting flexibility has spurred the development of sustainable, agronomically 

sound rotations in various regions of the country. Farms that have adopted these 

rotations have increased overall production and profitability through more diversified marketing opportunities and a broader risk management portfolio. 

The price component of any safety net should be equitable and based on historical 

price relationships across all program crops. Historically, safety nets have not been 

set equitably between crops. And we believe that it is very difficult for them to be 

set equitably because price relationships between crops continually evolve. For instance, current malting contracts—the majority use for barley—are tracking 90% of 

current wheat prices. We firmly believe that if rotational crops (e.g., corn, wheat, 

and soybeans) receive relatively higher target prices compared to barley, and if 

these target prices are tied to current year plantings, barley acres will fall if prices 

decline to levels near or below the target prices. 

Given the already declining trend in barley base acreage, any trigger that causes 

further loss of acreage could severely impact the critical mass supporting domestic 

barley production. The potential that a government program could cause growers to 

plant a competing crop with a more lucrative support price during a period of low 

prices has caused great concern to the barley producers and the industry reliant on 

the crop. The NBGA encourages the Committee to give strong consideration to these 

concerns. 

Finally, the NBGA supports a revenue program to cover shallow losses, with the 

payment trigger as close to the farm-level as feasibly possible. In my home state 

of Idaho, I operate a mostly dryland barley farm at six thousand feet above sea level 

in a low rainfall region. In the northern part of Idaho, dryland barley producers average nearly twice as much precipitation as I do while farming at a significantly 

lower elevation. These major differences within my state are just two factors that 

influence the effectiveness and impact of having a large area trigger for payments. 

We also urge that any revised revenue program address the burdensome landlord 

concurrence requirement within such a program. 

In conclusion, the NBGA understands and agrees that a domestic farm safety net 

must be defensible to U.S. taxpayers and compliant with our existing trade agreements and obligations. 

We ask the Committee not to forget the ultimate goal of Federal support for domestic agricultural production—U.S. food, fiber, feed and energy security. 

Thank you for the opportunity to submit these comments on behalf of the NBGA 

and U.S. barley farmers.

SCOTT W. BROWN, President,

National Barley Growers Association.

The CHAIRMAN. Thank you, Mr. Brown, and I appreciate the 

bumper sticker, No Barley, No Beer. You got everybody’s attention 

in the room. 

I recognize myself for 5 minutes. 

Mr. Vaughan, it is being bandied about the talking heads that 

protecting against multi-year deep price declines is really just a 

rice or peanuts issue. Is that an accurate criticism? 


11230178.eps
2198

Mr. VAUGHAN. No, sir, it is not just a peanut and rice issue. As 

a former President of National Corn Growers Association, I can assure you that I grow five commodities and it is an issue on my 

farm for all five of those commodities. In my role as President of 

Southwest Council, I get to interact with a lot of other producers, 

other states, and I hear from them that their greatest concern is 

price issues, if we have sustained low prices for a number of years, 

what do we do in that situation. That is their primary risk they 

feel. It is not just a single commodity issue, it is not a regional 

issue, it is a nationwide and all-commodity issue. 

The CHAIRMAN. Thank you, Mr. Vaughan. 

Ms. Raun, the one-size-fits-all kind of Senate approach, can you 

expand on your comments in your testimony how you all believe 

what currently works and if it wouldn’t work, going forward? 

Ms. RAUN. Right. Well, I explained in there that for rice, that 

price is our biggest risk and the one-size-fits-all just doesn’t work 

for us. The revenue product, we tried to make it work for us, and 

with all of our analysis, even adjusting the prices in there, it 

doesn’t work. We do not have the yield risk that the revenue product has in it, and we are also going into it with lower prices. However, within the rice industry, we are a prime example of one-sizedoesn’t-fit-all because within our industry, we have medium-grain 

growers, which is a different type of rice that is grown out in California. They like the revenue product and it does work better for 

them, because going into this, they have gone into it with higher 

prices. They sell into a different market than the long-grain and 

the southern crops, and their prices have been higher over the last 

5 years. So looking at the revenue product from California’s viewpoint, it works, but when you look at it from my viewpoint or from 

the southern crops, it doesn’t work. We are a good example of why 

one-size-doesn’t-fit-all. It doesn’t even fit within our industry. 

The CHAIRMAN. Thank you. 

Mr. Bowling, the testimony for corn growers talked about the 

farmers should be able to sustain a certain amount of loss in any 

1 year. Can you give me a sense from a percentage standpoint 

what that loss would be an acceptable percentage, year in and year 

out, for corn growers? 

Mr. BOWLING. It is hard to say what a percentage would be but 

if I had to put a number on it, I would say 10 to 25 percent. 

The CHAIRMAN. Okay. 

And Mr. Stallman, we are going to do away with direct payments, which is a clear green box issue. Can you talk to us about 

what your proposals do with respect to trade issues. How they 

might be viewed with respect to if we go to planted acres and others, that those fly in the face of some of this trade issue that we 

are dealing with? How do we walk that fine line of not creating another——

Mr. STALLMAN. Our deep loss proposal is basically an insurance 

area kind of revenue-based insurance product with an area coverage trigger. Based on the WTO rules, as long as that coverage 

does not exceed 70 percent, we would expect that to be green 

boxed. Coverage in excess of that would probably be notified as 

amber box. 

The CHAIRMAN. All right. 

2199

Mr. Coley, do you think that there is any cotton policy we could 

put in place with the Brazilians, who have already said they don’t 

like your STAX proposal? Is there anything we could do that you 

think would satisfy the Brazilians at any point? 

Mr. COLEY. Mr. Chairman, I don’t think any policy we put forth 

that the Brazilians are going to agree with. We at the Cotton Council feel that the policy we have come forth with, the STAX policy, 

and adjustments to the marketing loan more than justifies the result in this of the WTO rules based on what the ruling was. 

The CHAIRMAN. And Mr. Brown, in addition to a wonderful 

bumper sticker, is there anything specifically with respect to crop 

insurance as it currently exists that you would ask us to look at 

to improve the products or the delivery? 

Mr. BROWN. No, we just continue to ask for the 508(h) program 

in order to allow us as growers to have input in developing new 

products. We would like expanded coverage in all barley areas. 

Some areas now have certain programs not eligible in other areas, 

and we would like those programs that work well in some areas to 

be available to all barley growers. 

The CHAIRMAN. I appreciate the panel. 

Mr. Boswell for 5 minutes. 

Mr. BOSWELL. Thank you, Mr. Chairman. I thank all of you for 

being here with us today. I recognize many of you and I appreciate 

you being here. 

A couple of things that are kind of being discussed around, and 

I will tell you where I am. I think we need a farm bill, and some 

are saying well, let us just wait until the lame duck. I would like 

for you to comment on that. 

And the second part is, we started about 2 years ago with Chairman Peterson and Chairman Lucas certainly kept things moving, 

I appreciate that very much, to deal with what could we do to take 

some reductions in our base, how we would handle it, and we have 

talked a lot about that before now and even today. Before the 

Super Committee met, we came up with, what was it, $23 billion 

in cuts. Now some are suggesting $33 billion. I think that it was 

significant, but what are your thoughts on it and how would you 

tell me and the Chairman here to proceed on your behalf? Anybody? 

Mr. BOWLING. Mr. Boswell, Chip Bowling, National Corn Growers. Yes, I agree we need a farm bill now. We would like to get a 

farm bill done this year. If we don’t, then we are going to suffer 

more severe consequences than we are already facing. So if there 

is any way we can get this thing done, we are willing to work with 

you. 

Mr. BOSWELL. Be careful saying ‘‘any way.’’

Mr. BOWLING. I am sorry? Say that again. 

Mr. BOSWELL. I said be careful about saying ‘‘any way’’ we get 

it done. 

Mr. BOWLING. Let us get a farm bill done. I think all farmers 

across the country would be better served if there is a farm bill 

done this year. 

Mr. STALLMAN. Mr. Boswell, I would suggest we move as expeditiously as possible, given the current conditions, to get a farm bill 

done, and farmers and ranchers really need certainty. I mean, 

2200

some people think we wake up one morning and decide what we 

are going to go out there and plant. It doesn’t work that way. We 

need some certainty about what the rules are going to be for 2013. 

I am highly skeptical of the lame-duck scenario because a lot of 

stuff gets proposed for lame ducks that never happens. I believe 

the budget situation and environment could be even worse in 2013. 

It is very important we move forward and try to get it done this 

year. 

Ms. RAUN. And I will add to that, that for those of us in the 

South who plant our crops early in the fall—I mean early in the 

spring—we are putting our financing together in the fall, and if we 

don’t know what the farm bill looks like, it is going to be very difficult to get financing in November and December when we typically get it so that we can begin planting early the next year. 

Mr. BOSWELL. Nobody made any comment about the reduction 

that we proposed, the $23 billion and now some are suggesting it 

could be more. Any thoughts on that? Any thoughts? 

Mr. STALLMAN. Well, I don’t think this will come as a great surprise, but obviously less reduction is better. However, we are very 

cognizant as an organization of the fiscal situation and budget situation that exists in this country, and frankly realize we will have 

to deal with whatever the decisions are made. 

Mr. BOSWELL. So where would you suggest we go if we have to 

add to the $23 billion we have already agreed to? 

Mr. STALLMAN. I knew I was sticking my neck out when I said 

that. I would suggest that whatever the number is, we will have 

to look at that number in the context of the proposals that are on 

the table. I suspect some of the proposals from the Senate side will 

not fit as well with lower budget numbers and therefore we will 

have to come back and craft the best policy we can under the circumstances that exist. So we are supportive. We were supportive 

of the budget as proposed in the Senate. We understand the House 

may require further cuts and we will have to deal with those as 

they come. 

Mr. BOSWELL. I believe I will declare that a very general answer, 

and I understand and appreciate that. It is tough, and those of us 

that have—there are quite a few of us, still on the Committee, that 

have had to plan and get ready and set up financing and all the 

things that have to go on. It is pretty capital intensive and a lot 

of risk. When reporters talk about the high prices, they don’t talk 

about the cost of inputs, and that is unfortunate because they 

should, and the public would appreciate what we do in agriculture 

a lot better if they understood. 

Anyway, I appreciate that, Mr. Chairman, and I yield back. 

The CHAIRMAN. The gentleman yields back. 

Mr. Huelskamp, 5 minutes. 

Mr. HUELSKAMP. Thank you, Mr. Chairman. 

A question for Mr. Vaughan. I appreciate your attendance at the 

farm bill field hearing in Dodge City, and I was trying to remember 

your nameplate because they had a list of all those commodities 

that you grow on your farm, the crops, and what were those five 

crops that you grow on your farm? 

Mr. VAUGHAN. Corn, cotton, wheat, soybeans and sorghum. 

2201

Mr. HUELSKAMP. And my question would be, under the Senate 

bill, as you understand that, are there any one of those commodities you look at based on the farm program or two or three that 

you would say, ‘‘Hey, based on those changes that the Senate is 

proposing, I would be more likely or less likely to plant those particular crops?’’

Mr. VAUGHAN. Under the Senate bill? 

Mr. HUELSKAMP. Yes. 

Mr. VAUGHAN. It would take a lot of analysis. I don’t know that 

I could answer that today, that I would switch crop between, because without doing the analysis and knowing whether we will be 

able to sign up by crop or farm specific—well, I take that back. We 

do know in the Senate bill farm specific for the whole operation 

within the county. I can’t answer that without doing the analysis, 

running the numbers on the various commodities. 

Mr. HUELSKAMP. I don’t know if you heard the other panel, but 

I thought the answer was, they had done the analysis and didn’t 

think there would be much impact. I think it is probably yet to be 

determined by each individual farmer. I have some concerns of the 

wheat versus the corn analysis in my area or grain sorghum because in dryland crops, you don’t have nearly as many choices. If 

there are significant program changes, that is going to impact that, 

and it would probably on your operation as well. 

Mr. VAUGHAN. I would add that as producers look at this program at the ARC, they would have a tendency to look at it and go, 

well, what is my bias toward what prices are going to do in the 

next 10 years or 5 years, at least, during the life of the farm bill. 

They are going to look at it and go do I want to trigger—if this program is going to trigger payments relatively numerous times over 

the next 5 years, would I be better off to go that route. I have the 

opportunity to reset every year what my program is going to be. 

If corn is going to trigger a payment this year, I would plant corn, 

or wheat, I will plant wheat this year, and it is going to be based 

on my planted acres. 

Mr. HUELSKAMP. Yes, absolutely. 

This question would be for Ms. Raun, if I might. I appreciate 

your comments about rice producers. I am looking at the average 

cost of production versus the average price they are predicting. 

What happens if they are predicting 5 straight years of losses in 

the rice industry based on the current modeling? What happens 

with your producers, Linda? 

Ms. RAUN. Well, under the Senate proposal, even without price 

reduction, you are going to lose acreage in the rice industry because in our industry, we have to have something that is bankable. 

We are going to be losing the direct payment, and we recognize 

that, and that really is the only thing right now that our lenders 

are using as our safety net. When you take that away, the ARC 

program does not give us a safety net that they will be able to lend 

us money on. I predict that in most situations, I know in our situation, when you take that program to the bank, they would not lend 

you money on rice. And in some areas, like where I farm, rice is 

our only option. It is the only crop that grows on the type of land 

we have. If you move to the Delta where rice is grown and they 

have the choice of some other crops, they will move to those other 

2202

crops, I am sure, because they will not be able to get financed in 

rice. Now, if the prices decline, I would say that we will out be out 

of business and the rice industry will go away. 

Mr. HUELSKAMP. What percent of the current acres probably 

would not be convertible to another particular crop? Do you have 

an estimate on that? 

Ms. RAUN. You know, I don’t know that number. Typically there 

are six states that grow rice. California, Texas and Louisiana have 

very few alternative crops. The Delta area, which would be Missouri, Mississippi and Arkansas, they have alternative crops on a 

lot of their land and they can switch to corn or beans if they need 

to. They already have, especially in Mississippi, just because of the 

price of beans and corn right now, market driven. 

Mr. HUELSKAMP. Thank you, Linda. 

I yield back the balance of my time. 

The CHAIRMAN. Thanks. 

David Scott, 5 minutes. 

Mr. DAVID SCOTT of Georgia. Thank you, Mr. Chairman. 

Mr. Chuck Coley, I would like to hear from you regarding your 

desired changes to the commodities title to accommodate cotton. 

We hear from many of our cotton producers and some other commodity groups that the one-size-fits-all program in the Senatepassed bill will just not work for cotton. Can you explain what is 

fundamentally different about the structure of a cotton production 

operation, particularly in the Southeast in our part of the country, 

that would require a special program? 

Mr. COLEY. Mr. Scott, as far as growing cotton, it is highly capital-intensive. One reason we felt like, as we talked about STAX, 

because of the budget constraints and the WTO Brazil case, it was 

designed for that fact. You know, also in the South, you have—peanuts is another commodity we grow in Georgia. The amount of machinery and the capital intensiveness of growing cotton is one reason that we think that the STAX program to prevent the shallow 

losses on years where we have an area-wide loss or a price decline 

would help prevent some of that when we have a bad sharp reduction in price 

Mr. DAVID SCOTT of Georgia. Now, speaking of the STAX program, is that program able to coexist with what the Senate passed 

and potentially, with what the peanut growers would like to see 

and still all fit under the budget baseline that we have for this bill, 

or it is an all-or-nothing situation? 

Mr. COLEY. Well, the Senate proposals for cotton and STAX pretty much had what we wanted in it except for two things, to drop 

the reference price of 65¢ and also lowered the coverage from 95 

down to 90. Now, what the Senate passed, the Cotton Council and 

STAX, it would be what we want but we also understand what the 

Senate passed didn’t help our other southern crops such as peanuts 

and rice. 

Mr. DAVID SCOTT of Georgia. So you all can coexist with what the 

Senate passed but the peanut growers cannot? 

Mr. COLEY. That is correct. 

Mr. DAVID SCOTT of Georgia. Okay. Thank you, Mr. Chairman. 

The CHAIRMAN. Mr. Scott, thank you. 

2203

I will run through a couple real quick questions real fast before 

we recess. We are not going to adjourn the Committee’s hearing 

today because we will have another round tomorrow with different 

panels. 

Chip, let me put you on the hook just a little bit. There was testimony you heard this morning where the ARC program and the 

shallow loss program doesn’t work for all producers. What would 

corn growers feel about making sure that there were options available to other commodities if they wanted to choose something different. Are you guys opposed to a program where there are broader 

choices for folks to have, or do you want to stick just with this one 

program? 

Mr. BOWLING. No, I would say that we favor—if there were options offered to other commodities that needed to make options, 

that we would work with them the best we could to make it work 

for everybody. 

The CHAIRMAN. Okay. You may have said that in your testimony. 

I just wanted to make sure. 

Mr. BOWLING. I did. 

The CHAIRMAN. I thought you did. I just wanted to make sure 

we got that clear, that you are not insisting on a one-size-fits-all. 

Mr. BOWLING. We are not. We have been willing since the inception of this 2012 Farm Bill to work with other commodity groups. 

The CHAIRMAN. All right. Thanks, Chip. 

Ms. Raun, under the Senate bill, the baseline for rice and wheat 

is dramatically reduced, and some could argue that is inequitable. 

What does it leave you guys with for the safety net loss of direct 

payments and others? 

Ms. RAUN. Well, I think that is the problem that we have with 

the program, the ARC program, and if you look at our baseline, all 

farmers are willing—and this kind of goes to Mr. Boswell’s question—we are all willing to do our part and take our cut. In the Senate proposal, our analysis shows that we are cutting our baseline 

65 percent, and that basically takes away our safety net, and there 

is nothing left in there and that is what I was talking about with 

the bankers. There is nothing in there that would allow a banker 

to lend us money based on what is in that program when you take 

the direct payment away. 

The CHAIRMAN. All right. Thanks, Linda. 

Mr. Vaughan, in your written statement, you went through what 

you thought your projected expense would be with ARC, and just 

to get it clear on the record, do you think the ARC program passed 

by the Senate is an appropriate risk management tool that the 

House ought to consider? 

Mr. VAUGHAN. No, sir. We are very concerned about several implications within the ARC, the fact that it does not cover sustained 

losses over a number of years like we saw from 1996 through 2005, 

that type of situation. The fact that it only covers a very narrow 

band from basically 89 percent down to 79 percent and then a factor of .65 at the individual level or .8 for county-level coverage. 

That is such a narrow band that there is this what has commonly 

become called the donut hole between your crop insurance and that 

little narrow band of coverage that a producer would be on the 

hook for, tremendous risk in that area. And then the fact that it 

2204

competes against crop insurance, we just have tremendous concerns about the ARC proposal as a safety net tool. 

The CHAIRMAN. All right. Thanks, Dee. 

And Mr. Brown, finally, you mentioned some major differences 

within your state with producers. Again, this is a bit of a hanging 

curve ball question for you, but does this point to the need for producers to be allowed to choose risk management programs that 

best fit their own individual farming operation? 

Mr. BROWN. Well, like I mentioned in my written testimony, in 

my state, we are so diverse because of climatic and elevation 

changes and things like that that options would be good, I guess, 

to meet individual farmer needs and conditions. 

The CHAIRMAN. Thank you, Mr. Brown. 

Before we recess, I invite the Ranking Member for any comments 

that he would like to make. Leonard? 

Mr. BOSWELL. Thank you, Mr. Chairman, for having this. We all 

got it loud and clear that you need to be able to plan, and we have 

discovered that again. We didn’t need to discover it but we have 

been affirmed, and I appreciate you taking time to come and share 

your time with us. It means a lot, and I know it takes you away 

from things that you do, and I appreciate it. 

Thank you very much, and I yield back to the Chairman. 

The CHAIRMAN. Thanks, Mr. Boswell. 

I also recognize that you are taking after-tax dollars and to come 

to D.C. and testify on behalf of an industry that you are all deeply 

involved with, and I appreciate that. I also know that there is a 

tension between simplicity, which we call for in one of our five 

steps, that you can explain these programs to your banker, to your 

lenders and others, which leads you toward a one-size-fits-all, and 

the more options you have, the more choices you have, the more 

complicated and difficult this is. But my personal opinion is, and 

based on some of the comments we have heard this morning, that 

a one-size-fits-all is not going to work and that you would be willing to put up with the complexity of having more choices and having more opportunities to look at risk management tools that fit 

your individual circumstances better than perhaps other folks even 

within your same commodity group. 

Again, I appreciate you folks being here this morning. This hearing of the Subcommittee on General Farm Commodities and Risk 

Management will stand in recess until 10 o’clock tomorrow when 

we will hear testimony from panels three and four. We are adjourned. 

[Whereupon, at 12:26 p.m., the Subcommittee recessed, to reconvene at 10:00 a.m. Thursday, May 17, 2012.] 

(2205)

FORMULATION OF THE 2012 FARM BILL 

(COMMODITY PROGRAMS AND CROP 

INSURANCE) 

THURSDAY, MAY 17, 2012

HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON GENERAL FARM COMMODITIES AND

RISK MANAGEMENT, 

COMMITTEE ON AGRICULTURE, 

Washington, D.C. 

The Subcommittee met, pursuant to call, at 10:03 a.m., in Room 

1300 of the Longworth House Office Building, Hon. K. Michael 

Conaway [Chairman of the Subcommittee] presiding. 

Members present: Representatives Conaway, King, Neugebauer, 

Schmidt, Gibbs, Austin Scott of Georgia, Crawford, Roby, 

Huelskamp, Hultgren, Hartzler, Schilling, Lucas (ex officio), Boswell, McIntyre, Walz, Kissell, David Scott of Georgia, Peterson (ex 

officio), and Costa. 

Staff present: Bart Fischer, Tamara Hinton, Kevin Kramp, Matt 

Perin, Matt Schertz, Nicole Scott, Wyatt Swinford, Suzanne Watson, Alan Markey, John Konya, Liz Friedlander, Craig Jagger, C. 

Clark Ogilvie, Anne Simmons, Jamie Mitchell, and Caleb 

Crosswhite. 

OPENING STATEMENT OF HON. K. MICHAEL CONAWAY, A 

REPRESENTATIVE IN CONGRESS FROM TEXAS 

The CHAIRMAN. We are reconvening from yesterday’s hearing, 

the chair requests that Members who have opening statements 

submit those for the record. And now I would like to introduce our 

third panel of witnesses this morning, Mr. Erik Younggren, President, National Association of Wheat Growers, Hallock, Minnesota; 

Mr. Armond Morris, Chairman of the Southern Peanut Farmers 

Federation, from Irwinville, Georgia; Mr. Roger Johnson, President 

of the National Farmers Union here in Washington, D.C.; Mr. J.B. 

Stewart, Vice Chairman, National Sorghum Producers from Keyes, 

Oklahoma, and a constituent of our Chairman, Mr. Lucas; Mr. 

Steve Wellman, who is President of the American Soybean Association from Syracuse, Nebraska; and Mr. Jim Thompson, Chairman, 

USA Dry Pea and Lentil Council from Farmington, Washington. 

Gentlemen, thank you for being here this morning. 

Mr. Younggren, your 5 minutes starts when you are ready. 

2206

STATEMENT OF ERIK YOUNGGREN, PRESIDENT, NATIONAL 

ASSOCIATION OF WHEAT GROWERS, HALLOCK, MN 

Mr. YOUNGGREN. Chairman Conaway, Ranking Member Boswell, 

and Members of the Committee, thank you for the opportunity to 

address you today. I am Erik Younggren, a fourth-generation 

wheat farmer from Hallock, Minnesota. I am also serving as President of the National Association of Wheat Growers. 

We know you, leaders of the full Committee and your staff, have 

been working hard over the past year toward reauthorizing farm 

and food policy legislation. We appreciate your commitment to 

working in a bipartisan and bicameral fashion throughout this 

process, and we appreciate your dedication to providing a well functioning farm safety net to the farmers who supply our nation with 

food, feed, fiber, and fuel. 

Wheat growers around the country are well aware of the reality 

of our country’s fiscal situation and are committed to doing our 

part to help right our fiscal house. We know a functioning and solvent U.S. Government is one of many factors that helps us to maintain thriving farms, strong businesses, and a secure domestic food 

supply. We also know that fiscal integrity of our nation is important to the rest of the world to which we export about 1⁄2 of our 

wheat crop each year. 

We are also aware that, starting in August, wheat farmers in the 

South will be planting their 2013 crop. These farmers and their 

bankers will want to know with certainty what sort of safety net 

programs will be available to them. With ever-increasing input 

costs, these farmers are making a huge financial commitment and 

it is vital that you and our other agriculture leaders provide program certainty for these growers who are trying to make responsible business decisions. 

Wheat is grown on some of the most risky land in the country 

facing weather hazards, highly variable yields, and price swings 

based on a world market. Despite this variability, wheat country 

provides a steady, safe supply of one of the most widely consumed 

food staples on the planet, and has made the United States the 

most reliable supplier of wheat in the world. These factors make 

it all the more important for wheat farmers to have a farm safety 

net that is dependable, bankable, and defensible. 

Our highest priority for Federal investment in farm safety net 

programs is a portion of crop insurance premiums subsidized by 

the Federal Government, the public part of one of the most well 

functioning public-private partnerships. More than 85 percent of 

non-irrigated wheat acres planted are covered by crop insurance, 

and NAWG strongly opposes any reductions to the baseline available for the Federal Crop Insurance Program. 

To enhance the Federal Crop Insurance Program, we request 

that you make the enterprise unit subsidies permanent, provide 

authority for growers to purchase a combination of individual and 

group risk coverage policies, address the declining yield issue by allowing for 70 percent of the county yield to be incorporated as a 

plug, and allow RMA to deliver margin protection instead of just 

yield or yield and price protection. 

While crop insurance protects us year after year, we still need 

strong Title I options to help us deal with issues beyond our conVerDate 0ct 09 2002 12:54 Dec 11, 2012 Jkt 041481 PO 00000 Frm 00618 Fmt 6601 Sfmt 6601 I:\DOCS\112-30\74372.TXT BRIAN
2207

trol. As you work to refine risk management programs in Title I 

of the farm bill reauthorization, NAWG encourages you to keep a 

few basic principles in mind. 

NAWG supports reallocation of funding away from direct payments to an alternative Title I safety net program. We also support 

multiple safety net programs, including a disaster program in Title 

I. We recognize different production areas of the country rely on 

different types of farm programs to provide a safety net. However, 

we call on you to make sure that changes to existing programs or 

newly created programs do not affect planting decisions, and allow 

producers planting flexibility, which have been central tenets to the 

last three farm bills. 

NAWG supports a revenue-based program modeled on the ACRE 

and SURE Program with an on-farm trigger and coverage by commodity as part of a multi-legged safety net. That being said, we 

recognize and are grateful for concerns from the leaders of the 

House Agriculture Committee about protecting farms and farm 

businesses in times of low prices. As a farmer, I share those concerns and recognize the risks of changing the existing safety net so 

dramatically that it removes the price protection currently available in Title I. We recommend that any price protection included 

in the 2012 Farm Bill incorporates the principles that have made 

existing Title I programs successful, including being designed to 

not destroy planting decisions and to be WTO-friendly. 

Additionally, any reductions in payment caps or changes to the 

actively engaged in farming definition would be alarming for farmers who have developed business plans based on existing law. We 

ask you to recognize that family farms do need to utilize multiple 

business structures to protect both the family and the farm. 

It is my analysis that groups that want to tie crop insurance to 

conservation compliance believe farmers like crop insurance enough 

that they will do anything to keep it. However, the significant 

number of acres that go uncovered every year refutes this. Any regulation that disincentivizes producers from participating in the 

Federal Crop Insurance Program shifts more risk to farmers in 

highly variable areas and leaves more of our nation’s food supply 

and the farms that provide it in precarious situations. 

If you take anything away from my testimony today, take this: 

it is of the utmost urgency to our farmer members that you and 

your colleagues in the Senate approve new farm legislation soon. 

On behalf of the National Association of Wheat Growers, I appreciate your attention to my perspective on our nation’s agricultural 

risk management programs. We are committed to working with you 

and the other stakeholders as you outline a path forward through 

these serious and uncharted fiscal times. And I will be happy to answer any questions you may have. 

[The prepared statement of Mr. Younggren follows:]

PREPARED STATEMENT OF ERIK YOUNGGREN, PRESIDENT, NATIONAL ASSOCIATION OF

WHEAT GROWERS, HALLOCK, MN 

Chairman Conaway, Ranking Member Boswell and Members of the Committee, 

thank you for the opportunity to address you today. I’m Erik Younggren, a fourthgeneration wheat farmer from Hallock, Minn. I work with two of my cousins on our 

family’s farm and have been an active part of the farm’s management for 17 years. 

2208

I am also currently serving as President of the National Association of Wheat Growers. 

We know you, Members and leaders of the full Committee and your staff members 

have been working over the past year toward reauthorizing farm and food policy legislation. We appreciate your commitment to working in a bipartisan and bicameral 

fashion throughout this process, and we appreciate your dedication to providing a 

well-functioning farm safety net to the farmers who supply our nation with food, 

feed, fiber and fuel. 

Before I begin talking about policy priorities, I want to draw your attention to two 

encompassing, environmental factors that are influencing what I say today and the 

work you are preparing to undertake as a Committee. 

Wheat growers around the country are well aware of the reality and consequences 

of our country’s fiscal situation and are committed to doing our part to help right 

our fiscal house. We know a functioning and solvent U.S. Government is one of 

many factors that helps us to maintain thriving farms, strong rural businesses and 

a secure domestic food supply. We also know the fiscal integrity of our nation is important to the rest of the world, to which we export about half of our wheat crop 

each year. 

We are also strongly aware that, starting in August, wheat farmers in the South 

will go to their fields to plant their 2013 crops. These farmers and their bankers 

will want to know with certainty what sort of safety net programs will be available 

to them. With ever increasing input costs, these farmers are making huge financial 

commitments, and it is vital that you and our other agriculture leaders provide program certainty for these growers who are trying to make responsible business decisions. If you take anything away from my testimony today, take this: it is of the 

utmost urgency to our farmer-members that you and your colleagues in the 

Senate approve new farm policy soon.

Primary Farm Risk Management Through Crop Insurance 

Agriculture is arguably the industry most susceptible to natural disasters. While 

science and technological advancements have enabled producers to increase production efficiencies, farmers and farm businesses are still uniquely vulnerable to crop 

production losses from weather hazards, insects and other uncontrollable events. 

Today, farmers are partially guarded from the worst of these threats by a strong 

crop insurance program, which girds them against inevitable acts of Mother Nature 

and volatile price swings. By helping to ensure the stability of U.S. farmers, crop 

insurance helps to ensure a stable food supply—a necessary government responsibility that allows society and the larger economy to grow and allows us to protect 

ourselves against threat at home and abroad. 

The Federal Crop Insurance Program provides risk management tools to address 

production and revenue losses. Today, approximately 75 percent of total policy premiums come from revenue protection policies, while the remaining 25 percent come 

from yield protection policies. Since the inception of Federal crop insurance in the 

early 1930s, the program has become the most important cost-share, farm risk management tool available. On average, the Federal Government contributes 60 percent 

of crop insurance premiums, while a producer pays 40 percent out of pocket. 

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Federal Crop Insurance Producer and Taxpayer Premium Cost

(Source: 2002–2011 Actual obtained from FCIC, 2012–2021 Projections obtained from CBO.)

Government subsidization of the Federal Crop Insurance Program is absolutely necessary to maintain affordable and competitive policies for 

America’s farmers. The high level of risk involved with production agriculture prohibits private entities from writing agricultural policies, which have extremely limited and risky profit potential. Without government involvement, private companies 

would target high-profit, low-risk areas and leave highly vulnerable regions, including many wheat growing areas, without sufficient coverage options. As the crop insurance structure is now organized, private companies are able to write policies for 

regions and states that have historically shown losses. The public-private partnership ensures that all areas have equitable access to crop insurance. 

The partnership between government and private industry is also vital to maintaining the level of service necessary for the program to be truly effective on the 

farm. Private companies are able to be more flexible in meeting their customers’ 

needs and providing quick, local and comprehensive solutions for farmers, while the 

government provides oversight and enhanced security. Private agents have the ability to travel more extensively and operate longer hours than government employees, 

which means farmers can run their business around their farms’ schedules not 

Farm Service Agency (FSA) office hours. Housing and storing data within the Risk 

Management Agency (RMA) system enhances security and allows producers to keep 

track of sensitive information. All of this benefits the U.S. taxpayer, too, because 

the government is not responsible for the investment necessary to hire and maintain 

a staff of insurance agents in every county in the United States. 


11230179.eps
2210

Cash Value of Major Grain Production Covered by Crop Insurance

(Source: USDA Risk Management Agency.)

The most recent Congressional Budget Office (CBO) projections predict that the 

current crop insurance program will cost an average of $7.7 billion per year through 

2021. Compared to the 2011 cash value of major U.S. grain crops enrolled in the 

program, more than $109 billion, public investment in crop insurance shows an excellent return to the U.S. economy. That level of return on investment is expected 

to increase over time. Over the next 10 years, the cash value of crops is expected 

to increase, and yet estimates are that Americans will pay less than 5¢ per person 

per day to maintain current crop coverage options and protect the domestic food 

supply. 

Crop Insurance Cost and Total Estimated Cash Value of Major Grain Crops

(Source: Feb. 2012 USDA Long-term Projections, March 2011 CBO Crop 

Ins. Baseline Projections.)

As crop insurance has become more affordable and coverage options have expanded, a larger percentage of productive acres have been enrolled in the program, 

making the Federal Crop Insurance Program one of the most widely-used risk management tools for row crop producers. For wheat, this is especially important, with 

wheat acres insured through the program in 41 of 50 U.S. states. 


11230180.eps 11230181.eps
2211

U.S. Historical Total Planted Wheat Acres vs. Total Insured Acres

(Source: USDA Risk Management Agency ‘‘State Profiles’’ *2006 Data 

Unavailable*.)

Crop insurance provisions made in the Agriculture Reform, Food and Jobs Act of 

2012, recently approved by the Senate Agriculture, Nutrition and Forestry Committee, provide growers additional options for increasing their protection through 

public-private partnership, in which they and the government share premium costs. 

Some of these provisions include: authorizing supplemental coverage for farmers to 

buy county-level revenue policies in addition to individual coverage; authorizing separate enterprise units for irrigated and non-irrigated crops; and authorizing an increase in the transitional yield (T-yield) plug from 60 percent to 70 percent. NAWG 

strongly supports these improvements and would like to see the House Committee 

on Agriculture include them in its version of the legislation as well. 

Crop insurance historically has provided yield protection and, more recently, revenue protection. However, in consecutive years of poor yields, our farmers have seen 

protection decrease while premiums have remained the same or risen. While RMA 

and the Senate’s farm bill legislation have been responsive in helping farmers cope 

with prolonged years of poor yields, the only real way to fix the problem is for a 

farmer to grow his way out of the so-called ‘‘APH hole’’ through improved varieties 

and management practices, both of which require long-term investments in agriculture research. 

Traditional Title I Programs 

While crop insurance has been an important tool for our farmers, it does have its 

weaknesses, some of which have been ameliorated by Title I programs. NAWG’s 

farm policy priorities have always been to preserve AND enhance the farm safety 

net. Beginning in the 1996 Farm Bill, we began to see holes in our protection because our actual production history (APH) declined with bad weather years. In the 

1990s, this problem was patched with the direct payment and later an emergency 

double direct payment and ad hoc disaster assistance. As farmers and businessmen, 

we realized this was not a good path to continue with agricultural policy. In the 

2008 Farm Bill, mechanisms were put into place to help farmers deal with yearto-year revenue risk, through the ACRE program; single year disasters, through the 

SURE program; and multi-year price risk, through the countercyclical program. 

In the past, direct and countercyclical payments (DCP) have been essential to 

wheat growers because these payments were predictable from year to year and provided long term stability for growers, their bankers and their communities. Direct 

payments worked especially well for wheat farmers because other price-based programs were not structured in a way that provided regular support in times of loss. 

The combination of direct payments and crop insurance enables farmers to manage risk to the downside; because of crop insurance, we are able to forward contract 

our grain to maximize good pricing opportunities, and because of the cash flow the 

direct payment provides, we are able to lock in our inputs when the price is right. 

The banker likes this program because it allows the farmer flexibility and provides 


11230182.eps
2212

her with certainty that the farmer will be able to cover at least some of his costs. 

The countercyclical side of the DCP program, while overlooked in recent years because of high prices, was also an important part of the last farm bill package because it gave farmers and bankers assurance that help would be available in years 

of tragically low prices. 

We realize that the DCP program as it exists today is a thing of the past as we 

move forward with writing policy for 2013 and beyond, but NAWG would like to see 

a Title I program that is as dependable and bankable for farmers and that allows 

them to plan and make adequate planting decisions based on market conditions. 

Created in the 2008 Farm Bill, ACRE is a revenue-based plan that allows growers 

to still receive direct payments, but reduced these payments by 20 percent. To receive an ACRE payment, two triggers have to be met: first, the actual state revenue 

for a supported crop during the crop year has to be less than the state-level revenue 

guarantee amount and, second, an individual farm’s actual revenue for a supported 

crop has to be less than the farmer’s benchmark revenue. The second trigger theoretically is set to keep farmers from receiving payments when they did not have a 

sufficient loss, even when the state as a whole sustained a loss in revenue for the 

crop. 

The ACRE program attempts to soften volatility from 1 year to the next. By incorporating the Olympic average of the previous 5 years’ market prices, ACRE provides 

farmers with a soft landing in times of year-to-year price declines, and delivered a 

safety net for a good number of wheat farmers through the life of the last farm bill. 

This program did provide a cushion for wheat farms through the price declines from 

historic highs in 2008. We believe this program would have been more effective if 

the trigger had been as close to the farm as possible, particularly since much of our 

wheat is grown in the large, western states that have quite diverse growing regions. 

We also would be remiss not to call attention to the confusion created by the ACRE 

program, which was so problematic for farmers, landlords and local FSA offices it 

impeded the program’s overall effectiveness. 

The SURE program was also created in the 2008 Farm Bill. This program was 

frequently used by wheat growers and provided a safety net during times of disaster. In order to be eligible for SURE, producers had to:

• produce in a disaster county or contiguous to a disaster county and suffer a ten 

percent production loss,

• suffer a 50 percent production loss,

• satisfy the Risk Management Purchase Requirements (RMPR), and

• comply with other general eligibility requirements.

Wheat farmers found SURE beneficial because it used the current crop insurance 

price in the revenue guarantee, and if a farmer qualified, it also incorporated the 

National Average Market Price, which is a true representation of what farmers receive. Additionally, SURE covered an individual farm down to the crop insurance 

level so there was no overlap with crop insurance, even while the program 

incentivized farmers to buy up their crop insurance coverage. SURE did have 

downsides, including coverage on a whole-farm, non-crop-specific level and extremely delayed payments after a disaster. However, on the whole, wheat farmers, 

their bankers and suppliers found it a great benefit to non-diversified operations. 

Revenue-Based Options in Title I 

NAWG supports a revenue-based program modeled on the ACRE and 

SURE programs with an on-farm trigger, and coverage by commodity as 

part of a multi-legged safety net. Coverage close to the farm provides a safety 

net with fewer holes for farms with losses than area-level coverage. Additionally, although programs that provide whole-farm protection may sound appealing, it is important to note that they discourage diversification, one of the most basic tenets of 

risk management by producers. 

Over the past year, NAWG has met with fellow producer groups and House and 

Senate staff in efforts to find a new set of policies that can provide a safety net that 

is as strong as our current polices, but at a lower cost to American taxpayers. Since 

the Senate Agriculture, Nutrition and Forestry Committee marked up its version of 

the bill, we have been examining how the Ag Risk Coverage, or ARC, program 

might work for wheat farmers. We appreciate the work the Senate did in crafting 

a program that would work with crop insurance to cover a band of farmers’ revenue, 

building on current crop insurance policies. 

The Senate program is a single, risk-based coverage program that aims to protect 

against both price and yield losses. Farmers can make a one-time coverage choice 

between individual, by commodity level or county, by commodity level. Payments 

2213

under ARC would be made when actual revenue is less than the benchmark revenue 

calculated by using a 5 year Olympic average. 

Because the ARC program only covers between 79 percent and 89 percent of a 

farm’s expected revenue, there is a donut hole between a farmer’s insurance coverage level and the bottom end of the ARC program. To fill in this hole, the Senate 

bill includes in the crop insurance title a supplemental insurance coverage option 

(SCO) that allows producers to purchase coverage on a county yield and loss basis 

between their crop insurance coverage and 79 percent, or up to 90 percent for those 

farmers not participating in ARC. Payments under this option would trigger only 

if losses exceeded 21 percent for the producers enrolled in ARC and ten percent for 

all other producers who purchase this coverage. We believe SCO coverage would 

allow cost-effective protection against shallow losses beyond what the government 

can afford to provide in ARC. We realize that all farmers around the country and 

of various crops have different risk profiles, and this program would allow them to 

work with their agents to customize coverage for their unique operations. 

While we appreciate the expansion of crop insurance, not every county has group 

insurance available because of limited National Agricultural Statistics Service 

(NASS) data availability. We appreciate the authority granted in the Senate’s legislation to allow RMA to utilize their own yield and price data to supplement the 

NASS data previously allowed. With this expanded authority, we believe countylevel SCO protection would be available in most areas of the country. 

Other Title I Options 

While NAWG supports a revenue-based Title I program, we are also cognizant of 

the concerns expressed in the House about protection during consecutive years of 

low commodity prices. 

Wheat is a unique crop, grown in some of the riskiest areas of the country and 

in rotation with nearly every other program crop and is harvested many months out 

of the year. The price wheat farmers are paid depends not only on market factors, 

but also on quality characteristics and wheat class, which are not pertinent for some 

program crops. Therefore, we realize it is important for growers to have choices, 

which can be provided in a multi-legged plan. 

Since we export so much of our wheat crop, wheat growers are also very concerned about distortions of the market from any price protection program and, 

therefore, compliance with World Trade Organization (WTO) agreements. We feel it 

best to keep any price protection program decoupled from current year planted 

acres. However, we realize that the base acres utilized in farm programs for almost 30 

years are outdated and irrelevant. Most farms have changed dramatically since base 

was set and many do not grow the crops for which their fields have base. We would 

recommend that this Subcommittee update base acres for any Title I price protection program to more accurately represent what is planted on the farm and to maintain WTO compliance. 

Review of NAWG’s Risk Management Policy Priorities 

Wheat is grown on some of the most risky land in the country, facing weather 

hazards, highly variable yields and price swings based on a world market and quality-related factors beyond our control as farmers. Despite this variability, wheat 

country provides a steady, safe supply of one of the most widely consumed food staples on the planet and has made the United States the most reliable supplier of 

wheat in the world. These factors make it all the more important for wheat farmers 

to have a farm safety net that is dependable, bankable and defensible. 

Our highest priority for Federal investment in farm safety net programs is the 

portion of crop insurance premiums subsidized by the Federal Government, the public part of one of the most well-functioning agriculture public-private partnerships. 

More than 85 percent of non-irrigated wheat acres planted is covered by crop insurance. We believe crop insurance is essential to the farm safety net and to the reliable production of our nation’s food supply. 

Perhaps one of the strongest testaments to crop insurance is the performance of 

the agricultural industry in 2011. Despite extreme weather losses and market volatility faced over the past 12 months, U.S. agriculture is poised to continue into a 

new year as one of the strongest segments of our nation’s economy. This performance in the face of trial has made the crop insurance program the top farm policy 

priority for most major farm groups, including our commodity friends. NAWG 

strongly opposes any reductions to the baseline available for the Federal 

Crop Insurance Program.

To enhance the crop insurance program, we request that you:

• make permanent the enterprise unit subsidies;

2214

• provide authority for growers to purchase a combination of individual and group 

risk coverage policies such as the Total Coverage Option introduced by Rep. 

Randy Neugebauer or the SCO coverage authorized in the Senate Agriculture 

Nutrition and Forestry Committee’s legislation;

• address the declining yield issue by allowing for 70 percent of the county yield 

to be incorporated as a plug; and

• allow the Risk Management Agency to deliver margin protection instead of just 

yield or yield and price protection.

While crop insurance protects us year after year, we still need strong Title I options to help us deal with issues beyond our control. As you work to define risk 

management programs in Title I of the farm bill reauthorization, NAWG encourages 

you to keep a few basic principles in mind: 

First, we ask you to outline a revenue program that is understandable and builds 

on the lessons farmers have learned from the revenue crop insurance products in 

the 2008 Farm Bill. Even with the inception of ACRE and SURE, it took USDA, 

farmers and all of our advisors much study and research to determine how they 

would work on the farm. Our farmers, extension specialists, bankers, landlords and 

other farm partners need to be able to understand these programs so we can appropriately adapt our risk management plans. 

NAWG supports reallocation of funding away from direct payments to an 

alternative Title I safety net program. We also support multiple safety net 

programs, including a disaster program in Title I. We recognize different production areas of the country rely on different types of farm programs to provide a 

safety net. However, we call on you to make sure that changes to existing programs 

or newly-created programs do not affect planting decisions and allow producers 

planting flexibility, which have been central tenets to the last three farm bills. 

NAWG supports a revenue-based program modeled on programs in the 

2008-authorized ACRE and SURE programs with an on-farm trigger, and 

coverage by commodity as part of a multi-legged safety net. Coverage close 

to the farm provides a safety net with fewer holes for farms with losses than coverage at the state, crop reporting district or county levels. Furthermore, we would 

request that any revenue-based program cover as large a portion of our planted 

acres as possible. 

While we support a revenue-based program in Title I, we recognize and are grateful for concerns from the leaders of the House Agriculture Committee about protecting farmers and farm businesses in times of low prices. As a farmer, I share 

these concerns and recognize the risks of changing the existing safety net so dramatically that it removes the price protection currently available in Title I. We recommend that any price protection included in the 2012 Farm Bill incorporates the 

principles that have made existing Title I programs successful, including being designed not to distort planting decisions and to be WTO-friendly, therefore decoupled 

from current plantings. 

Any farm policy program should be designed to help farmers minimize the risks 

they face. Any reductions in payment caps or changes the definition of active farming would be alarming for farmers who have developed business plans based on existing law. We encourage your recognition that family farms do need to utilize multiple business structures to protect both the family and the farm and allow it to 

transfer to the next generation when appropriate. 

It is my analysis that groups that want to tie crop insurance to conservation compliance believe farmers like crop insurance enough that they will do anything to 

keep it. However, the significant number of acres that go uncovered every year refutes this. Any regulation that disincentivizes producers from participating in the 

crop insurance program shifts more risk to farmers in highly variable areas and 

leaves more of our nation’s food supply and the farmers that provide it precarious 

positions. NAWG believes we need to keep as many farmers in the crop insurance 

program as possible. In fact, RMA has been working to expand crop insurance to 

under-served areas and farmers. Additional restrictions to participation are farm 

harmful to that long-term goal. 

Most importantly, the nation’s wheat farmers call on you to reauthorize 

this legislation this year, before the expiration of the current bill on Sept. 

30. This will provide reliability for the nation’s food supply as our wheat farmers 

go to the fields in August and September to plant the 2013 winter wheat crop. 

Conclusion 

On behalf of the nation’s wheat farmers, I appreciate your attention to my perspective on our nation’s agricultural risk management programs and that of the National Association of Wheat Growers. We are committed to working with you and 

2215

the vast array of other stakeholders to Federal agriculture programs as you outline 

a path forward through these serious and uncharted fiscal times. I am happy to answer any questions you have of me or my Association, now or at a later date.

The CHAIRMAN. Thank you, Mr. Younggren. 

Mr. Morris, your 5 minutes begins when you want it to. 

STATEMENT OF ARMOND MORRIS, CHAIRMAN, SOUTHERN 

PEANUT FARMERS FEDERATION, IRWINVILLE, GA 

Mr. MORRIS. Good morning, Chairman Conaway, Members of the 

Subcommittee. My name is Armond Morris. I am a peanut producer from Irwin County, Georgia. I am Chairman of the Southern 

Peanut Farmers Federation and Georgia Peanut Commission. I am 

here today representing a federation whose growers produce 75 

percent of the U.S. peanuts. I serve on Congressman Austin Scott’s 

Agricultural Advisory Committee and also Senator Saxby 

Chambliss’ Agricultural Advisory Committee. 

We recognize that all Federal programs will be scrutinized and 

the budget cuts will be made. Peanut producers want to do their 

fair share. The debate today in Congress is whether we will have 

a farm bill that works for one or two regions of the country, and 

one or two crops, or a national farm bill that works for all regions 

of the country and all crops. 

For the last several farm bills, peanut producers have relied on 

the University of Georgia National Center for Peanut Competitiveness for farm policy economic analysis. The Center has 22 U.S. representative peanut farms established and maintained by the Center. The farm organization members of the House, Senate, and public institutions offer farm policy concepts for the 2012 Farm Bill. 

The Center would analyze each proposal, including multiple scenarios throughout the 22 U.S. representative farms dispersed 

throughout the nation. 

Each of these alternatives or revenue-type programs was found 

not to work on the 22 representative farms. I recognize that some 

organizations believe that a one-size-fits-all revenue program will 

work for the U.S. agricultural economy. I do not agree. Our cost 

structure and equipment needs alone are significantly different 

than the Midwest. We believe producers need a policy choice to 

manage risk, revenue protection, price protection, and crop insurance. 

We support producers having a choice between a countercyclicaltype program with a target price of $534 per ton and a revenue 

program in consultation with the Center and analysis of the 22 

representative farms. We believe this target price will serve as protection during periods of low prices. USDA estimates that the market price for peanuts is over $1,000 per ton. I assure you, just as 

any peanut producer or major buyer of peanuts would, that a $534 

per ton target price will not increase peanut production or acreage. 

Please also note that we have to rotate peanuts. 

At the same time, peanut producers need a revenue program 

that is a real substantial choice for producers. We should include 

a reference price of $534 per ton and a world market price determined by a Rotterdam price analysis. 

Although we asked the Senate Agriculture Committee to include 

a producer-choice-type program, countercyclical program, or revVerDate 0ct 09 2002 12:54 Dec 11, 2012 Jkt 041481 PO 00000 Frm 00627 Fmt 6601 Sfmt 6601 I:\DOCS\112-30\74372.TXT BRIAN
2216

enue program in their legislation, the Committee failed to do so. 

We asked the Center to evaluate the Senate Agriculture Committee’s 2012 Farm Bill. The Center determined that the Senate agricultural risk coverage program was not beneficial to peanut producers. The Senate Committee’s period to determine a farmer’s eligible acres is 2009 to 2012. This change will adversely affect peanut producers in Oklahoma, Texas, and Virginia where there has 

been significant changes in peanut acreage since 2002. 

The Center applied the Senate’s ARC Program to peanut producers for 2013 through 2017 crop years. The analysis indicated, 

except for one farm, that no representative farm had any payment 

during the 2012 Farm Bill. 

I also grow other commodities, including corn and wheat. In examining the Senate’s ARC Program on my farming operation, I do 

not see how it will help my farm maintain economic viability with 

respect to corn, wheat, relative to the current program. We looked 

at the county levels in other counties and none of these would get 

a payment. So I would like to say that we ask the House Agriculture Committee to draft a farm bill that works for farmers 

across the nation and not just one or two regions of the country. 

This Committee has a long history of developing U.S. farm policy 

in a bipartisan manner. I know you and many Members of this 

Committee and am confident that no farm bill will move forward 

that doesn’t represent the interests of all U.S. farmers and ranchers. We believe Chairman Lucas and Ranking Member Peterson 

were on the right track last year with their budget recommendations on the producer choice. 

In closing, I appreciate the opportunity to appear before the Subcommittee today. Thank you. 

[The prepared statement of Mr. Morris follows:]

PREPARED STATEMENT OF ARMOND MORRIS, CHAIRMAN, SOUTHERN PEANUT FARMERS

FEDERATION, IRWINVILLE, GA 

Good morning, Chairman Conaway, Members of the Subcommittee, my name is 

Armond Morris. I am a peanut producer from Irwin County, Georgia. I am Chairman of the Southern Peanut Farmers Federation (Federation) and the Georgia Peanut Commission. The Federation is comprised of the Alabama Peanut Producers Association, the Georgia Peanut Commission, the Florida Peanut Producers Association, and the Mississippi Peanut Growers Association. I am here today representing 

the Federation whose growers produce approximately 75% of all U.S. peanuts. 

I have been a peanut producer for 45 years. I farm over 2,000 acres of peanuts, 

cotton, corn, wheat, rye, and watermelons. I am active in local, state, and national 

agricultural organizations and am a graduate of the Abraham Baldwin Agricultural 

College. I serve on U.S. Congressman Austin Scott’s Agricultural Advisory Committee and Senator Saxby Chambliss’ Agricultural Advisory Committee. 

I appreciate the opportunity to testify today on Federal peanut policy as you formulate the 2012 Farm Bill. Our family’s livelihood is based on agriculture which 

is influenced by farm policy. 

The farm bill provides farmers, agribusinesses, and financial institutions as much 

certainty as possible in an industry that has a very large number of variables impacting profits and losses. A 5 year farm bill allows all segments of agriculture the 

opportunity to achieve the economic impact that all of us desire. We certainly recognize the budget, geographic differences and other concerns that you face in drafting 

national farm bill legislation. 

I do want to make one point that I believe is very important to the Subcommittee. 

I, like many farm organization leaders, attend many grower meetings. What has 

been evident in the peanut producer meetings that I have participated in is that 

peanut producers recognize that our country is in a fiscal crisis. They recognize that 

2217

all Federal programs will be scrutinized and that budget cuts will be made. Peanut 

producers want to do their fair share. 

The debate today is not whether farmers will take significant cuts in farm programs; we know this will take place. The debate today in Congress is whether we 

will have a farm bill that works for one or two regions of the country, and one or 

two crops, or a national farm bill that works for all regions of the country, and all 

crops. 

When I began farming, the peanut industry was driven by a Federal supply-management peanut policy. In 2002, peanut growers met with the House Agriculture 

Committee leadership and asked the Committee to move our program policy from 

the peanut quota program to a marketing loan type program. This marketing loan 

program is what we have today. It has been very successful for our industry. We 

support the current program as included in the 2008 Farm Bill but we recognize 

that there is a significant effort to eliminate direct payments. 

All of our policy analyses assume that direct payments are eliminated. For the 

last several farm bills, peanut producers have relied on the University of Georgia’s 

National Center for Peanut Competitiveness (Center) for farm policy economic analyses. The Center has 22 U.S. Representative Peanut Farms established and maintained by the Center. As farm organizations, Members of the House and Senate, and 

public institutions offered farm policy concepts for the 2012 Farm Bill, the Center 

would analyze each proposal, including multiple scenarios through the 22 U.S. Representative Farms dispersed throughout the Peanut Belt (Virginia to New Mexico). 

Each of these alternative or revenue type programs was found not to work on the 

22 Representative Farms. I recognize that some organizations believe that a onesize-fits-all revenue program will work for the U.S. agricultural economy. I do not 

agree. Our cost structure and equipment needs alone are significantly different than 

the Midwest with our peanut producers requiring very specialized equipment. Why 

don’t these revenue proposals work for peanuts?

• There is No Consideration for irrigated versus non-irrigated production practices. There are significant yield differences for peanuts—at least 1,100–1,400 

lbs—based on Risk Management Agency (RMA) data and the U.S. Representative Peanut Farms. The Center’s 2011 preliminary data indicated that the yield 

differences could reach 3000 lbs and higher per acre in Georgia. National Agricultural Statistical Service (NASS) county yields do not separate out the differences between irrigated and non-irrigated peanuts.

The Senate Agriculture Committee bill allows the U.S. Department of Agriculture to make this determination, but it is not mandatory.

• There is NO revenue insurance program for peanuts—all proposals use revenue 

insurance as the core part of their program where a producer is covered at the 

65–85% level. Peanuts had a GRIP yield insurance program, but no peanut 

farmers used it so RMA discontinued the program. This implies county yield 

based programs do not work for peanuts.

The Senate bill includes a revenue insurance program but the Congressional 

Budget Office scores the program at approximately $300 million. Peanut growers have been working with the U.S. Department of Agriculture (USDA) and 

Agrilogic on a peanut revenue insurance program since Fall of 2009. On May 

10, 2012, the Federal Crop Insurance Corporation (FCIC) Board of Directors 

voted in the affirmative to approve the peanut revenue insurance package to 

be submitted for external review. The expectation is that if the FCIC Board of 

Directors approves it at their August or September Board meeting, the peanut 

revenue insurance package should be available for the 2013 peanut crop season.

• Peanuts do not have any source for a predicted harvest price.

• Peanuts DO NOT and WILL NOT HAVE A FUTURES MARKET like other row 

crops. Multiple land-grant university studies and efforts by the U.S. Department of Agriculture have all concluded that a futures market is not an option 

for peanuts.

• The Rotterdam price series with appropriate conversion formula for peanuts is 

the best source, not NASS. Our own U.S. Government used the Rotterdam price 

series during the GATT trade negotiations and the USDA Foreign Agricultural 

Service reports that price series.

• Utilizing NASS–CRD and NASS-County yields WILL NOT work for peanuts.

None of the six Georgia Representative Farms analyzed trigger on either the 

CRD criteria or the county level using existing NASS yields. No CRD district 

that has one of the Center’s Representative Peanut Farms outside the SouthVerDate 0ct 09 2002 12:54 Dec 11, 2012 Jkt 041481 PO 00000 Frm 00629 Fmt 6601 Sfmt 6621 I:\DOCS\112-30\74372.TXT BRIAN
2218

east would trigger a payment. Peanuts have a greater variability of yields within a county and CRD than other row crops excluding cotton.

• An Olympic average does not protect a farm from a period of depressed prices 

or weather related depressed yields.

• Given the 2011 peanut season, none of the non-irrigated producers who had between no yields to 1,000 lbs would have been helped by any of the proposed revenue proposals.

The Senate ARC proposal will trigger a couple of farms with non-irrigated peanuts and extremely low yields, below 1,000 pounds.

If we eliminate direct payments, what will work for peanut producers? After conferring with the Center over the last 9 months, we believe producers need a policy 

choice to manage risk—Revenue Protection, Price Protection and Crop Insurance. 

We support producers having a choice between a counter cyclical type program with 

a target price of $534 per ton and a revenue program. In consultation with the Center and analysis of the 22 representative farms, we believe this target price will 

serve as protection during periods of low prices. USDA estimates that the market 

price for peanuts is over $1,000 per ton. I can assure you, just as any peanut producer or major buyer of peanuts would, that a $534 per ton target price WILL NOT 

increase peanut production or acreage. Please also note that we have to rotate peanuts and if our rotation gets out of sync then costs escalate and yields decline. 

At the same time, peanut producers need a revenue program that is a real, substantive choice for producers. This should include a Reference Price of $534 per ton 

and a world market price determined by a Rotterdam price analysis. 

Although we asked the Senate Agriculture Committee to include a producer choice 

type program, countercyclical program, or revenue program in their legislation, the 

Committee failed to do so. We asked the Center to evaluate the Senate Agriculture 

Committee 2012 Farm Bill as to its impact on peanut producers. The Center determined that the Senate’s Agricultural Risk Coverage (ARC) program was not beneficial to peanut producers. The percentage cut in payments that the 13 Southeastern 

representative peanut farms would have received if the ARC component was in effect during the 2007–2011 time period would have ranged from 6.5% to 95% with 

the average being 62% under the ARC option (See Attachment 1). The Senate Committee’s period to determine a farmer’s eligible acres is 2009–2012. This change will 

adversely affect peanut producers in Oklahoma, Texas and Virginia where there 

have been significant changes in peanut acreage since 2002. 

In addition, the Center applied the Senate’s ARC program to peanut producers 

for the 2013–17 crop years. The analysis for 2013–2017 crop years using the Senate’s ARC program indicated, except for one farm, that no representative farm had 

any payments during the life of the 2012 Farm Bill. This applies to all three regions 

of the peanut belt (See Attachment 2). 

As I mentioned in the beginning of my testimony, I also grow other commodities 

including corn and wheat. In examining the Senate’s ARC program on my farming 

operation, I do not see how it will help my farm maintain economic viability with 

respect to corn and wheat relative to the current program. We looked at the county 

level data for my county Irwin plus two neighboring counties of Coffee and Turner. 

None of these counties would have triggered an ARC payment for corn for the years 

2007–2011. However, I asked the Center to apply the Senate’s ARC program to its 

representative farms for the years 2007–2011 with respect to corn and wheat production in the South. Due to our weather patterns, the majority of the representative farms with corn production are under irrigation. None of the irrigated corn production on the representative farms triggered an ARC payment. In contrast, every 

non-irrigated corn producer triggered a payment at least 1 of the years. Please note 

the payments were at a level of $4.11–$7.19 per planted acre. Except for one farm, 

these payments were 54% to 71% less than what they received under the current 

program. For the irrigated corn producers, they had a 100% loss in government payments. While their analysis is not complete in looking at the 2013–2017 time period, 

indications are that the conclusions will be similar to their findings for 2007–2011. 

With regard to wheat, only one representative farm in each of the three peanut production regions triggered an ARC payment. The farm in the Southeast triggered 1 

year and its 5 year average payment was 1⁄2 of what it received under the current 

program. The farms in the Virginia-Carolina area and in the Southwest region did 

not have any wheat base. Their 5 year average payment was $1.53 per planted acre 

and $3.48 per planted acre, respectively. Those levels of payments will not sustain 

an economically viable operation during the hard times. 

We hope the Committee will work hard to assure that program participation applies to the producer. There are areas in the peanut belt, i.e., tobacco counties that 

2219

do not have any commodity base. Please take this into consideration when developing the legislation. 

Mr. Chairman, you and other Members of the Committee were successful in reforming payment limitation rules in the 2008 Farm Bill. Working with agricultural 

groups and Members of Congress not on the Agriculture Committee, I believe the 

reforms in the 2008 Farm Bill were equitable. We request that the current adjusted 

gross income rules and payment limitation restrictions be continued in the 2012 

Farm bill. 

Our peanut producers ask that the House Agriculture Committee draft a farm bill 

that works for farmers across the nation, not just one or two regions of the country. 

This Committee has a long history of developing U.S. farm policy in a bipartisan 

manner. I know you and many Members of this Committee and am confident that 

no farm bill will move forward that doesn’t represent the interests of all U.S. farmers and ranchers. We believe Chairman Lucas and Ranking Member Peterson were 

on the right track last year with their budget recommendations on Producer Choice. 

In closing, I appreciate the opportunity to testify before the Subcommittee today. 

You have a difficult task before you as you attempt to reconcile a crisis in our Federal budget while assuring that Americans have an adequate, safe food supply. 

Thank you.

2220

ATTACHMENT 1

22 United States Representative Peanut Farms 2013–2017: 5 Year Average 

Payment Comparison of Current Program (if continued) Relative to 

Senate’s Agriculture Risk Coverage Proposal for Peanuts 

National Center for Peanut Competitiveness

ATTACHMENT 2

22 United States Representative Peanut Farms 2013–2017: 5 Year Average 

Percentage Reduction in Payments of Senate’s Agriculture Risk Coverage Proposal to Current Program (if continued) Relative for Peanuts 

National Center for Peanut Competitiveness


11230183.eps 11230184.eps
2221

The CHAIRMAN. Thank you, Mr. Morris. 

Mr. Johnson, at your leisure. 

STATEMENT OF ROGER JOHNSON, PRESIDENT, NATIONAL 

FARMERS UNION, WASHINGTON, D.C. 

Mr. JOHNSON. Thank you, Chairman Conaway, Ranking Member 

Boswell, Members of the Committee, for the opportunity to testify. 

I am Roger Johnson, President of National Farmers Union, thirdgeneration farmer from North Dakota where I spent most of my life 

before moving out here. 

We represent 200,000 family farm members all around the country. And our members at our most recent annual convention 2 

months ago voted on and formally adopted principles for the next 

farm bill in two special orders of business. 

Everyone from producers and consumers benefits from a strong, 

effective farm safety net. Commodity prices never stay high and do 

not always return profits to farmers. When prices come down, as 

we know they will, it is critical that a price-based safety net be in 

place. Low market prices generally last much longer than high 

prices. Crop insurance is a very necessary risk management tool 

that should be provided to a larger variety of commodities and specialty crops. We strongly support it. 

Unlike most businesses, food, fiber, and fuel producers face more 

uncontrollable variables on both the cost and price side. Therefore, 

a strong risk management system must be in place, but crop insurance alone cannot protect against multi-year price collapse. As a 

consequence, we have proposed a program called the Market-Driven Inventory System, which I will spend a bit of time talking 

about. 

We also support permanent disaster programs. We know that 

long-lasting drops in commodity prices and artificially high-priced 

peaks are harmful to the entire production supply chain in both domestic and international markets. The bill passed by the Senate 

Agriculture Committee does not include protection against this 

damaging price volatility. To address the threat of instability, we 

commissioned the University of Tennessee’s Ag Policy Analysis 

Center, who helped us develop the Market-Driven Inventory System Program, dealing with extreme price volatility in commodity 

markets while allowing farmers to receive most of their income 

from the marketplace rather than from government payments 

while saving the Federal Government a significant amount of 

money in the process. 

I would like to draw your attention to the graphs in my testimony that further explain how MDIS would benefit multiple stakeholders. This system is an agricultural commodity program that 

mitigated price volatility, it benefits commodity and livestock producers, the biofuel industry, hungry people in this country and 

around the world. We also reduce government expenses and increase the value of crop exports while maintaining net farm income 

over time. 

The central feature of MDIS is a voluntary, farmer-owned and 

market-driven inventory system based on recourse loan rates set at 

levels below total cost of production but above variable cost. Once 

crops are placed under loan, they would be required to remain off 

2222

the market until a release level set at 160 percent of the loan rate 

is reached. At that time, storage payments would stop, the loan 

would be called on a first-in/first-out basis. In the unlikely event 

that inventory caps are reached, the Secretary would be authorized 

to offer a voluntary paid land set aside on a bid basis to those commodity producers. 

The analysis showed that from 1998 to 2010 actual government 

payments for the eight program crops in the U.S. totaled $152 billion excluding crop insurance programs. If MDIS had been in place 

during this time frame, farmers would have received $56 billion 

from the government largely from storage payments while earning 

roughly the same net farm income. Taxpayers would have saved 

$100 billion. 

The MDIS Program could reduce the Federal budget deficit, provide a workable safety net for farmers for significantly less money, 

mitigate high feed costs for livestock producers, help reduce our dependence on foreign oil by stabilizing the biofuels industry, and 

most importantly, reduce the number of food insecure families in 

this country and around the world. 

It is important to pass a farm bill this year. We appreciate the 

recent work of the Senate Agriculture Committee. However, their 

bill is not perfect. We believe the largest deficiency in the Senate 

bill is its failure to deal effectively with long-term price collapse. 

As such, the most economically rational and fiscally responsible 

way of addressing long-term price collapse we believe is through a 

program such as MDIS. 

Alternatively, but at greater cost, price decline protection could 

also be provided by increasing and balancing target prices, which 

again must be set at a level below cost of production. We would 

support such a move in balancing and increasing target prices 

based on cost of production and recent years’ relative prices across 

commodities. 

Thank you for the opportunity to testify. 

[The prepared statement of Mr. Johnson follows:]

PREPARED STATEMENT OF ROGER JOHNSON, PRESIDENT, NATIONAL FARMERS UNION, 

WASHINGTON, D.C. 

On behalf of the family farmers, ranchers, fishermen and rural members of National Farmers Union (NFU), thank you for the opportunity to submit testimony regarding the 2012 Farm Bill. More than 125 organizations, representing farm, agricultural, rural, conservation, nutrition and hunger interests have called for the passage of a farm bill this year. Many parts of the 2008 Farm Bill have already expired, with the balance set to expire in a few months. The efforts of Chairman 

Lucas, Ranking Member Peterson, Members of this Subcommittee and the Agriculture Committees, and many others to craft an efficient and effective 2012 Farm 

Bill are commendable. The recent action by the Senate Committee on Agriculture, 

Nutrition and Forestry in forwarding a bill out of their committee has been very 

encouraging, and it offers hope that both houses of Congress may act swiftly to pass 

a bill. Enacting a strong farm bill this year will allow America’s farmers, ranchers 

and rural communities to be confident they have access to a strong safety net that 

can be deployed when disasters strike or when markets collapse. 

NFU is proud to be a grassroots organization made up of approximately 200,000 

farm families in 33 states. Policy positions are developed by the farmers, ranchers, 

fishermen and rural resident members. Our policies are written at the local, regional and state levels, and then on the national level. Our members voted on and 

2223

1 ‘‘The 2012 Farm Bill: Investing in Rural America.’’ National Farmers Union Special Order 

of Business. Approved March 6, 2012. http://www.nfu.org/images/stories/SpecialOrders/2012/

FarmBillAMENDEDlSpecialOrder.pdf. 2 ‘‘Market-Driven Inventory System and The Farm Bill.’’ National Farmers Union Special 

Order of Business. Approved March 6, 2012. http://www.nfu.org/images/stories/

SpecialOrders/2012/MDISlSpecialOrder.pdf. 

formally adopted our principles for the next farm bill in two special orders of business (see addendum) in March at our annual convention in La Vista, Neb.1–2

NFU acknowledges today’s challenging budget environment, but also understands 

that tomorrow’s budget situation is not likely to be any more favorable. The agriculture community has stated many times that it is willing to bear its fair share 

of cuts in order to contribute toward deficit reduction, but they must be proportional 

to cuts in other sectors. I respectfully urge Members of the Committee to consider 

the critical and tenuous nature of our nation’s food security when considering the 

next farm bill. Production agriculture is a primary economic driver. When production agriculture prospers, a multiplier effect results and jobs and tax revenues at 

the local, state, and national levels are added without raising tax rates. Spending 

reductions that adversely impact the productivity and profitability of production agriculture are counterproductive to our overall national economic interests. Family 

farmer- and rancher-owned and operated food, fuel, and fiber production is the most 

economically, socially and environmentally beneficial way to meet the needs of our 

nation. 

Our national farm and food policy affects all Americans, urban and rural, food 

producers and food consumers. We have the opportunity to shape this important policy only once every few years. Our nation’s family farmers, who are those most vulnerable to risk, need an effective and fiscally responsible safety net to mitigate the 

effects of weather and market volatility in order to achieve our food and energy security goals and to preserve jobs in rural America. As the Members of the Committee know, agriculture is a unique industry, with market behavior that defies typical supply and demand economics, high input costs, and the constant risk of weather disasters threatening our nation’s producers. It is NFU’s belief that farmers 

should not receive support in the good times, but that farm policy should instead 

provide economic security to farmers, who have little market power, in bad times. 

Our nation’s farmers need a more effective and fiscally responsible safety net to 

mitigate the effects of weather and market volatility and to achieve our food and 

energy security goals. 

Additional Farm Bill Priorities 

Congress should continue investments in rural America through farm bill conservation and energy programs. Demand for these initiatives remains high and yet 

these programs are chronically under-funded in the annual appropriations process, 

which results in program backlogs. Congress should provide a flexible conservation 

toolbox in the 2012 Farm Bill that includes streamlined program delivery for working lands, land retirement and easement programs, coupled with significant Federal 

funding and flexible local planning authorities. 

Additionally, the 2008 Farm Bill included language that established and continued important research, animal health, marketing, and disaster programs related 

to livestock production, which brought additional interests into the farm bill process. 

The livestock title mandated country-of-origin labeling (COOL) for meat, fish, perishable agricultural commodities, and assorted other food products, which has been 

a long awaited and very beneficial law for farmers and consumers alike. A livestock 

title should be a part of the 2012 Farm Bill and must maintain the progress established by the previous farm bill. 

Furthermore, NFU has a long, proud history of advocating for programs that help 

the less fortunate among us. National nutrition policy must address both the quantity and quality of food available to needy Americans, and nutrition programs 

should place an emphasis on fresh and local food to ensure that Americans of all 

income levels have access to healthy, nutritious foods. The local food procurement 

directive of the 2008 Farm Bill must be continued and further emphasized in the 

2012 Farm Bill, and NFU supports further incentives for Supplemental Nutrition 

Assistance Program (SNAP) and other Federal nutrition program recipients to use 

their benefits at farmers markets, achieving dual objectives of providing healthy 

food to those who need it most and supporting family farmers and ranchers. 

Market-Driven Inventory System: An Overview 

In 2011, NFU commissioned the University of Tennessee’s Agricultural Policy 

Analysis Center (APAC), under the leadership of Dr. Daryll E. Ray, director, and 

Dr. Harwood Schaffer, research assistant professor, to develop a farm program that 

2224

would moderate extreme volatility in commodity markets while allowing farmers to 

receive their income from the marketplace rather than from government payments, 

saving the Federal Government a significant amount of money in the process. 

The Market-Driven Inventory System (MDIS) developed by Dr. Ray is an agricultural commodity program that mitigates price volatility, providing advantages to 

livestock producers, the biofuels industry, and to hungry people in this country and 

around the world. In addition, it would reduce government expenses, increase the 

value of crop exports, and maintain net farm income over time. The central feature 

of MDIS is a voluntary, farmer-owned and market-driven inventory system that operates under market forces during normal conditions but moderates prices at the 

extremes. Inventory stocks activity would only be activated when crop prices become 

so low or so high that normally profitable agricultural firms are not provided with 

reasonable investment and production signals. By working with the market, MDIS 

would ensure that farmers receive their income from the market instead of from 

government payments. 

In the wake of the extreme commodity price volatility seen from 2006 to 2010, 

many of our international counterparts have revitalized, constructed or made plans 

for a grain inventory management system on a national level. The international 

community has also of late called for the establishment of a global ‘‘ ‘virtual’ internationally coordinated reserve system for humanitarian purposes,’’ first mentioned 

in the G8 Leaders’ Statement on Global Food Security at the Hokkaido Toyako 

Summit on July 8, 2008, and more recently at the November 2011 G20 summit in 

Cannes, France. Implementation of MDIS in the United States could be a valuable 

model for future global, coordinated grain inventory management systems. 

This two-phase study found that MDIS can provide the functions sought by NFU’s 

family farmer and rancher members and our international brothers and sisters. The 

first portion of the study (Phase I) is a rerun of history from 1998 to 2010 with one 

change: the commodity programs during that period are replaced with MDIS. The 

second (Phase II) uses the U.S. Department of Agriculture (USDA) 10 year baseline 

released in February 2012 as the starting point for the analysis. Because 10 yearahead baseline projections lack real world variability, a pattern of shocks that 

roughly mimic the variability experienced by crop agriculture from 1998 to 2010 

were imposed on the projections. 

The POLYSYS simulation model, developed by APAC, is the analytical model 

used in this analysis. POLYSYS simulates changes in policy instrument levels and/

or economic situations as variation away from a baseline situation. Crop allocation 

decisions are made with linear programming models using county-level data as a 

proxy for farm-level decisions. The crop prices and demands as well as all livestock 

variables are estimated at the national level. National estimates of revenues, costs 

and net returns are also estimated. 

MDIS Phase I: A Historical Analysis 

Phase I explores the extremely volatile commodity price period between 1998 and 

2010 using historical data as the baseline. In this portion of the analysis, the actual 

historical supply, demand and price numbers are compared with what those numbers are estimated to have been had MDIS been in effect. 

During the 1998 to 2010 time period, actual government payments for the eight 

program crops (corn, wheat, soybeans, grain sorghum, barley, oats, cotton and rice) 

totaled $152.2 billion, excluding crop insurance premium subsidy payments. If 

MDIS had been in place during this time, farmers would have received $56.4 billion 

from the government (in storage payments), while earning roughly the same net 

farm income over the period as historically received (figures 1 and 2). With MDIS 

in effect, annual net farm income would have been, on average, higher in the early 

part of the period (1998 to 2005) and lower in the latter part of the period (2006 

to 2010) but for the full 13 years under MDIS, net farm income averaged only 

slightly lower ($51.1 billion versus $52.1 billion). MDIS would have proven to provide an effective safety net for farmers, remove the volatility from the commodity 

market and reduce government payments by approximately 2⁄3. 

2225

Figure 1: Government Payments for 8 Crops: 1998–2010

Fig.1 compares the Federal cost of the farm bill programs that were implemented from 1998 to 2010 to the cost of MDIS if it had been in place during 

this time frame. The analysis found that, had MDIS been implemented instead of the farm bill programs that were in place, the Federal Government 

would have saved more than $95 billion over the 13 year period. 

Figure 2: Realized Net Farm Income, 1998–2010

Fig. 2 compares net farm income from the farm programs that were implemented from 1998 to 2010 to what net farm income would have been had 

MDIS been in place during this time frame. The analysis found that net 

farm income would have remained virtually unchanged over the 13 year period.

For the entire 13 year period, the value of production under the baseline policies 

was $413 billion while with MDIS it would have been $446 billion—a difference of 

$2.6 billion per year. Crop prices were significantly higher under MDIS in the early 

part of the period, and for the full 1998 to 2010 period prices were higher by $0.25, 

$0.50 and $1.00 per bushel for corn, wheat and soybeans, respectively, compared to 

actual prices. 

Had MDIS or a similar inventory-based commodity program been in effect from 

1998 to 2010, the value of crop exports would have exceeded the actual value of exports during that period (figure 3). A higher crop price does cause a reduction in 


11230185.eps 11230186.eps
2226

the quantity exported, but that decline is less than the increase in price. As a result, 

the value of exports increases with rising prices and decreases with price declines. 

(As an aside, this property does not bode well for the future direction of the change 

in value of agricultural exports over the next few years if prices decline.) 

Figure 3: Annual Value of Exports for 8 Crops (1998–2010)

Fig. 3 compares the historic export value of the eight program crops from 

1998–2010 to their value if MDIS had been in place during this time frame. 

The analysis found that, had MDIS been implemented instead of the farm 

bill programs that were in place, the export value of the eight program crops 

would have been greater over the 13 year period. 

MDIS Phase II: Future Projections 

Phase II is based on USDA baseline projection data for 2012 to 2021 as the beginning point of the analysis, but production shocks were used to mimic the variability 

that crop and livestock agriculture experienced between 1998 and 2010. Crop yields 

ten percent above the baseline for the eight major crops for the 2012 through 2014 

crop years were imposed, and in the 2017 and 2018 crop years a ten percent decrease below baseline yields was used, along with a five percent decline in 2019. The 

purpose of these yield shocks was to reproduce price conditions similar to those that 

were seen in 1998 through 2010—a timeframe that saw both low prices accompanied by massive government payments and record high prices. The resulting comparisons below are between this shocked baseline assuming continuation of current 

commodity programs and the MDIS alternative. The MDIS simulation includes the 

same production shocks. 

Government payments with a continuation of the current programs and shocked 

production total $65 billion over the 10 years from 2012 to 2021. With MDIS in 

place, government payments are estimated to total $26 billion, or 60 percent less 

(figure 4). 


11230187.eps
2227

Figure 4: Government Payments for 8 Crops: 2010–2021

Fig. 4 compares the projected Federal cost if current farm programs are extended to the projected net farm income under MDIS from 2010 to 2021 

under three scenarios. First, if current programs are extended and annual 

values match USDA’s baseline projections; second, if current programs are 

extended and supply/demand shocks are felt (as described earlier in the document), and; third, if supply/demand shocks occur but MDIS programs are 

in place. The analysis projects that government payments would be $39 billion lower if MDIS is implemented rather than extending current programs.

Net farm incomes averaged over the 10 years are nearly identical—$79.2 billion 

per year under the current programs and slightly higher with MDIS, $79.6 billion 

(figure 5). 

Figure 5: Realized Net Farm Income, 2010–2021

Fig. 5 compares the projected net farm income if current farm programs are 

extended to the projected net farm income under MDIS from 2010 to 2021 

under three scenarios. First, if current programs are extended and annual 

values match USDA’s baseline projections; second, if current programs are 

extended and supply/demand shocks are felt (as described earlier in the document), and; third, if supply/demand shocks occur but MDIS programs are 

in place. The analysis projects that net farm income would be slightly higher 

under MDIS than under current programs in either scenario.


11230188.eps 11230189.eps
2228

Because crop prices average higher with MDIS than under the current program, the value of exports over the 10 year period is higher with MDIS by $15 billion, 

or $1.5 billion per year, on average (more in the first part of the period and less 

in the latter part of the period) (figure 6). 

Figure 6: Value of Exports—8 Crops, 2010–2021

Fig. 6 compares the projected export value of the eight program crops from 

2010 to 2021 to their projected value if MDIS is in place during this time 

frame. The analysis projects that, if MDIS is implemented instead of extending the current farm bill programs, the export value of the eight program 

crops would be $15 billion more over the study period. 

MDIS: Mechanics 

For Phase I, the beginning corn loan rate is halfway between the variable cost 

of producing a bushel of corn and the corresponding total production cost. In 1998 

that number is computed to be $2.27 per bushel of corn. The 1998 loan rates for 

other crops are then computed to be in the same proportion to corn loan rates as 

those legislated by the Federal Agriculture Improvement and Reform (FAIR) Act of 

1996 (the 1996 Farm Bill) in order to minimize distortion, except for grain sorghum, 

for which the loan rate is raised to be equal to that of corn, and soybeans, for which 

the loan rate is raised to $6.32. The loan rates of all crops are adjusted for 1999 

through 2010 using USDA’s prices-paid-by-farmers chemical input index. 

The analysis for Phase II of the study follows the approach and most of the basic 

specifications used for Phase I. The loan rates for this analysis (all in dollars per 

bushel) are: $3.50 for corn, grain sorghum and barley, $2.49 for oats, $5.28 for 

wheat and $8.97 for soybeans. The loan rates have the same proportion to corn as 

the loan rates in the Food, Conservation and Energy Act of 2008 (the 2008 Farm 

Bill). Loan rates are held constant for the full 2012 to 2020 period. 

The maximum quantities of grain allowed in the MDIS inventory in both Phase 

I and Phase II are specified to be 3 billion bushels of corn, 800 million bushels of 

wheat and 400 million bushels of soybeans. Inventory maximum levels for other program crops would be set as appropriate. Farmers with MDIS recourse loans are paid 

$0.40 per bushel per year to store the grain and are required to keep the grain in 

condition. 

With MDIS in operation, markets work uninterrupted until prices are estimated 

to fall below a recourse loan rate or, if MDIS inventory is available, prices exceed 

160 percent of the loan rate. 

When prices fall below the loan rate, the model estimates the amount of grain 

that farmers would need to put under recourse loan with the Farm Service Agency 

(FSA) to raise the market price to or above the loan rate, which is the ‘‘price’’ that 

FSA uses to value the grain used as collateral for the loan. If a market price is estimated to exceed 160 percent of the loan rate, the model checks to see if there is 

an inventory stock in the MDIS farmer-owned inventory. If MDIS inventory is available, the model computes the quantity needed to lower price to about 160 percent 

of the loan rate and allows that amount of stock onto the market. Setting the release price at 160 percent of the loan rate is the key to establishing a functional 


11230190.eps
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3 Jerardo, Alberto. February, 2004. ‘‘The U.S. Trade Balance . . . More Than Just a Number.’’ 

U.S. Department of Agriculture-Economic Research Service. 4 Ray, Daryll, et. al. March 2012. ‘‘An Analysis of a Market Driven Inventory System (MDIS)’’ 

University of Tennessee Agricultural Policy Analysis Center. 5 Ibid.

6 Ibid.

7 Ray, Daryll, et. al. March 2012. ‘‘An Analysis of a Market Driven Inventory System (MDIS)’’ 

University of Tennessee Agricultural Policy Analysis Center. 

system. The market does not work as effectively within the model at higher or lower 

loan rate-release price ratios. 

The grain under MDIS must stay in inventory, that is, it cannot be redeemed by 

paying off the loan and marketed until the price goes above the release price of 160 

percent of the loan rate and notification is specifically received. With MDIS in effect, 

all government payment programs (countercyclical payments, loan deficiency payments, fixed or direct payments, etc.), except MDIS inventory storage payments and 

crop insurance subsidies, are eliminated for corn, grain sorghum, oats, barley, 

wheat, and soybeans. An optional set-aside would be available for use at the secretary’s discretion if MDIS inventory maximums are reached and prices fell below 

loan rates. Rice and cotton are not included in MDIS and are assumed to remain 

eligible for current program payments. 

History of Commodity Programs—How Did We Get Here? 

With the adoption of the FAIR Act of 1996, which extended the marketing loan 

program to all crops, the holding of grains either by the Commodity Credit Corporation or farmers in a farmer-owned reserve was made ineffective. Part of the logic 

behind the end of these grain storage programs was the belief that if there were 

a need for stocks, participants in the commercial sector would buy up those stocks 

at a low price and later sell them at a higher price with no cost to the government. 

Recent history has demonstrated that those commercial inventories simply did not 

come into existence and the market has seen numerous countries impose harmful 

export limitations of their domestically produced foodstuffs in the face of citizen concern over food shortages. In the U.S., we have even heard concerns from the livestock sector over the availability of sufficient feed supplies. 

The 1996 Farm Bill instead established the present system of direct and countercyclical payments. Almost immediately after the 1996 bill, the market changed and 

commodities prices began to decline. From 1996 until 2004, the value of agricultural 

exports fell from an all time high of $27.3 billion to $10.5 billion.3 From 1996 until 

2005, corn prices fell to an average of $2.06 per bushel, wheat an average of $3.03 

per bushel and soybeans an average of $5.33 per bushel.4 The elimination of reserves and new incentives to plant program acres combined to result in widespread 

overproduction, devalued crop prices and thus an increase in the amount paid in 

government subsidies. The resulting system had no way to manage wild swings in 

supply and market volatility that have proven detrimental not only to family farmers but also to consumers in developing countries, industries dependent upon agricultural commodities for inputs, and rural economies. 

In times of high commodity prices, such as current market conditions, target 

prices are set so low that even in the case of a market downturn the countercyclical 

program does not reflect the rising cost of production or provide an adequate safety 

net. Direct payments are increasingly indefensible to the public and unnecessary for 

farmers, as they get distributed based on historic production, regardless of current 

market price. 

As a result, from 1998 to 2010, government payments for crops totaled $152.2 billion.5 If MDIS had been in place for corn, wheat and soybeans between 1998 and 

2010, government payments to farmers would have been reduced by nearly 2⁄3 to 

$56.4 billion, the value of exports would have increased, average commodity prices 

for farmers would have been higher, damaging price volatility would have been substantially reduced and overall farm income would have been left effectively unchanged.6

MDIS and the Federal Deficit 

As Congress continues to seek ways to reduce the Federal deficit, any serious discussion regarding controlling government expenditures should include MDIS. 

APAC’s analysis over the 10 years from 2012 to 2021 found that government payments with a continuation of the current program and shocked production remain 

unsustainably high, totaling $65 billion. However, with MDIS in place, estimated 

government payments over the same period total $26 billion, a 60 percent reduction 

(figure 4) as compared to the current farm programs.7

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MDIS could save tens of billions of dollars paid under existing government payment programs and the additional tens of billions in ‘‘emergency’’ payments and government subsidies to revenue insurance programs otherwise needed to offset the almost inevitable periodic severe collapses in grain prices. Under MDIS, grain farmers 

receive their income from the market and grain demanders are not subsidized or 

overcharged. 

MDIS Benefits Stakeholders 

MDIS holds numerous benefits for a variety of stakeholders, including farmers, 

the environment, livestock producers, the ethanol industry, taxpayers and the food 

insecure worldwide. 

MDIS Benefits Farmers 

MDIS helps smooth out some of the wild price swings that can put some farmers 

out of business. By providing a greater level of income certainty, MDIS helps farmers plan for the future without decreasing net farm income. Land prices and input 

costs rise dramatically when commodity prices rise, but when prices drop, these 

costs do not drop correspondingly. With a reasonable loan rate, farmers could make 

long-term investments in their farming operation that improve their long-term profitability. 

Farmers who put their corn, wheat and/or soybeans into the inventory system 

would benefit from the receipt of storage payments. They would also benefit from 

the future sale of their stored commodity at the higher release price. With MDIS 

in effect, annual net farm income was higher, on average, in the early part of the 

period from 1998 to 2005 and lower in the latter part of the period from 2006 to 

2010, but for the full 13 years, the MDIS net farm income averaged only slightly 

lower ($51.1 billion versus $52.1 billion). The low-price years would reduce the tendency to capitalize higher returns into land. While sufficient to keep current land in 

production, the moderated prices do not provide the kind of price signals that would 

lead to an over-expansion of productive capacity and lower prices over the longer 

term. Net farm incomes averaged over the 10 years are almost identical ($79.2 billion per year under the current program and slightly higher with MDIS at $79.6 

billion). From 1998 to 2010, farmers would have benefited from price signals that 

more accurately reflect the supply/demand situation at a given time, than when futures prices reflect herd-following speculative behavior on the part of some market 

participants. 

MDIS Benefits Conservation 

MDIS holds significant conservation benefits because price stability puts less 

pressure on environmentally sensitive land. During high price years, for example, 

demand pressures on land is reduced because farmers will not be incentivized to 

break native grassland or bring Conservation Reserve Program acres back into crop 

production. During low price years, net farm income would remain higher under 

MDIS. This means that farmers have more money to invest in conservation in order 

to meet their cost-share requirements under programs such as the Environmental 

Quality Incentives Program. 

MDIS Benefits Livestock Producers 

Less volatile commodity prices under MDIS help livestock producers keep input 

costs more stable and help prevent skyrocketing grain prices, which can bankrupt 

livestock producers. In the 2006 to 2010 period, higher prices put some producers 

over the financial edge; however, MDIS would have reduced commodity prices to a 

more reasonable and survivable level. Livestock producers are vulnerable to rapidly 

increasing feed prices, which they cannot quickly pass on to the consumer. Overall, 

MDIS would have provided livestock producers and industrial users with security 

in the availability of feed supplies and a more reasonable range of prices. 

MDIS Benefits the Ethanol Industry 

Abnormally high commodity prices are also damaging to the ethanol industry and 

can cause disruptions in the supply chain. Having access to a stable supply within 

a more predictable price range allows ethanol producers to engage in long-range 

planning. MDIS decreases price fluctuation faced by ethanol plants and ensures 

more stable production, which in turn helps put America on the road to energy independence. 

MDIS Benefits Taxpayers 

Throughout the study period, government payments for crops totaled $152.2 billion. Had MDIS been in place from 1998–2010 rather than the existing programs, 

taxpayers could have saved more than $95 billion compared to what the Federal 

2231

8 USDA Economic Research Service, retrieved from http://www.ers.usda.gov/Data/

FarmIncome/FinfidmuXls.htm. 

Government actually spent on farm programs. This is a nearly 60 percent reduction 

in expenditures. Government payments with a continuation of the current programs 

and shocked production total $65 billion over the 10 years from 2012 to 2021; with 

MDIS the estimated cost is $26 billion, also a 60 percent reduction. 

Equally important, MDIS addresses perceptions among some consumers that the 

government is giving unwarranted handouts to farmers. By setting up a system that 

allows the price to range closer to costs of production, these policies allocate the 

costs to the major users of commodities, both domestic and international, rather 

than expecting the U.S. Federal Government to subsidize their purchases. In addition to the benefits they would receive under MDIS as taxpayers, U.S. consumers 

would benefit from more stable commodity prices that would reduce the volatility 

of food costs. While commodity prices under MDIS increased in the 1998 to 2005 

period according to the model, the farm portion of most processed food costs that 

U.S. consumers eat is relatively small, resulting in minimal long-term pressure on 

food prices. Average commodity prices in the 2006 to 2010 period under MDIS would 

not have increased as much as they did under existing policies, reducing upward 

pressure on food prices. 

MDIS Benefits the Impoverished 

In developing nations, a small increase in commodity prices can mean the difference between putting food on the table and going hungry. MDIS reduces the price 

swings that cause many people who are directly reliant upon staple crops like corn 

to go hungry when they can no longer afford food. Importers of U.S. corn, wheat 

and soybeans would have been assured of a stable supply of storable commodities, 

reducing the need for countries to protect local supplies of grains. 

With farmers constituting as much as 60 to 70 percent of the poor in developing 

countries, higher prices in the 1998 to 2005 period under MDIS would not adversely 

affect these farmers because of the large amount of food that they produce for self 

consumption. In addition, they would receive a more stable income for the product 

they do sell into the market. In times of high prices, many subsistence farmers and 

urban poor are often priced out of the market, increasing the number of chronically 

hungry persons in the world. As a result of the price spike in 2007 and 2008, more 

than 200 million people fell into the chronically hungry category. By moderating the 

price spikes, MDIS reduces the price pressure on the poor in developing countries. 

In addition, MDIS assures participants in the marketplace of an adequate supply 

of grain, reducing the hoarding tendency, which often results in localized price 

spikes. 

Permanent Disaster Programs 

NFU has long been a leading proponent of a permanent disaster program. The 

unpredictability and inefficiencies associated with ad hoc disaster programs led to 

the inclusion of the Supplemental Revenue Assistance Program (SURE) and other 

related programs, such as the Emergency Assistance for Livestock, Honey Bees and 

Farm-Raised Fish Program (ELAP), the Livestock Indemnity Program, and more, in 

the 2008 Farm Bill. These permanent disaster programs were intended to allow 

farmers and ranchers to recover quickly from devastating weather without waiting 

for piecemeal disaster assistance. Unfortunately, that set of programs was inadequately funded and oversight challenges postponed many of the rules and regulations needed to implement the programs. Even in 2010, there were farmers still 

awaiting their claims for 2007 losses. SURE and similar initiatives were a hard-won 

victory for family farmers and ranchers and those programs’ guiding principles—to 

protect farmers against catastrophic yield losses—ought to be included and appropriately implemented in the next farm bill. 

In the next farm bill, permanent disaster programs must be funded at a level that 

makes them effective and eliminates the need for ad hoc payments. Partial advance 

payments should be made available so that assistance can be quickly provided in 

times of desperate need. Decision makers must ensure that we can continue the 

work that was done with SURE and other programs in 2008. Returning to a system 

of ad hoc disaster programs is likely to be much more costly for both the Federal 

Government and for farmers. Not only are ad hoc programs expensive, they are also 

difficult to administer, extremely political and not solely influenced by real conditions and/or need. Between 1996 and 2002, when the commodity title was removed 

from the farm bill, approximately $30 billion was spent on ad hoc disaster programs.8 The cost to extend SURE and similar disaster assistance programs for 5 

2232

9 Congressional Budget Office. 

10 Ray, Daryll, et. al. March 2012. ‘‘An Analysis of a Market Driven Inventory System (MDIS)’’ 

University of Tennessee Agricultural Policy Analysis Center. 

years in a 2012 Farm Bill is projected to be $8.9 billion,9 and baseline funding for 

the permanent disaster programs expired in 2011. It should also be noted that any 

disaster program would likely be less costly if the MDIS concept were also included 

in the next farm bill.10

Even though permanent disaster programs were enacted in the 2008 Farm Bill, 

ad hoc disaster relief efforts were authorized in 2010. This is likely due to the fact 

that SURE and the other programs were not as effective or fast-moving enough to 

satisfy the needs of farmers who were affected by disaster. If disaster programs 

were strengthened, these legislative solutions would likely be unnecessary. It should 

also be kept in mind that disaster programs are among the few farm bill programs 

that provide roughly equal benefits to both farmers and ranchers. Including a set 

of previously unaffected sectors of agriculture in Federal farm policy would generate 

more support for the overall farm bill. 

It is important that farmers do their part by responsibly sharing in the inherent 

business risks of their farm. The distribution of disaster aid must remain linked to 

crop insurance participation, and SURE participants should be required to purchase 

more than just catastrophic (CAT) coverage so that they are able to reasonably recover some of their losses through crop insurance. 

Any improvements in disaster programs should not come at the expense of program delivery. County FSA staff who service these programs are pushed to the limits of their resources as it is, and their offices need adequate funding and modern 

technology in order to continue to serve our country’s farmers. A consistent, predictable and stable backup plan for farmers struck by weather-related problems is the 

most important benefit of having a permanent disaster aid program. Any efforts to 

improve upon it should not interrupt the positive results SURE and other disaster 

programs provided. 

Risk Management 

Crop insurance is an important safety net mechanism that provides assistance to 

farmers only when assistance is needed. It is fully compatible with MDIS and, as 

such, crop insurance must remain a cornerstone of farm policy. Risk management 

tools must be made economical for all farmers, regardless of crop or geographic region, and more insurance products should be made available that protect against 

changes in the cost of production. Farmers also need protection against losses due 

to weather-related disasters, high input costs or devastatingly low prices. NFU supports efforts aimed at streamlining and eliminating duplication among existing farm 

bill programs. Risk management provisions in the next farm bill should extend the 

availability and affordability of Federal crop insurance programs to farmers in portions of the country that have not historically carried significant levels of crop insurance, thereby reducing the need for disaster aid. 

NFU members support the reestablishment of compliance requirements for Federal crop insurance eligibility so that all existing or new crop and revenue insurance 

or other risk management programs are subject to all conservation compliance provisions. 

Crop insurance coverage should be improved for organic producers, including ending the existing surcharge on organic policies and the full implementation of coverage levels based on organic prices. Additionally, crop insurance products and other 

risk management tools should be developed for specialty crop producers. Funding 

levels for crop insurance must remain adequate as it is the most critical and effective safety net for farmers and crop insurance has already been subjected to recent 

significant cuts. 

Recent budget cuts to crop insurance, which subtracted from the farm bill baseline, were made since the last farm bill. We urge lawmakers to carefully consider 

the effects of reduced funding for crop insurance programs and prohibitions should 

be put in place to prevent future raids on crop insurance resources, particularly 

through the Standard Reinsurance Agreement process. Cuts should not come at the 

expense of greatly increased risk management costs for farmers. Continued vigilance should be maintained to prevent the abuse of crop insurance programs, but 

crop insurance must remain a part of the next farm bill. Costs associated with the 

Federal Crop Insurance Program have risen as crop insurance has taken on additional importance in the suite of safety net tools in the farm bill. Although costs 

have increased over the long run, total costs of the crop insurance program were 

cut nearly in half between 2008 and 2010. Most of the savings came from reductions 

2233

11 USDA Economic Research Service, retrieved from http://www.ers.usda.gov/Data/

FarmIncome/FinfidmuXls.htm. 

in net indemnities, although reductions to administration and overhead subsidies 

for approved insurance providers have made for decreased spending as well. 

There are also a few adjustments to the mechanisms of the crop insurance programs that should be considered. All risk management programs should be based 

upon Actual Production History (APH), and for situations in which the APH is not 

available, the qualified yield for a farm should not be set at a lower level than that 

of county FSA calculations. In order to protect farmers in the event of successive 

crop disasters, we also urge the establishment of APH yield floors. These common 

sense approaches to crop insurance will help to ensure that losses are accurately 

reflected in indemnities. 

Crop insurance is not the be-all and end-all for a farm safety net. Without reducing the volatility that plagues agriculture commodity markets with MDIS, revenuebased crop insurance products will be extremely expensive in high price periods and 

will provide little, if any, assistance to farmers when prices collapse. NFU members 

would much rather see a farm policy that also includes MDIS and disaster assistance programs to moderate the volatility of the agricultural marketplace and yields 

so that farmers can continue to farm. 

Conclusion 

Many challenges lie ahead in the writing of the next farm bill. Funding is and 

will continue to be tight. It is critical that lawmakers come together in a bipartisan 

manner to outline the top priorities for the omnibus agricultural legislation. 

The average American spends less than ten percent of his or her disposable income on food, which is the lowest rate of any industrialized nation in the world. It 

is a fantastic bargain. This deal is the result of our national investments in agriculture through farm policy, which have ensured that America’s farmers and ranchers can continue to provide the safest and most abundant food supply in the world. 

The primary purpose of the next farm bill ought to be as a strong safety net that 

protects farmers and ranchers during tough times for the health of our nation and 

our rural economies. A forward-thinking and well-designed safety net will be much 

more cost-effective than reactionary legislation that is put forward in times of emergencies. 

When writing the next farm bill, lawmakers must be penny-wise but not poundfoolish. The MDIS program will have a cost, but as the study by the University of 

Tennessee demonstrates, it will save money in the long term. Permanent disaster 

programs, too, save money. For example, the U.S. spent $30 billion between 1996 

and 2002 in emergency and ad hoc disaster programs to help farmers and ranchers 

when prices collapsed and the farm bill had no safety net for them.11 Keeping that 

in mind, the cost to extend SURE and similar disaster assistance programs for 5 

years, which could have replaced those ad hoc disaster programs, is $8.9 billion. 

We must also complete the next farm bill this year to protect against even further 

cuts to agriculture. USDA cut $4 billion from agriculture programs by renegotiating 

the Standard Reinsurance Agreement in 2011. Congress approved a budget reduction to agriculture programs of more than 15 percent for the 2012 Fiscal Year, a 

cut that was two to three times deeper than the average across-the-board reduction 

in discretionary spending. By waiting until 2013 or later to complete the next farm 

bill, there may be even less funding available, making it nearly impossible to pass 

a farm bill that will protect America’s family farmers and ranchers in tough times. 

By coming together in a strong, bipartisan fashion, it is possible to craft a fiscally 

responsible 2012 Farm Bill with an adequate safety net to protect America’s family 

farmers and ranchers and to help make rural communities vibrant. On behalf of the 

members of National Farmers Union, thank you for the opportunity to outline our 

priorities and I look forward to working with you to enact this critical legislation. 

ATTACHMENT 1

2012 NFU Special Order of Business—The 2012 Farm Bill: Investing in 

Rural America 

Agriculture is a primary driver of our rural and national economy, providing employment for 1 in 12 Americans, and is a job-creating industry based upon sustained 

production by approximately 2.2 million family farmers and ranchers. Congress has 

historically maintained significant investment in rural America through the farm 

bill. 

Although farm safety net programs account for only about 14 percent of the total 

spending in the farm bill, about half of the spending reductions that would have 

2234

been attained in the Agriculture Committees’ recommendation to the Joint Select 

Committee on Deficit Reduction would have come from farm safety net programs. 

Deep, unjustified cuts to farm bill programs are unacceptable and the agriculture 

community should not be asked to do more than its fair share in reducing the Federal budget deficit. 

The next farm bill must be written to serve the needs of farmers and ranchers 

in times of need so that agriculture can continue to be a job-creating industry for 

all of America. 

We support providing adequate funding levels for USDA microloan programs, targeted to beginning and small farmers, including the use of third party lending agencies to distribute funds and provide ongoing technical support. 

The Farm Safety Net 

Crop insurance has become the primary safety net mechanism for many farmers 

and has proven to be effective in the last few years. This program must be maintained and must continue to include and expand to offer coverage to more farmers 

and methods of production, such as livestock, forage crops, specialty crops, organic 

agriculture and other emerging products to provide them with protection from natural disasters. However, the proliferation of price-based revenue insurance products 

creates potential problems in the event of a collapse in prices. 

NFU supports reestablishment of compliance requirements for Federal crop insurance eligibility so that all existing or new crop and revenue insurance or other risk 

management programs are subject to all conservation compliance provisions. A 

means of protecting farmers against deep or catastrophic losses must be included 

in the next farm bill to ensure that farmers are able to weather occasional significant yield losses. 

Conservation and energy 

NFU calls on Congress to continue investment in rural America through farm bill 

conservation and energy programs. Demand for farm bill conservation and energy 

programs remains high, and yet these programs are chronically underfunded in the 

annual appropriations process, resulting in program backlogs. Of the 37 farm bill 

programs scheduled to expire with the 2008 Farm Bill on September 30, 2012, five 

are programs within the conservation title and eight are in the energy title. 

Congress should provide a flexible conservation toolbox in the 2012 Farm Bill that 

includes streamlined program delivery for working lands, land retirement and easement programs, coupled with significant Federal funding and flexible local planning 

authorities. 

Congress should provide robust, mandatory funding for the Rural Energy for 

America Program (REAP), Biomass Crop Assistance Program (BCAP) and Biorefinery Assistance Program. 

Livestock 

The 2008 Farm Bill included language that established and continued important 

research, animal health, marketing, and disaster programs related to livestock production, which brought additional interests into the farm bill process. The livestock 

title mandated country-of-origin labeling (COOL) for meat, fish, perishable agricultural commodities, and assorted other food products, which has been a long awaited 

and very beneficial law for farmers and consumers alike. 

It also included important provisions to improve competition in the livestock and 

poultry marketplace for farmers, ranchers and growers, including directives to the 

Executive Branch to better enforce the Packers and Stockyards Act. 

NFU supports the inclusion of a livestock title in the 2012 Farm Bill that contains 

the following beneficial and widely popular efforts:

• Deeming products inspected under a state cooperative agreement, which are 

equal to or exceed USDA inspection standards, eligible for interstate trade;

• Taking action against pseudorabies and cattle fever ticks;

• Improving food safety provisions;

• Creating the Livestock Indemnity Program and the Livestock Forage Program 

disaster protections;

• Establishing a sheep industry improvement center; and

• Directing Federal agencies to seek a better understanding of livestock marketplace dynamics.

A livestock title in the 2012 Farm Bill must not roll back the progress achieved 

by the last farm bill by repealing or defunding COOL, eliminating fairness proviVerDate 0ct 09 2002 12:54 Dec 11, 2012 Jkt 041481 PO 00000 Frm 00646 Fmt 6601 Sfmt 6621 I:\DOCS\112-30\74372.TXT BRIAN
2235

sions for poultry growers, or facilitating the further market-distorting vertical integration and consolidation of the livestock sector. 

Nutrition 

NFU has a long, proud history of advocating for programs that help the less fortunate among us. National nutrition policy must address both the quantity and quality of food available to needy Americans, and nutrition programs should place an 

emphasis on fresh and local food to ensure that Americans of all income levels have 

access to healthy, nutritious foods. 

Farm bill nutrition programs, including the Supplemental Nutrition Assistance 

Program (SNAP), Department of Defense Fresh Program, Fresh Fruit and Vegetable 

Program, Farmers Market Nutrition Programs, Emergency Food Assistance Program (TEFAP) and Commodity Supplemental Food Program (CSFP) should be reauthorized in 2012 at levels no lower than those of the 2008 Farm Bill and farm bill 

nutrition program funding should not be used to reduce the Federal deficit. 

The local food procurement directive of the 2008 Farm Bill must be continued and 

further emphasized in the 2012 Farm Bill, and NFU supports further incentives for 

SNAP and other Federal nutrition program recipients to use their benefits at farmers markets, achieving dual objectives of providing healthy food to those who need 

it most and supporting family farmers and ranchers. 

USDA should provide Electronic Benefit Transfer (EBT) machines free of charge 

to all farmers markets, community-supported agriculture systems (CSAs), farm 

stands and other direct marketing outlets to ensure Federal nutrition program recipients are able to use their benefits at all healthy food locations. 

ATTACHMENT 2

2012 NFU Special Order of Business—Market-Driven Inventory System and 

the Farm Bill 

The 2008 Federal Farm Bill is set to expire in 2012. It is essential that the U.S. 

Congress pass a new Federal farm bill in the interest of the food and energy security of the United States and the economic viability of the rural and overall United 

States economy. 

Farming and ranching have high, uncontrollable risks due to weather such as disasters and disease, so the new Federal farm bill must include provisions that both 

maintains current farm income and reduces the cost to the Federal Government. 

A study by the University of Tennessee’s Agricultural Policy Analysis Center 

found that if a Market-Driven Inventory System (MDIS) had been in place for corn, 

wheat and soybeans between 1998 and 2010, government payments to farmers 

would have been reduced by 60 percent, exports would have increased, average commodity prices for farmers would have been higher, damaging price volatility would 

have been substantially reduced and overall farm income would have been left effectively unchanged. 

NFU supports the inclusion of a strong and effective safety net that mitigates the 

extreme volatility of agriculture markets, including wild variation in prices, yields 

and cost of production. 

NFU supports implementation of MDIS to ease the costly volatility in commodity 

prices, a system that will be beneficial not only for farmers but also for livestock 

producers, the biofuels industry, the environment, and consumers worldwide. 

NFU calls on Congress to enact a new Federal farm bill that uses MDIS as its 

central component to maintain a return on the cost of production plus an opportunity for reasonable profit for farmers and ranchers.

The CHAIRMAN. Thank you, Mr. Johnson. 

Mr. Stewart for 5 minutes. And let the record show that I shamelessly bragged on him being a constituent of the Chairman. 

STATEMENT OF J.B. STEWART, VICE CHAIRMAN, NATIONAL 

SORGHUM PRODUCERS, KEYES, OK 

Mr. STEWART. Good morning. On behalf of the National Sorghum 

Producers, I would like to thank you, Chairman Conaway, Ranking 

Member Boswell, and Members of this Subcommittee, for the opportunity to discuss the impact of this farm bill on my operation 

and sorghum producers and farmers nationwide. And before I go 

any further, I do want to especially thank my Congressman, ChairVerDate 0ct 09 2002 12:54 Dec 11, 2012 Jkt 041481 PO 00000 Frm 00647 Fmt 6601 Sfmt 6601 I:\DOCS\112-30\74372.TXT BRIAN
2236

man Frank Lucas, for his strong leadership and dedication to this 

farm bill process on behalf of American agriculture. 

I farm with my son, Jarrod, on a farm in the far western Panhandle of Oklahoma. There we raise grain sorghum, wheat, and 

sometimes sunflowers. We also operate a commercial spray operation and an ag supply business. This is a semiarid region with 

variable weather, but my family has lived and worked the land 

there since 1918. In fact, I still own the quarter section of land 

homesteaded by my grandfather. 

Years in the field have given me the experience to realize the 

vast impact this one piece of legislation has on my day-to-day operations, and I want to ensure that farmers benefit from the farm bill 

we are here to discuss today. 

Sorghum producers across the Sorghum Belt faced significant 

challenges last growing season as a result of a devastating drought. 

Fortunately, we survived because of a workable and viable Federal 

Crop Insurance Program. I have coined it as the life-sustaining medium on my farm after that drought last year. While Federal crop 

insurance is providing meaningful risk management tools, there obviously are a few changes we feel could enhance this program. First 

of all, we believe the APH methodology in the T-yield system could 

be improved. Specifically, for sorghum we would request that RMA 

exclude the impact of second crop sorghum yields on county yields. 

These T-yields are so low in some counties that they provide basically no protection. 

We support the development of a sweet sorghum and high biomass energy sorghum insurance. NSP also encourages new products and options for all crops, much like the trend yield adjustment 

that has had significant value for corn and soybean producers. 

NSP supports the supplemental coverage option as a cost-effective way to address shallow losses and high deductibles. Our analysis shows this is a simple way to provide a safety net across a 

number of geographic regions and different commodities. Commodity title programs must provide protection against systemic 

risk. NSP is wary of assistance programs that may impact planting 

decisions and we feel that crop diversity should be encouraged in 

farm rotations. 

NSP analyzed the farm bill ARC Program and found there is not 

a strong amount of coverage per acre for sorghum and for wheat 

in my area. NSP analysis for sorghum farms in Kansas, our largest 

production state, shows that historically, the average ARC payment 

would amount to only $2.27 per acre with a trigger frequency of 

about 26 percent. This amount of shallow loss protection is just 

simply too shallow. In reality, the ARC program is essentially free 

insurance. Our fear is that when given free insurance, farmers or 

lenders would pick the coverage with the highest potential payout. 

This free insurance could be a set backwards in farm policy. 

And while we appreciate the complexity of the cotton program 

and the challenges of the WTO case, NSP is also concerned about 

how STAX could impact sorghum’s acreage. This probably could be 

addressed, though, through an effective SCO Program and proper 

construction of the commodity title. 

Bottom line, while we understand the Committee’s desire to tailor programs for those at risk, we urge extreme caution in that 

2237

area so as not to discourage or limit future sorghum plantings. Our 

priority is to ensure if irrigation and water declines in the Sorghum 

Belt that market opportunities for sorghum grown in nontraditional sorghum areas like North Carolina, farm policy does not discourage producers from continuing to change. Any policy that is recoupled to planting will push farmers into higher-value crops and 

we support decoupled price basis and revenue-based support to 

help address this. 

Farmers need a program that is simple and bankable. A program 

should be built to withstand a multi-year low price scenario. Rather than a revenue plan or a price-based countercyclical plan, we 

would prefer to have a minimum price set that serves as a floor 

to protect producer income in the event of a series of low price 

years. 

Finally, given the likely possibility in this new farm program, 

most payments will be triggered by loss situations, NSP does not 

support any tighter payment limits or any change in actively engaged rules. 

In closing, this new safety net is not only important for sorghum 

farmers but is also important to providing stability to rural communities, the economy of our states, the economy of our nation, and 

even the economy of our world. 

We thank you for your time and this opportunity, and I look forward to questions. 

[The prepared statement of Mr. Stewart follows:]

PREPARED STATEMENT OF J.B. STEWART, VICE CHAIRMAN, NATIONAL SORGHUM

PRODUCERS, KEYES, OK 

Introduction 

Thank you Subcommittee Chairman Conaway, Ranking Member Boswell and the 

entire Subcommittee on General Farm Commodities and Risk Management for holding this hearing today. I also thank you for the opportunity to submit testimony on 

the impact future farm policy under the next farm bill will have on sorghum producers across America and my operation alike. 

My name is J.B. Stewart, and my son Jarrod and I grow grain sorghum, wheat 

and sunflowers. We also operate a commercial spraying and ag supply business in 

the far western panhandle of Oklahoma near Keyes. It is a semi-arid region with 

variable weather, but my family has lived and worked the land here since 1918. In 

fact, I still own the quarter of land my great grandfather homesteaded that year. 

I am a fourth generation farmer, and I have a 7 year old grandson that will likely 

be the sixth generation. 

Before I go any further, I would also like to thank my Congressman Chairman 

Frank Lucas for his leadership of this House process and for recognizing the importance of fair treatment for sorghum and identifying its water-saving advantages. 

I am currently serving as Vice Chairman of NSP’s board of directors and Chairman of the NSP legislative committee, and I understand that the actions of this 

Committee and the actions of the U.S. Congress have a significant impact on my 

farming operation and individual commodities. 

NSP supported the work put forth last fall and we look forward to working with 

the House Agriculture Committee over the next several months as the next farm 

bill is drafted. My testimony will focus on several areas of farm policy as they relate 

to sorghum’s safety net, including crop insurance, the importance of equity in Title 

I, and the sustainability of sorghum. 

Industry Overview 

The Great Plains states produce the largest volume of grain sorghum, but the 

crop is also grown from Georgia to California and South Texas to South Dakota. According to the National Agricultural Statistics Service, last year sorghum was produced in many of the states you represent. This includes Texas, Kansas, Oklahoma, 

2238

Illinois, Arkansas, Missouri, Georgia, North Carolina, California, Alabama and 

Ohio. 

Over the past 15 years, grain sorghum acreage has ranged from a high of 13.1 

million acres in 1996 to a low of drought reduced 5.5 million acres planted in 2011. 

On average the crop is valued at approximate $1.2 billion annually. 

The creation of the Conservation Reserve Program in the 1985 Farm Bill had a 

significant impact on the sorghum industry as producers enrolled thousands of sorghum acres in CRP. Today’s sorghum acreage is 1⁄3 of its level prior to the 1985 

Farm Bill. As CRP acreage is reduced, production of this water-sipping crop should 

move back toward the pre-1985 Farm Bill acres. NSP expects that returning acreage 

to that level will help ensure necessary infrastructure to supply the needs of our 

domestic and international customers. This goal is consistent with the working 

lands approach to conservation. 

Forage and Grain Sorghum 

Forage sorghum utilized as silage, hay and direct grazing represents approximately an additional 5 million acres of production. 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. 

Grain sorghum is a non-transgenic crop and is typically exported to three main 

markets: Mexico, Japan and the European Union (EU). According to the May 2012, 

World Agricultural Supply and Demand Estimate (WASDE), U.S. exports accounted 

for approximately 28 percent of this year’s sorghum use. 

The most important new market for grain sorghum is the biofuels industry. According to the latest WASDE report, industrial use including ethanol production will 

account for 42 percent of total sorghum usage. This is more than triple the amount 

of the 2007–2008 crop year, and this market has even more potential in the future. In addition, the U.S. dominates world sorghum seed production with a $200 million seed industry focused on 200,000 acres primarily in the Texas Panhandle. 

Sweet and Energy Sorghum 

Two other very important sectors of our industry are sweet sorghum and high biomass, energy sorghum. Most Americans perceive sweet sorghum to be used to make 

syrup or molasses. However, it is also used worldwide for the production of renewable fuels and chemicals. India, China and South America are producing renewables 

from sweet sorghum, and many private and public pilot studies are ongoing in the 

U.S. to explore the potential of sweet sorghums. 

These crops do not receive benefits as Title I commodities, nor as specialty crops. 

It is critical that these two crops receive crop insurance to help level the playing 

field with Title I and specialty crops. We appreciate the Senate farm bill package 

that reinforces the importance of having crop insurance for dedicated energy crops 

such as sweet and biomass sorghum, and we urge this Committee to do the same. 

Farm Bill Priorities 

Protect Federal Crop Insurance 

Sorghum producers across the Sorghum Belt faced significant challenges last 

growing season as a result of the drought. NSP supports Federal Crop Insurance, 

which is providing meaningful risk management tools to our producers. We feel the 

program should be built upon in the following ways:

• We believe the APH methodology should be reformed and county T-yield system 

improved so as to reduce the impact of local weather phenomena and allow the 

producer’s insurable yield (pre-deductible) to reflect what the producer and his 

lender would actually hope and expect to produce in that year. Specifically for 

sorghum, we would request that RMA exclude the impact of second crop sorghum yields on county T-yields. The T-yields are so low in some of the sorghum 

producing counties that they provide no protection.

• We would also support improvement to the product development processes so 

that there would be a clear pathway to bring new policies, like one for sweet 

sorghum or high biomass energy sorghum, to market. Additionally, we need the 

sorghum silage pilot program expanded nationwide for 2013.

• In no case should the crop insurance tools, which are purchased by the producer, be encumbered with environmental regulation or other conditions such 

as payment limits that fall out of the scope of insurance.

• As crop insurance continues to grow in crops covered and area covered, NSP 

wants to make sure that new products and options for one crop continue to be 

made available for other crops quickly. For example, sorghum looks forward to 

having the trend yield adjustment for sorghum in 2013. The trend-yield adjustVerDate 0ct 09 2002 12:54 Dec 11, 2012 Jkt 041481 PO 00000 Frm 00650 Fmt 6601 Sfmt 6621 I:\DOCS\112-30\74372.TXT BRIAN
2239

ment option has proven to have significant value for corn and soybean producers in 2012 and sorghum farmers look forward to having the same opportunity in 2013.

• We support a TCO or SCO type product. Our analysis shows that this is a simple way to provide a safety net across a number of geographic areas and different commodities. 

Carefully Consider Impact on Planting Decisions 

Sorghum is an agronomically important crop across the center of the nation and 

beyond. However, it is often not the largest acre crop for producers and is extraordinarily sensitive to any incentives that are created in the farm program. No matter 

which form of assistance is pursued, NSP’s second priority is that special care be 

taken to encourage crop diversity and rotation on the farm to avoid a monoculture 

system that rejects agronomics in favor of higher government support. In considering options in this regard, we give weight to the following factors: 

A program should not dictate or distort planting decisions. Decoupled direct payments are excellent in this regard, but the consensus seems to be they should be 

eliminated. Going forward, any commodity specific program that is tied to planted 

acres must be designed with extreme care to avoid creating payment scenarios that 

incentivize farmers to plant crops with higher inherent value to maximize payments 

rather than making the wisest possible agronomic decisions. 

As we have analyzed the Senate Farm Bill ARC program, we found that there 

is not a strong amount of coverage per acre for any crop, but inasmuch as the potential benefits are tied to planted acreage we are still concerned about the disparity 

among crops and the impact that would have on plantings. 

The table on the following page shows actual dollars that would have been paid 

out over the last several years both based upon the county program or on the individual farm level for multiple crops. Our analysis for these four sorghum producers 

in Kansas, the largest sorghum producing state, shows an average ARC payment 

of only $2.27 an acre with a trigger frequency of 26.1 percent. Additionally, it shows 

that sorghum is generally toward the bottom of the payments that would have been 

made. 

In reality, the ARC program is essentially free insurance. Our fear is that when 

given free insurance, farmers or lenders would pick the coverage with the highest 

potential payout. This free insurance does not appear to serve sorghum well. 

Comparison of Individual Payments to County Payments

Table 1: Comparison of Individual and County Payments in Kansas 

County Crop/Practice Individual 

County (Individual Years 

Only) 

Avg. $/Ac Frequency Avg. $/Ac Frequency 

Kingman Sorghum/NI 1.53 35.7% 3.50 42.9%

Kingman Soybeans/NI 7.19 60.0% 6.53 40.0%

Kingman Wheat/NI 2.28 38.5% 2.01 23.1%

Ellsworth Sorghum/NI 3.51 27.8% 3.34 26.3%

Ellsworth Soybeans/I 12.85 66.7%

Ellsworth Soybeans/NI 2.68 40.0% 6.11 46.7%

Barton Corn/I 2.32 20.0% 0.00 0.0%

Barton Corn/NI 0.00 0.0% 0.00 0.0%

Barton Sorghum/NI 0.00 0.0% 0.00 0.0%

Barton Soybeans/NI 6.02 33.3% 6.81 33.3%

Barton Wheat/NI 2.99 44.4% 0.00 0.0%

Ford Corn/I 1.59 11.1% 0.10 10.0%

Ford Sorghum/NI 3.36 22.2% 3.68 33.3%

Ford Wheat/NI 1.45 23.1% 1.92 23.1%

* Incomplete County Irrigated Soybean Data. 

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Based on average dollars per acre received in the 13 comparisons (excluding 

Ellsworth irrigated soybeans) and using the county data from the years that the 

producer would have been participating in ARC (green and blue columns), the 

individual producer would have been better off using the individual choice six 

times. Based on frequency, the individual choice would have also been the better 

choice six times. The largest spread between the county and individual average 

payments per acre was the difference in Ellsworth County for non-irrigated soybeans. The county averaged payments of $6.11 per acre compared to the individual payments of $2.68 per acre while the frequency was very close (46.7 percent for the county versus 40.0 percent for the individual). 

While we appreciate the complexity of the cotton program and the challenges of 

the WTO case, we are also concerned about how STAX would impact sorghum’s 

acreage, especially in high commodity price scenarios given the differentiated high 

premium assistance rate included in STAX. 

Bottom line, while we understand the Committee’s desire to tailor programs for 

those at risk, we urge extreme caution in this area and care so as to not discourage 

or limit future sorghum plantings. Our priority is to ensure that as irrigation water 

declines in the Sorghum Belt and market opportunities for sorghum grow in nontraditional sorghum areas like North Carolina, farm policy does not discourage producers from continuing to change. Any policy that is re-coupled to planting will push 

producers to higher value crops unless precaution is taken to encourage diversity 

and rotation. 

Simple and Bankable Price Protection 

With all the discussion about new and complicated options—very reminiscent of 

the 2008 approach that gave us ACRE and SURE in addition to a traditional safety 

net, NSP would urge this Committee to step back and focus on what is really needed. In a word, that is stability. 

Farm Policy should be simple and bankable. The recently expired SURE program 

had too many factors and was not tailored to the multiple business risks producers’ 

face—it was not simple. The ACRE program was based on state-wide revenue—it 

was not bankable. The marketing loan and target prices are simple and bankable—

unfortunately the trigger prices are no longer relevant to current production costs. 

A program should be targeted and defensible. We believe it makes sense to provide assistance when factors beyond the producers’ control create losses for producers. 

A program should be built to withstand a multi-year low price scenario. Whether 

in a revenue plan, or a price-based countercyclical plan, we would prefer to have 

a set minimum price that serves as a floor or reference price to protect producer 

income in a relevant way in the event of a series of low price years. Ideally, this 

minimum could move over time should production costs also increase. 

Eliminate Dated Pay Limits 

Given the likely possibility that a new farm program would have less certainty 

for the producer (due to the likely elimination of direct payments) and will therefore 

be designed to provide assistance only in loss situations, NSP believes the program 

should not be limited based on arbitrary dollar limits, i.e., assistance should be tailored to the size of loss. A producer should not be precluded from participating in 

a farm program because of past income experience. Any internal program limits on 

assistance should be percentage-based (i.e., 25 percent of an expected crop value) 

and not discriminate based on the size of farm. 

Finally, as stated above, Crop Insurance must remain free of arbitrary payment 

limitations or means tests. 

Build Incentives into Conservation, Energy and Research Titles 

While we know these titles are not under this Subcommittee’s jurisdiction, these 

additional titles are important in the overall farm policy picture. Sorghum is a highly water efficient crop that works well in various rotation systems, spanning from 

southern Texas to South Dakota. It thrives in drought prone areas because, whereas 

other crops will die during a period of prolonged water stress, sorghum will become 

dormant and thrive again upon taking in moisture. This ability to make a crop 

under the most water deficient conditions allows sorghum to fit easily into farms 

where water is becoming more scarce each year. As such, we suggest strengthening 

existing water conservation language in the Ag Water Enhancement Program 

(AWEP) in the farm bill to more specifically encourage planting sorghum and other 

water saving crops. Currently, the program allows incentives for switching to lower 

2241

water intensity crops, but a vast majority of payments are going to other projects. 

There is also a place for water conservation language in existing Conservation Security Program (CSP) and Environmental Quality Incentive Program (EQIP) language, 

and NSP encourages the strengthening of water conservation options wherever practical. Using farm bill conservation programs as a transitional support, farmers will 

be able to economically justify switching higher value crops to lower water intensity 

crops over time. 

Additionally, grain, sweet and high biomass forage sorghums are all used to 

produce renewables under economically viable biofuels technologies. We support the 

continuation of a farm bill energy title and specifically encourage continuing mandatory funding of the Bioenergy Program for Advanced Biofuels from Section 9005 of 

the 2008 Farm Bill. This program allows incentive payments to eligible biofuels producers that use feedstocks outside the mainstream, like sorghum. It has had positive economic impact on the Sorghum Belt and served as a water savings incentive 

where aquifers are already depleted. 

Finally, sorghum does not enjoy the significant research support by private industry that the large acre crops enjoy. Additionally, we do not receive the public dollars 

targeted to specialty crops. Therefore, it is a challenge for sorghum to get the investment to continue to make genetic improvement. In reality, sorghum improvement 

has been quite remarkable over the last twenty years given the fact that we have 

lost many of the ‘‘best’’ acres sorghum was planted on to other crops, and we have 

not had billions of dollars of investment. It is critical that sorghum receive investment to continue to make the improvement that will be necessary to help feed a 

growing world population.

The CHAIRMAN. Thank you, Mr. Stewart. 

Mr. Wellman, 5 minutes. 

STATEMENT OF STEVE WELLMAN, PRESIDENT, AMERICAN 

SOYBEAN ASSOCIATION, SYRACUSE, NE 

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

Subcommittee. I am Steve Wellman, a soybean, corn, wheat, and 

cattle producer from Syracuse, Nebraska. I currently serve as 

President of the American Soybean Association. ASA appreciates 

the opportunity to present our views on commodity and risk management programs for the 2012 Farm Bill. 

The nation’s high budget deficits contribute to our mounting Federal debt. Pressure for spending cuts in all sectors, including agriculture, remains intense and prices for most commodities remain at 

historically high levels. These factors are driving efforts to reform 

farm programs as risk management tools rather than income support guarantees. We commend the leadership of the Committee for 

committing to reduce spending by $23 billion over 10 years during 

last fall’s Super Committee process. This contribution represents 

agriculture’s fair share of deficit reduction. We urge the Committee 

to make no reduction in funding for crop insurance, which is the 

foundation of an effective risk management system. 

With the limited resources, ASA supports replacing Direct Payments, the Counter-Cyclical Program, and ACRE with a revenuebased program that partially compensates for revenue losses of individual commodities. A revenue benchmark would be established 

based on a moving 5 year Olympic average of prices and yields. 

Losses would need to exceed ten percent of this revenue benchmark 

and compensation would be limited to a ten percent band between 

80 and 90 percent of average revenue. 

ASA initially supported limiting the percent of acres on which 

payments would be made to a farm’s total crop acreage base. However, the ARC Program included in the Senate Agriculture Committee’s farm bill uses the average of planted and prevented-plantVerDate 0ct 09 2002 12:54 Dec 11, 2012 Jkt 041481 PO 00000 Frm 00653 Fmt 6601 Sfmt 6601 I:\DOCS\112-30\74372.TXT BRIAN
2242

ed acres in 2009 to 2012 as the farm acreage cap. We believe this 

is a better approach since it more closely reflects recent farming 

practices. 

We support limiting payments to 65 percent of planted acres 

with a determination of a revenue shortfall at the farm level. Payments on prevented-planted acres would be set at 45 percent. 

We also support reauthorizing the existing Marketing Loan Program for all commodities and maintaining existing payment limitations and caps on adjusted gross income. 

One of the most important policy results from the last three farm 

bills is planting flexibility, which allows farmers to base their 

planting decisions on the market rather than payments from the 

government. Decoupled Direct Payments and the current CounterCyclical Program have enabled farmers to maximize their returns 

from the marketplace. Preserving planting flexibility is ASA’s highest priority in reforming Title I programs. 

A revenue program would have a marginal impact on planting 

decisions. First, it requires actual losses based not only on declines 

in prices but declines in yields. It would be difficult to anticipate 

payments prior to planting. 

Second, the revenue benchmark is adjusted annually to reflect 

Olympic average prices and yields. Since the benchmark is not 

fixed, it would be less likely to get out of line with market conditions over the life of the bill. 

Third, farmers would need to experience a ten percent revenue 

loss before payments would be available. Coverage would be restricted to a narrow ten percent band of revenue and payments 

would be limited to only a percentage of eligible acres. These factors would mitigate any role of a revenue program influencing producer planting decisions. 

It has been noted that by basing support on current-year production, a revenue program would increase prospective outlays for 

crops that are actually grown. Indeed, the CBO baseline estimate 

for the Senate’s ARC program shows an increase in outlays attributed to soybean plantings of $1.5 billion over 10 years while most 

other crops show declines. The reason for these changes is that 

U.S. soybean base acreage, as established in 2002, totals only 50 

million acres compared to actual planting acres in 2011 of 75 million acres. The change in outlays indicated in the CBO baseline 

simply reflect the reality that 1⁄3 of soybeans are currently grown 

on base acres for other crops. 

In addition, payments under a revenue program would go to producers who, in response to the market, have decided to change 

their cropping patterns. Since 2002, for example, farmers in southern states have increased soybean plantings by 14.8 percent compared to a 1.6 percent increase nationwide. Coverage under a revenue program would reflect this trend. 

As I mentioned earlier, crop insurance is the foundation of an effective risk management system for producers of soybeans and 

many other crops. Recently, we joined our colleagues from other 

major farm and commodity organizations in a letter to the Committee asking for your support to keep crop insurance strong in the 

next farm bill. 

2243

Crop insurance has become more expensive for farmers and the 

government because premiums are based on market prices. Along 

with high prices comes greater financial risk for farmers. We have 

been willing to pay high premiums because the financial risk is 

greater than ever. Crop insurance allows us to borrow money and 

forward-contract our crops. 

That concludes my statement, Mr. Chairman. I am happy to respond to questions later. Thank you. 

[The prepared statement of Mr. Wellman follows:]

PREPARED STATEMENT OF STEVE WELLMAN, PRESIDENT, AMERICAN SOYBEAN

ASSOCIATION, SYRACUSE, NE 

Good morning, Mr. Chairman, and Members of the Subcommittee. I am Steve 

Wellman, a soybean, corn, wheat and cattle producer from Syracuse, Nebraska. I 

currently serve as President of the American Soybean Association (ASA), which represents 21,000 soybean farmers in 26 states on domestic and international issues 

of importance to all U.S. soybean producers. ASA appreciates the opportunity to appear before you today to present our views on commodity and risk management programs for the 2012 Farm Bill. 

The circumstances facing the Committee and Congress in writing the farm bill 

this year are similar to those that prevailed last fall, during the Super Committee 

process. The nation’s budget deficits remain high, contributing to a mounting Federal debt. Pressure for spending cuts in all sectors, including agriculture, remains 

intense. And prices for most farm commodities remain at historically high levels, 

eroding support for Direct Payments as a component of the current farm safety net. 

Combined, these factors are driving efforts to reform farm programs as risk management tools rather than income support guarantees. 

We commend the leadership of the Committee for committing to reduce spending 

by $23 billion over 10 years during last fall’s Super Committee process. As noted 

at the time, this contribution represents agriculture’s fair share of deficit reduction. 

We urge the Committee to write a bill that does not exceed this level, including not 

more than $15 billion in cuts to commodity programs and no reduction in crop insurance funding. Soybean producers strongly support the existing crop insurance 

program as the foundation of an effective risk management system. 

Support for a Revenue Program 

With the limited resources available to the Committee, ASA supports replacing 

three existing Title I programs, including Direct Payments, the Counter-Cyclical 

Program, and ACRE, with a revenue-based program that partially compensates for 

revenue losses for individual program commodities. A revenue benchmark would be 

established based on a moving 5 year Olympic average of prices and yields. Losses 

would need to exceed ten percent of this revenue benchmark, and compensation 

would be limited to a ten percent band between 80 and 90 percent of average revenue. 

ASA initially supported limiting the percent of acres on which payments would 

be made to a farm’s total crop acreage base. However, the ARC program included 

in the Senate Agriculture Committee’s farm bill uses the average of planted and 

prevented planted acres in 2009 to 2012 as the farm acreage cap. We believe this 

is a better approach than using crop acreage bases, since it more closely reflects recent farming practices. 

In order to meet budget requirements, we support limiting payments to 65 percent of planted acres, with the determination of a revenue shortfall at the farm 

level. However, we are open to providing producers with a one-time option to select 

county-level coverage, using county average prices and yields to establish the revenue benchmark and payment trigger. Because this option would be less costly than 

the farm-level option, payment acres would be set at 80 percent of the acreage cap. 

Payments on prevented planted acres would be set at 45 percent under both the 

farm-level and county-level options. 

ASA believes a revenue approach would give producers a viable risk management 

tool that would complement the current crop insurance program. It makes the best 

use of the limited resources available to the Committee. We also support reauthorizing the existing marketing loan program for all commodities, and maintaining existing payment limitations and caps on Adjusted Gross Income. 

2244

Maintaining Planting Flexibility 

One of the most important policies included in the last three farm bills is planting 

flexibility, which allows farmers to base their planting decisions on prospective returns from the market rather than prospective payments from the government. By 

decoupling the production of specific crops from commodity-specific payments, Direct 

Payments and the current Counter-Cyclical Program have enabled farmers to maximize their returns from the marketplace. Preserving planting flexibility is ASA’s 

highest priority in reforming Title I programs. 

We believe a revenue program, although it would be tied to current-year production, would have only a marginal impact on planting decisions. First, it requires actual losses that are based not only on declines in prices, but declines in yields. It 

would be much more difficult to anticipate payments prior to planting. Second, the 

revenue benchmark is adjusted annually to reflect Olympic average prices and 

yields. Since the benchmark is not fixed, it would be less likely to get out of line 

with market conditions over the 5 year life of the farm bill. Third, farmers would 

need to experience a ten percent revenue loss before payments would be available, 

coverage would be restricted to a narrow ten percent band of revenue, and payments 

would be limited to only a percentage of eligible acres. These factors would mitigate 

any role of a revenue program in influencing producer planting decisions. 

The Impact on Baseline Spending 

It has been noted that, by basing support on current-year production, a revenue 

program would increase prospective outlays for crops that are actually grown. Indeed, the CBO baseline estimate for the Senate’s ARC program shows an increase 

in outlays attributed to soybean plantings of $1.5 billion over 10 years, while most 

other crops show declines. The reason for these changes is that U.S. soybean base 

acreage, as established in 2002, totals only 50 million acres, compared to actual 

planted acres in 2011 of 75 million acres. The change in outlays indicated in the 

CBO baseline simply reflects the reality that 1⁄3 of soybeans are currently grown on 

base acres for other crops and on non-base acres. 

In addition, payments under a revenue program would go to producers who, in 

response to the market, have decided to change their cropping patterns. Since 2002, 

for example, farmers in southern states have increased soybean plantings by 14.8 

percent, compared to a 1.6 percent increase nationwide. Coverage under a revenue 

program would reflect this trend, providing improved risk protection to producers 

in regions where soybean production has been increasing. 

Protecting the Current Crop Insurance Program 

As I mentioned earlier in my statement, crop insurance is the foundation of an 

effective risk management system for producers of soybeans and many other crops. 

Earlier this week we joined our colleagues from other major farm and commodity 

organizations in a letter to the Committee asking for your support in keeping crop 

insurance strong in the next farm bill. 

Crop insurance has become more expensive for both farmers and the government 

because premiums are based on market prices. Along with high prices comes greater 

financial risk for farmers. We have been willing to pay high premiums in recent 

years because the financial risk of a crop failure is greater than ever. Crop insurance allows us to borrow money and forward contract our crops. There have been 

no countercyclical payments or marketing loan gains paid to soybean farmers under 

the 2008 Farm Bill. Crop insurance has become the foundation of our safety net, 

and we urge the Committee not to make changes in or reduce funding for this program as part of the farm bill. 

Conclusion 

That concludes my statement, Mr. Chairman. I am happy to respond to any questions you or other Members of the Subcommittee may have.

The CHAIRMAN. Thank you, Mr. Wellman. 

Mr. Thompson for 5 minutes. 

STATEMENT OF JIM THOMPSON, CHAIRMAN, USA DRY PEA 

AND LENTIL COUNCIL, FARMINGTON, WA 

Mr. THOMPSON. Good morning, Mr. Chairman and Members of 

the Subcommittee. I am Jim Thompson. I got off my tractor yesterday to attend this important hearing and the tractor is still sitting 

by the way. We are still seeding in eastern Washington where I am 

2245

a fourth-generation small grains farmer growing pulse crops, 

wheat, and barley. I am also the current Chairman of the USA Dry 

Pea and Lentil Council. We are a unique organization that represents producers, processors, exporters, and warehousemen of 

peas, lentils, and chickpeas. 

Peas, lentils, and chickpeas are grown primarily in the northern 

tier States of Washington, Idaho, Montana, and North Dakota with 

some chickpea production in California and Arizona. However, 

acreage of pulse crops is expanding in the Great Plain States of 

South Dakota, Wyoming, Colorado, Nebraska, and Kansas. 

The membership of our organization is fully aware of the budget 

deficit facing this country. We ask Congress to reject efforts to disproportionately cut farm policy programming that is critical to 

maintaining a healthy agriculture sector. We ask the Committee to 

write a bill that does not exceed $23 billion in cuts and not more 

than $15 billion in commodity programs with no reduction in crop 

insurance funding. We support an increase in research funding in 

this bill because the development of new agriculture technology is 

essential to feeding the growing world population. 

Maintaining cost-effective crop insurance programs for pulse producers is a high priority for the USA Dry Pea and Lentil Council. 

Pulse producers view crop insurance as a necessary risk management tool with over 90 percent of the planted acres enrolled in the 

current crop insurance programs. The Council opposes major restructuring of the Federal Crop Insurance Program in the 2012 

Farm Bill. Producers should be encouraged to participate in crop 

insurance programs. The Council would oppose provisions like 

mean testing and conservation requirements that would limit participation in crop insurance. 

The commodity title must allow and encourage planting flexibility so producers will respond to market signals rather than government payments. Our industry has suffered through periods of 

low prices. When low prices return to agriculture, we do not want 

artificially set target prices that will inevitably distort planting decisions. If post-target prices are not in line with other program 

crops in rotation, we could see dramatic declines in acres. This 

would be devastating to our growing pulse processing and support 

industry that provides important jobs in rural areas. As a pulse 

farmer, I have lived through low prices and a banker telling me to 

raise wheat instead of lentils because wheat had a better safety 

net. 

We support the continuation of the Marketing Loan Program and 

would like to see loan rates rebalanced to reflect current market 

conditions. Pulse crops have never received a direct payment or a 

countercyclical payment. The current Counter-Cyclical Program set 

for pulse crops in 2008 has no relationship to historical or current 

market conditions. We support its elimination in favor of a marketbased revenue option. 

Our organization supports a revenue option similar to the Average Risk Coverage Program passed by the Senate Agriculture Committee. The established price for the revenue option should be 

based on current market conditions and calculated the same for 

every crop in the program. The revenue option price should have 

a cup and cap of no more than ten percent in any given year for 

2246

the life of the farm bill. The revenue option should put every program crop on equal footing based on formula that uses a 5 year 

rolling average of prices and yields. 

Our organization strongly supports a revenue option with a farmlevel trigger that is available on planted and prevented-planted 

acreage. We also support the Senate Agriculture Committee farm 

acreage cap to determine payments based on average of planted 

and prevented-planted acres from 2009 to 2012. This reflects that 

farmers are currently planting versus an outdated base-acre calculation. 

In conclusion, we would like to reiterate the importance of reauthorizing the farm bill prior to the September deadline. We ask the 

Committee to maintain a strong and unrestricted Federal Crop Insurance Program that will protect farmers from short-term revenue 

and yield volatility. Finally, we ask the Committee to support a rebalanced Market Loan Program and a revenue option based on current market conditions that will ensure continued planting flexibility and protection from a multi-year farm revenue collapse. 

Thank you for the opportunity to submit these comments on behalf of our organization and the dry pea and lentil, chickpea industry. 

[The prepared statement of Mr. Thompson follows:]

PREPARED STATEMENT OF JIM THOMPSON, CHAIRMAN, USA DRY PEA AND LENTIL

COUNCIL, FARMINGTON, WA 

Mr. Chairman and Members of the Subcommittee, I am Jim Thompson. I got off 

my tractor yesterday to attend this important hearing. We are still seeding in Eastern Washington where I am a third generation small grains farmer growing pulse 

crops, wheat and barley. I am also the current Chairman of the USA Dry Pea and 

Lentil Council. 

The USADPLC represents producers, processors, exporters, warehouseman of dry 

peas, lentils and chickpeas (pulse crops) grown in the United States. Our mission 

is to provide cost effective solutions to the health, food security, and agricultural sustainability problems of this great nation. Pulse crops are considered one 

of nature’s ‘‘super foods’’. They contain high levels of inexpensive vegetable protein, 

dietary fiber (excellent source), potassium (more than a banana), folate and other 

essential nutrients. In addition to their remarkable nutrient composition these legume plants do not require application of artificial fertilizers because they fix their 

own nitrogen from the atmosphere. 

Dry peas, lentils and chickpeas are grown primarily in the northern tier states 

of Washington, Idaho, Montana and North Dakota with some chickpea production 

in California and Arizona. However, acreage of pulse crops is expanding into the 

great plain states of South Dakota, Wyoming, Colorado, Nebraska and Kansas. 

Since the year 2000 acreage of pulse crops has nearly tripled to 1.5 million acres 

replacing summer fallow in mostly dryland crop rotations because of their efficient 

use of available moisture. The acreage expansion has been fueled by strong domestic 

and global demand for these healthy, cost effective foods. 

Budget Concerns—The membership of our organization is fully aware of the 

budget deficit facing this country. We applaud the bipartisan effort last fall between 

the Chairs of the House and Senate Agriculture Committees to reduce agriculture 

spending by $23 billion over the next 10 years. However, we are concerned that 

farm policy spending is being singled out for disproportionate cuts compared to 

other Federal programming. In the past 5 years (2007–2011) farm policy, including 

crop insurance averaged $12.9 billion per year. Spending on farm policy is less than 

1⁄4 of 1 percent of the Federal budget. Farm policy has been subject to three rounds 

of cuts in the past 6 years totaling roughly $15 billion in real savings. We ask Congress to reject efforts to disproportionately cut farm policy programming that is critical to maintaining a healthy agricultural sector. 

Reauthorization— The producers of pulse crops urge Congress to reauthorize 

the farm bill this year. Agriculture is a risky business that requires huge capital 

outlays each crop season. My bankers and the suppliers I deal with need to know 

2247

the outcome of this legislation as soon as possible. Our organization asks the Committee and Congress to pass bipartisan legislation prior to September 2012. 

USA Dry Pea, Lentil & Chickpea Harvested Acres 1998–2012

Risk Management 

Maintaining cost effective crop insurance programs for pulse producers is a high 

priority for the USA Dry Pea and Lentil Council. Pulse producers view crop insurance as a necessary risk management tool with over 90% of the planted acres enrolled in the current crop insurance programs. 

The Weather—In 2011 pulse producers across the northern tier faced unprecedented spring flooding and excessive moisture during the planting season. The crop 

insurance prevented planting provisions on many farms was the difference between 

surviving to plant another year and financial ruin. 

Pulse Revenue Pilot—The crop insurance program is the core risk management 

tool for all northern plains crops, including dry peas, lentils and chickpeas. On 

March 1, 2012, the Federal Crop Insurance Corporation (FCIC) board of directors 

approved a pilot revenue policy for pulse crops. Pulse producers have been working 

to obtain a revenue policy for over 13 years. The revenue policy will be offered in 

combination with the existing yield policy. Pulse producers consider the option to 

purchase yield or revenue coverage a critical risk management tool for their farming 

operations. 

508(h) Program—The pulse revenue pilot approved by the FCIC board was submitted under the 508(h) policy development process included in the last farm bill. 

The USADPLC strongly supports the 508(h) program that allows commodity groups 

like ours to bring forward new risk management ideas. Recently the USDA made 

a significant change to the reimbursement rate allowed 508(h) developers. This action could limit future submissions from small commodity groups with limited financial resources. We ask the Committee to review this issue during the farm bill debate to ensure the 508(h) programs remains strong and affordable. 

Oppose Restrictions—The USADPLC opposes major restructuring of the crop 

insurance program in the 2012 Farm Bill. Producers should be encouraged to participate in crop insurance programs. The USADPLC would oppose provisions like 

means testing and conservation requirements that would limit participation in crop 

insurance. 

Commodity Title 

Planting Flexibility—The commodity title must allow and encourage planting 

flexibility, so producers will respond to market signals rather than government payments. Our industry has suffered through periods of low prices. When low prices 

return to agriculture, we do not want artificially set target prices that will inevitably distort planting decisions. If pulse target prices are not in line with other proVerDate 0ct 09 2002 12:54 Dec 11, 2012 Jkt 041481 PO 00000 Frm 00659 Fmt 6601 Sfmt 6621 I:\DOCS\112-30\74372.TXT BRIAN

11230191.eps
2248

gram crops in the rotation, we could see dramatic declines in acreage. This would 

be devastating to our growing pulse processing and support industry that provides 

important jobs in rural areas. As a farmer I have lived through a banker telling 

me to raise wheat instead of lentils because wheat had a better safety net. 

Marketing Loan—We support the continuation of the marketing loan program 

and would like to see loan rates rebalanced to reflect current market conditions for 

the past 5 years. We believe a rebalanced marketing loan/LDP program to be simplest and most affective farm safety net for all program crops. We realize that this 

idea may fall outside the budget constraints facing the Committee. 

Countercyclical—Pulse crops have never received a direct payment or a counter 

cyclical payment. The current counter cyclical program set for pulse crops in 2008 

has no relationship to historical or current market conditions. We support its elimination in favor of a market based revenue option. 

Revenue Option—Our organization supports a revenue option similar to the Average Risk Coverage (ARC) program passed by the Senate Agriculture Committee. 

Crop insurance is a good risk management tool, if prices or yields decline sharply 

within the crop year of production. However, multi-year price and/or yield declines 

leave producers vulnerable. The USADPLC supports the establishment of a revenue 

option to cover shallow losses between crop insurance coverage and the risk of a 

multi-year farm revenue collapse. The established price for the revenue option 

should be based on current market conditions and calculated the same for every 

crop in the program. The revenue option price should have a cup and cap of no more 

than 10% in any given year for the life of the farm bill. The revenue option should 

put every program crop on equal footing based on recent pricing history. Our organization strongly supports a revenue option with a farm level trigger. 

In conclusion, we would like to reiterate the importance of reauthorizing the 

farm bill prior to the September deadline. We ask the Committee to maintain a 

strong and unrestricted crop insurance program that will protect farmers from short 

term revenue and yield volatility. Finally we ask the Committee to support a rebalanced marketing loan program and a revenue option based on current market conditions that will ensure continued planting flexibility and protection from a multi-year 

farm revenue collapse. 

Thank you for the opportunity to submit these comments on behalf of our organization and the Dry Pea, Lentil and Chickpea producers of the United States.

JIM THOMPSON, 

Chairman,

USA Dry Pea and Lentil Council. 

ATTACHMENT 1

Comparison of Individual Payments to County Payments

U.S. Crop Prices vs. 2008 Farm Bill 

2008 Farm Bill Crop Prices *

Direct

Payment Loan Rate CC Target Price 

5 yr Avg. 

2007–2011

2 yr. Avg. 

2010–2011

Wheat, All (bu) 0.52 2.94 4.17 6.24 6.50

Barley, All (bu) 0.24 1.95 2.63 4.67 4.63

Corn (bu) 0.28 1.95 2.63 4.68 5.69

Soybean (bu) 0.44 5.00 6.00 10.52 11.50

Cotton, all (lb) 0.0667 0.52 0.71 0.71 0.91

Rice All 2.35 6.50 10.50 14.12 13.45

Sorghum (bu) 0.35 1.95 2.63 7.66 9.93

Peanuts (ton) 36 355 495 460.33 505.00

Canola (cwt.) 0.8 10.09 12.68 19.09 21.30

Dry Peas (cwt) 5.40 8.32 12.01 12.24

Lentils (cwt) 11.28 12.81 28.61 28.55

Small Chickpeas (cwt) 7.43 10.36 22.41 21.45

Large Chickpeas (cwt) 11.28 12.81 32.56 36.00

* *Source—USDA/NASS Annual Crop Values. 

The CHAIRMAN. Thank you, Mr. Thompson. 

I remind Members that the chair will recognize Members in 

order of seniority, for the Members who were here when the hearVerDate 0ct 09 2002 12:54 Dec 11, 2012 Jkt 041481 PO 00000 Frm 00660 Fmt 6601 Sfmt 6601 I:\DOCS\112-30\74372.TXT BRIAN
2249

ing reconvened. After that, Members will be recognized in the order 

of the arrival. And I appreciate my colleagues’ understanding. 

And now, I will have my 5 minutes. 

Mr. Younggren, wheat’s baseline under the Senate farm bill took 

something in order of a 58 percent cut. On average over the last 

5 years wheat has planted something like 20 percent less than the 

base acres. I suspect I know the answer to this, but can you visit 

with me about how you feel how equitable that treatment is under 

the Senate’s version? 

Mr. YOUNGGREN. We do recognize that wheat does take a significant portion of cuts. A lot of that is due to the loss of our primary 

safety net tool, the direct payment. We realize that we are in a new 

program now that is going to protect—well, the ARC Program basically protects on a farmer’s revenue and we have different revenues 

than the other crops have. We feel that by moving that coverage 

level down to 65 percent or to 75 percent, that band, you will have 

more money coming into the wheat industry than the other crops. 

The CHAIRMAN. Thank you. 

Mr. Morris, you mentioned the University of Georgia study in 

your opening comments and you may have said this, but just for 

the record, would you reiterate that based on their analysis, will 

the Senate’s ARC Program work for peanut growers? And the second question would be, have you found any shallow loss revenue 

program that will work for peanut growers? 

Mr. MORRIS. Yes. The loss that we have had as far as shallow 

losses of peanuts has been very minimal in the past years because 

of the price and the situation. And of course we need the safety net 

we feel of the countercyclical payment, and realizing, too, that a 

long level is set low, that there wouldn’t be a cost to government. 

So we feel that the peanut program, as we have discussed, we do 

not have a Chicago Board of Trade for us to work off of in setting 

prices, so our losses would be very minimal so far as the loss is 

concerned, too. 

The CHAIRMAN. All right. Thank you, Mr. Morris. 

Mr. Stewart, the farm bill that was put together by the top four 

last fall, can you talk to us about how you feel that would impact 

planting decisions? Or would it influence planting decisions in your 

view? 

Mr. STEWART. Well, from what I know about the proposal last 

fall I really don’t think in my area it would have that much effect 

on planting decisions. And really throughout I was really pleased 

with that language and I firmly believe that it would have been a 

good program. And it would have sure saved a battle that we have 

in front of us now. 

The CHAIRMAN. All right. Thank you, Mr. Stewart. 

Mr. Wellman, we have about two against four, or two against 

three—I was coming to the other panels for the reference to the 

Senate’s ARC proposal, and they are asking for options other than 

ARC. What would be you and your organization’s position with respect to allowing other commodities an option other than ARC that 

might benefit their circumstances? 

Mr. WELLMAN. Well, last fall, the American Soybean Association 

and some other organizations wrote a letter to the House and the 

Senate Agriculture Committees during the process of developing 

2250

the farm bill at that point in time, and our position there was that 

we are open to other alternatives as long as it doesn’t distort planting and allows for planting flexibility. And our position is that target prices, if they would be decoupled from actual plantings, that 

may be an alternative that we would be open to be interested in. 

The CHAIRMAN. So what would you say to the folks in Texas who 

are more interested in price protection over multiple-year low 

prices than what the ARC position would do in setting up that 

choice? 

Mr. WELLMAN. Well, I am not sure—say that again, please. 

The CHAIRMAN. Well, in terms of other states, price protection 

against multi-year lower prices seems to be more important to 

them than the ARC Program. Do you take a position either way on 

that? 

Mr. WELLMAN. Well, I will say that the process that we have 

gone through to develop our position for the Soybean Association 

started over 2 years ago and with the Farm Bill Task Force covered 

many regions, all regions of the soybean production area and also 

two resolution sessions of our delegate body. And we have had 

input from across the soybean production area and the overwhelming majority has an interest in a revenue program, something that actually reflects what is being planted out in the current 

production areas and the crops that are being produced now. And 

to have an effective risk management program, it needs to have a 

tie to the crops that are actually being planted. 

The CHAIRMAN. All right. Thank you, Mr. Wellman. 

Mr. Boswell for 5 minutes. 

Mr. BOSWELL. The Ranking Member first if you want to. 

The CHAIRMAN. All right. He yields to Mr. Peterson for 5 minutes. 

Mr. PETERSON. I thank the gentleman. 

I guess following up on the Chairman’s questions, my concern is 

what is going to happen if we get into a low price situation for a 

number of years? And, given the extra subsidies that we put into 

crop insurance for enterprise units and the shift that has gone on—

I don’t know, it just seems like we are duplicating what we are already doing in the crop insurance system with this revenue. So, the 

first question is, are all you guys that are supporting this going to 

guarantee me that if we have $3 wheat for 5 years you are not 

going to be in here asking for help? I mean that is what I am concerned about. I mean the farm program should be about providing 

a safety net when things are a problem and it should not be about 

the government increasing your profit. We don’t get into a situation 

like that. So I don’t know if any of you want to respond to what 

I said but——

Mr. STEWART. Mr. Peterson, I would respond to that. You know, 

we are not looking for any kind of a guaranteed profit, and as you 

are well aware, crop insurance only gives us 1 year of——

Mr. PETERSON. Yes, and that is exactly my concern. 

Mr. STEWART. And I especially appreciated your comments yesterday when you used the term—you didn’t want us to be lining 

the halls up here in 2 or 3 years and that is why we are proposing 

some sort of a revenue policy. And I am not proposing it to be high 

enough to guarantee a profit, just to——

2251

Mr. PETERSON. Well, yes. 

Mr. STEWART.—stay in business. And I would just reiterate that 

I really appreciated your comments yesterday and I, too, don’t want 

to be up here lining the halls in 2 or 3 years. That is why I would 

ensure and encourage the Committee let us take care of business 

now and in 2 or 3 years I can be on my farm where I belong. 

Mr. PETERSON. Right. Well, the reality is you could come up here 

in 3 years and it won’t do you any good because there isn’t going 

to be any money. 

Mr. JOHNSON. If I could respond, thank you very much for the 

question. 

Farmers Union has long believed that the safety net ought to be 

constructed in such a fashion that it kicks in only when times are 

difficult. So there are really two kinds of really difficult times that 

we face in agriculture—you have disasters that strike. You kind of 

have crop insurance that is fundamentally designed to deal with 

that because they are annual kinds of things. Crop insurance 

works well in those circumstances. You have permanent disaster 

programs that were put in place in the last farm bill. Yes, they 

could be modified, lots of changes could be made there, but fundamentally, they need to be constructed in a way that they do not 

disincentivize the carrying of crop insurance. So that is one circumstance, when disaster strikes. 

The other circumstance which we face frequently and across the 

entire industry is in times of low prices. And I commend the Committee Members for their focus on this question because that is a 

very important question. If you look at the charts that we provided 

in our testimony, all of those big payments that were made back 

in the base period, they weren’t target price-based on even marketing loan-based; they were ad hoc disaster payments that were 

economic emergency disaster payments designed to cover price collapse situations. So we would absolutely concur with your focus on 

trying to do something that deals with long-term price collapse. 

That hits everybody across the board. 

Mr. MORRIS. Congressman, I would like to make a comment or 

two there on crop insurance and of course we appreciate the peanut 

farmers having crop insurance. But our crop insurance kind of follows the market. As our market goes down, our insurance goes 

down, so really in essence it doesn’t cover the cost of production. 

I think this year we had a little over $600 as far as insurance is 

concerned, we have had contracts from $500 to $700 on peanuts for 

this year. So the peanut farmer you can see that the $500 figure 

is not going to cover the cost of production for the farmer unless 

he makes a really high yield. So growing peanuts—and when you 

look at seed prices of $1.15, you look at fertilizer prices, you look 

at $200,000 tractors, $115,000–$20,000 peanut combines, the cost 

of equipment. So we need some stabilization there in our crop insurance. We are working on hopefully getting a new program for 

next year of a revenue type deal that will have a basis there for 

peanut farmers. But to answer that, we do need some help in that 

area to make it work. We appreciate the insurance program. We 

appreciate what is going on. We just need to try to make it to 

where it is a good, viable program for peanut farmers. 

Mr. WELLMAN. Do we have time for another response? 

2252

Mr. PETERSON. Absolutely. 

Mr. WELLMAN. Thank you, Mr. Chairman. 

Definitely we know the history of prices and they are cyclical and 

there always is a possibility of price declines. With the revenue 

program, that is one factor of determining the revenue. The other 

factor is yield. So depending upon the depth of the price decline, 

if yield makes up the difference, there would not be a loss underneath the revenue program so therefore would not be a payment 

made. We do need to consider what the price cyclical patterns 

might be, but we also have to keep in mind that that is only one 

factor in determining when payments are made. 

Second, I began farming in 1981 and I remember the days of 

planting crops that were tied to base acres and because of the target, because of the government program that was tied to the base 

acres. From 1995 on we have had the freedom to plant crops and 

respond to the marketplace. We need to avoid going back to the 

days of being tied or being incentivized to plant crops because of 

the government program and have the ability to plant to the marketplace. 

The CHAIRMAN. The gentleman’s time has expired. 

The Ranking Member is recognized for an additional 30 seconds. 

Mr. PETERSON. I mean if we are going to do a target price program, it is not going to be tied to base acres. It is going to be tied 

to planted acres. And I have yet to find a farmer in my district that 

says that people are going to change their planting because of the 

target price the way it was in the Super Committee bill. I have not 

found one. I bet I have talked to over 100 farmers. And what they 

tell me, it is the fifth or sixth thing they consider when they decide 

what crop to plant. You know, it is so far down the line that I don’t 

think it makes any difference. So we are not talking about going 

back to any base acres if we look at this kind of a situation. And, 

my time has expired but maybe somebody can ask this panel what 

they think about what the target prices would do to the marketplace. 

Thank you, Mr. Chairman. 

Mr. LUCAS. [presiding.] The gentleman’s time has expired. 

Mr. THOMPSON. Mr. Chairman, could I have an opportunity to 

address questions? 

Mr. LUCAS. Mr. Thompson, on these very important issues we 

will indulge you for 30 seconds, yes, sir. 

Mr. THOMPSON. Thank you, Mr. Chairman. 

I guess the one thing we were looking at with the revenue policy, 

we are trying to get an equal and equitable program here for all 

crops considered, and we aren’t against target price but if a target 

price is selected that it is equal across all the crops. However, if 

that is done, I am not sure that that would fall within the budget 

constraints that we are working under. That is our concern with 

that. Thank you. 

Mr. LUCAS. The gentleman’s time has expired. I now recognize 

myself for 5 minutes. 

Mr. Younggren, you note that farmers in the South—and I would 

add the Southwest—began planting wheat late August, September 

in my home area, any time after the 1st of September if there is 

enough moisture. Many of these same farmers have made it abunVerDate 0ct 09 2002 12:54 Dec 11, 2012 Jkt 041481 PO 00000 Frm 00664 Fmt 6601 Sfmt 6601 I:\DOCS\112-30\74372.TXT BRIAN
2253

dantly clear to me that the shallow loss program does not provide 

an adequate safety net for all of their crops. Do you support giving 

producers options instead of forcing all of them into a one-size-fitsall policy? 

Mr. YOUNGGREN. Yes, we recognize that different regions of the 

country have different needs and we support options for those 

farmers. 

Mr. LUCAS. Thank you very much. 

Mr. Morris, we have heard a few of the national commodity 

groups claim that protecting against multi-year price declines is 

just a rice and peanut issue. Now, you are a diversified producer, 

correct? Do you agree with that philosophy? 

Mr. MORRIS. Yes, I am a diversified producer, exactly. Peanuts, 

we don’t have any market that we can go back to other than Rotterdam markets. We are not on the Chicago Board of Trade so it 

is very hard for us to establish something that would be good for 

peanuts. 

Mr. LUCAS. And as a producer of more than just peanuts, it is 

an important issue for your other crops, too, correct? 

Mr. MORRIS. Yes, sir. 

Mr. LUCAS. Can you expand on why you believe providing producers with choices or an option among risk management tools is 

important to crafting that safety net? 

Mr. MORRIS. Yes, sir, it is very important that we have something that will help us and have a safety net that we can produce. 

Of course, irrigated ground in Georgia produces pretty good and we 

can make it but then we have probably 60 percent of the land in 

Georgia is dryland so we have to have something that is going to 

help those farmers to stay in business. So they need some type of 

coverage to help them. 

Mr. LUCAS. Absolutely. 

Mr. Stewart, in addition to sorghum, I know you plant wheat, so 

let us put on that wheat hat for just a moment. How do you view 

the shallow loss revenue program as the Senate Committee has 

adopted it? On your wheat acres I guess I should say is shallow 

loss something you are concerned about? 

Mr. STEWART. Well, we have run an analysis on my actual wheat 

farms——

Mr. LUCAS. Yes. 

Mr. STEWART.—to sorghum producers, ran an analysis on the 

ARC on my wheat and it is a lot like it is on sorghum. It is just 

too shallow. I think you will appreciate this, after last year a shallow loss would be a victory. I really more lean towards our SCOtype product that we are promoting, which is a shallow loss also 

but at least I like the idea with our budget constraints of being 

able to kind of pay our way. And it is up to the Committee to decide if they do this what subsidy level that premium might be, but 

I still like the idea of paying for my protection because we have to 

protect the budget of this country. 

Mr. LUCAS. In your statement you also discuss the importance of 

having a reference price and a plug yield built into any revenuebased program. Could you expand for a little bit on why that is important in your view based on the crops you grow? 

2254

Mr. STEWART. Yes, I can. The reason I promote a plug yield is 

that I have been pretty fortunate in my farming career I haven’t 

endured a long-term drought but I grew up in one. In the 1950s 

we had a 7 year drought and luckily my father with conservative 

living, 10¢ fuel, and $2 wheat we survived it. But with $4 fuel and 

$6 wheat, that is no longer practical. And I like the idea of the personal t-yield as a percentage of it as a plug yield because that way 

our plug yields are reflective of our actual farming practices on our 

farm. And I do support some sort of a revenue product simply because we don’t have any protection in crop insurance against a 

multi-year low price and we don’t have the option of planting other 

crops. You know, and where I live it is wheat and sorghum and we 

can’t lean back on corn or soybeans. If there is something in their 

program that makes it look more attractive, it won’t work for us 

anyway. 

Mr. LUCAS. Mr. Wellman, my soybean growers in Kay County, 

Oklahoma, in the northeast part of the 3rd Congressional District, 

which by the way is the largest soybean-producing county in Oklahoma, are planting soybeans on a wheat base, a trend you referenced in your statement. Those acres currently draw $16 per acre 

in direct payments. Under the Senate ARC proposal, the most ARC 

that would ever be paid no matter how far the market falls on soybeans in Kay County would be $18 an acre. That is $2 above what 

the direct payment would have been. 

But by contrast, looking at the numbers across the country, in 

your home county producers receive an $11 per acre direct payment 

on soybeans but the Senate ARC proposal could pay up to $38 an 

acre, a little bit of a difference there. Now, I understand why you 

like the ARC proposal, but tell me, how do I sell this to soybean 

producers in my part of the country? 

Mr. WELLMAN. Well, Mr. Chairman, as I just stated earlier, the 

proposal from the American Soybean Association does reflect input 

from our delegates from across a growing area. And definitely there 

are differences in regions; there are differences in locations. I am 

southeast Nebraska. Where I am at is a non-irrigated area. You 

know, maybe evidently my production capability is a little higher 

than those in your biggest district, but what we took into consideration is having payments made only when there is an actual loss 

on the farm and also with the current limitations on the available 

resources. 

Mr. LUCAS. But my question I guess is, how is the Senate version 

of the proposal as it stands now equitable and fair to all soybean 

producers? 

Mr. WELLMAN. Well, I am not going to sit here and say that it 

is necessarily but I think that same question could be asked for 

some of the other programs, too. When you start basing target 

prices based on cost of production, the cost of production varies 

throughout all the growing areas——

Mr. LUCAS. So looking at the numbers, if the Senate ARC proposal were to be the proposal, would you be in favor of giving the 

option so that soybean producers outside of your area who might 

have a potential to have a better shot at a safety net that they 

would be able to make that choice, or do you stand firm with the 

concept that one-size-fits-all, we are all going to be there together? 

2255

Mr. WELLMAN. We are open to the target price option as long as 

it is decoupled from current plantings. 

Mr. LUCAS. My time has expired. 

The chair now recognizes the gentleman from Iowa for 5 minutes, Mr. Boswell. 

Mr. BOSWELL. Thank you, Mr. Chairman. 

Mr. Peterson, I was following your dialogue there. Did you want 

to wrap it up? I would be glad to yield for a minute. In case you 

change your mind, let me know. 

Mr. Johnson, you point out a safety net must protect against 

long-term multi-year price collapse and so on. You may have covered that in different things you have said, but just to review, how 

should that be done? What sort of mechanisms should be in place 

in your opinion to ensure that farmers who need assistance will receive it? 

Mr. JOHNSON. Yes. So there are a couple of policy tools that can 

be used to provide long-term price protection. Obviously, the one 

that we have spent a lot of time and effort on, the Market-Driven 

Inventory System, is one of those options. We think it is the best 

option because it is the most affordable for the government and it 

maintains net farm income. The reason it is the most affordable is 

because the only cost the government really would incur would be 

in the event of storage payments. And it wouldn’t pay on every 

bushel because it wouldn’t have to because the effect of the policy 

would be to lift prices. 

It also enjoys total planting flexibility. We don’t care what anybody plants. It is indifferent. Let the market adjust as it wishes as 

to which crops producers want to plant. The only thing that is really important there is that you balance those loan rates just like you 

would need to balance target prices, which is sort of the second policy option tool that you have in providing some sort of long-term 

price protection. 

If you do target prices or marketing loan kinds of programs, they 

simply transfer payments from the government on the basis of 

every bushel produced, whereas what we are proposing you don’t 

pay on every bushel produced; you pay on maybe 20 percent of the 

bushels in order to get the price lift. So that is the fundamental 

difference you have. 

And we are supportive of both of them. Let me be very clear 

about that because having long-term price protection is enormously 

important in agriculture. The thing that you all are going to have 

to juggle is how much of the economy is going to project that the 

price is going to fall because the deeper that they project it falling, 

the higher the cost for doing a target price marketing loan kind of 

policy instrument it is going to be and that is the issue that you 

have in front of you. 

Mr. BOSWELL. Well, thank you. 

Any of the rest of the panel want to comment on what was just 

said? That means you all agree? Well, Mr. Johnson, you have quite 

a following. 

Mr. WELLMAN. Well, since he mentioned whether we agree or 

not, I think I should just not say—the important point is if you are 

trying to develop the program under the current fiscal conditions 

that we have in the United States, we definitely need to take into 

2256

consideration what the cost of the program is going to be. And from 

our standpoint, when we approach this, the revenue program, it 

was a program that would pay the producer when there is a loss 

and it would make efficient use of the taxpayer dollars. 

Mr. BOSWELL. I appreciate that. A lot of us on the Agriculture 

Committee have been through the school of hard knocks about how 

to deal with the capital cost of doing what we do. It takes a lot of 

capital to go to the field, whatever crop when you put all those 

things in there. And it has been kind of stressful to me when—you 

have heard it before—but when the media reports all the prices 

like it has been very good the last couple years, but they neglect, 

Mr. Chairman, to report the cost of input so you can see what is 

really going on out there. So therefore the inner city folks—and 

that is very important to us—don’t get a full appreciation of how 

we manage to have this very special thing, United States of America, and that is the available, safe, low-cost food. 

And so we have a big challenge here and we have been talking 

about how to economize and we all know we need to do it, but we 

have to protect agriculture. It has been creeping up there but it is 

finally up there with the category of energy or whatever else you 

want to refer to. And with the exploding population of this world, 

we are on the front burner and it is something we want to do right. 

So I appreciate your response and I am sure we are going to 

have further dialogue. Thank you very much. I yield back. 

Mr. LUCAS. The gentleman’s time has expired. 

The chair now turns to the gentlelady from Ohio for 5 minutes, 

Mrs. Schmidt. 

Mrs. SCHMIDT. Thank you, Mr. Chairman. 

I am going to start with Mr. Younggren. You say your highest 

priority is the portion of crop insurance premiums subsidized by 

the Federal Government. As you know, there have been many calls 

to either reduce the premium levels, or apply payment limits to 

crop insurance premiums. What impact would this have on your 

growers? 

Mr. YOUNGGREN. Right now, a lot of wheat growers are seeing—

in the Chairman’s district we have serious droughts—their coverage is going down and their premiums are staying the same or 

getting higher. Any payment limits that affected how growers purchased crop insurance we feel would jeopardize the program and 

some farmers would drop out of the program, make the program 

less reliable for those in the higher-risk areas, which is traditionally wheat country. 

Mrs. SCHMIDT. Thank you. 

Does anybody else want to add to that? Mr. Morris? 

Mr. MORRIS. I would like to respond. In Georgia, for instance, we 

have had 2 drought years, 2 of the worst probably in the history 

of the State of Georgia in our growing year. Last year, I had a 

dryland farm of peanuts that was assessed at 52 pounds per acre. 

Our state yield was 3,550 pounds per acre. So as you can see, insurance, it does down because of the production. So we have to 

take account of yield, whatever that might be, 1,700–1,800 pounds 

on the 65 percent level. So you can see that we do not have the 

coverage when I just expressed to you that it costs now for an acre 

of peanuts in my testimony. So you can see that we need some help 

2257

I suppose and protection against bad years such as the wheat farmers do or any other, wherever there might be droughts. Texas has 

experienced some exceedingly bad drought periods in peanut production areas and cotton. So——

Mrs. SCHMIDT. Thank you. 

Mr. MORRIS.—it needs some help. Thank you. 

Mrs. SCHMIDT. Okay. Mr. Johnson, I am going to ask you, we 

hear often how lenders now require crop insurance coverage in 

order to make operating loans. And I hear that in my own district. 

How important is crop insurance to securing financing for the year? 

Mr. JOHNSON. Crop insurance is very important and if I think 

that there is anything all of us up here and probably everyone on 

the panel yesterday agrees on and most folks, probably every one 

of you as Members of the Committee agree on as it is important 

to have a strong crop insurance program. We may differ in how you 

construct it. For example, on the question of payment limitations, 

our members at our recent convention voted to support payment 

limitations on crop insurance because there is a concern that, especially in these high price years, the level of protection on the crop 

insurance is very, very strong and that they believe that it is used 

as an advantage by the larger farmers to squeeze out a lot of beginning farmers from entering the business. 

Now, the question is how would you construct such limits? I 

mean you wouldn’t simply cut them off. All you would do is have 

a limit as to the amount of the Federal Government subsidy and 

what that limit should be. And once a producer of a certain size 

reached that limit, then they would still buy crop insurance; they 

would just make the choice on full cost versus the subsidized cost. 

Mrs. SCHMIDT. Thank you. 

Mr. Thompson, I appreciate your comments on the importance of 

crop insurance. I think everyone here would agree. How do you 

think we can best improve crop insurance of the pulse crop producers? 

Mr. THOMPSON. Thank you for the question. Actually, I was back 

here March 1 of this year and the FCIC Board of Directors approved a pilot revenue program for our crop, which we have been 

working on for about 13 years to obtain. And it is important to us. 

And getting back to when you asked about the bankers, and in our 

area we have pulses and wheat production in our area, and when 

you can get 85 percent protection on your wheat and basically just 

have the multi-peril, which is good but it is not revenue. It doesn’t 

protect against price fluctuations during the year. 

So anyway, we were happy to get this pilot program and it would 

be just like with the wheat and whatever else, the CRC, we are 

asking to help in that area of subsidy in that area. Thank you. 

Mrs. SCHMIDT. Thank you very much. 

Mr. LUCAS. The gentlelady’s time has expired. 

The chair now turns to the gentleman from Minnesota, Mr. Walz, 

for 5 minutes. 

Mr. WALZ. Thank you, Mr. Chairman. 

And first of all, I wanted to thank all of you and your membership for doing very important service to this country, feeding us, 

clothing us, and fueling us. As we look back I am very proud of the 

work we did on the 2008 Farm Bill collectively together. When you 

2258

look out in farm country right now, things are going pretty well. 

But I appreciate all of you saying that is for now and we need to 

prepare for the future. We need to get this right. And I am confident we can. 

I want to hit on just something, again, narrowly focused. Mr. 

Wellman mentioned and several others have that I think we are 

trying to get our mind wrapped around. And in the 2008 Farm Bill 

we did a pilot program on farm flex, allowed for flexibility on planting acres. And it was geared mainly in the area—we have a lot of 

those acres in Minnesota—where we have a large canning industry 

in terms of especially Del Monte and Green Giant and those areas. 

But what it was also aimed at was giving some of that flexibility 

some of you talked about here while still providing the safety net 

underneath. It was one way to manage stewardship of the land if 

that was the cast on crop rotations, but it also allowed for the flexibility the market was demanding more canned goods there, and 

some of the things that come from some of our other industries but 

it allowed folks to move from those commodity crops. 

And I know this is something that scared people. It was scary to 

get it in on the pilot program to move some of these crops to allow 

people to do that. I wish some of you could comment a little bit. 

Was that farm flex piece of legislation the way to go? Is that the 

way to strike the balance between planting flexibility and still 

keeping some control over this? Whoever wants to pick that one up. 

Mr. JOHNSON. Nobody is jumping at it, Congressman. You know, 

and probably the reason for that is particularly folks that represent 

individual commodities, it is less of an issue. 

Mr. WALZ. Yes. 

Mr. JOHNSON. It is an issue for folks who want to do different 

things. You know, and the fruit and vegetable industry has historically been very skeptical of allowing the planting of their crops on 

base acres or whatever you want to call them, commodity acres——

Mr. WALZ. Right. 

Mr. JOHNSON.—and so I mean my sense is that that was a good 

way of trying to—we are all talking about planting flexibility and 

letting folks do what the market is asking for, and particularly 

with canned goods where you have a very defined market that is 

surrounding them. Principally, those producers are going to be 

working on a direct contract with a cannery. It seems to me like 

it makes a whole lot of sense to allow for that sort of flexibility. 

Mr. WALZ. Well, the reason I say it, it seems very popular 

amongst those folks. I understand like you are right and the fruits 

and vegetables folks, the fresh fruits and vegetable folks, we get 

very provincial and I don’t blame you. I mean that is where we are 

at. What the Chairman is trying to do and what we have always 

tried to do is strike that proper balance amongst all of us. We are 

all in this together and this one appeals to that sense of give us 

back some control of where we go. We are not going to assume all 

the risk, nor should they, because it is food for everyone, but allow 

us a little bit of that flexibility. 

Mr. Johnson, I am going to come right back to you on this. This 

kind of segues right into that. This idea of whole farm revenue insurance where we have this and in different parts of the country, 

and I am very appreciative of this, if it is drought in Georgia, you 

2259

don’t have the opportunity to move to a different crop. Those areas 

of the country where you do, we have very diversified operations. 

And you represent a diversified commodity group here. Could you 

talk a little bit about how does that play into this? Again, moving 

away from the one-size-fits-all, how do we get that whole farm revenue? 

Mr. JOHNSON. Whole farm crop insurance programs are underappreciated in agriculture and maybe that is because we tend to 

sort of think crop by crop or commodity by commodity. But in a lot 

of areas of the country—yours would be one of these—where you 

have a lot of different crops that are planted, you want to provide 

an environment in which farmers are allowed to plant what they 

think makes the most sense but yet have the same kind of risk 

management tools that cover all of them available for them. The 

big challenge that folks that have multiple crops in a rotation face 

is they can’t get a decent APH because if you are not planting this 

crop this year, you don’t get a yield this year. And so it may take 

10 years to get 2 years worth of yield in it. And so the whole farm 

programs are designed to try and address that. They also should 

be lower premium as a result because the risk is lower when you 

plant a variety of different crops. 

Mr. WALZ. I don’t want to single any of you out. I know this is 

very difficult. Is there room in a farm bill for this type of ability 

where we are going to have to find some compromise? I am going 

to tell you this approach especially—and I know it is geographically 

and it is my area and a few others or whatever—but it is very appealing to people, especially very appealing to producers and young 

farmers who feel like they are more in control where they are not 

being told by the government which direction to go in. They get to 

make those choices. And if they choose to do down the program 

crop road, we should be there helping and doing what is necessary 

there. Do you think there is room in this in a farm bill for this type 

of thing for the farm flex from the whole farm insurance? 

Mr. STEWART. Well, I will respond briefly to that, and even 

though it certainly doesn’t apply to me because where I am located 

I am so limited——

Mr. WALZ. Yes. 

Mr. STEWART.—but it would be a great program. I think anything we can do to enhance food production in this country definitely needs to be looked at. 

Mr. WALZ. I appreciate that. 

Mr. LUCAS. The chair yields the gentleman from Minnesota an 

additional minute. Would the gentleman from Minnesota yield to 

the chair for the purpose of a question? 

Mr. WALZ. Absolutely. 

The CHAIRMAN. I thank the gentleman. 

Mr. Johnson mentions support for payment limits on crop insurance. Could we go down the panel starting with Mr. Younggren 

what you or your organization’s opinion is or position on payment 

limits on crop insurance? Just work our way across, please. 

Mr. YOUNGGREN. We would oppose payment limits on crop insurance. 

Mr. LUCAS. Mr. Morris? 

2260

Mr. MORRIS. Yes, sir, we would have to oppose payment limitation because of the different size farming operations and it would 

be very hard and it just wouldn’t work really for us. And not only 

that, because of the diversity between crops also. 

Mr. LUCAS. Mr. Stewart? 

Mr. STEWART. Well, please excuse me here, Mr. Chairman, but 

not no, but hell no. 

Mr. LUCAS. Delivered in a very Panhandle Oklahoma sort of way. 

Mr. Wellman? 

Mr. WELLMAN. We would oppose payment limits on crop insurance. 

Mr. LUCAS. Mr. Thompson? 

Mr. LUCAS. As well we would oppose payment limitations. 

Mr. LUCAS. The gentleman from Minnesota’s time has expired. 

The chair now recognizes the gentleman from Ohio, Mr. Gibbs, 

for 5 minutes. 

Mr. GIBBS. Thank you, Mr. Chairman. 

Just a couple comments. Would everybody agree that the crop insurance revenue program would maybe be the best vehicle to provide a safety net versus like ad hoc disaster payments? Would we 

like to move that way? I think, Mr. Wellman, that is what I get 

from the Soybean Association as long as it has flexibility. And obviously the last question if we don’t cap crop insurance payments 

then is that the vehicle we should really be using to provide a safety net? 

Mr. WELLMAN. Let me make sure I understand the question. The 

vehicle we should be using is crop insurance? 

Mr. GIBBS. Yes. 

Mr. WELLMAN. Yes, we would agree with that as opposed to ad 

hoc disaster? 

Mr. GIBBS. Yes. 

Mr. WELLMAN. Yes, we support the use of the Federal Crop Insurance Program. We think it is well accepted by the producers, 

the farmers. We pay a percentage of the premiums, a percentage 

of the cost of that program——

Mr. GIBBS. Yes. 

Mr. WELLMAN.—and it works very well for the majority of the 

commodities. 

Mr. GIBBS. What is the participation rate between your members 

you think in the Federal Crop Insurance Program? 

Mr. WELLMAN. I might have to get back to you on that exact 

number if you would like to have that. I can’t tell you offhand. I 

don’t want to guess at it. 

Mr. GIBBS. That might be nice to know. 

Mr. WELLMAN. And the percentage of our membership or percentage of soybean acres——

Mr. GIBBS. Let us go just soybean acres. Do you have a ballpark 

idea or not? 

Mr. WELLMAN. I don’t think we have that right now. 

Mr. GIBBS. Okay. 

Mr. WELLMAN. Excuse me, 83 percent of the acres are covered by 

crop insurance. 

Mr. GIBBS. What do you suppose it was 10 years ago? 

Mr. WELLMAN. Less than that. 

2261

Mr. GIBBS. That was my assumption, too. 

Mr. WELLMAN. Yes. 

Mr. GIBBS. So——

Mr. WELLMAN. And there obviously were less soybean acres back 

then also. 

Mr. GIBBS. That is true, too. 

Mr. WELLMAN. Yes, so there has been not only an increase in the 

soybean acres but an increase in participation of soybean farmers 

in the Federal Crop Insurance Program. 

Mr. GIBBS. How about on the wheat side? Where is our wheat 

person? 

Mr. YOUNGGREN. Yes, I agree. We have seen drastic improvements in crop insurance. From personal experience going through 

the 1990s and the early 2000s, my county was the poster child for 

disaster payments and we were the ad hoc disaster people always 

out here that Congressman Peterson is referring to. 

Mr. GIBBS. Yes. 

Mr. YOUNGGREN. So with that in mind, we pushed for the SURE 

Program in 2008 as kind of a permanent disaster legislation. We 

would still like to see a program such as that. 

Mr. GIBBS. I just going back to Mr. Wellman, in your testimony 

you talk about the need, flexibility and all that. The whole farm 

coverage, can you kind of expand to me how that interacts, the coverage for your members’ participation and how that is working? 

And what does the level need to be for taxpayer subsidy to make 

this thing work, the crop insurance side? Do you understand what 

I am getting at? 

Mr. WELLMAN. Well, specifically to whole farm crop insurance? 

Mr. GIBBS. Yes, whole farm, yes. 

Mr. WELLMAN. I don’t know that I have that answer either. I 

don’t know. I don’t know what the whole farm policies and participation is from just particular soybean acres. On our farm we use 

the enterprise units, but I think that we are in the minority until 

just recently we have had a reduction in the cost of the premiums 

for the enterprise units. It has made it more attractive to producers 

to be involved and to not cover individual farms with crop insurance and move towards the enterprise units. A lot will depend on 

how the program is structured, the cost of the premiums to the producers, and the potential payouts of the indemnity and the risk factors that are involved. 

Mr. GIBBS. Does anybody do any calculation? I think it was you, 

Mr. Wellman, that talked about the 65 percent maximum pay or, 

concern about our budget, the taxpayer, we started to say on our 

budget framework. Can you expand a little bit on there if there are 

any calculations to see if we have nearly 100 percent participation 

of what the percent subsidy would have to be you think? 

Mr. WELLMAN. Well, in my testimony when I mentioned 65 percent, that was on a revenue program that is not part of the crop 

insurance program. It would be tied to the farm level production 

and comparing the current year production to the Olympic average——

Mr. GIBBS. Okay. 

Mr. WELLMAN.—of the previous 5 years of the revenue. And that 

is part of the ARC Program that came out of the Senate AgriVerDate 0ct 09 2002 12:54 Dec 11, 2012 Jkt 041481 PO 00000 Frm 00673 Fmt 6601 Sfmt 6601 I:\DOCS\112-30\74372.TXT BRIAN
2262

culture Committee. The 65 percent number was a percentage of 

coverage of payment acres. And on a county level they would pay 

out on 80——

Mr. GIBBS. Eighty-five——

Mr. WELLMAN.—percent of those. And the reason that has 

dropped to 65 at the farm level is because it would be more costly. 

So that has been compensated for. 

Mr. GIBBS. All right, thank you. 

I yield back my time. 

The CHAIRMAN [presiding.] I thank the gentleman. 

The gentleman from Georgia, David Scott, for 5 minutes. 

Mr. DAVID SCOTT of Georgia. Thank you, Mr. Chairman. 

Mr. Morris, I have a couple of questions for you. I know you may 

have mentioned it in your testimony but let me ask you, can you 

please reiterate for the Committee what peanut producers see as—

I am over here, Mr. Morris. My cousin is over there, Mr. Scott. We 

are both from Georgia. Could you please reiterate for the Committee what peanut producers see as most important in crafting an 

effective safety net? 

Mr. MORRIS. Well, I feel just as I stated in my statement there 

that the $534 target price and then of course having some countercyclical price because of the way the market works on peanuts and 

us not having any marketing system that we really can base prices 

off of. And of course we are working on insurance policy that hopefully is going to come into effect next year that would give better 

coverage for peanut farmers. And our commodity is a perishable 

commodity. Those peanuts have to be shelled out within less than 

12 months. We have to monitor our warehouses for insect damage 

and we have to provide a safe food to the consumer. So it is very 

important for peanuts. 

Mr. DAVID SCOTT of Georgia. And I certainly agree with you. The 

peanut industry is very, very, very important. And again I want to 

make this perfectly clear. In your opinion and in the opinion of 

other peanut growers, does the Senate Agriculture Committeepassed bill provide an adequate safety net for peanut producers? 

Mr. MORRIS. No, sir, it does not. And I would like to reiterate 

there a little bit, too, Donald Chase, which is on our board, he is 

a good corn producers, produces 200 bushel of corn per acre and 

the county yield in his county is 70 bushels per acre. So he would 

get no help from the farm bill that the Senate just passed. 

Mr. DAVID SCOTT of Georgia. All right. Thank you, Mr. Morris, 

for that. 

Mr. Chairman, I think that this underscores the need to produce 

a commodities title in this farm bill that works for all commodities 

in all regions of the country and I hope that we are able to do that 

as we move forward in the coming weeks. 

And I yield back the balance of my time. 

The CHAIRMAN. I thank the gentleman. I appreciate those comments and concur with those. I now turn to your cousin, Austin 

Scott, also from Georgia. 

Mr. AUSTIN SCOTT OF GEORGIA. Thank you, Mr. Chairman. 

Mr. Morris, I would like to continue down that same train of 

thought. Would you speak about the machinery costs and those 

2263

costs related with regard to the production of peanuts versus other 

crops? 

Mr. MORRIS. Yes, sir. In Georgia, well, particularly on my farm, 

I am a medium-size operator. We farm around 2,500 acres of crops, 

row crops, and of course that is wheat, peanuts, cotton, corn. And 

a lot of our farming operations in my size or larger they have three 

sets of equipment. You have a peanut set of equipment, you have 

cotton equipment, and you have corn equipment or small grain and 

corn. And of course we grow small grains and corn. And in our 

case, peanut equipment we range 900 to 1,000 acres of peanuts a 

year and we can wind up with between half and a million dollars 

worth of peanut equipment. For instance, a new John Deere cotton 

picker is somewhere in the range of $650,000. And then of course 

you have to have some other equipment for each of those. But then 

on corn, for instance, you have a grain combine and you can have 

two heads. We custom cut our small grains, our soybean, our corn 

with one piece of equipment. 

So if you are in other sections of the country where you can have 

either cotton equipment or just grain equipment, it makes a lot of 

difference. You have to have a lot less tractors. On my farming operation I have about ten tractors so when we go to gathering peanuts and cotton, it takes an extensive amount of tractors and 

horsepower to do the job. 

Mr. AUSTIN SCOTT OF GEORGIA. Would you speak to distinguishing between irrigated and non-irrigated land with regard to 

growing peanuts and whether or not you believe there should be 

a differential in premium with regard to insurance? 

Mr. MORRIS. Yes. Insurance it is very good. It helps to cover the 

losses I reckon you would say. But on irrigated land, you have a 

substantial amount more cost per acre. And on irrigated you can 

be looking at over $600 per acre and on dryland then you are looking at $500+ on it, but the difference being in the irrigation and 

irrigation cost. 

And for instance, last year, our irrigated land produced over the 

state yield what the state yield was. And as I stated in my statement or after answering some questions we had peanuts that we 

didn’t even harvest that had assessed at 52 pounds. And then we 

had several other fields that was 1,500–1,800 pounds. So you have 

basically not the same cost but pretty close to it and so there is 

a lot of difference. And with irrigated crops you have to protect 

against any insurance or any cost to the government or to the ag 

program. It is very important that we take and assess both dryland 

and irrigated. 

And, for instance, I had some insurance this past year that I had 

50 percent irrigated and 50 percent dryland on some crops and I 

was not notified up front that I was going to be put under one unit 

system. So we irrigated this crop at extensive cost per acre and 

then the dryland and the irrigated were lumped together. The insurance company lumped them together and so I had no claim but 

we had well over $100,000 worth of claim on that dryland. So we 

have to be careful as to how we administer the programs and how 

they can fit into agriculture and we keep good sustainable agriculture and produce the fiber and food that we need for this country. 

2264

Mr. AUSTIN SCOTT OF GEORGIA. Thank you, Mr. Morris. I want 

to ask one quick question if I can with regard to corn because I 

know you said that you grow corn. And the National Corn Growers 

seem to advocate for the Senate proposal, yet from what I am hearing from southeastern producers, the Senate proposal didn’t do any 

good for us. Can you——

Mr. MORRIS. For us in Georgia it would be no cost to the program at all. It would not give any safety net so far as corn farmers 

are concerned because of the fact that the county yields are way 

too low. We cannot afford to grow dryland corn in Georgia, no way, 

because the cost is too great and your fixed cost is going to be $500 

an acre to grow corn or a little over according to the price of fertilizer and some of the input cost. But for instance, seed is right 

at $100 an acre just for the seed cost and our fertilizer is $250, 

$300. So no, sir, it would not work for us. 

Mr. AUSTIN SCOTT OF GEORGIA. Thank you, Mr. Chairman. My 

time has expired. 

The CHAIRMAN. I thank the gentleman. 

We now go to Mr. Huelskamp, from Kansas, for 5 minutes. 

Mr. HUELSKAMP. Thank you, Mr. Chairman. I appreciate the opportunity to ask a few questions. 

I thought I might start with Mr. Younggren, with a pretty broad 

question. Do you believe the provisions of the Senate Agriculture 

Committee product is equitable for your wheat growers? 

Mr. YOUNGGREN. It is no secret that wheat loses a lot in the 

baseline. Again, what we are looking at is how it affects the individual farmer, and there are some improvements that we would 

like to make to try and draw some more money back into wheat. 

Mr. HUELSKAMP. Okay. A follow-up question, then, the same 

question for Mr. Stewart. And actually kind of a similar crop in 

terms of some of the options that are particularly limited in my 

area to these two crops, so Mr. Stewart, your thoughts? 

Mr. STEWART. Yes, and I will have to tell the Committee that actually I can stand on one of my farms and throw a rock into Mr. 

Huelskamp’s district, so I feel——

Mr. HUELSKAMP. Pretty good affinity to him. 

Mr. STEWART. But yes, in my instance of wheat and grain sorghum, the Senate bill is just not a good fit. We just definitely need 

choices. 

Mr. HUELSKAMP. Okay. And then, Mr. Stewart, a follow-up on 

another issue and I appreciate those responses. You make some 

reference in your testimony to biofuels particularly in Kansas, the 

fuel of choice for ethanol plants is grain sorghum. Can you explain 

a little further for the rest of the Committee the issue of drought 

tolerance and use of your crop versus the other options and what 

that means for our water tables——

Mr. STEWART. Sure. 

Mr. HUELSKAMP.—in your area of the Great Plains. 

Mr. STEWART. Yes, yes. Sorghum is coined as the water sipping 

crop of the Midwest and it is a very water efficient crop and very 

nutrient efficient. Forty-two percent of our crop this year, I believe, 

is used in biofuels. That is our grain crop. We see a great potential 

for sweet sorghum and biomass sorghum also in the future. We 

have ethanol plants in Mr. Huelskamp’s district that are pretty 

2265

much devoted to sorghum and has really helped our sorghum price. 

But yes, sorghum will be a crop of the future as our water laws 

and our water tables continue to drop. It just makes sense. And 

there has been some talk in some conservation language that might 

help encourage some planting of sorghum to take care of some of 

these water deficiencies. I know in your district you have some 

pretty stringent state laws dealing with water use we need to be 

aware of. 

Mr. HUELSKAMP. Yes, and I appreciate that. Certainly, those 

comments are recognizing if we can encourage some folks to use a 

crop that is less water-intensive, 10 years from now we will have 

some water left for long-term use. 

So I yield back the balance of my time, Mr. Chairman. 

The CHAIRMAN. I thank the gentleman. 

The gentleman from Arkansas, Mr. Crawford, for 5 minutes. 

Mr. CRAWFORD. Thank you, Mr. Chairman. I appreciate your indulgence. As I mentioned to you earlier, we actually suffered a loss 

in the ag community last week that I think is noteworthy and actually prepared comments to deliver on the Floor. But, under the circumstances, I think this individual would appreciate those comments being delivered here because in fact he has probably spent 

as much time in this Committee room as many of us on this Committee. 

So with that, Mr. Chairman, today we honor the memory of 

Stewart Doan. Stewart was a familiar face on Capitol Hill and a 

respected agriculture journalist around the country. With his unexpected passing last week, Stewart leaves a legacy of responsible reporting and genuine friendship. He loved covering farm policy and 

it showed in his excellent broadcasts and articles. For more than 

30 years, Stewart covered agricultural news for a variety of media 

beginning with radio. He was considered the premier cotton and 

rice journalist in the nation but expanded his horizons to master 

the difficult policy questions that USDA and Congress grapple with 

daily. He was in Washington regularly to interview policymakers 

and develop his wide range of contacts. 

Stewart was President of the National Association of Farm 

Broadcasting in 1998 and continued his involvement by serving on 

committees and as a stringer for the NAFB News Service. NAFB 

named him as 2006 National Farm Broadcaster of the Year. He has 

been recognized by the National Cotton Council, the USA Rice Federation, and the Arkansas Farm Bureau for his reporting on a wide 

range of agricultural policies. 

My prayers go out to Stewart’s wife Leslie and his daughters 

Lauren and Sarah. God bless them and God bless the well lived life 

of Stewart Doan. I am proud to have called him a friend and colleague. 

With that I have a quick question for Mr. Wellman. How well do 

you think the ARC Program would work for irrigated southern production as compared to that Midwestern model? 

Mr. WELLMAN. I would think it would be comparable if you are 

basing it on the revenue from the last 5 years, and if there is a 

loss in the current year, then there is a payment depending upon 

your range of loss. According to ARC, at least an 11 percent loss 

2266

there would be partial payments on the next ten percent. So I believe it would be comparable between those two regions. 

Mr. CRAWFORD. Okay. You said planting flexibility is the highest 

priority for American Soybean Association reforming Title I programs. You then go on to explain why you think paying a shallow 

loss revenue program on planted acres would not influence plantings. Based on the testimony we heard yesterday, it seems as 

though many would disagree with you. Your thoughts on that? 

Mr. WELLMAN. Well, yes, there is disagreement. There is disagreement on how much a fixed price program would distort and 

change plantings, and evidently, there is disagreement on how 

much the revenue program would. If you have a program that is 

based on actual revenue and only pays when there is a loss, there 

is really no influence to plant more of a crop that you are losing 

money in. So you would have the ability to switch to another crop 

that looks more attractive from the marketplace. And if you have 

a fixed price, just because the price drops down and you go to your 

bank and the banker knows you are going to be guaranteed a certain payment because of a government program, that may influence your decision on what you are going to plant. And with revenue program you wouldn’t have that type of input. You are going 

to look for options that do generate more revenue. 

Mr. CRAWFORD. Okay, thank you. 

Mr. Stewart, real quick, with regard to the current Counter-Cyclical and Marketing Loan Program, you commented that target 

prices and loan rates are set too low in relation to current prices 

to provide adequate protection. Where are target prices and loan 

rates in relation to where your costs of production are today? 

Mr. STEWART. Well, our estimated cost of production on sorghum 

now is right around $420 per bushel. Is that what you are looking 

for? 

Mr. CRAWFORD. Sure. 

Mr. STEWART. I think that would provide an adequate basis. And 

of course that is always a moving thing and we can’t ever nail it 

each year exactly where it needs to be, but that would be a good 

place to start. 

Mr. CRAWFORD. All right. I yield back. 

The CHAIRMAN. I thank the gentleman. 

The gentleman from Iowa for 5 minutes, Mr. King. 

Mr. KING. Thank you, Mr. Chairman, and I thank the witnesses. 

I appreciate the input here and I would start with Mr. Wellman 

and follow up a little bit on what I heard from Chairman Lucas on 

that discussion with regard to if the ARC Program isn’t adequate 

for some of these producers, and the question of whether you would 

be open to the discussion of allowing an option for them, target 

prices, for example. And Mr. Wellman, would you have some recommendations to this Committee on where those resources might 

come from if we needed to provide more resources to take care of 

those concerns that were voiced by the Chairman? 

Mr. WELLMAN. Let me first say that the American Soybean Association, we all want a farm program that works for agriculture. I 

mean agriculture as a whole is very important. Obviously, I am 

here representing the American Soybean Association and soybean 

growers, but all of us need a farm bill and we need it done when 

2267

this bill expires. So we understand the challenge that is at hand 

here for all of us in this room. And fiscally, where the funds are 

going to come from I don’t have recommendations right now. There 

have been cuts from the Direct Payment Program, the current 

Counter-Cyclical Program, the funds from ACRE Program, and if 

we look at the conservation title, the American Soybean Association supports a reduction in the cap of the CRP, which would create some cost savings there. A consolidation of conservation programs and a focus on conservation for working lands——

Mr. KING. That sounds like the Senate bill, Mr. Wellman. 

Mr. WELLMAN. That does sound like the Senate bill, yes, sir, but 

those are proposals that were also developed by the growers and 

the delegates of the American Soybean Association. 

Mr. KING. And we are not in disagreement I point out. I am just 

curious if there is a recommendation on how we might go about 

finding these resources. 

But first, I would like to turn to Mr. Johnson and ask if you have 

an opinion on whether there should be a conservation compliance 

in a House farm bill. 

Mr. JOHNSON. Yes, we do have policy on this. It was, as you 

might imagine, not unanimously supported in our organization, but 

at the end of the day, our delegates do support conservation compliance tied to crop insurance. The rationale is principally that crop 

insurance is becoming a larger and larger part of the safety net. 

There is a larger and larger taxpayer contribution to crop insurance as the years go on. I mean it is no secret. You go back 10 

years, of course, not many people were carrying crop insurance; we 

didn’t spent as much money on it either as taxpayers. We spend 

a lot more now. And there is a feeling among our membership that 

there is a quid pro quo that is owed back to the taxpaying public. 

We receive these subsidies, we are grateful for them, we carry crop 

insurance; we also have a very strong conservation ethic. 

Mr. KING. I think that we would agree that if the Federal Government is going to put guaranteed resources in place, there is 

going to be an ask on the other side of that. But in the dialogue 

among your organization was there discussion about tying that to 

the ARC Program as I am going to guess maybe Mr. Wellman and 

I may agree on that but would your organization? 

Mr. JOHNSON. Tying conservation compliance to the ARC Program? 

Mr. KING. Yes. 

Mr. JOHNSON. Yes, of course we would support that. 

Mr. KING. Would that be preferable to crop insurance? 

Mr. JOHNSON. Would it be preferable? We would support them 

both. 

Mr. KING. Either one? I would just like to go down the panel and 

ask the panel left to right starting with Mr. Younggren as our clock 

starts to wind down here. If you had to choose, if compliance with 

conservation were a principle that we were holding together in this 

House—I don’t want to exactly presume that will be the case; I expect it will be—would you prefer it be part of crop insurance or an 

ARC Program? 

Mr. YOUNGGREN. The Title I program. 

Mr. KING. And Mr. Morris? 

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Mr. MORRIS. Yes, we would support that, but on the other hand, 

we have been having in Georgia—comply a lot with conservation in 

our farming programs already, so yes, sir. 

Mr. KING. And you are suggesting with that, then, that perhaps 

we don’t need to tie it, that there is a good enough soil stewardship 

tradition, that it might not be necessary? 

Mr. MORRIS. I wouldn’t think so. 

Mr. KING. And I will go to Mr. Stewart. 

Mr. STEWART. Yes, thank you. You know, I am a fourth-generation farmer. I have a 7 year old grandson. I am going to be in conservation. I don’t have to be paid to and I don’t have to be forced 

to. This is something that is already in Title I and in our FSA programs. I see no need of taking it into crop insurance. I just really 

don’t. 

Mr. KING. And just allow the time to finish with Mr. Wellman 

and Mr. Thompson quickly, please, as our time has run out. 

Mr. WELLMAN. Sure. We support compliance tied to Title I programs. We have a 98 percent rate now of complying to conservation 

programs that are tied to Title I and we believe that will continue 

in the future. 

Mr. KING. Thank you. 

Mr. Thompson? 

Mr. THOMPSON. Yes, we would support it in compliance with 

Title I. I would have the question of oversight, how are we going 

to get that accomplished and the funding to do that? 

Mr. KING. Thank you very much, I appreciate it. 

Mr. Chairman, I yield back. 

The CHAIRMAN. All right. I am sorry, Randy Hultgren for 5 minutes. 

Mr. HULTGREN. I don’t think I have any questions for this panel. 

I will wait for the next one. Thank you. 

The CHAIRMAN. All right, the gentleman yields. 

Mrs. Roby for 5 minutes. 

Mrs. ROBY. Thank you very much. And I am happy to report as 

I have looked over all my questions throughout this hearing, most 

of them have been answered. And I know we have spent so much 

time talking specifics of crop insurance so I just want to touch on 

a few extra things. 

And Mr. Morris, I will start with you and if anybody else on the 

panel wants to jump in. But there is accepted practices in farming 

like bushwhacking with cotton that is used to save the crop, but 

under the crop insurance programs, these actions result in some 

cases in nullifying the contract. So how can we make changes to 

the programs to allow for some of these practices? Yes, sir, Mr. 

Morris, or I mean anybody can jump in but if you want to start——

Mr. MORRIS. Well, as I think you are probably aware of that peanuts have a new program that hopefully will be implemented in 

2013 as far as crop insurance is concerned to maybe provide a safety net for the peanut farmers. So we are hoping that that will help. 

And then there needs to be some vehicle that the price of peanuts 

does not fall, the contract prices such as they have been in the 

past. There needs to be a level of safety that would make the farmer hold or at least he would recover his cost of production for the 

2269

year. So there are some ways and things that we need to do to help 

to improve insurance for the peanut farmer. 

Mrs. ROBY. Well, you mentioned earlier that you are a diversified 

farm. Do you grow cotton as well? 

Mr. MORRIS. That is correct. That is correct. 

Mrs. ROBY. And so how do you feel about these practices that 

could nullify your insurance program if you are trying to save your 

crop? 

Mr. MORRIS. Well, for instance, cotton this year we have the revenue coverage at 95¢ but cotton yesterday closed at 74¢. So if the 

price selection is next year lower or were to go down, it could get 

below the cost of production. We realize that we need to set a level 

that would guarantee cost of production in the same way with peanuts. But we feel that you all are going to help us as commodities 

to establish a program that will work as far as peanut producers, 

cotton farmers, or corn, whatever the case might be. And I appreciate your effort so far as looking into this. 

Mrs. ROBY. Well, and certainly that is the challenge before us. 

And as the Chairman mentioned, this one-size-fits-all approach is 

clearly not necessarily a good thing. We have to look at how this 

affects different regions of the country and certainly different commodities as well. 

This is for anybody who wants to jump in, but final planting date 

for various row crops should be—all of these thoughts come from 

my farmers back in Alabama but they can be applied throughout 

the country—the final planting dates for various row crops should 

be extended. The current dates do not reflect the technological advances in some crops in their ability to perform well when planted 

later than current final planting dates. Should the planting dates 

be extended for some row crops? 

Mr. MORRIS. I would like to make a comment on that. We went 

and asked RMA to help us with the crop planting dates because of 

the recommendations from extension. And they helped us with 

those recommendations by 5 days so we very much appreciate that. 

One of the problems that I have, for instance, we double crop 

wheat and cotton and cotton, if we have a prior crop of wheat 

there, then they lower our coverage on our cotton per acre. It is 

kind of forced a lot of the wheat farms in Georgia not turning their 

wheat acreage in from the standpoint—or either have wheat insurance because it is going to lower their insurance rates on cotton 

then. There are some things that could be addressed in different 

situations such as that. But in the peanut sector we did get some 

changes made and we very much appreciated that. 

Mrs. ROBY. Anybody else want to add? Mr. Stewart? 

Mr. STEWART. Well, in the sorghum industry this is an issue that 

we have dealt with at numerous times and numerous occasions 

with RMA because we do have a lot of planting date issues on sorghum and even on sunflowers. And they have been somewhat cooperative. We have gotten some counties in Oklahoma now that are 

recognized as double-crop counties and then we are getting some 

earlier planting date data due to cold tolerance. We feel like we can 

help Oklahoma’s sorghum crop with earlier planting dates and we 

are giving that information to RMA. 

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And another thing, RMA—I mentioned the sunflowers—sunflowers are uninsurable in my county basically because the ending 

plant date is June 15. If we plant them June 15, we end up spraying multiple times for insects. And really the top time to plant sunflowers in my area is July 10 to the 15. 

Mrs. ROBY. My time has expired. Thank you all very much and 

I have other questions that I will submit for the record. 

The CHAIRMAN. The gentleman recognizes the Chairman of the 

full Committee. 

Mr. LUCAS. Thank you, Mr. Chairman. Just an observation to my 

colleagues, when we talk about tying conservation compliance to 

crop insurance, remember that crop insurance is a product farmers 

and ranchers are paying for. So you are going to ask them to pay 

for the product with all of these extra requirements tied to it. 

Second point worth noting, what is the one comment we get in 

our town meetings wherever we do them across this great country? 

Farmers and ranchers are very sensitive about the regulations, the 

rules, the requirements, the things that we place upon them. So we 

need to be very thoughtful when we consider incorporating more 

government oversight into their process as they try to produce the 

food and fiber. Just a thought. 

Thank you, Mr. Chairman. I yield back. 

The CHAIRMAN. I thank the gentleman. 

I want to thank the panel. They did a terrific job this morning, 

very succinct on your opening statements. Certainly, I want to recognize that for the record. Thank you very much. 

While we transition to the second panel, I would ask unanimous 

consent to include in the record of today a joint statement from 

Congressman Joe Pitts, Pennsylvania; and Congressman Danny 

Davis of Illinois, in the record of today’s hearings. 

[The information referred to is located on p. 2306.] 

The CHAIRMAN. I would like to welcome our fourth panel of witnesses while folks are kind of transitioning around. We have Ms. 

Ruth Gerdes who is President of The Auburn Agency Crop Insurance, Inc., Auburn, Nebraska, on behalf of the Crop Insurance Professionals Association. We have Mr. Brian M. McSherry, President, 

McSherry Agency, Inc., Flanagan, Illinois, on behalf of the Independent Insurance Agents and Brokers of America. And Mr. Tim 

Weber, President, Crop Insurance Division, Great American Insurance Company, Cincinnati, Ohio, on behalf of all approved insurance providers. 

All right, with that, Ms. Gerdes, your opening statement for 5 

minutes. 

STATEMENT OF RUTH GERDES, PRESIDENT, THE AUBURN 

AGENCY CROP INSURANCE, INC.; CHAIR, REGULATORY

AFFAIRS COMMITTEE, CROP INSURANCE PROFESSIONALS 

ASSOCIATION, AUBURN, NE 

Ms. GERDES. Mr. Chairman, Ranking Member Boswell, Members 

of the Committee, thank you for inviting me to testify today. My 

name is Ruth Gerdes and I am a crop insurance agent from Auburn, Nebraska. I am here testifying on behalf of the Crop Insurance Professionals Association. CIPA is an agent organization with 

members from all over the U.S. 

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My husband Myron and I farm. I became a crop insurance agent 

because in 1983 and 1984 we had back-to-back massive droughts 

on our farm. Guess what? We had the wrong crop insurance policy. 

I was at home with newborn twins, and as a result of the droughts, 

I needed to find a job to help pay the bills so we could keep our 

family farm. I became an agent to help pay the bills but I also 

vowed that what happened on our farm would never happen to us 

again, nor would it happen to my farmers and neighbors. I firmly 

believe that that is the attitude which has built Federal crop insurance into what it is today, the single policy that nearly every farmer, every farm group, and every lawmaker involved in farm policy 

says is now the cornerstone of U.S. farm policy. It must not be cut 

or harmed in this farm bill. 

It was not always this way. From 1938 to 1980, crop insurance 

barely limped along serviced and sold by government employees. It 

was its own disaster. In 1980, Congress did something that would 

change crop insurance for the better. It turned crop insurance over 

to the private sector to companies and agents to sell and service 

the policy and help shoulder some of the risk. In 1994, Congress 

improved crop insurance by, among other things, recognizing a 

farmer’s own production history or what we call APH today. 

Nineteen-ninety-six marked the year that revolutionized crop insurance as we know it. Rick Gibson and Art Barnaby from Kansas 

State University teamed up in developing the very first revenue 

products. Last, in 2000, a bill was passed which accelerated crop 

insurance to its current success. 

Today, crop insurance stands as a model farm policy. It is WTOcompliant. Crop insurance allows the farmer to buy the policy most 

relevant to their operation. It requires farmers to pay substantial 

premiums for the coverage they buy. Through agents and companies, crop insurance provides timely relief. Producers are paid an 

indemnity within a few weeks rather than 2 or 3 years later like 

ad hoc disaster or permanent government programs do. 

Crop insurance is unencumbered with arbitrary rules that have 

not and should not have anything to do with crop insurance, rules 

such as payment limitations, AGI limits, or compliance with conservation. Crop insurance is about farmers and farmers who may 

have lost everything in a flood just as happened in 2011 to many, 

many of my producers. Crop insurance is not about social engineering in Washington. Crop insurance is cost-effective and efficient. 

Last year alone, we insured $114 billion in liability. We have paid 

nearly $11 billion in indemnity in 2011 and a taxpayer cost of 

$6.62 billion without one call for ad hoc disaster. 

I think it is important to remember why we have crop insurance. 

We have crop insurance because without it, farm families who borrow money each year to produce a crop would have to do so without 

multi-peril crop insurance. Without crop insurance, many producers could not get credit, especially small and beginning farmers. 

And without credit, producers cannot farm. 

There are critics of crop insurance that will tell you take it away 

from the private sector and turn it all over to the government, in 

other words, repeat history and the mistake of the 42 year government-run program. These are the same people who would like to 

tie payment limits, AGI tests, and conservation to crop insurance. 

2272

They want a government-run program in order to first control it, 

then limit its usefulness, and then finally to kill it after its value 

has been so diminished that nobody cares. 

There are many hired-gun academics who actually argue that 

farmers are not getting a dollar-for-dollar return on taxpayer investment in crop insurance so it must not be efficient. But who on 

earth expects, who on earth wants a dollar-for-dollar return on 

their insurance investment? I buy my home, auto, and certainly my 

life insurance hoping never to collect but only to protect. 

So what can you do to preserve, protect, and improve crop insurance? To start, I applaud the House and Senate Agriculture Committee’s agreement last fall that there should be no cuts to crop insurance. I encourage this Committee to help ensure that crop insurance provides good coverage for all producers of all crops in all 

regions. 

Finally, I want to briefly touch on two other issues. First, I hope 

the Committee will expand your important work in the area of regulatory reform to crop insurance in a few ways. Requiring FSA to 

share information with agents and companies that helps us ensure 

that a farmer’s policy is accurate, by allowing producers to correct 

unintentional errors, and by requiring the Risk Management Agency to involve its eyes and ears on the ground, their agents. 

Second, and importantly, there are some aspects of the Standard 

Reinsurance Agreements signed in 2010 that are especially inequitable to crop insurance agents. Frankly, what was done in the SRA 

was illegal and a bureaucratic overreach of major proportions. I 

urge the Committee to address the compensation issue for agents. 

Each of us are reminded at points in our life that we don’t know 

what we have until we have lost it. Farmers can’t afford to lose 

crop insurance and neither can the U.S. economy. After more than 

$12 billion in cuts made to crop insurance over the past 4 years, 

that is enough. We need to stop and start rebuilding and moving 

forward on the success that crop insurance has given us. 

Thank you. 

[The prepared statement of Ms. Gerdes follows:]

PREPARED STATEMENT OF RUTH GERDES, PRESIDENT, THE AUBURN AGENCY CROP

INSURANCE, INC.; CHAIR, REGULATORY AFFAIRS COMMITTEE, CROP INSURANCE

PROFESSIONALS ASSOCIATION, AUBURN, NE 

Introduction 

Chairman Conaway, Ranking Member Boswell, and Members of the Committee, 

thank you for holding this hearing concerning risk management and commodities 

in the 2012 Farm Bill. I am humbled, and grateful for the opportunity to present 

this testimony as a crop insurance agent—one of the 16,799 crop insurance agents 

who serviced a policy in 2011—and on behalf of the farmers we serve. 

I am Ruth Gerdes. And while I have been fortunate to gain the fancy title of 

President of The Auburn Agency Crop Insurance, Inc., I am really just a farm and 

ranch girl from Nebraska who loves to take care of business. Some 28 years ago, 

after nearly losing the land my husband and I were farming, I decided I wanted 

to help other farmers avoid the situation we had found ourselves in after a string 

of bad weather along with tough markets. I got into crop insurance, believing it 

could be a powerful tool for farmers. It is still that same belief and passion that 

drives me to work each day, and I am proud to say it remains challenging and fulfilling work as the risks farmers face, and that we as agents are charged to help 

them with, are only growing and becoming more complex. 

In addition to working for my farmer clients, I have served on a number of industry task forces and working groups through the years, both with grower associations 

like the National Corn Growers Association and in the crop insurance industry. In 

2273

the late 1990’s, I was fortunate to serve on what were two seminal committees: (1) 

a USDA Risk Management Agency (RMA) Task Force on Actual Production History 

(APH); and (2) an Advisory Committee for Senator Bob Kerrey that was instrumental in the development of the Agricultural Risk Protection Act of 2000 (ARPA). 

I currently serve as Chair of the Regulatory Affairs Committee of the Crop Insurance Professionals Association (CIPA), a band of excellent and long-serving agents 

from across the nation founded by two gentlemen—Mr. Bill Hanson of Manhattan, 

Kansas and, a constituent of Chairman Lucas’s, Mr. Max Claybaker of Blackwell, 

Oklahoma—for the purpose of strengthening Federal Crop Insurance to better serve 

the needs of U.S. producers. 

I volunteer and serve in these capacities because I care about the farmers I serve, 

and believe in the product I sell. From just a handful of farmer clients in 1984, Auburn Agency has grown to serve more than 1800 farmers in eight states, with an 

average buy-up coverage level exceeding 80% (I am told this is one of the highest 

levels of average buy-up in the nation). I strongly believe the role farmers play in 

our society is a noble one. I understand that Federal Crop Insurance is about the 

farmer first, and I am honored to have been able to play a role in helping farmers 

learn how to use it to its maximum value. I hope my testimony today will provide 

some useful insight to guide as the Committee embarks upon its own noble task of 

directing our nation’s farm policy for the future. 

Crop Insurance Enjoys Great Support for a Reason 

In one sense, I have an easy job today as, based on the statements I have read 

anyway, Federal Crop Insurance enjoys very strong support in this room. Most producer groups have said that preserving crop insurance is their first priority, as have 

several Members of this Committee. I want to say thank you for this leadership and 

support. It is gratifying, but it is also consistent with what I hear from my farmers. 

Crop insurance has become that powerful tool that I thought it could be when I entered the business, and that Congress wanted it to be when you set it on a new 

path in the early 1980’s. There is still much more that can be done, but its fundamental popularity arises from the following facts:

1. It is real and bankable protection that is tailored by the farmer with 

their agent to the specific needs of the producer’s operation. No other farm program is like this.

2. It is well managed—producers sign a business contract, and when disaster 

strikes an adjuster will be present and claims are paid timely. The competitive aspect of delivery ensures excellence.

3. It is defendable in that farmers pay significant premiums—have skin 

in the game—for this coverage.

4. As a voluntary business decision, crop insurance comes unencumbered 

with regulatory dictates.

But even though Crop Insurance enjoys this great popularity and is in fact working as planned and actually under budget right now, we realize this Committee is 

charged with some difficult issues in crafting the next farm bill, and therefore want 

to confront these issues with our key principles and values in the pages that follow. 

Reflections on Growth of Crop Insurance Industry 

The growth of Federal Crop Insurance is an outstanding success story. From the 

time the modern public-private partnership was forged in 1980, the program has 

grown from an insignificant nuisance among farm programs covering less than 12% 

of the nation’s cropland and generally attracting not the best of farmers; to a robust 

program covering 83% of all cropland acres and providing bankable protection to 

America’s best, most dynamic and most productive farm families. 

In 2011, companies and agents sold policies costing a record $4.5 billion in producer paid premium on 265.4 million acres covering a record $114 billion in production. This is especially astounding when you consider that just 10 years ago in 2001 

(the first year of ARPA), producers spent just $1.2 billion on premium on 211.3 million acres covering just $37 billion in production. 

We should not just gloss over this growth or these statistics as if it was just happenstance, or being in the right place at the right time. The fact is it has been the 

product of very substantial and very deliberative work by many—you and your predecessors around this dais, and many CEO’s and staff and adjuster and agents and 

farm leaders in the field—and so I think it’s worth taking some time to think about 

what has truly been the force behind this growth. We would list four key factors:

1. Good lawmaking—I want to pay homage to this Committee and those lawmakers who came before you who crafted: the 1980 Federal Crop Insurance Act, 

2274

which began the movement of the delivery of Crop Insurance to the private sector; the 1994 Act which cast the vision that Federal Crop Insurance might one 

day eliminate the need for costly ad hoc disaster programs; and especially the 

2000 ARPA which set the course and trajectory for what Federal Crop Insurance has become today.

As Members of this Committee, I would hope you look at Federal Crop Insurance with a great deal of pride in ownership. You have created a program to 

address a very real need—farmers as a fundamental element of society do indeed face greater risks (contending with weather and markets risks beyond 

their control) than any other business, and need access to affordable risk management tools. And, you established a successful public-private partnership that 

has uniquely met that need in a reliable and comprehensive and defendable 

way.

2. Motivated participants—The private sector leaders who jumped into this 

program from the beginning believed in the need first, but saw sufficient potential reward to risk their capital to make it work. Still today, the 15 companies 

(AIP’s) that remain are dynamic and competitive, and therefore constantly 

searching for ways to bring better value to the farmer customers as they compete for more business and greater market share.

The value of this framework may be hard to quantify exactly, but we can see 

from the numbers that crop insurance began a very different path in terms of 

both the quality and quantity of coverage beginning in the early 1980’s. We also 

see evidence of this in innovation. Crop Revenue Coverage or CRC was created 

in the late 1990’s and absolutely revolutionized risk management for producers 

of most major commodity crops by providing risk protect against both yield 

losses and price losses within the growing season.

3. Quality products at affordable prices—Good insurance policies that provide relevant protection tailored to the producer’s needs and history at a reasonable value are key. As yields and prices for commodities have climbed, the business of farming has not gotten easier so much as it has become higher stakes. 

For this reason, the premium assistance provided to the farmer is absolutely 

critical. Even the conservative American Enterprise Institute (AEI) has published papers stating the crop insurance simply would not be viable without 

Federal backing and cost-share. Any efforts to reduce premium assistance 

should be rejected outright.

The Actual Production History (APH) system for determining a farmer’s insurable yield, based on the producer’s real history, is also key. The APH rewards 

good behavior, and discourages bad behavior, and thus pushes the farmers to 

be the best they can be.

4. Dedicated agent force—While I might like to think my Agency is unique, 

the reality is that we are pretty typical. We all strive to provide a quality service. We all work to know the products and markets and are willing to be called 

upon at all hours when disaster strikes. Why is this? Well the first and most 

obvious answer is, we do it because we take pride in our work and want our 

customers to be happy with our products and our service. And, yes, a part of 

that is because we want the producer’s business again the next year.

In the past, the best agents could not only win business, but they could be rewarded for exceptional work by the Companies with compensation. This competitive business model is good for the farmer and good for the system, but it 

has been dramatically undermined by the recent Standard Reinsurance Agreement (SRA) which, in addition to capping A&O reimbursements to companies, 

took the unprecedented and noxious step of capping and standardizing agent 

commissions from the companies. I should note here that this egregious overreach by the RMA was done administratively, with no clear legal authority or 

direction from Congress.

While one might add to this list of reasons for the success of crop insurance, the 

result is the same: crop insurance is undeniably a growing and positive force in the 

agricultural economy. I noted earlier the fact that acres insured, value insured and 

the amount farmers are investing in crop insurance continues to grow and set new 

records. For a state like Nebraska, that has big implications for the economy. 

Stories Behind the Numbers 

At the end of this testimony, I have attached a simple fact sheet for my state Nebraska. These are available for many more farm states at www.cipatoday.com. What 

I want to point out in these is that there are faces, jobs, economic activity and stories behind each of the numbers. In Nebraska in 2011:

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—2,275 is the number of licensed agents—small business owners like me providing farmers guidance and advice. Each agent is supported by company underwriters, adjusters, claims staff and computer programmers, and most employ 

office support staff. Collectively, these jobs, which are all supported by A&O and 

AIP resources, represent a significant number of good jobs in rural communities 

mine.

—15.587 million acres of crop and pasture covered represents the livelihood of 

thousands of farm families in my state.

—$8.631 billion in liability covered represents expected income for these farm 

families should weather and markets cooperate. Covering this risk through 

Crop Insurance allows farmers to use their capital elsewhere—better machinery; better seed; technology; irrigation; conservation practices; etc. The economic 

impact of offsetting this amount of risk in this way is tremendous.

—$309 million in premiums is what farmers were willing to pay for this cov- erage in 2011 (roughly $20/acre). While this is a lot, it has also helped a lot 

of farmers and their wives sleep better at night and make more productive uses 

of their days.

—$254 million in claims paid to date represents assistance directed to those 

with covered losses—these are farm incomes saved, catastrophes avoided, and 

localized farm economies kept afloat. 

Business Perspective vs. D.C. Perspective and the problem of CBO 

While in business growth is a good thing, in D.C. it is not all positive. It often 

invites unfair scrutiny. In fact, spending on agricultural policies including Crop Insurance is way down. In the most recent 5 years, average funding for U.S. farm policy, including crop insurance, was $12.9 billion per year, which is 28% less than the 

previous 5 year average of $17.9 billion and 31% less than the average of $18.8 billion that incurred in the preceding 5 years. 

But opponents of agriculture have never let facts stand in their way. With higher 

commodity prices boosting the baseline for Crop Insurance, they have set their 

sights upon this vital risk management tool, never mind the fact that crop insurance 

was cut by more than $6.4 billion in the 2008 Farm Bill, and by another at least 

$8 billion administratively in the 2010 SRA. 

Perhaps what is most disheartening from this standpoint is the fact that the Congressional Budget Office seems to persistently overestimate the cost of crop insurance to the taxpayers, putting a bull’s eye on our back. The following table compares 

the CBO estimates for crop year expenditures (for 2006, from the August 2006 baseline, etc.) to the actual crop year spending that is tallied after all is settled (the 

March baseline of the following year).

Year 2006 2007 2008 2009 2010 2011

CBO estimate $3.864 $4.670 $7.746 $7.496 $7.784 $9.213

CBO actual $3.291 $4.374 $4.146 $6.767 $4.547 $6.620

% difference ¥14.8% ¥6.34% ¥46.5% ¥9.73% ¥41.5% ¥28.15%

The point of this is simply to show that CBO (like its sister agency, OMB) does 

the Federal Crop Insurance system no favors. Right now, as of the March baseline, 

they are showing budget authority for the 2012 crop year at $9.465 billion and average spending over the next 10 years at another $9B per year (a total of $90 billion). 

But if past is prologue, the actual spending will be lower, and could be much lower. 

Why is this? Using 2011 as an example, even though companies have paid out more than $10.75 billion in claims (a record), the program is still at a loss ratio (indemnities/total premium) below 1.0 and therefore an underwriting gain will be 

made, thus lowering the cost from the $9.213 billion estimate. Beyond this year, no 

one really knows, but CBO assumes high prices are here to stay. In reality, if prices 

were retreat again, what is currently a $90 billion baseline could easily shrink by 

$20 to $30 billion in a wink. 

To conclude this section, let me just state that from my perspective, and I think 

the perspective of all of rural America, growth in the Federal Crop Insurance program is in fact a good thing. It was always the hope of your predecessors to establish a system that would be so comprehensive and robust in its coverage that it 

would eliminate the need for ad hoc disaster assistance. Well considering that we 

just came off a year in 2011 that contained the worst heat and drought in the history of the Southwest United States, and epic flooding along the fertile plains of the 

Missouri River, and not a single call was heard for additional disaster assistance, 

I would say this Committee has achieved a grand success in Crop Insurance. 

2276

Reflections on Value of Crop Insurance to the Producers it Serves 

While we have covered at length the value of crop insurance generally, I have not 

touched on its most important quality from my perspective, and that is what it does 

for the individual farmers who use it well. 

I am fortunate to be from an area with really incredible generational farmers who 

love the land and care for it well and raise crops with amazing consistency and productivity. From this perspective, I can attest to the fact that the value of crop insurance is far more than what they receive in indemnities over time. Many of my farmers have never made a claim on crop insurance, and hope they never will. And, yet, 

they assign it an indispensable value, particularly in the revenue products. Why is 

this? 

First, Crop Insurance has become a powerful tool for farmers in marketing 

their crops and managing input costs. I have farmers who price their corn and 

beans 2 and 3 years in advance, knowing they will have crop insurance to back 

them up. This allows farmers to lock in prices on their commodity when they are 

best rather than when they have to. It also allows them to purchase inputs ahead 

if prices are attractive. Together, when used well, the Crop Insurance products, 

while having a significant cost up-front, can really improve the bottom line of farmers even when they don’t have a loss. 

Also, by taking certain risks off the table, farmers are able to focus their capital 

on other needs. Many of my farmers will tell you that the bank-ability of crop insurance has allowed them to purchase better equipment, like center pivot irrigation or 

a bigger planter or better combine. These investments also increase efficiency and 

hedge risks for the farm operation. So the value of crop insurance is magnified as 

it allows the farmer to focus resources on other needs. 

Finally, although I do live in a very good farming area, that does not mean we 

are immune to disaster. And this leads me to the best thing about crop insurance—

it is there when you need it. Perhaps the best, most recent example of this, for my 

agency, came last year in the wake of the Missouri River floods. The story of one 

of my farmer clients was told on The Hand That Feeds U.S. (HTFUS). See:

http://www.thehandthatfeedsus.org/farmerslprofile-Under-water-but-not-out-ofbusiness.cfm. Mike Woltemath from Hamburg, Iowa lost more than 80% of his farm 

ground last year to flooding, partly in a successful effort to save the Town of Hamburg. As the picture below indicates, there was absolutely nothing that could be 

done to hold back the waters.

A generation ago, this would have been an economic hit that would have destroyed farms families, or taken a lifetime to recover from. Thankfully, Mike was 

well insured, and has since been able to put his farm back into shape such that he 

is ready to plant again this year. His words for the HTFUS article are relevant to 

this hearing:

‘‘Crop insurance needs to be protected. It provides us with a very good backstop, 

and if you take that away you leave an already high-risk industry with no protection, making it almost impossible to withstand this kind of catastrophic 

event. . . . It’s not unheard of to have $700 invested in 1 acre out here, much 

of which is borrowed from banks that would not likely approve the loan without 

the protection of crop insurance. No one realizes how much we invest in order 

to produce the food and fuel that we do. But when you don’t have anything to 

sell, you can’t invest, and when you can’t invest, you can’t produce—it’s a downward spiral.’’


11230192.eps
2277

Mike was not alone. In fact there were many just like him. Walking though this 

type of disaster with farmers is difficult and even emotional. Without Crop Insurance, this would be an entire year’s income lost on top of the loss of very costly assets. This is why we have crop insurance, and why it is so important that crop insurance remains a business proposition, unencumbered with arbitrary rules and 

regulations that are part of so many farm bill policies, so that it can provide just 

this type life and business-saving assistance exactly when it is needed. 

To conclude, the true value of Crop Insurance has to be measured taking into account all of these factors together. Some ivory tower economists like to propound 

the view that the only true measure of insurance is what it pays back in relation 

to what the purchaser has paid in. No one in the real world views insurance that 

way. As agents, having walked the fields and sat at the kitchen table with the producers who are taking these huge risks, we know better. 

Key Issues in the Farm Bill 

Clearly, crop insurance has tremendous value both from a broad economic perspective and to the farmer. This is, no doubt, why it enjoys such broad support from 

producer organizations and Congress alike. But even with this support, the future 

of the industry seems more uncertain than ever. 

It has been a difficult couple of years for crop insurance with respect to government affairs, with stinging cuts made to both companies and agents in the 2010 

SRA. Based on the Administration’s recent FY 2013 budget blueprint, apparently 

OMB believes even more should be cut. Thankfully, those around this table have 

answered with a firm, no. But, another big issue for crop insurance, at least from 

my vantage point, lies in your hands, and has everything to do with the 2012 Farm 

Bill—how it is structured, and how it will interact with crop insurance. 

There is an irony that virtually all the farm groups indicate that crop insurance 

being their top priority, but in many cases they are also advocating new farm bill 

policies that they believe can ‘‘supplement’’ or ‘‘compliment’’ crop insurance, but in 

most cases will mainly duplicate, compete with, or otherwise tarnish the reputation 

of that top priority, Crop Insurance. 

Imitation is the highest form of flattery so, in one sense, we might be gratified 

that farm bill policy discussions are now using the language of revenue protection 

or risk management. But, I would urge caution not to create a weak duplicate that 

might undermine the real deal. 

Rather than creating a less-tailored version of crop insurance with the hope it will 

succeed like crop insurance, we believe Congress should look for things that crop 

insurance does not do well, and fill those gaps. There are a couple of examples relevant to your work here that I would reflect upon:

—Deductible-level losses are, in fact, a legitimate problem for producers given 

the high stakes in agriculture today. But we do think care must be taken in 

how much revenue farm policy should guarantee. We believe this problem can 

best be addressed through crop insurance, where farmers have skin in the 

game. As agents, we are excited about three possibilities within crop insurance 

that are being put forward, and would urge the Committee to give these careful 

consideration.

1. Trend Adjusted Yields. For 2012 (the current sales season), RMA approved 

a trend adjustment for corn and soybeans in certain states, with plans to expand to cotton, rice, wheat and sorghum in 2013. Having been in one of the 

areas, and run thousands of quotes using the Trend Adjustment, I can say 

with confidence that in the counties where it truly reflects the technology advances, it is a powerful tool for the producer to cover more of their expected 

production. However, there is a problem in that it does not work well in all 

counties. CIPA has long advocated applying a national trend to T-yields 

which would give a more consistent and reliable benefit. CIPA has also advocated for T-yield plugs or other means of holding up APHs in multi-year loss 

scenarios. The bottom line is that where the APH is made more truly reflective of what the farmer truly expects to produce, this goes a long way toward 

addressing the problems that are associated with the problem of high 

deductibles.

2. Personal T-Yields (PTY). What has been implemented as a pilot in North 

Dakota for the last few years seems ready for prime time. By allowing producers to set their own T based on their own experience, you further 

incentivize good record keeping and the best possible use of the crop insurance products. The PTY would streamline and improve the plug-yield system 

referenced above, and make the APH more truly reflective of what the farmer 

expects to produce.

2278

3. Supplemental Coverage Option (SCO). Introduced by Congressman 

Randy Neugebauer of Texas, this concept would allow farmers to pay for and 

stack a supplemental area-based coverage on top of their individual coverage 

to address systemic county-wide losses. It is the functional equivalent of the 

Senate Agriculture Committee’s ARC program (county-based, deductible level 

coverage), but it is designed to interact seamlessly with crop insurance, and 

is not free to the producer. He must pay for it. In that it complements Crop 

Insurance, works easily within the current framework, and provides a potentially valuable choice for producers, CIPA has embraced this plan.

—Deep and long-term price declines are a very real concern for most of the 

farmers I serve. Crop insurance is based on market prices in the current market, and there is no question that if price elections for corn and beans this year 

were $3.50/bushel and $7.00/bushel, respectively, as opposed to $5.68 and 

$12.55 (the price elections for 2012), my farmers and their lenders would be in 

serious trouble—indeed, many would not be in business. Under the Senate’s 

ARC plan, like many others that have been offered, this is addressed by tying 

the price part of revenue to a 5 year rolling average. Others use minimum reference prices. Without speaking to the merits of either, let me just say that this 

is probably a risk that would best be addressed outside the scope of crop insurance.

Given the farm bill backdrop, rather than try to dictate what should be done 

or how, we would rather offer two simple requests on behalf of agents and the 

farmers we serve:

1. First, do no harm—be careful in crafting a farm bill policy to take aim at 

only those risks that are not well covered by crop insurance, structured in a 

way that will not duplicate what crop insurance is already doing well.

2. Second, trust that you can build upon Crop Insurance—this structure that 

was built by this Committee, your colleagues and predecessors has proved to 

be able and competitively motivated to serve the needs of farmers. 

Reflections on Importance of Private Structure and Damage Caused by 

SRA 

I want to end back where we began the section on the growth of Crop Insurance. 

That is complimenting this Committee on the creation of Crop Insurance and a delivery structure that has worked, and done a great thing for farmers and rural 

economies. I am very proud to be a part of that structure. 

But it is disheartening when it seems, at every turn, that this structure is under 

attack. The recent SRA is good example. And the fact that OMB and Administration’s budget is calling for more cuts even before the deep SRA cuts have been fully 

realized just adds insult to a very real injury. 

Nebraska agents and staff were hurt badly by the SRA, as compensation was 

capped at a full 22% below 2010 amounts in gross dollars (average commission rates 

were cut by more than 50%). But even worse off are areas like California, where 

gross A&O reimbursements dropped by 32% from 2010 to 2011, meaning gross commissions for agents dropped over 45% (the effect of the 80% cap on agent commissions). 

The following table illustrates one of the more extreme and unintended consequences of RMA’s actions. Although it was asserted that fruit and vegetable producers would somehow be advantaged by the new SRA, actual experience has 

proved differently as A&O plummeted in those states.

State Category 2008 

(million) 

2009 

(million) 

2010 

(million) 

2011 

(million) 

2011 

After 

80% cap 

Change 

from 

2010

California Total A&O $47.6 $43.3 $41.3 $28.2 $22.6 ¥45.4%

Florida Total A&O $29.4 $20.2 $17.5 $12.6 $10.1 ¥42.4%

Nebraska Total A&O $141.8 $106.6 $85.9 $83.6 $66.8 ¥22.1%

There is no doubt that OMB and GAO have a bias against crop insurance or any 

farm policy for that matter. But, I would like to have them along with certain academics out to walk the fields with me so that they might gain a better understanding of the true value of Crop Insurance to real people in real communities who 

too often in Washington are just numbers and statistics on a page. But, I know Congress and the Agriculture Committees have a better understanding of how business 

works. We would simply ask that you step in and say, enough is enough. You cannot 

2279

make 50% cuts to the resources in offices and expect to have the same level of service. 

The unprecedented and egregious overreach of regulating and bureaucratizing 

agent compensation should be reversed. This would be a no-cost item as it would 

not impact government A&O expenditures. In addition, the incredibly poor design 

of the cap on A&O expenditures which caused and will continue to effect disproportionate cuts to certain crops or areas of the country such as California and Florida 

in 2011 should be addressed. This outcome would have been avoided with a more 

transparent process, which should have included agents considering that agent compensation was to be regulated. 

From my perspective, the substance behind calls for cuts to agents was not a credible accusation 3 years ago when gross compensation to agents was nearly twice 

what it was in 2011, and it is most certainly not a credible charge today. On the 

CIPA website at www.cipatoday.com, you can access a document that details the 

work my agency does on a month by month basis over the course of a year. This 

is the process we go through for each and every client, taking special care to fully 

educate them on their risk management options available. Some say the process has 

only gotten easier over time, but the following picture shows the basic rules for Crop 

Insurance that we have to follow at the risk of losing our agency.

A comparison of paperwork in 2000 versus 2012.

As an agent, I consider it my duty to make the voyage through all the options 

and paperwork as easy, painless and efficient for the farmer as possible. But I am 

here to tell you the preparation for this is immense. I know that I am making judgment calls in my advice that, if wrong, could cost my producer customer his operation and livelihood. 

Now NASCOE is calling on Congress to reverse course from the seminal decision 

it made in 1980 and hand the delivery of Crop Insurance bask to the government. 

On behalf of agents, let me say we truly do appreciate the FSA and hope they have 

a significant role in delivering a quality farm bill. But the sentiment of agent groups 

and the farmers we serve is summed up very well in Ranking Member Roberts’ comment on this prospect, ‘‘it is a loony idea.’’ If we want to undo Crop Insurance, this 

is the way to do it. 

Closing 

We have covered a lot of ground in this testimony. But Federal Crop Insurance 

is a long and detailed and great story and I hope that my passion for the risk management tools that it provides and the delivery system has come through loud and 

clear. 

In closing, let me say on behalf of agents that we stand ready to assist you in 

minimizing cuts to agriculture policies overall, and building upon the excellent crop 

insurance framework wherever possible. I hope this testimony offers insight and evidence that will serve you well in this tremendous responsibility you have, and we 

wish you the very best as you proceed to the next steps.


11230193.eps
2280

ATTACHMENT


11230194.eps

s ...... 

ero Insurance 

Of the 19 million acres planted in Nebraska 

in 20 11, 15.6 million or 82% were enrolled in 

crop insurance. Of th .... insured acreage, IS 

million were individual buy·up 

coverage, with 7.3 million (47% of acres; 

58% of premiums) with a buy-up level of75% 

or greater. Only 202,000 (1%) were in 

CAT and only 30,000 (.19%) were in an-a 

plans like GRP or GRIP. 

Ad"trti nnnts a \'c an dO "",. ti ng 

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Insurance Policies by Net Acres 

Insured 

..,.,.-".., .. 

The chan to the left highlights how the 

cost to the government to administer 

crop insurance in the slate has been 

drastically cut since 2008, even as total 

liability within Nebraska has increas.!d 

(from $5.5 billion in 2010 10 $8.6 billion 

in 201 I), 

Crn1'...,._1011 . ."rn .• ~ 1 • CI ~ Al;o;<.o< Ji Q" 
2281

The CHAIRMAN. Thanks, Ms. Gerdes. 

Mr. McSherry for 5 minutes. 

STATEMENT OF BRIAN M. MCSHERRY, CIC, PRESIDENT, 

MCSHERRY AGENCY, INC.; CHAIRMAN, CROP INSURANCE 

TASK FORCE, INDEPENDENT INSURANCE AGENTS AND

BROKERS OF AMERICA, FLANAGAN, IL 

Mr. MCSHERRY. Good morning, Mr. Chairman, Ranking Member 

Boswell, Members of the Committee. My name is Brian McSherry 

and I am pleased to be here today on behalf of the Big ‘‘I,’’ the 

Independent Insurance Agents and Brokers of America. I am owner 

of the McSherry Agency located in Pontiac, Illinois. I am a member 

of the Big ‘‘I’’ Government Affairs Committee and serve as Chairman of the Big ‘‘I’’ Crop Insurance Task Force. 

Big ‘‘I’’ is the nation’s oldest and largest national trade association of independent insurance agents and brokers. We represent a 

nationwide network of more than 1⁄4 million agents, brokers, and 

their employees. Our agents serve the needs of their communities 

not only by offering important insurance products to their neighbors but also by serving as key community leaders. 

The Federal Crop Insurance Program is a powerful success story 

and Big ‘‘I’’ is proud to have been a key player in the evolution of 

the program as it moved from a federally administered program to 

a public-private partnership. Independent agents are the sole delivery mechanism of the FCIP and this important and successful relationship has resulted in the program offering better protection to 

farmers over the past 30 years. 

Crop insurance provides essential benefits to farmers and ranchers and has proven instrumental in achieving the program’s goal 

of helping farmers make well informed risk assessments and 

choices about coverages that they purchase. Crop insurance agents 

are experts in the FCIP, which makes them extremely skilled at 

assisting farmers who have questions or concerns about their coverage. 

The crop program is an indispensable financing tool, and without 

it, many farmers would be unable to access credit that allows them 

to fund their businesses. Protection provided by the program gives 

the lender the confidence to extend that credit. Crop insurance is 

especially critical for young farmers who have less collateral, would 

be unable to obtain financing without it. Farmers wholeheartedly 

believe in the value and benefits provided by the FCIP and have 

reiterated that preserving the program should be a fundamental 

goal of the farm bill. 

The Big ‘‘I’’ is committed to ensuring that independent agents 

continue to have the resources necessary to effectively provide this 

crucial safety net for America’s farmers. Any FCIP reforms should 

focus on private sector delivery mechanisms and leverage the expertise of independent agents. 

While supporting the overall goal of balancing the Federal budget, the Big ‘‘I’’ believes that the Federal Crop Insurance Program 

has already sustained a disproportionate level of cuts in the name 

of deficit reduction. The 2008 Farm Bill and the 2011 Standard Reinsurance Agreement have already slashed the FCIP by a total of 

$12 billion. In an attempt to streamline and modernize the FCIP, 

2282

the Administration has already made significant reductions to subsidies for crop insurance which subsequently raise premiums for 

farmers. When asked, farmers have consistently stressed that ensuring a strong safety net is vital to the future of the nation’s farming communities. Therefore, Congress should prioritize programs 

within the farm bill that have a proven track record of efficiency 

and effectiveness and that best serve our farmers’ risk management needs, not simply shift funds away from the FCIP. 

In addition, any new proposals should not impinge or overreach 

on the practical or successful programs already in place. The Big 

‘‘I’’ understands the need to revisit programs over time. However, 

additional cuts to the FCIP will reverberate in small rural communities across the country jeopardizing the efficient and effective 

quality of services provided to farmers. Further cuts to the FCIP 

on top of the $12 billion over the next 10 years will only hinder 

small business growth in America’s heartland. 

The Big ‘‘I’’ has serious concerns about components of the 2011 

Standard Reinsurance Agreement that have cut the FCIP by $6 billion and radically changed the reimbursement rate of administrating and operating expenses in a way that shifts dollars between 

states picking winners and losers. The SRA imposed an 80 percent 

cap on compensation a private company may pay a private agent 

for delivery of insurance. This, together with the 2011 A&O ceiling 

factor, agency revenue was reduced by over 50 percent. This unreasonable agreement represents the first time that RMA has attempted to enforce price controls and regulate agents’ commissions 

rather than allow the marketplace to determine appropriate commission rates. The 80 percent commission cap doesn’t save the government any money or affect the budget baseline for the program. 

The cap only serves to further compromise the Federal Crop Insurance Program and its intended beneficiaries—farmers and ranchers. 

In addition, the SRA negotiations are held behind closed doors 

without agent participation, yet the outcome of these negotiations 

has a huge impact on the day-to-day business operations of every 

crop insurance agency. The program cuts along with the commission cap have created great uncertainty with respect to the future 

of the program and have begun to have a destabilizing effect on 

rural jobs. The Big ‘‘I’’ feels strongly that the 80 percent commission cap should be removed. 

In conclusion, we greatly appreciate the opportunity to present 

our testimony at this hearing and we are more than happy to provide further details on any of the issues I have discussed. Big ‘‘I’’ 

understands the challenges the Committee faces in crafting a new 

farm bill, but we also believe that this is a vital program that has 

proven its strength and effectiveness and will serve as a springboard to even more prosperous future of agricultural development. 

Thank you. 

[The prepared statement of Mr. McSherry follows:]

2283

PREPARED STATEMENT OF BRIAN M. MCSHERRY, CIC, PRESIDENT, MCSHERRY

AGENCY, INC.; CHAIRMAN, CROP INSURANCE TASK FORCE; INDEPENDENT

INSURANCE AGENTS AND BROKERS OF AMERICA, FLANAGAN, IL 

The Big ‘‘I’’ is the nation’s oldest and largest national trade association of independent insurance agents and brokers, and we represent a nationwide network of 

more than 1⁄4 million agents, brokers and employees. Independent agents offer all 

lines of insurance—property, casualty, life, health, employee benefit plans, retirement products, and crop insurance. Our agents serve the needs of their communities 

not only by offering important insurance products to their neighbors, but also by 

serving as key community leaders—we have agents who serve as volunteer firefighters, youth leaders, school board and city council members. 

The typical agency employs not only the writing agent, but also licensed supportstaff who help in servicing the products. They have considerable overhead—computers with high-speed Internet connections, office space leases, advertising costs, 

auto expenses, payroll, their own insurance (liability, workers’ compensation, 

health), taxes, and other expenses that are drawn directly from the agent’s commissions collected from selling insurance products. 

Specifically regarding crop insurance, today an agent does more work per crop policy than ever before. Agents do all the data entry, and they keep the yield records 

per unit—not per policy. The reality is that agents require an extraordinary amount 

of expertise in servicing this insurance product per acre. In 2011 farmers held 1.15 

million polices and crop insurance agents are proud to be partners in the successful 

operation of this invaluable program for farmers. We appreciate the opportunity to 

provide our perspective today on the important role independent agents play in the 

sale and delivery of the Federal Crop Insurance Program (FCIP). 

2012 Farm Bill 

While supporting the overall goal of balancing the Federal budget, the Big ‘‘I’’ believes that the crop insurance program has already sustained a disproportionate 

level of cuts in the name of deficit reduction. The reductions endured by the FCIP 

through the 2008 Farm Bill and the 2011 Standard Reinsurance Agreement (SRA) 

total $12 billion. In an attempt to ‘‘streamline and modernize’’ the FCIP, the Administration has already made significant reductions to subsidies for crop insurance 

which subsequently raises the price of premiums for farmers. When asked, farmers 

have consistently stressed that ensuring a strong safety net is vital to the future 

of the nation’s farming communities. As Congress continues to work on the 2012 

Farm Bill, it is imperative that any decisions or changes to the present crop program serve our farmers’ risk management needs and not simply shift funds away 

from the FCIP. In addition, any new proposals should not impinge or overreach on 

the practical and successful programs already in place. IIABA understands the need 

to revisit Federal programs over time; however, additional cuts to the FCIP will reverberate in small rural communities across the country, jeopardizing the efficient 

and effective quality of services provided to farmers. Further cuts to the FCIP on 

top of the $12 billion over 10 years will only hinder small business growth in America’s heartland. 

Agents—The Exclusive Sales Force of the FCIP 

The Federal Crop Insurance Program (FCIP) is a powerful success story, and 

IIABA is proud to have been a key player in the evolution of the program as it 

moved from a federally-provided program to a public-private partnership. Independent agents are the sole delivery mechanism of the FCIP, and this important 

and successful relationship has resulted in the program offering better protection to 

farmers over the past 30 years. In 2011, approximately 18,000 agents serviced 1.15 

million crop insurance policies. These policies cover 83% of the nation’s cropland and 

provide the strongest safety net to America’s world food producers. In 2011, companies and agents sold policies worth a record $4.5 billion in producer paid premiums 

covering a record $114 billion in production. 

Crop insurance provides essential benefits to farmers and ranchers, and it has 

proven instrumental in achieving the program’s goal of helping farmers make wellinformed risk assessments and choices about the coverages they purchase. Crop insurance agents are experts in the FCIP, which makes them exclusively skilled at 

assisting farmers who have questions or concerns about their coverage. 

A Federal Government entity will never be able to achieve the level of efficient 

services provided to farmers by independent agents. If the goal of the Administration is to continue to reduce its administrative costs, shifting additional responsibilities over to the Farm Services Agency (FSA) will have the opposite effect. Agents 

are already highly skilled and knowledgeable about the intricacies of the numerous 

policies and programs available to farmers. Training FSA employees unfamiliar 

2284

with these polices, particularly with respect to the extremely detailed technology 

programs used to execute these policies, will be costly. In addition, providing all 

FSA offices with the necessary technological tools (i.e., color printers, computers, 

etc.) will result in a heavy cost burden. 

Agent Workload and Program Complexity 

Even more than other insurance lines, a crop agent’s responsibilities require a 

hands-on approach. On average, with advance meeting preparation, travel, and 

meeting time, an agent spends approximately 7 hours on a policy during the sales 

window alone. A transaction typically begins with the agent quoting the wide variety of different plans of insurance available, then explaining production reporting 

and supporting record requirements to the farmer. The agent explains different date 

requirements by crop and coverage for application, the actual production history 

(APH), the acreage report, and the farmer’s options and claims. He completes APHrelated forms for the farmer, calculates preliminary yields, reviews production early 

to determine if there is a revenue loss, reviews the APH form for completeness and 

accuracy, and forwards the signed form and any applicable worksheets to the company. The agent must also review approved APH from the company to ensure accuracy, explain approved APH yields to the farmer, and provide the farmer with a 

copy. 

Additionally, the agent is responsible for implementing procedures for Preventive 

Planting, Yield Adjustment, Unit Division changes, Power of Attorney requirements, 

or any of the other technical policy provisions. All of the preceding goes into writing 

the policy—and does not even factor in the consequences, and the time spent in the 

event of a potential loss, which occurs more often than any other line of insurance. 

The sale of crop insurance is indeed extremely complex and challenging. 

Preventing Waste Fraud & Abuse 

In 2011 the RMA included an Anti-Rebating Certification Clause in the 2012 Document Standards Handbook. The certification will be included on the form in which 

liability is established for the policy, e.g., acreage reporting time. In a strong attempt to preserve the integrity of the crop program, the inclusion of this certification was spearheaded by the IIABA Crop Insurance Task Force. Rebating undermines consumer confidence in agents, the companies and the crop insurance program as a whole. It is important to address and halt any future manipulations of 

the program. (See final page for certification language). 

Crop Insurance—an Indispensable Financing Tool 

The Federal Crop Insurance Program is an indispensable financing tool. Without 

crop insurance, many farmers would be unable to obtain financing. Protection provided by the program gives a lender much more confidence in extending credit. Crop 

insurance makes the process of farmers obtaining annual operating loans much 

easier and more efficient. In the case of farmers who have purchased crop insurance, banks usually require less collateral because they consider these farmers to 

be better protected. Crop insurance is especially critical for younger farmers with 

less collateral who would be unable to obtain financing without crop insurance. The 

purchasing cost of crop insurance provides certain benefits for the farming operation, including greater ability to finance land purchases, enter into land rental contracts, and arrange production input purchases. Farmers understand more and 

more that crop insurance is another cost of doing business and have reiterated that 

preserving the FCIP should be a fundamental goal of the farm bill. 

Standard Reinsurance Agreement (SRA) 

The Big ‘‘I’’ has serious concerns with components of the 2011 Standard Reinsurance Agreement (SRA) which cut the FCIP by $6 billion over 10 years and made 

unprecedented and sweeping changes to the delivery system. SRA negotiations are 

held behind closed doors without agent participation, yet the outcome of these negotiations has a huge impact on the day to day business operations of every crop insurance agency. Last minute changes to the SRA were unveiled by the United 

States Department of Agriculture (USDA) in the final version of the SRA in an allor-nothing approach presented to both the agents and the companies. The 2010 SRA 

radically changed the reimbursement rate for administrative and operating (A&O) 

expenses in a way that shifts significant delivery dollars between states, resulting 

in massive cuts to certain states such as California, Florida and New York in 

2011—states with crops that USDA maintained the SRA was intended to benefit by 

‘‘rebalancing’’ the distribution of insurance. In addition, Midwest states took a disproportional level of cuts to their A&O, a part of the country that has already been 

hit hard by the economic recession. The bottom line from the fallout of the SRA is 

that five states took the brunt of the SRA cuts. Those states were Iowa, Illinois, 

2285

Indiana, Minnesota and Nebraska. Crop insurance is an essential component of job 

creation in these rural states. Many agencies employ full and part time support staff 

(in addition to agents) to help service customers. Continuous cuts to the program, 

coupled with great uncertainty in the future of the program, have begun to have 

a destabilizing effect on rural jobs. 

The SRA imposed an 80% cap on the compensation a private company may pay 

private agents for the delivery of insurance. This unreasonable agreement represented the first time that RMA had attempted to enforce price controls and regulate agent crop insurance commissions directly rather than allow the marketplace 

to determine the appropriate agent commission rate. 

The proposed 80% commission cap does not save the government any money, or 

affect the budget baseline for the program. The cap only serves to further compromise the crop insurance program and its intended beneficiaries—farmers and 

ranchers. IIABA feels strongly that the 80% commission cap should be removed. The 

$6 billion cut to the program—on top of the cuts already made to the 2008 Farm 

Bill—coupled with the controlling commission cap proposal, greatly undermine crop 

insurance agents and the service they can provide to producers. SRA negotiations 

are held behind closed doors without agent participation, yet the outcome of these 

negotiations has a huge impact on the day to day business operations of every crop 

insurance agency. IIABA feels strongly that the 80% commission cap should be removed. 

The Administration’s broad reforms have also ultimately led to the SRA containing a ‘‘covenant not to sue,’’ which effectively restricts agents from bringing lawsuits against the Federal Government for claims related to the A&O cuts. Insurance 

agents are not parties to the SRA and should not be forced to waive their legal 

rights. The lasting effect of this covenant is that agents cannot negotiate with RMA 

about the A&O cuts during the drafting of the SRA, and agents are now going to 

be denied their legal right to challenge these cuts in court. RMA is silencing agents 

by not allowing them to have a voice on an issue that directly affects their livelihood. 

Conclusion 

We greatly appreciate the opportunity to present our testimony at this hearing, 

and we are more than happy to provide further details on any of the issues I have 

discussed. The Big ‘‘I’’ understands the challenges the Committee faces in crafting 

a new farm bill, but we also believe that this vital program has proven its strength 

and effectiveness and will serve as a springboard to an even more prosperous future 

of agricultural development. 

ATTACHMENT

D. ANTI-REBATING CERTIFICATION STATEMENT

In accordance with section 508(a)(9) of the Federal Crop Insurance Act and 

the SRA, a company and its affiliates are prohibited from providing a rebate, 

except as authorized in section 508(a)(9)(B). 

The Anti-Rebating Certification is an individual certification of the applicant/

insured and agent required at the time liability is established. For the 2012 CY, 

this statement is non-substantive. In subsequent crop years, this certification 

will be substantive on the form in which liability is established for the policy, 

e.g., acreage reporting time. The AIP has the discretion to require this certification at other times. 

[See Exh. 5].

The CHAIRMAN. Thank you, Mr. McSherry. 

Mr. Weber for 5 minutes. 

STATEMENT OF TIM WEBER, PRESIDENT, CROP INSURANCE 

DIVISION, GREAT AMERICAN INSURANCE COMPANY,

CINCINNATI, OH 

Mr. WEBER. Mr. Chairman, Ranking Member Boswell, and Members of this Subcommittee my name is Tim Weber and I am here 

today to speak on behalf of the 15 crop insurance companies that 

deliver the Federal Crop Insurance Program. Thank you for this 

opportunity. 

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In recent months, we have heard a lot about crop insurance. We 

have heard major farm groups call on policymakers to maintain a 

strong, effective, efficient, and affordable crop insurance system. 

We have heard three major lending organizations—the American 

Bankers Association, Independent Community Banks of America, 

and the Farm Credit Council—call on policymakers to maintain a 

strong and vibrant Federal Crop Insurance Program for American 

farmers and ranchers. 

We appreciate this Committee’s dedication to ensuring the availability of risk management tools to keep American agriculture 

strong. Crop insurance is key in the financial stability of American 

farmers and ranchers and enables them to supply our country with 

feed, fuel, fiber, and fuel. 

The 2011 crop year, one of the most destructive weather events 

in recent history, taught us that crop insurance is absolutely critical. With large farm losses, high indemnity payments, farmers 

who might otherwise be out of business are back in their fields 

again this year. When farmers and ranchers are left picking up the 

pieces after disasters, we are proud to help them provide prompt 

delivery to indemnity payments, often in 30 days or less. The responsiveness of the private sector delivery system and the Federal 

Crop Insurance Program itself is unmatched. 

It is not surprising that a union of government employees have 

proposed to take over the crop insurance duties. The private sector 

has been very successful in achieving Congressional objectives to 

increasing crop insurance participation. Private companies and 

agents have worked diligently to educate producers and expand 

their risk management protection. Some 12,500 licensed agents and 

nearly 5,000 certified adjustors have a remarkable record for reducing fraud, waste, and abuse to a very low level. It makes very little 

sense to change a truly successful program’s current competitive 

proven delivery system for a government system that can only result in reduced services to U.S. farmers and ranchers. 

Congress has taken great steps to enhance crop insurance over 

the years. Reform legislation enacted in 1994 and in 2000 strengthened the public-private partnership and encouraged greater farmer 

participation. These steps put us on a path to success by combining 

Federal dollars with farmer premiums to make otherwise cost-prohibitive policies affordable to farmers of all sizes, all backgrounds, 

including those of limited resource and social disadvantage. 

I would like to share some figures with you that demonstrate 

how this Committee has had a positive impact on crop insurance 

for farmers and ranchers. In 2011, crop insurance provided over 

$114 billion of coverage. This compares to $28 billion in 1998. In 

2011, over 265 million acres were insured compared to 180 million 

in 1998. And in terms of the level of protection producers are 

choosing, well over half are writing coverage at 75 percent level 

and above and about 25 percent is written at the 80 and 85 percent 

level. 

Today, crop insurance is indeed the cornerstone to risk management and provides coverage for well over 100 crops across the 

country. As development of the 2012 Farm Bill progresses, we appreciate that farm and lending organizations have publicly acknowledged the value of crop insurance. We respectfully caution 

2287

against changes that would negatively affect farmers and ranchers 

and the private sector delivery system. In 2008, crop insurance has taken more than $12 billion in Federal funding cuts, which sets agriculture apart as one of the only 

sectors if not the only sector to take repeated budget cuts in order 

to reduce the deficit. Additional cuts such as those suggested by the 

Government Accountability Office would have unintended effects 

on reducing program participation, discriminating against larger 

farmers, higher-risk farms, farms producing higher-valued crops, 

and increasing calls for ad hoc disaster. In short, adopting such a 

proposal would risk undoing the great progress made protecting 

U.S. agriculture. What Mother Nature and the volatile commodity 

markets have in store for farmers and ranchers this year is unknown, but those of us in the crop delivery system are ready to ensure their survival when disaster strikes. 

Thank you again, Mr. Chairman, for this opportunity to be here 

today. 

[The prepared statement of Mr. Weber follows:]

PREPARED STATEMENT OF TIM WEBER, PRESIDENT, CROP INSURANCE DIVISION, GREAT AMERICAN INSURANCE COMPANY, CINCINNATI, OH 

Chairman Conaway, Ranking Member Boswell, and Members of the Subcommittee, thank you for inviting crop insurance companies to appear at today’s 

hearing to discuss farm policy and the importance of crop insurance as agriculture’s 

fundamental risk management tool. 

My name is Tim Weber. I am President of the Crop Insurance Division at Great 

American Insurance Company located in Cincinnati, Ohio. Great American Insurance has been in the business of offering risk management tools to agricultural producers for over 100 years. We have been involved in the private sector delivery of 

federally reinsured multiple peril crop insurance since 1980. Great American currently writes both private hail insurance and federally reinsured multiple peril coverage in 32 states. 

I am pleased to have the opportunity today to present this testimony on behalf 

of the approved insurance providers (AIPs). The statement was developed jointly by 

National Crop Insurance Services (NCIS), the Crop Insurance and Reinsurance Bureau (CIRB), and the American Association of Crop Insurers (AACI). Therefore, it 

encapsulates the common views of these organizations. 

This morning, I will examine how crop insurance evolved to become the essential 

policy that it is today; discuss the role crop insurance has played since 2008, a timeframe which contains the 2 most costly years in the history of crop insurance; outline recent challenges facing AIPs; and provide guidance as this Committee continues into the 2012 Farm Bill process. 

The Function of the Private Sector Delivery System 

Currently, there are 15 private sector insurance companies that sell and service 

policies through the Federal crop insurance program. In 2011, these AIPs wrote 

more than $11.9 billion in Federal multiple peril crop insurance premiums covering 

over 265 million acres of farmland, protecting over 80 percent of planted acres. The 

potential liability exceeded $114 billion. 

These private sector companies service policies that encompass all farmers and 

ranchers participating in the Federal and private programs, including those who are 

limited resource and socially disadvantaged. In partnership with the Federal Government, our members comprise the delivery system for this critical risk management program. 

The Increasing Importance of Crop Insurance in Protecting America’s 

Food, Fiber, Feed, and Fuel Production 

Although the crop insurance program was originally launched in 1938, it was not 

particularly successful because, as late as 1979, it was available in only 1⁄2 of the 

nation’s counties, and in those counties, only one or two crops were covered. In 1980, 

Congress passed legislation designed to increase participation in the crop insurance 

program and make it more affordable and accessible for farmers. This modern era 

of crop insurance was marked by the introduction of a public-private partnership 

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between the U.S. Government and private insurance companies. Under this partnership, private insurers began administering insurance policies and delivering indemnities quickly to insured farmers. 

Congress greatly enhanced the crop insurance program in 1994 to strengthen the 

public-private partnership and encourage greater farmer participation. This landmark legislation, and a subsequent bill enacted in 2000, put us on the path to success by combining Federal dollars with farmer premiums to make otherwise costprohibitive, high-coverage crop insurance policies universally affordable to farmers 

of all sizes. The changes also expanded the role of the private sector in developing 

new products—such as revenue insurance policies—that would help farmers and 

ranchers manage their risks and enhance their marketing plans. With these additional changes, participation in the program greatly expanded. 

By 1998, more than 180 million acres of farmland were insured under the program, representing a three-fold increase over 1988. And since 1998, crop insurance 

has continued to evolve in positive ways. In 2011, over 265 million acres were protected by crop insurance. Since 1998, meaningful buy-up coverage has increased by 

over 125 million acres, while basic catastrophic (CAT) coverage has declined by over 

42 million acres, to a low of 19 million acres insured in 2011. Federal support combined with producer premiums in 2011 provided over $114 billion in liability protection, compared with approximately $28 billion in 1998. 

Today, crop insurance is the cornerstone of most farmers’ risk management portfolios and covers all major grain and oilseed crops; cotton; nursery; many fruits, vegetable and tree nut crops; rice; potatoes; forage and livestock. We appreciate that 

farmers and ranchers have found crop insurance to be a great value and look forward to being involved in discussions regarding proposals intended to enhance crop 

insurance coverage. 

2011: A Year for the Record Books 

With most claims now settled, crop insurance companies have paid out a record 

$10.7 billion in indemnity payments to America’s farmers and ranchers in 2011. 

This has already surpassed the former record of $8.68 billion in indemnities paid 

in 2008. 

The year 2011 was perhaps one of the most destructive weather years in history—

featuring severe droughts in the Southern Plains, hard freezes in Florida, flooding 

along the Mississippi and Missouri Rivers, tropical storms in the South and Northeast, and a broad swath of destruction in the Central Plains. To date, roughly $1 

out of every $4 indemnity payments went to farmers and ranchers in Texas, who 

have received $2.6 billion in indemnities. For every dollar of premium in Texas for 

the 2011 crops, producers have received $2.35 in indemnities. 

Based on crop insurance indemnities paid, the next hardest hit state was North 

Dakota, with $1.6 billion in indemnities. The other states to fill out the top five 

were Kansas, South Dakota and Minnesota. Together, these five states accounted 

for 58 percent of the 2011 indemnities paid nationally. 

Since 2008, private crop insurance company indemnity payments have totaled 

more than $28 billion. This figure is significant for a number of reasons. First, the 

private sector, not taxpayers, is carrying a significant portion of the risk for these 

policies. Second, the policies are being written and managed by private sector crop 

insurance agents who meet personally with the farmer and devise a plan that fits 

the farmer’s risk profile. Nearly 5,000 certified loss adjusters determine losses and 

ensure that the farmer complies with the mandates of the policy to reduce fraud 

and abuse. Lastly, it is the private sector, not the government, that delivers the indemnity payment. These companies must deliver the crop insurance indemnity payment to the producer within 30 days. Contrast that with government-run disaster 

programs, which can take months, or years, to get the payments into the hands of 

farmers and ranchers. 

When farmers and ranchers are left picking up the pieces after weather or market 

disasters, they rely on speedy 30 day delivery, not cumbersome 30 month delivery. 

The fact that the United States is planting crops just months after such devastation 

in 2011 should not be taken for granted. Crop insurance is permitting farmers and 

ranchers to recover from last year’s disasters and return to their normal practices 

in 2012. 

Crop insurance is more than just periodic payments. It has become indispensable 

for producers because it helps them obtain needed operating capital, which would 

otherwise be highly restricted. Equally important, farmers have also integrated crop 

insurance and marketing to the point that they are very willing to buy crop insurance at high coverage levels, even if they expect no indemnity, to ensure the adequacy of resources to cover forward marketing commitments in the event disaster 

strikes. 

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Doing More With Less 

The year 2008 was significant for crop insurance for a number of reasons. First, 

it is the second costliest year in American history in terms of damage to the agricultural sector. Next, since 2008, crop insurance has taken more than $12 billion in 

Federal funding cuts, a figure which sets agriculture apart as having been one of 

the only sectors that has taken repeated budget reductions to help address the deficit and curb government spending. The first reduction of $6 billion occurred as part of the 2008 Farm Bill. Another $6 billion resulted from the 2011 Standard Reinsurance Agreement negotiations between crop insurance providers and the U.S. Department of Agriculture. 

The 2008 Farm Bill cut was more than 10 percent of baseline crop insurance 

funding, while the SRA cut was an added cut of more than seven percent of baseline 

funding—a very large total reduction in the Federal investment in crop insurance 

infrastructure in just 4 years. This reduction is astounding when one considers that 

crop insurance represented only eight percent of farm bill spending and a meager 

1⁄10 of 1 percent of overall government outlays. 

And while Federal financial support for crop insurance has been reduced by recent cuts, insurers’ exposure to risk has been increasing. Rising demand for major 

food, fiber, feed, and fuel crops since 2008—fueled by booming exports and the growing renewable fuel industry—has pushed commodity prices to record highs. While 

this has been great news for the agricultural sector and has been a factor in pulling 

the overall U.S. economy out of the prolonged and deep recession, it has greatly expanded the value of the crops and hence the risk exposure of AIPs. 

The crop insurance delivery system has responded and is doing more with less 

resources and doing it well. That is why crop insurance has been widely praised by 

leading farm groups and farmers as the single most important risk management 

tool available. In the interest of time, I will not read through the long, positive 

string of quotes from most major commodity groups, but I am including a sampling 

of quotes pulled from newspapers across the country in this statement for the 

record.

» ‘‘Crop insurance—which is the most important component of the farm safety 

net for specialty crop producers and growers of most major crops—was specifically created to ensure that private insurance companies, not taxpayers, shoulder the burden of funding payouts following crises.’’—Roger Johnson, former agriculture commissioner for North Dakota and current President of the National 

Farmers Union, in an op-ed that appeared in the Omaha World Herald on 

May 31, 2011.

» ‘‘Now I understand that when Congress starts trimming the budget, everyone 

is going to argue that their specific program deserves protection. While I can’t 

speak for other aspects of Federal spending, I can attest to the fact that crop 

insurance and other aspects of farm policy work for me. Without a doubt, they 

are the policies that keep family farms like mine in business and our nation 

is food secure.’’—Greg Schwarz, President of the Minnesota Corn Growers Association, in an op-ed that appeared in the Minneapolis Star Tribune, June 13, 

2011.

» ‘‘Because of the many challenges, all young farmers depend on components contained in the 2008 Farm Bill—most notably crop insurance—to provide lenders 

with the confidence and collateral they need to extend loans. Politicians continue to put these components to the test, even though without crop insurance, 

farmers throughout the South, Midwest, and various other parts of the country, 

would have been left with no crop—and no starting point on which to rebuild—

due to the range of floods, droughts, tornadoes and frosts, this year alone.’’—

Matt Huie, a 35 year old farmer who raises cotton, corn, sorghum, and livestock, in an op-ed that appeared in the Dallas Morning News on August 17, 

2011.

» ‘‘Without crop insurance, I’m not sure that my operation would still exist—and 

the same goes for many of my neighbors—not just in Kansas but in the Texas 

Panhandle where they haven’t seen a drop of rain since October 17, and Missouri, where flooding has left thousands of acres under water and unproductive.’’—John C. Thaemert, Vice President & Trust Officer at Citizens State 

Bank & Trust Co. in Ellsworth, Kansas and past President of the National Association of Wheat Growers, in an op-ed that appeared in Agri-Pulse on September 6, 2011.

» ‘‘But perhaps most importantly for those of us who farm, the crop insurance 

program has the efficiency and speed of the private sector when it comes to getting payments into the hands of those who have suffered economic loss. The 

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crop insurance policy recognizes that farmers are often over-extended after 

planting and will be very short of cash in hand if a crisis hits until the harvest 

season comes.’’—Dee Vaughan, the current President of the Southwest Council 

of Agribusiness and the former President of the National Corn Growers Association, in an op-ed that appeared in the Lubbock Avalanche-Journal on September 11, 2011.

» ‘‘The speed of delivery of crop insurance—because it’s administered by privatesector companies—makes it a different kind of animal. In fact, if a natural disaster strikes and I’m covered by a crop insurance policy, typically the payment 

comes to me in 1 or 2 weeks, not in 1 or 2 years. Because of that speed of delivery, I can quickly recover from the loss and replant the field, garnering myself 

some needed income for the year and putting some food on the tables for consumers.’’—Quentin Bowen, who raises corn and soybeans, in an op-ed that appeared in the Lincoln Star-Journal on October 31, 2011.

» ‘‘Now is not the time to weaken crop insurance and put taxpayers—instead of 

private insurance companies—on the hook for picking up the pieces. If anything, discussions should be centered on ways to strengthen crop insurance and 

the rest of the safety net. After all, there’s far more at stake than farmers in 

the next farm bill.’’—Neil Widner, Chairman of the American Crystal Sugar Co. 

and a sugarbeet, wheat and soybean farmer, in an op-ed that appeared in the 

Fargo Forum on November 30, 2011.

» ‘‘Crop insurance is the quintessential tool for managing farm risks because it 

allows each farmer to pay for the plan that makes the most sense for him or 

her. Just like car insurance, health insurance or homeowner’s insurance, crop 

insurance allows the individual to assess his tolerance for risk and loss, and 

purchase plans to meet those needs.’’—Jay Armstrong, who farms corn, soybeans, and wheat, in an op-ed that appeared in the Garden City Telegram

on December 24, 2011. 

The 2012 Farm Bill, and Beyond 

How crop insurance emerges from the 2012 Farm Bill process will hold major 

ramifications for this risk management program and for America’s farmers and 

ranchers who have come to rely on it. The ability of Federal crop insurance to shoulder a significant portion of the risk that U.S. producers face lies with the legislators 

who are writing the 2012 Farm Bill and charting a course for the future of farm 

policy. 

We firmly believe that crop insurance should remain the core risk management 

tool, and we are committed to the public-private partnership of program delivery, 

which directly supports more than 20,000 private sector jobs across the country. The 

private sector should continue to provide and deliver crop insurance options, share 

in the risk of loss caused by changing markets and natural disasters, and adjust 

losses for insurable crops. We believe the private sector, not the government, is the 

best way to provide the individual risk management information and tools that are 

indispensable for producers today. We understand that is the way farmers and 

ranchers want the program to operate, and trust in our Congressional leaders to 

stay the course. 

As development of the 2012 Farm Bill progresses, the crop insurance delivery system is in a unique situation. Companies are still processing and delivering record 

payouts to farmers and ranchers for their 2011 losses. At the same time, crop prices 

remain elevated far above historic levels, and projections show that producers will 

continue to take advantage of that and push themselves to plant to capacity. This 

indicates the need for crop insurance is likely to rise, as will insurers’ risk exposure. 

With this growth comes an increasing sensitivity to additional changes to the program and the delivery system—because the industry’s administration and organizational infrastructure continues to be pushed to the limit. 

For example, reporting and regulatory requirements have increased already 

through the SRA, and new farm bill provisions could impose additional requirements. The AIPs maintain very serious concerns about the President’s recent budget 

proposal, which would weaken the program and delivery infrastructure by removing 

an additional $8 billion in funding over the next 10 years. This program, the primary risk management tool for producers, is now adjusting to the cumulative effects 

of funding cuts over the past 4 years, record claims in 2011, and significant program 

changes in store for 2012 and 2013. Any further changes affecting the program must 

be considered very carefully as swift changes can have the unintended effect of impairing the delivery system, reducing service, and even limiting coverage to producers. In short, we risk undoing the great progress made in protecting U.S. agriculture from risks that farmers and ranchers cannot manage alone. 

2291

In the development of the 2012 Farm Bill, many commodity organizations and 

lawmakers have stated their support for crop insurance, and in developing Title I 

proposals, many have expressed an interest in revenue protection. Revenue protection policies, which insure producers against yield losses and revenue losses, made 

up 2⁄3 of crop insurance policies nationwide in the 2011 crop year and accounted for 

81 percent of premium. Revenue coverage is clearly a vital link in the farm safety 

net, and we are proud to be—and should remain—providers of the products currently available. 

While we believe that Title I programs should not compete with crop insurance 

at all, we recognize the difficulty in creating revenue programs within Title I that 

are distinctly different from crop insurance revenue products. In 2011, policies with 

coverage levels of 80 and 85 percent accounted for about 1⁄4 of total premium. New 

supplemental revenue programs potentially compete with and may displace these 

high levels of crop insurance protection that Congress and AIPs have worked so 

hard for so long to achieve. We recognize and share the concern about program duplication, and we respectfully request that interaction between Title I programs and 

crop insurance—the adverse direct or indirect effects on crop insurance—be minimized. 

As providers of this successful risk management tool, our goal is to strengthen our 

ability to assist producers in managing their risk through a strong, efficient, and 

effective crop insurance program. It is the key to financial stability for America’s 

farmers and ranchers, enabling them to supply our country with food, fiber, feed, 

and fuel. Without this support, large numbers of producers would be unable to manage weather and market risks with the success they can today. 

Conclusion 

What Mother Nature or the wildly fluctuating commodity markets have in store 

for farmers and ranchers this year is unknown. But 2011 taught all of us to expect 

the unexpected, and those of us in the crop insurance delivery system will be ready 

to help farmers pick up the pieces no matter what the future holds. 

In summary, crop insurance providers are committed to continued private sector 

delivery of this successful—and essential—risk management tool. We believe in competition and the provision of services through the market, and we think that is the 

way producers want the program to operate. As farmers and ranchers increasingly 

rely upon crop insurance to manage risk and as our risk exposure continues to rise, 

we respectfully caution against swift changes that could negatively impact the program. Crop insurance continues to adjust to the cumulative effects of funding cuts 

over the past 4 years, record claims in 2011, and significant program changes in 

store for 2012 and 2013. Additional cuts such as those proposed in the President’s 

budget could have the unintended effect of impairing the delivery system, reducing 

service, and even limiting coverage to producers. 

We are hopeful that policymakers will recognize the record of success that crop 

insurance has demonstrated and will continue with a policy that recognizes the key 

role crop insurance plays in helping farmers and ranchers manage risk and ensuring an ample and stable U.S. food, fiber, feed, and fuel supply. 

Chairman Conaway, Ranking Member Boswell, and Members of the Subcommittee, thank you for the opportunity to be here today. We look forward to continued dialogue with you and your staffs throughout the farm bill reauthorization. 

ATTACHMENT

State Net Acres Liabilities Total

Premium Indemnity Loss Ratio 

U.S. 265,405,179 265,405,179 114,104,391,259 114,104,391,259 11,954,936,150 11,954,936,150 10,750,474,073 10,750,474,073 .90

Texas 36,906,751 5,465,269,133 1,095,629,331 2,570,340,127 2.35

North Dakota 23,541,052 6,108,140,921 1,067,304,344 1,648,900,766 1.54

Kansas 17,402,867 5,296,285,345 796,996,676 1,087,512,734 1.36

South Dakota 15,064,341 5,054,744,160 725,405,668 475,788,323 .66

Minnesota 17,144,947 9,482,671,987 844,734,854 449,167,714 .53

Top 5 6,231,709,664

Missouri 8,240,382 3,390,336,359 404,049,825 444,758,439 1.10

Oklahoma 5,141,362 1,000,600,202 204,424,097 438,332,126 2.14

Illinois 17,738,949 12,336,752,079 928,639,287 408,117,802 .44

North Carolina 3,523,232 1,853,272,137 217,685,420 352,746,386 1.62

Iowa 21,467,872 14,679,854,813 1,030,480,901 294,949,543 .29

Indiana 8,597,616 5,786,592,053 515,537,241 294,767,002 .57

Nebraska 15,595,231 8,635,348,808 759,860,115 266,844,432 .35

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State Net Acres Liabilities Total

Premium Indemnity Loss Ratio 

Georgia 2,666,049 1,504,152,238 203,180,664 219,791,647 1.08

Arkansas 5,110,908 1,517,577,725 150,114,809 162,228,639 1.08

Montana 10,942,603 1,216,679,784 214,702,304 158,169,671 .74

Mississippi 3,544,688 1,356,731,762 155,040,210 155,160,912 1.00

Ohio 6,603,852 3,855,352,768 379,483,104 153,925,766 .41

Colorado 5,470,849 1,308,352,378 212,685,068 141,453,931 .67

California 4,057,166 4,781,873,593 248,148,659 102,148,754 .41

Kentucky 2,778,876 1,462,199,947 154,079,578 99,247,937 .64

South Carolina 1,148,478 531,590,424 79,195,156 70,454,349 .89

Florida 1,864,539 2,799,775,360 113,153,600 69,140,945 .61

Tennessee 2,451,942 1,120,710,761 123,876,709 65,005,498 .52

Louisiana 2,778,402 1,006,904,149 102,165,676 62,555,649 .61

Pennsylvania 1,177,910 541,756,123 66,526,830 61,395,959 .92

Michigan 4,119,641 2,082,684,687 211,663,147 59,102,526 .28

Washington 2,838,965 2,096,135,213 148,172,069 53,748,476 .36

Alabama 1,270,599 566,187,546 87,546,161 51,640,447 .59

Wisconsin 5,002,145 2,739,932,861 296,068,480 51,495,345 .17

Idaho 2,148,219 1,024,681,179 84,033,291 50,649,442 .60

New Mexico 1,888,679 185,478,884 25,960,500 45,442,062 1.75

New York 951,756 472,671,952 36,240,939 44,115,223 1.22

Virginia 1,254,918 591,995,651 74,555,124 36,552,443 .49

Maryland 911,395 398,757,463 45,968,402 30,086,294 .65

Arizona 475,809 341,625,355 33,030,150 12,412,030 .38

Oregon 956,698 732,806,736 44,199,413 10,628,095 .24

Delaware 359,314 145,407,482 17,520,814 9,055,768 .52

Maine 124,083 79,611,377 8,524,142 8,081,832 .95

Wyoming 1,547,858 128,417,958 17,098,150 7,804,167 .46

Connecticut 23,519 65,814,951 5,007,332 6,434,980 1.29

Vermont 75,872 32,009,956 2,360,372 6,397,089 2.71

New Jersey 172,081 110,799,978 8,959,335 3,099,551 .35

Hawaii 23,455 79,785,895 1,274,771 2,530,034 1.98

Utah 155,341 29,530,033 4,095,206 2,487,593 .61

Massachusetts 26,983 46,485,602 3,004,179 2,305,940 .77

West Virginia 47,531 20,526,914 2,723,423 1,673,109 .61

Nevada 53,337 31,174,795 3,171,175 1,437,812 .45

New Hampshire 8,954 6,734,333 478,081 199,371 .42

Rhode Island 1,402 1,106,765 95,353 162,558 1.70

Alaska 5,761 502,684 86,015 26,835 .31

Table for 2011 as of May 7, 2012. 

The CHAIRMAN. Well, thanks, Mr. Weber. And I thank all three 

of our panelists. 

Ms. Gerdes, you were pretty clear in your opening statement that 

you do not favor payment limits or having conservation requirements tied to insurance. Could I get the other two witnesses just 

to kind of give me your position with respect to payment limits and 

conservation requirements? 

Mr. MCSHERRY. Mr. Chairman, I would agree, no tie. 

The CHAIRMAN. No tie, okay. 

Mr. WEBER. Yes, I would also agree——

The CHAIRMAN. Okay. 

Mr. WEBER. No tie. 

The CHAIRMAN. A lot of discussion over the last several days 

about shallow loss coverage and others. My good friend Randy 

Neugebauer has a proposal on a supplemental coverage option for 

this shallow loss arena. Can any of the three of you give us your 

thoughts on an insurance product like that delivered through the 

private sector that you are most familiar with be better than one 

run by FSA like the ARC Program, whatever is going on? 

Ms. GERDES. Mr. Chairman, absolutely I would welcome the opportunity to work on a program like that and to provide it to my 

farmers. 

2293

Mr. MCSHERRY. Mr. Chairman, I would agree. I think there are 

a lot of folks between the company ranks and the insurance and 

our producers that could come up with a program delivered 

through the private sector. 

Mr. WEBER. Mr. Chairman, I would also agree. The private industry is well positioned, capable, and willing to take on a delivery 

of a shallow loss program such as SCO. 

The CHAIRMAN. Let me ask this question. What are the barriers 

to the private sector coming up with a product that doesn’t have 

a premium support tied to it, would just be a private sector product? Are there mechanical barriers to the industry being able to address this issue? And maybe, Mr. Weber, you ought to whack on 

that. 

Mr. WEBER. Yes, sure, I will answer your question for you. 

The primary barrier is cost. You know, that is what has really 

driven the participation in the Federal program is the premium assistance. Without that premium assistance, many products become 

a bit cost-prohibitive. Our company as many as the others that we 

compete against do have private products out there as a means of 

trying to address some of the voids that are present in the MPCI 

policy but are very cost-prohibitive. 

The CHAIRMAN. Okay. Well, other than who shares the premium 

issue, are there things in law that prevent this product that would 

need to be changed if we went to something like this would have 

to be changed as well? 

Mr. WEBER. Yes. There is statute out there that prevents a publicly subsidized program from competing against the private sector 

if that answers your question. 

The CHAIRMAN. But there are issues, then, in law that would 

have to be addressed if we decided to go with another product like 

SCO? 

Mr. WEBER. No, I misunderstood you. No, there is nothing that 

I am aware of that would prevent us from going forward with SCO. 

The CHAIRMAN. One of the complaints I get from the producers’ 

side is that they have to share information with their agents and 

they also have to share almost the exact same information with 

FSA. And maybe you mentioned this in your opening statement, 

but could you talk to us briefly about can that issue be solved? Can 

you guys kind of work out the differences and have a one-stop kind 

of place where data from producers can be deposited that both of 

you would then work off of to do whatever it is you need to do? 

Ms. GERDES. Absolutely, Mr. Chairman. As a farmer myself, my 

own husband comes home every time he certifies and says why in 

the heck am I doing this in two places? I think the key is the farmers’ information is the accurate information. And what he puts 

down is what should be accurate, whether he does it at the agent’s 

office or the FSA office. I am more than happy to share the information that my farmer provides to me to FSA. I wish we had the 

reciprocal ability from FSA. I would say it is not the FSA office’s 

problem, thereby regulation prohibited from sharing with us now. 

I would encourage you to work on that because it would be ideal 

to get that worked out. But the key thing is the farmers’ information should be what is accurate. 

2294

The CHAIRMAN. Would we have to facilitate additional waste, 

fraud, and abuse investigations if RMA and FSA were working off 

the same set of data? 

Ms. GERDES. It would cut out all of the busy work that agents 

do and FSA does over 1.2 acres here, 4 acres there, 5 acres here. 

I can tell you I just worked on a situation last week under the 

SURE Program that took me 2 hours with the farmer in my office 

on the phone with the county director in a local area office. We 

spent 2 hours doing it. I said at the end of the conference I will 

send you the documentation that confirms this. She said oh, no, 

thank you. I don’t need it. 

The CHAIRMAN. All right. 

Ms. GERDES. We can’t take your information. 

The CHAIRMAN. I got you. 

Well, the gentleman from Iowa, Mr. Boswell, for 5 minutes. 

Thank you. 

Mr. BOSWELL. Thank you, Mr. Chairman, and thank you to the 

panel. I hate busy work, too, so your point is well made. 

And I would just say something to the rest—I wish the whole 

Committee was here. Just very briefly, I was born and raised on 

a farm, actually born in a farmhouse, left the farm, went off to the 

military and was gone for 20+ years and came back to my dream 

and got back into something and had to learn a lot. I learned real 

quickly that I had to have a good bank, a farmer store if you will, 

and then I learned a little later I need a good insurance agent, 

very, very important. It is just a must in this high-capital economy 

we live in, particularly in crop production, animals, the whole 

works. So I wanted to just say that to you. And I appreciate what 

you bring. 

A couple things I would like for you to comment on. It may be 

awkward, I don’t know. I am not trying to be awkward. I want us 

to have a good bill, as you do. And it is terribly important. But I 

would like to know two things. What is your reaction to the recent 

GAO report on crop insurance that was requested by one of the 

Senators? Just your brief comment, all of you. 

Mr. WEBER. Yes, I will take that, Congressman. You know, we 

feel that a premium subsidy limit would be very damaging to the 

Federal Crop Insurance Program. We feel it would have a detrimental effect on participation. You know, I mentioned in my comments that it would discriminate against not only large farmers 

but we would even argue that those farmers that would touch that 

limit aren’t considered overly large by today’s standards but also 

by high-value crops. We have situations where in California, as an 

example, a wine grape grower would hit a cap at 56 or 58 acres. 

So we think it is very intrusive. 

Mr. BOSWELL. Okay, thank you. Please. 

Mr. MCSHERRY. I would agree. Our opinion is we think that coverage would start to be decreased as the subsidy was reduced. We 

also think that it would open up the door for request of ad hoc payments. So, yes, we do not favor that at all. 

Mr. BOSWELL. Okay, thank you. 

Ms. GERDES. There is one unintended consequence that has not 

been thought about in regard to this discussion that I haven’t 

heard in the last 2 days. On my book of business, my average acres 

2295

to reach that limit would be 568 acres. The reason that number 

varies from area to area so dramatically is I live near the Missouri 

River, I insure an awful lot of ground in Iowa, Missouri, Kansas, 

and Nebraska. It is high-risk ground. Those people are the people 

you need in the program or you are going to have ad hoc disaster 

requests that you cannot handle. 

Mr. BOSWELL. Appreciate the comments. Again, I don’t want to 

make it awkward for you but I need to know. We need to know. 

What are your thoughts on the American Farm Bureau Federation 

proposal for catastrophic loss coverage up to a certain level that 

would be available to all commodities, including specialty crops 

then utilizing the privately delivered crop insurance products beyond the protection level provided by the government? Just briefly, 

my time is short. 

Mr. MCSHERRY. Okay, yes, I will start. From a crop insurance industry perspective what we think is important is that as various 

concepts are being crafted that it is very important that we mitigate the interaction between any such program and the current 

successful Federal Crop Insurance Program. And our concern from 

an industry perspective is that it creates a great deal of interaction 

that we feel would be harmful to the current Federal Crop Insurance Program. 

Mr. BOSWELL. Thank you. 

Ms. GERDES. I agree absolutely. 

Mr. BOSWELL. Thank you very much. 

With that, Mr. Chairman, I am going to yield back. 

The CHAIRMAN. All right. Thank you, Mr. Boswell. 

Mrs. Schmidt for 5 minutes. 

Mrs. SCHMIDT. Thank you. And I am going to start with Mr. 

Weber, my good friend from Cincinnati. 

Mr. Weber, there has been some interest in transferring some of 

the work that companies do back to the government. In fact, there 

is one proposal that says the Farm Service Agency should actually 

administer crop insurance. What is your view on having the government assume a greater role in crop insurance delivery either in 

part or in full? And anybody else that wants to add to it. 

Mr. WEBER. Yes, thank you for the question. We feel that this 

recommendation falls into the we have been there, done that category. In the early days for private sector delivery which began in 

1980, this industry did have dual delivery both through the private 

sector and through the public sector. And that was ultimately discontinued in the early to mid-1990s I believe. And the reason it 

was discontinued was because public delivery could not compete 

with private sector delivery in terms of the efficiency and the service levels that we have been able to provide. 

And second, the private industry has spent 30+ years developing 

its infrastructure, its system capabilities and the technical knowledge to deliver this system. And we think it would be extremely 

difficult for the government sector to be able to duplicate those 

services that our farmers and ranchers come to expect of the private sector delivery system. 

Mrs. SCHMIDT. Does anybody else want to add to it? 

Mr. MCSHERRY. Yes, I would. Thank you. 

2296

I would just echo Mr. Weber’s comment and probably attribute 

it to one thing and that is service. We distribute or provide a program at the kitchen table, at the lunch table, at the dinner table, 

in the combine, on the tractor, in the machine shed from 6:00 a.m. 

to 9:00 p.m., 7 days a week. Thank you. 

Ms. GERDES. I would just add to that if we need new computer 

equipment in order to explain any item, if we need a new IT system to explain the new farm program and how it interacts with 

crop insurance, we invest and provide it to our farmers. We invest 

in education. I probably have done more education on SURE Program and on the ACRE Program to my producers than anyone in 

the area. 

Mrs. SCHMIDT. Thank you. 

Mr. Weber, I am going to ask you a follow-up. I believe we all 

need to continue to work on improving crop insurance. Given our 

current budget constraints, what do you think are the most significant things we should consider that could improve crop insurance 

for those crops and regions that have fallen behind? And then I will 

ask anybody else to add in. 

Mr. WEBER. Sure. While the private industry is very proud of the 

participation levels that we have been able to achieve over the 

years, we do recognize that there are some areas of the country and 

some crops where participation levels are less or where the level 

of coverage purchased is less than what it is in other areas. And 

the industry has done a lot of work in that area developing new 

products. You know, as an example, for the 2012 year we had new 

products in the area of olives, pistachios, and so we continue to roll 

out new coverages. We continue to work towards enhancing current 

coverages. I know we have heard the concerns from the peanut 

growers as an example and the rice growers and we are currently 

in process of looking at the policy and working to try and increase 

the enhancement and attractiveness of crop insurance for those 

growers. But we recognize there is still work ahead of us. 

Mrs. SCHMIDT. Thank you. 

Anybody else want to add? Mr. McSherry? 

Mr. MCSHERRY. Just quickly, I won’t repeat what Mr. Weber said 

but probably the most important piece of that is there are basically 

three groups involved in the program and we just need to get those 

three groups together talking, figure out what everybody needs and 

put a program together to satisfy that need. 

Mrs. SCHMIDT. I will give you a very specific example of one of 

the frustrations of helping these folks. I have been involved in the 

periphery with the rice growers. They have been trying for 4 years 

to get a 508(h) product through RMA. And it is held up due to expert reviews, legal reasons, legal reasons that I simply do not understand. Having been through the 508(h) process I can tell you it 

is torture and it is very difficult to help producers get a product 

through that. 

Mrs. SCHMIDT. Thank you and I will yield back my 3 seconds. 

The CHAIRMAN. All right. The gentleman from Illinois, Mr. 

Hultgren, for 5 minutes. 

Mr. HULTGREN. Well, thank you so much. This is a very important topic and I appreciate you being here. And I know these are 

long days but very important for us as we get ready to address the 

2297

farm bill. And quite honestly, the most important thing I hear from 

my farmers in Illinois is crop insurance and how important that is 

to them, but also what do we do to improve it and protect it? I just 

have a couple questions. 

First of all, I will address one to Mr. Weber and maybe you have 

touched on this a little bit, but very specifically, what is your view 

on applying conservation compliance requirements to the receipt of 

Federal Crop Insurance Program benefits? 

Mr. WEBER. Yes, the industry position on the tie to conservation 

compliance is we feel that that tie ought to remain within Title I. 

We have concerns about conservation compliance being tied to crop 

insurance in that it can disrupt coverage, it can eliminate coverage, 

reduce program participation, and then obviously cause difficulties 

with the ag lenders when those things happen. Our position is we 

would highly encourage the Committee to contain the conservation 

compliance through Title I. 

Mr. HULTGREN. Okay. I wonder if each of you maybe could, if you 

have comments on this, you all understand the situation that we 

are in and the challenges that we are facing as we step into this 

work of writing a farm bill in these times. With deficits where they 

are today, government absolutely needs to tighten its belt everywhere it can. Crop insurance has already done its purpose saving 

taxpayers more than $12 billion. I wonder, do you believe it would 

save taxpayers more money in preempting any abuse of insurance 

if the Risk Management Agency involved agents and companies in 

the development process of policies and procedures, and if so, why 

isn’t that happening now? 

Ms. GERDES. I would welcome the opportunity. We have asked 

for the opportunity time and time again and sometimes we simply 

insert ourselves in the process to try and help. We are the ones on 

the ground working with the farmers and we could preempt a lot 

of the problems that you all hear when you go out into your districts to visit with farmers. I think it would be a major help. 

Mr. MCSHERRY. I would emphatically agree with Ruth on that. 

We have requested for many, many years to be involved in that 

process. We think we can bring some important views to the table. 

We think we can help avert a lot of problems before they become 

problems. We have had one recent success actually in talking to 

RMA where we were able to right some anti-rebating language and 

get that incorporated into the policy handbook. It is now 2012 it 

is starting to show up on the acreage report. So that was a small 

contribution that agents were able to make. And is it a fix-all? I 

wouldn’t sit here and say yes but it is a contribution. I think it is 

a step forward and I think that is what we can bring to the table. 

Mr. WEBER. I would also concur with the previous witnesses. We 

in the industry work hard to try and keep ourselves involved in the 

process. And if we have I guess a concern or a frustration at times, 

we feel that the voice that we have in product development and 

product improvement isn’t heard as loudly as it should be. We are 

concerned with at times the lack of transparency in terms of what 

is going on with product development within the agency and have 

a strong desire to be involved in that process to the extent possible. 

Mr. HULTGREN. My time is winding down. One more question I 

would ask if you have a comment, just a brief suggestion. You all 

2298

have vast experience in this. And I would just ask you to put yourselves in our shoes just for a minute and with the challenges we 

are facing I am going to start with Mr. Weber. You do understand 

I mean the budget constraints we are under. I wonder if you could 

just address one or two things, the most significant things we could 

do or could be considering to improve crop insurance for those crops 

in the regions that have fallen behind. 

Mr. WEBER. You know, we really don’t have a silver bullet in 

that regard. We feel one area where there is an opportunity for improvement and I believe Ruth touched on it earlier in terms of creating efficiencies between the agencies with data sharing and 

things of that nature. We believe that because the contractual relationship that we have with the producers and the financial risks 

that we have involved in the program that the data ought to come 

through the Federal Crop Insurance Program, be received by us 

first, and then efficiently pushed towards the Farm Service Agency. 

That would go a long ways to dealing with a lot of the data reconciliation issues that we have and a lot of the circumstances that 

Ruth touched on earlier. 

Mr. HULTGREN. I am out of time. Thank you very much. But any 

other suggestions you have, please let us know. 

The CHAIRMAN. I thank the gentleman. 

The gentlelady from Alabama, Mrs. Roby, for 5 minutes. 

Mrs. ROBY. Thank you, Mr. Chairman. Thank you all for being 

here today and I appreciate the vast experience here where you can 

help us through some of these issues. 

And I want to touch quickly on three things under the current 

rules. In some situations, a farmer is required to carry a failed crop 

to harvest and then they end up spending more money than the 

harvested crop is going to bring. So do you agree that these rules 

should be examined, and if yes, what are your suggestions on how 

to change them? 

Ms. GERDES. Where I live we have a lot of flooding issues and 

we will have half of a field gone and half of a field left. And so we 

deal with failed crops often. I think with failed crops you have to 

be very careful and very accurate to the area you are working in 

and make sure that you have something that is sound, does not 

promote moral hazard. With that said, there is nothing more frustrating as a farmer to have to go through a field with combine and 

harvest crop that it costs you more to harvest than it does to destroy it. In 2002 we had soybeans make more than our corn did 

and yet we harvested our crop. It was rather silly. 

I think there are ways to address this. My suggestion would be 

to get agents, companies, farmers, and RMA in a room and hide 

the key until they work it out. 

Mrs. ROBY. Sounds like a good idea. Anybody else want to comment on that? 

Mr. MCSHERRY. Just quickly and it goes back to some of my 

statements earlier. I think if we are involved in the process which 

we are currently for the most part excluded from issues like that 

could have resolution. 

Mrs. ROBY. And just another issue, should the prevented planting rules be reviewed to allow companies to be more flexible with 

2299

farmers in deciding whether or not that farmer qualifies for prevented planting? 

Mr. WEBER. Prevented planting would be the most, in my opinion, difficult provision of the policy to work with from a company 

perspective. There is a great deal of subjectivity involved in terms 

of whether an acre should or shouldn’t qualify for prevented planning. The rules oftentimes can be ambiguous and from a company 

standpoint we think there is a considerable amount of room for improvement in terms of enhancing the prevented planting coverage 

within the policy. 

Mrs. ROBY. Any other comments? 

Ms. GERDES. Absolutely. I happen to be one of the people that 

got prevented planting put in the policy in the late 1980s when we 

were not able to plant. And prevented planting is difficult. You 

need to really understand the rules and hopefully we can get those 

explained to the farmer correctly. It is very ambiguous sometimes 

and a clearer set of rules would be very helpful. 

Mrs. ROBY. Well, any input that you can help provide us with to 

do that. Double-cropping soybeans with wheat is a common practice 

in Alabama and the question is should soybean final planting dates 

be adjusted to accommodate situations where adverse weather such 

as rain delays the wheat harvest which in turns delays the soybean 

planting? So if you could address those and if you want to overlay 

your answer to other similar situations, that would be fine. 

Ms. GERDES. Well, I don’t have any clients in Alabama. 

Mrs. ROBY. I know you don’t. 

Ms. GERDES. But I believe the best thing to do in these situations 

is for agents, farmers, and RMA to work closely with agronomists 

to define what is a feasible option in their area. I know I work with 

several agronomists all the time that my clients use and that has 

been enormously helpful in getting some of the changes that we 

have gotten in our area. 

Mrs. ROBY. It goes to the point again that the one-size-fits-all approach isn’t going to work when it comes to crop insurance programs because of the way things happen in different parts of the 

country. Any other comments? I have about 30 seconds? Thank you 

very much. 

Mr. Chairman, I yield back. 

The CHAIRMAN. The gentlelady yields back. 

The gentleman from California, Mr. Costa, is not a Member of 

this Subcommittee but has joined us today and I have consulted 

with the Ranking Member and we are pleased to welcome him to 

join us in the questioning of the witnesses. So, Mr. Costa, 5 minutes. 

Mr. COSTA. Thank you very much, Mr. Chairman and Ranking 

Member Boswell, for allowing me to join this important hearing. 

First, I would like an opportunity before I question the witnesses 

to ask unanimous consent to submit for the record testimony of a 

witness that I had requested. And I will testify you both tried to 

work with me but it was not possible, but in lieu of that I would 

like to submit——

The CHAIRMAN. Without objection. 

[The information referred to is located on p. 2339.] 

Mr. COSTA. Okay, thank you very much. 

2300

Federal Crop Insurance Program is an essential risk management tool I believe for America’s farmers. I think we all believe 

that. Crop insurance agents are farmers’ point of contact with the 

entire Federal Crop Insurance Program, the agents are and you 

represent them. And particularly for growers who are involved in 

specialty crops, the expertise and the effort of insurance agents is 

critical for completing timely and accurate applications and claim 

forms and the submissions to some, what, I guess 15 private insurance companies across the country, not only across the country but 

of course in California. 

I would like to address a particular concern about the agent administrative operating allowances and agent commissions that 

seem to be more problematic at least out in California. The administrative operating allowances paid for by the USDA to the private 

insurance companies tripled between 2000, 2009 I am told and the 

average range of commissions per policy had increased significantly 

during that time I understand. I need to try to figure out how we 

deal with that. 

However, the Standard Reinsurance Agreement that was negotiated in 2010 between the USDA and the Risk Management Agency with the RMA trying to control the growth of these administrative and operating costs has particularly impacted agents out in 

our area. The Risk Management Agency created an agreement with 

private insurance companies that imposed a nationwide, acrossthe-board cap or cut in the administrative and operating payments 

an agent commissions. It has had a devastating effect on agents 

and specialty crops in states across the country that focus on specialty crops, especially in California. And while A&O payments continue to rise I understand in program crop states while specialty 

crop states have experienced double-digit losses because of the administrative and operating cost. I am told, Ms. Gerdes, that you 

are an expert on all of this so would you please describe the burden 

placed on specialty crop insurance agents by the arbitrary cap and 

commissions as it relates to the Standard Reinsurance Agreement. 

Ms. GERDES. I guess you are called an expert if you have been 

around a long time. Mr. Costa, I would first like to say thank you. 

Thank you for caring enough about this issue to come. Jordan 

Roach is Vice President of the CIPA agents and he is a California 

agent and a very good friend of mine. We in Nebraska, Iowa, Illinois don’t have a good Federal Crop Insurance Program if it doesn’t 

work in California, Florida for the specialty crops. Jordan has been 

hurt very, very badly by this SRA and I believe it was an illegal 

and a bureaucratic overreach of the power of RMA to put that in 

the SRA. 

Mr. COSTA. Because my time is going, is it correct to understand 

that the caps have never been placed on agents and they are not 

a party to the Standard Reinsurance Agreement? 

Ms. GERDES. Absolutely. And specialty crops are hit very hard 

because their commodity prices didn’t enjoy the great big rise that 

we have enjoyed in the Midwest. So they got a double whammy. 

Mr. COSTA. And so you would say that this agreement is unfair 

that was negotiated in 2010? 

Ms. GERDES. Absolutely. 

2301

Mr. COSTA. Don’t you think it should be as opposed to put in a 

cap that the market should be the place to determine what these 

operating costs, administrative costs are? 

Ms. GERDES. Absolutely. And the marketplace will determine 

based on what Mr. Boswell said in that you need a good crop insurance agent. If you go to a flat fee, you are going to make everybody 

the same and there is no incentive to do the extra things. 

Mr. COSTA. Well, as you know, I have a lot of agriculture 

throughout my district and throughout California and my family 

has farmed for three generations. With every conversation that we 

have had with regards to risk management agencies, the insurance 

companies, the Congressional offices, we have been told that everyone recognizes that, in effect, the Standard Reinsurance Agreement 

had a terrible, level of unintended consequences, especially as it relates to specialty crop agents. There is no question that injuries 

suffered by our members, particularly in those in California but 

Florida, Michigan, everywhere where they grow specialty crops. 

The only question in my mind, Mr. Chairman and the Ranking 

Member, is whether or not Congress is willing to act to save the 

program and continue to offer protection for the nation’s specialty 

crop producers. And obviously my time has expired but I thank you 

for allowing me to participate. I think this is an issue we are going 

to have to deal with in the reauthorization of the farm bill. 

The CHAIRMAN. Well, I would concur. And our opening statement 

yesterday lead point was don’t harm crop insurance. And a tangent 

of that would be to un-harm crop insurance—that is probably a 

poorly worded phrase. 

But I now turn to the Ranking Member for any comments he has 

and any last questions he might have, Mr. Boswell? 

Mr. BOSWELL. Just a couple things, Mr. Chairman. I will close. 

I appreciate the comments about specialty crop but I would like to 

just address the panel. The 2008 Farm Bill coupled 2011 SRA 

changed the way agents are compensated for delivery of the Federal Crop Insurance Program. Now, they have realized the full impact of these changes. Could you tell us just plain talk how this has 

impacted your agency? 

Mr. MCSHERRY. Yes, I would like to respond to that. And I will 

use my own agency as an example of the hundreds that are around 

the Midwest. When I first looked at the new SRA back in 2010 

probably December, I do what every other business does—I pull out 

my income and expense and I try and make projections on what 

those things are going to look like. I started out in 2011 assuming 

that I would take a 25 percent reduction in revenue and I started 

looking at the expense side to see what I could trim to accommodate for that. Obviously, I tried to skip the employee line. No one 

likes to lay off employees so we did what we could on all the other 

lines and we felt we came close. As we went through the sales discovery period in February, it was clear that 25 was not going to 

fairly represent the revenue reduction and we relooked at it and we 

were looking at more toward a 40 percent reduction in revenue. By 

the 1st of May I was forced to lay off one of my employees. That 

is the only line left that would contribute to that. At the end of the 

day when things were all done, my revenue for 2011 was down 51 

percent. 

2302

Mr. BOSWELL. Okay. Some have advocated payment limits and 

additional cuts to the farm program, so based on what you have 

said I guess a fair question is, in your opinion, what are the consequences of additional cuts and who would be hit the hardest? 

Anybody? 

Ms. GERDES. Additional cuts to the farm programs or additional 

cuts to crop insurance? 

Mr. BOSWELL. Payment limits and additional cuts to farm programs. 

Ms. GERDES. Payment limits in crop insurance would have dramatic effects and very drastic unintended consequences that I don’t 

think most people understand. Crop insurance simply cannot sustain any more cuts. It is that simple. Mr. McSherry talked about 

his office. I need to hire people. I cannot do it. I have gone to parttime help that I don’t pay benefits to in order to get the work done. 

We could create a lot of jobs if we would lift the cap. 

Mr. BOSWELL. Anybody else in the panel? 

Mr. WEBER. I thought I would just reflect on Chairman Lucas’ 

comments earlier. There is a substantial difference between Title 

I programs and Title XI programs. You know, it may make sense 

to have payment limits on Title I programs, but Title XI is insurance and our customers, they pay a premium for that insurance so 

our industry feels that the programs in the two various titles need 

to be viewed differently. 

Mr. BOSWELL. Well, thank you very much. 

Mr. Chairman, I appreciate the panels we have had over these 

last 2 days. I think we have learned quite a bit and I kind of remember saying too much about being down on the farm but did 

learn something else I am just going to share it with you. 

You know, if it ain’t broke, don’t try to fix it. So with that, I am 

just going to stop and thank you for your hard work and yield back. 

The CHAIRMAN. Well, I thank my good friend from Iowa. And I 

was teasing you about establishing your farm bona fides but they 

are well established. 

Real quickly, Mr. McSherry, just to make sure the record is clear, 

when the SRA was renegotiated last year, agents were not at the 

table and your right of legal redress against the Department was 

bargained away without you having any input into it at all. Is that 

an accurate statement? 

Mr. MCSHERRY. That is accurate. 

The CHAIRMAN. All right. I am not a lawyer; I am a CPA. Maybe 

I will have to find that lawyer someplace who can help me understand how somebody who is not a party to a contract can have 

their rights or whatever affected one way or the other. It is an interesting approach by USDA and RMA. 

So again I want to thank our witnesses on this panel as well as 

the ones we have already had. Make sure I get the right words in 

so that the department chair won’t jack me up about this deal. 

Under the rules of the Committee, the record of today’s hearing 

will remain open for 10 calendar days to receive additional and material and supplementary written responses from the witnesses to 

any questions posed by a Member. 

This hearing of the Subcommittee on General Farm Commodities 

and Risk Management is adjourned. 

2303

[Whereupon, at 12:40 p.m., the Subcommittee was adjourned.] 

[Material submitted for inclusion in the record follows:] 

2304

2305

SUPPLEMENTARY MATERIAL SUBMITTED BY JOE L. OUTLAW, PH.D., PROFESSOR AND

EXTENSION ECONOMIST-FARM MANAGEMENT & POLICY, DEPARTMENT OF AGRICUL- TURAL ECONOMICS, TEXAS A&M UNIVERSITY; CO-DIRECTOR, AGRICULTURAL AND

FOOD POLICY CENTER

During the May 16, 2012 hearing entitled, Formulation of the 2012 Farm Bill 

(Commodity Programs and Crop Insurance), requests for information were made to 

Joe L. Outlaw, Ph.D. The following are his information submissions for the record. 

Insert 1

Mr. HUELSKAMP. And that is one of the other concerns I have, and maybe, 

Dr. Outlaw, if I could ask you and the other folks to provide for the Committee 

the cost of production for each of these other commodities for our worldwide 

competitors, how close we are to those. That has not been part of this discussion 

at all, what is happening outside of the United States in terms of our ability 

to compete. Do you have those figures, or each one of you sometime can provide 

that later to the Committee? 

Dr. OUTLAW. We would have to provide them for you, but in essence—well, 

hopefully Keith knows the answers off the top of his head. I sure don’t.

There is not one single source that compares the cost of production across commodities for major producing countries. We developed this answer using information 

from the popular press specifically related to Brazil, publications from the European 

Union, USDA–ERS, OECD–FAO, and our own research estimates. The average 

2011–12 U.S. average production costs are corn—$3.71/bu, soybeans—$9.40/bu, 

wheat—$6.44/bu, cotton—$0.95/lb, and rice—$13.10/cwt. Published estimates of 

Brazilian corn costs would be 18% higher and soybean costs are 16% lower than 

U.S. estimates. Comparing to the European Union, cereals (includes wheat, barley, 

and corn) total economic costs are $8.59/bu which are significantly higher than estimated U.S. production costs. Cotton costs of production in South America are generally 20–30% lower than U.S. estimates depending upon the country. 

Insert 2

Mr. COURTNEY. Thank you, Mr. Chairman. 

I just have a quick question to follow up. Dr. Outlaw, you mentioned that ethanol policy changes could have an impact on corn prices. Well, there was one 

change that just happened in January when the tax credit expired. I was wondering if you could give us a little more detail about, first, did that really 

change much of anything; and second, what policies would you identify or specify that might have an impact? 

Dr. OUTLAW. Yes. There has been quite a bit of research done on this issue, 

and basically most people felt that the expiration of the VTEC was not going 

to have a big impact on the markets. It is the mandate that has the driving 

impact. If something happens to the mandate or we—and again, I use ethanol 

as an example because everyone is aware of it but there could be trade issues 

we would have within a foreign country that could have just as big of effects. 

But those are some of the things that I think would change the picture substantially. 

Mr. COURTNEY. So the analysis or study that has been done that you mentioned, I mean, have they actually kind of quantified what the impact of repealing the mandate would be? 

Dr. OUTLAW. Most of that work actually has, well, a lot of it has come out 

of Iowa State and maybe a couple of other places, and they have quantified it. 

I could get those numbers for you but I don’t them off the top of my head. There 

are some pretty recent articles on that.

There have been a couple of studies that address this issue. Both of them support 

my previous answer that the VTEC had very little impact on corn prices and that 

the RFS mandate was much more important to corn prices—although still a fairly 

small factor. One study from Iowa State by Babcock and Fabiosa that was published 

by CARD and one recent study from FAPRI at the University of Missouri by Thompson, Whistance, Westhoff and Binfield. 

In general, the CARD publication titled ‘‘The Impact of Ethanol and Ethanol Subsidies on Corn Prices: Revisiting History’’ provided the following summary. Corn 

prices increased by an average of $1.65 per bushel from 2006 to 2009. Only 14¢ (8%) 

of this increase was due to ethanol subsidies. Another 45¢ of the increase was due 

to market-based expansion of the corn ethanol industry. Together, expansion of corn 

ethanol from subsidies and market forces accounted for 36% of the average increase 

that we saw in corn prices from 2006 to 2009. All other market factors accounted 

for 64% of the corn price increase.

2306

As the name indicates, the FAPRI report titled ‘‘Renewable Fuel Standard Waiver 

Options during the Drought of 2012’’ was aimed primarily at addressing the impact 

of a proposed short-term elimination of the ethanol mandate. In their discussion, 

they did address the impact of the policies on corn prices. Their results indicated 

a relatively small negative impact on corn prices of eliminating the ethanol mandate. 

SUBMITTED JOINT STATEMENT BY HON. JOSEPH R. PITTS, MEMBER OF CONGRESS; 

AND HON. DANNY K. DAVIS, MEMBER OF CONGRESS

We believe that it is important for the Agriculture Committee to know that the 

current sugar program is responsible for the serious loss of U.S. food manufacturing 

jobs. Data available from the Department of Commerce indicates that 125,000 jobs 

have been lost in the sugar-using industry between 1997 and 2010. In our two 

States of Illinois and Pennsylvania combined, Commerce Department data shows 

that as many of 25,000 jobs have been lost between 1997 and 2007. 

Left unchanged, the current sugar program will continue to hurt American workers by overly restricting the supply of sugar in the U.S. market, thereby excessively 

driving up the cost of domestic sugar and encouraging the relocation of good American manufacturing jobs to Canada, Mexico, and other foreign countries. 

Left unchanged, the current sugar program will continue to hurt American consumers by increasing the price of every product made with sugar. A November 2011 

study by researchers at Iowa State University found that comprehensive reform of 

the Federal sugar program would save American consumers up to $3.5 billion each 

year. This cost amounts to about $40 per year for a family of four, which is a significant government cost for those families on a tight budget. 

Left unchanged, the current sugar program will continue to put inflexible government regulations between buyers and sellers of sugar, making the market less efficient and less able to respond to shifts in supply. The sugar provisions added to the 

2008 Farm Bill took away the ability of the Secretary of Agriculture to ensure the 

U.S. market is adequately supplied with sugar throughout the marketing year, 

causing unnecessarily tight inventories and thereby artificially raising the cost of 

sugar dramatically above the already high world market prices for sugar. 

Left unchanged, the current sugar program will continue to undermine the ability 

of our U.S. Trade Representative to open markets to U.S. goods in future trade 

agreement negotiations. The current treatment of sugar as a ‘‘sensitive product’’ 

needing special import protection means that every country with whom the U.S. negotiates also seeks to exclude its sensitive products from the prospective trade 

agreement. 

We have witnessed the destructive consequences of sugar policy on employment 

in our states, and therefore, we now call on the Agriculture Committee to bring 

about real reform of the Federal sugar program. This Committee should seize the 

opportunity to reform American sugar policy as part of the 2012 Farm Bill. The 

sugar program can and should be made more flexible, more market-oriented, less 

costly to consumers and food companies, less damaging employment, and more compatible with efforts by our trade negotiators efforts to open up export markets for 

U.S. commodities. 

Again, we cite the recent Iowa State University research, which show that real 

reform of the sugar program would generate up to 20,000 jobs per year in food manufacturing and related industries. For those of us in Congress who are truly serious 

about creating new jobs, there is no better place to start than reforming the sugar 

program. 

We urge this Committee to reexamine the sugar program with a view of how it 

affects all stakeholders and consider holding a Congressional hearing on the matter 

before producing a farm bill. We believe there is a way to balance the need for a 

safety net for sugar growers with consumers, sugar industry workers, food companies, export-oriented commodity growers, and others that are impacted by the many 

negative aspects of this program. If the Agriculture Committee fails to undertake 

significant reform of the sugar program, we will be left with no other option than 

to offer House floor amendments to the farm bill to achieve sugar policy reform.


112301134.eps
2307

Hon. JOSEPH R. PITTS, Hon. DANNY K. DAVIS, 

Member of Congress; Member of Congress. 

SUBMITTED STATEMENT BY WADE COWAN, KLINT FORBES, DAVID DICKERSON, WEST

TEXAS GUAR, INC. 

Chairman Conaway and Members of the Subcommittee on General Farm Commodities and Risk Management—thank you for the time, attention, and thoughtfulness with which you are approaching drafting the House version of the 2012 Farm 

Bill. 

As the future of U.S. farm policy is debated, West Texas Guar, Inc., the nation’s 

only processing facility for guar, and the guar producers that deliver to West Texas 

Guar, Inc., submit these written comments to you in order to highlight the growing 

importance of guar and its positive impact on sustainable agriculture and domestically produced energy. Furthermore, West Texas Guar, Inc., and its guar producers, 

would urge this Congress to adopt a farm policy that is equitable for all commodities 

and puts U.S. producers on a level playing field with one another. 

Concededly, guar is a crop that is often unfamiliar to those involved in production 

agriculture. However, the guar industry in the United States is growing. Guar is 

a Nitrogen-rich, drought-resistant legume that is well-suited to the semiarid regions 

of the United States. As a result, the producers who are currently growing guar and 

delivering product to our facility are located from the San Joaquin Valley in California, to the Southern High Plains of Texas. Guar is often planted on a rotational 

basis with other crops, such as cotton or peanuts. Guar is becoming an important 

tool for sustainable agricultural practices, because of the high nitrogen residue that 

is left after a guar harvest. In turn, the high nitrogen levels lead to significant soil 

quality and crop yield improvements. 

Today, not only is guar an ingredient in many foods and household products (guar 

gum), but, harvested guar is also a critical component of more environmentally 

sound oil and gas fracturing operations (‘‘fracking’’). When frack gel is made with 

processed guar, the need for toxic chemicals in the frack gel is eliminated. Currently, approximately 70–80% of the world’s guar is grown in India. But, as domestic oil and gas fracking operations expand, the U.S. guar industry must be prepared 

to meet the demands of expanding our domestic energy production. 

To be sure, there is an increasing demand for guar and guar products. Nonetheless, guar producers face the same risks as other agricultural producers—unpredictable conditions, severe weather events, volatile prices. Therefore, West Texas Guar, 

Inc. and the guar producers that deliver to West Texas Guar seek practical, sound, 

risk management tools. 

Most producers who are planting guar are often using guar on a rotational basis 

with more traditional commodities. Therefore, the growing guar industry in the 

United States echoes, and adds to, the litany of comments you have received this 

week from commodity organizations seeking a farm policy that is centered on providing a strong safety net for all agricultural producers. Simply put, farm policy 

should not create disincentives for producers who would otherwise follow market 

signals and elect to grow a different type of crop in a given year. West Texas Guar, 

Inc. supports a farm bill that treats all agricultural producers equitably. 

Farm bill proposals such as the Senate bill jeopardize a farmer’s ability to make 

planting decisions based on the market from year to year. A producer who is contemplating planting guar as a part of his rotational planting system, in lieu of the 

same commodity he has planted for the last 5 years, may now risk negatively affecting subsequent ARC ‘‘safety net’’ calculations; this is simply detrimental those producers who choose to implement environmentally sound production practices, as 

well as to the U.S. guar industry as a whole. 

Conversely, as was discussed by the Subcommittee during its May 16, 2012 hearing, the guar industry supports a bill that, despite a certain level of complexity, offers a number of risk management and safety-net options for all agricultural producers in lieu of a one-size-fits-all approach. As agricultural producers seek to diversify their operations, Federal farm policy should not preclude those efforts. 

Mr. Chairman and Subcommittee Members, thank you for all that you do for agriculture and domestic energy development. We look forward to working with you to 

provide any information you need as the 2012 Farm Bill develops, to ensure that 

U.S. guar producers are afforded the same risk-management tools as are available 

to other U.S. agriculture producers. 

Sincerely,

West Texas Guar, Inc.

2308

WADE COWAN, 

KLINT FORBES, 

DAVID DICKERSON. 

SUBMITTED STATEMENT BY LARRY GRAHAM, CHAIRMAN, COALITION FOR SUGAR

REFORM

Mr. Chairman and Members of the Committee:

These comments on the sugar program for the 2012 Farm Bill are submitted on 

behalf of the ‘‘Coalition for Sugar Reform,’’ which is comprised of the organizations 

representing companies who use sugar in their confectionery, bakery, cereal, beverage and dairy product and food manufacturing, as well as business advocacy, consumer, environmental, trade and other organizations that are concerned about the 

adverse effect of current sugar policy on the U.S. economy. 

We are disappointed that the Agriculture Committee denied our request to testify 

at either of the commodity hearings on May 16 or 17. Similarly, sugar-using companies were denied the opportunity to testify at any the of Committee’s field hearings 

across the country. In fact, we were further denied the opportunity to testify before 

the Senate Agriculture Committee on the need for sugar program reform. If Congress is truly concerned about jobs, why would it deny an open debate on a sugar 

program that is negatively impacting the interests of the 600,000 Americans employed by the sugar-using sector? 

The Adverse Effects of the U.S. Sugar Program 

We want and need strong and healthy domestic sugar producers and processors, 

but we are deeply concerned about a one-sided sugar program that was made worse 

by the 2008 Farm Bill, which further restricted the ability of the Secretary of Agriculture to allow in additional sugar imports when needed in the U.S. market. A government sugar policy placing severe restraints on both domestic production and imports has had a devastating impact on consumers and food companies. With the 

U.S. being a net importer of sugar—needing at least 3 million tons of sugar imports 

every year—continued protection of the U.S. sugar producing industry is no longer 

necessary, and is counterproductive to U.S. economic interests. 

A November 2011 study entitled ‘‘The Impact of the U.S. Sugar Program’’ examined the impact of the U.S. sugar policy on consumers and businesses, and found 

that comprehensive reform of the Federal sugar subsidies program would save 

American consumers up to $3.5 billion a year and generate up to 20,000 new jobs 

in food manufacturing and related industries. This study was conducted by Iowa 

State University researchers, who used an econometric model evaluating sugar 

prices, employment, imports, and exports. 

The research also found that sugar program reform would convert the sugar-containing product sector from what is now a net importer—to a new exporter, thus 

adding to the U.S. employment gain. Creating a more competitive sugar program 

should be a priority of this Committee, since the Government of Canada has not 

been shy about promoting the fact that ‘‘Canadian sugar users enjoy a significant 

advantage—the average price of refined sugar is usually 30 to 40 percent lower in 

Canada than in the U.S.’’ (see attached literature from Agriculture and Agri-Food 

Canada entitled: ‘‘Canada—North America’s Location of Choice for Confectionery 

Manufacturers’’). We would like to believe that the Agriculture Committee would be 

interested in at least discussing reform of a U.S. Government sugar policy that is 

allowing Canada to claim it is ‘‘the location of choice for manufacturers of confectionery products wishing to supply North America.’’

The U.S. sugar program is a textbook example of the consequences of excessive 

government intrusion in the marketplace. Tightly controlled supplies by the government have caused historically high domestic sugar prices that have approached as 

much as twice the level of record world prices. The following is a summary of the 

implications of a flawed sugar policy: 

Loss of U.S. Manufacturing Jobs: Excessively high domestic sugar prices provide 

a huge incentive to relocate U.S. food processing jobs overseas. A number of factors 

are used to determine whether or not to relocate overseas, including labor and foreign exchange rates, but the prospect of much lower sugar input costs as a key ingredient provides a powerful incentive to relocate food processing overseas. The last 

several years have seen several examples of the migration of food manufacturing 

jobs to overseas locations and there has been a sharp difference in job growth within 

the food industry, with those segments that use sugar losing jobs, while non-sugarusing segments experienced modest job growth. 

2309

U.S. Department of Commerce data indicate that 125,000 sugar-using industry 

jobs were lost between 1997 and 2010. In light of these tremendous job losses, this 

Committee has a responsibility to ask whether an alternative program design could 

mitigate these effects, while still offering protection for producer incomes. 

Loss of Trade Opportunities: The current Federal sugar policies are difficult to 

reconcile with the future direction of international trade policy, and U.S. trade liberalization objectives and obligations. Denial of additional Australian sugar market 

access in the U.S.-Australia FTA has led to serious adverse consequences that continue to plague other segments of our economy today. In the aftermath of excluding 

sugar from the Australian FTA, South Korea insisted on and obtained the exclusion 

of rice from the Korea-U.S. FTA. 

In fact, every country with which the U.S. now negotiates seeks to exclude its sensitive commodities from the prospective trade agreement. Many sectors of the U.S. 

economy that rely on trade are denied export opportunities because of the special 

treatment that we provide to U.S. sugar growers. Excessive protection of U.S. sugar 

growers comes at a cost in minimized market expansion for U.S. rice, beef, pork, 

poultry, corn, soybean, and other commodity exports. 

For these reasons, we believe it is time for the Committee to reassess its sugar 

policy as part of a broader reaffirmation of an open trade agenda for the U.S. Future 

sugar policy should be redesigned to be more closely aligned with the realities of 

world trade and promote greater market orientation to the benefit of all of U.S. agriculture. 

Cost to Consumers: American consumers would gain up to $3.5 billion a year in 

savings on a wide variety of food products if the sugar program were reformed. This 

additional cost amounts to about $40 dollars per year for a family of four, and for 

those families on a tight budget, this unnecessary expense resulting from a government policy is quite significant. 

Cost to Taxpayers: A special feature added to the 2008 Farm Bill requires USDA 

to buy surplus sugar and sell it to ethanol plants at a loss. Since ethanol plants 

will not pay more for sugar as a feedstock than they could pay for an equivalent 

amount of corn, USDA will effectively be forced to buy sugar at the program loan 

level and sell it to ethanol plant at a fraction of the sugar support price. The Congressional Budget Office has forecasted that this sugar program component will cost 

taxpayers $193 million over the next 10 years. 

Environmental Harm: The Florida Everglades have been seriously harmed by runoff of phosphorous, pesticides and wastewater. Water quality has suffered and nutrients from fertilizer run-off have spurred non-native life, such as cattails, that strangles the food supply of many land and water species. The 400,000 acres of sugar 

production at the top of the Everglades has disrupted normal water flow, causing 

problems all of the way to Florida Bay. Clearly, the generous sugar program has 

promoted the growth of sugar production in sensitive environmental wetlands. 

Sugar Program Differences from Other Commodities 

Compared to government support policies for other commodities, the sugar program is different in several respects. Two of the most important are import quotas 

and marketing allotments, both of which affect the availability, timing and control 

of supplies in the marketplace. 

Sugar is one of the few U.S. commodities whose domestic program relies on import quotas (also called tariff-rate quotas or TRQs), which set limits on how much 

sugar can be shipped to the U.S. every year from each of 40 countries that exported 

sugar to the United States 30 to 35 years ago. Sugar imports above the relevant 

TRQ are subject to what is intended to be a prohibitive tariff. For raw sugar imports 

above the TRQ, the tariff is 15.36¢ per pound and for refined sugar the over-quota 

tariff is 16.35¢ per pound. 

In addition to import quotas, sugar is now the only U.S. crop commodity employing marketing allotments that serve as mandatory supply constraints. Most other 

program crops had acreage controls until the mid-1990s, but policies were changed 

in the 1996 and 2002 Farm Bills to meet the challenges of an evolving marketplace 

and the realities of international trade, including the Uruguay Round Agreement on 

Agriculture and the North American Free Trade Agreement. 

The 2008 Farm Bill also established the feedstock flexibility program, which mandates that in times of surplus, the government must buy sugar and re-sell it to ethanol plants at a loss. Although this program has not been used because of shortages 

of sugar, when it is used, it will come at the expense of U.S. taxpayers, who as consumers are already paying more for sugar than they should. No other commodity 

has this program feature. 

However, the most startling difference between the sugar program and commodity 

programs is the dramatic inequity of the benefits provided to sugar growers over 

2310

other agricultural producers. In 2011, the average sugar grower received an average 

benefit of $512,000 for the year. In comparison, the average farm operator who received direct payments from the government received less than $12,000 (based on 

2009 data). 

The Difficulty of Administering Import Quotas 

The United States is obligated by the World Trade Organization (WTO) rules to 

import minimum amounts of both raw and refined sugar. The WTO minimum required import quota is 1,231,484 short tons for raw cane sugar, but only 24,251 

short tons for refined sugar. Importing mostly raw sugar helps maintain throughput 

in our nation’s cane sugar refineries, which is important because this part of the 

sugar industry has been shrinking for many years. However, there are times 

throughout the marketing year when available domestic sugar inventories are so 

low that refined sugar must be imported to avoid disruption of food product supply 

chains. 

For the past 3 decades, Congress has burdened USDA with the challenge of determining the quantity and timing of announcing the additional import quotas above 

the amounts supplied by the WTO minimum import quota and other existing trade 

agreements. The government supply-control policy has proved to be difficult, if not 

impossible for USDA to accurately forecast market fundamentals, the effects of nature (i.e., droughts, floods, Hurricane Katrina’s idling of a large sugar refinery for 

several months, etc.), a refinery explosion, trade agreements, and consumer trends, 

to name a few. 

The sugar TRQ supply-control tool has increasingly adversely affected the U.S. 

sugar-using sector, especially after additional constraints were imposed on the flexibility of the Secretary of Agriculture to administer the program in the last farm bill. 

The 2008 Farm Bill requires USDA to set the TRQ at the WTO minimum at the 

beginning of each marketing year in October, even if the U.S. is in need of several 

hundred thousand tons of sugar beyond this amount. Moreover, USDA no longer has 

the authority to allow in additional sugar imports for the first 6 months of the marketing year (i.e., until April 1) unless there is an ‘‘emergency shortage.’’ Unfortunately, historically high sugar prices caused by a government policy designed to severely restrict supplies apparently do not qualify as a trigger to allow much-needed 

imports. 

Despite the best efforts of USDA, the TRQ policy tool is difficult to administer 

efficiently and effectively and has frequently resulted in market dislocations. For example, in 2010 U.S. supplies of sugar were so tight, that U.S. food manufacturers 

were forced to pay what was supposed to a prohibitive tariff on 200,000 of sugar 

imports just to meet their basic needs. 

In other instances, USDA has announced several import quota increases for refined sugar, but these quotas were less effective in increasing refined supplies than 

expected, largely because of problems that are not of USDA’s making. For U.S. 

sugar users, the sugar to make their products needs to be refined to a polarity of 

99.8 or 99.9, but U.S. Customs and Border Protection considers any sugar with a 

polarity of 99.5 or greater to be refined sugar, and therefore eligible to fill a refined 

sugar quota. The net result is that sugar with a polarity of 99.6 or 99.6 can be imported as refined sugar, which exhausts the available refined quota, but it does not 

immediately add new refined sugar needed in the U.S. market, since it requires further refining in the U.S. before it can meet normal U.S. manufacturing standards, 

and be delivered to an industrial sugar user. Thus, USDA’s intentions to add refined 

sugar to the market have been frustrated, with the actual available amount of refined sugar imported under the quotas being less that the announced quota amount. 

Another TRQ problem concerns the type of quota that has been established for 

refined sugar. A portion of the quotas may be entered into the U.S. on a ‘‘first-come, 

first-served’’ basis, meaning it is open to all origins, but if early-arriving cargoes fill 

the quotas, then sugar that has not yet arrived will not benefit from the announced 

TRQ and may be charged the prohibitive over-quota duty if it is imported. 

These examples show the problems and limitations associated with the TRQ as 

a policy tool. If sugar policies were modified, so as to make the TRQ unnecessary 

or less important, we believe that these particular problems would have been addressed more efficiently and effectively. If a TRQ is still used in the future, we are 

interested in pursuing administrative or legislative remedies to these and other difficulties of TRQ administration. 

Problems with Marketing Allotments 

Current U.S. sugar policy requires the Department of Agriculture to manage the 

domestic supply of sugar though marketing allotments. These legally-binding sales 

quotas are applied to all domestic sugar processors, and establish the maximum 

2311

quantity of sugar they are permitted to sell during a fiscal year. USDA is required 

to administer this policy tool in an attempt to balance the conflicting goals of limiting domestic production, maintaining an adequate balance of domestic beet and 

cane sugar supplies, meeting import requirements as required by trade agreements, 

and avoiding forfeitures. 

Marketing allotments were enacted in the 2002 Farm Bill at the request of the 

U.S. sugar growers, in an effort to restrict supplies and raise the prices their customers must pay. Another stated purpose of the allotments is to avoid Federal Government forfeitures that result when sugar price support loans cannot profitably be 

repaid and the collateral for these loans—raw or refined sugar—is forfeited to the 

government in settlement of the loan. 

Such forfeitures are infrequent, but costly. In fiscal year 2000, about 1 million 

tons of sugar were forfeited at a taxpayer cost of nearly $500 million. Despite 

USDA’s best efforts, the use of marketing allotments has also resulted in several 

instances of market distortions, including volatile prices, production limitations and 

supply shortfalls. 

In the past, there have been limited domestic stocks of perfectly good sugar that 

sellers were willing to sell, and users were willing to buy, but these stocks were 

‘‘blocked’’ from the marketplace because of the allotment system. In other words, 

buyers and sellers of sugar could not come together to consummate a business 

transaction that was in their mutual interest until they got permission from the 

government. The result was to exacerbate the already-severe logistical problems 

that beset sellers and buyers alike, and further limit the availability of sugar to the 

marketplace. 

Even at its best, government usually cannot react as quickly as the marketplace 

demands, especially in turbulent times when all buyers and sellers are scrambling 

to match up available supplies with pressing demands. In that kind of environment, 

it is problematic to have a policy which says it is illegal to sell sugar until the government decides otherwise. 

Sugar Policy Changes to the 2008 Farm Bill Made a Bad Program Much 

Worse 

At the sugar lobby’s behest, the 2008 Farm Bill established a floor under marketing allotments, so they cannot ever be set at less than 85 percent of estimated 

domestic sugar consumption, regardless of supply conditions. From a budget standpoint, the 85 percent floor’s most significant drawback is that it eliminated USDA’s 

ability to control sugar program costs through marketing allotments. 

Instead, USDA would be required to purchase surplus sugar in the open market 

and resell it to biofuel plants as an ethanol feedstock. These sales will require large 

taxpayer-funded subsidies because in the U.S. sugar market, sugar cannot compete 

with corn as an ethanol feedstock on the basis of price. 

If USDA had the flexibility to reduce marketing allotments below 85 percent of 

domestic demand, it would be unnecessary to spend taxpayer funds on sugar-for-ethanol schemes. The burden of storing any surplus sugar would fall on sugar processors—as these processors have continually claimed they preferred. 

Eliminating the 85 percent floor would require that the sugar sector shares in deficit reduction along with other crops. Contrary to sugar growers’ claims, CBO does 

not consider the sugar program to be ‘‘no net cost,’’ since as previously mentioned 

it has been assigned a $193 million, 10 year cost. 

Final Observations 

It our hope that Members of Congress will join us to reform a Federal sugar policy 

crafted to strangle the supply of sugar and artificially inflate domestic sugar prices 

well above world market prices. A sugar policy that now pushes U.S. market prices 

so high that the price support feature of the sugar program is no longer relevant 

begs the question of whether the loan component is even necessary. 

At a time when U.S. farm policy is moving away from intervention in the marketplace and the various commodities are facing program reductions, the Committee 

should consider similar reforms for sugar growers and processors. We believe the 

2012 Farm Bill should fix the inequities in U.S. sugar policy that benefit only a few 

to the detriment of many. A Federal sugar program designed exclusively for sugar 

growers and processors to the detriment of the rest of the U.S. economy has very 

real consequences, including sugar supply shortages, excessively high sugar prices, 

consumer costs, lost jobs, inhibition of new export opportunities, and relocation of 

manufacturing facilities overseas. 

The next farm bill should feature greater market orientation, which will address 

these problems. 

2312

We are disappointed that the Committee with jurisdiction over the sugar program 

was unwilling to allow us the customary 5 minutes to testify during its 2 days of 

hearings on the commodity title, so we could describe the problems caused by the 

sugar program. However, we would welcome the opportunity to work with the Committee to craft a balanced sugar policy that accommodates the needs of all stakeholders who are affected by U.S. sugar policy.

2313

ATTACHMENT


112301128.eps

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2315

SUBMITTED STATEMENT BY HON. GEORGE D. GREIG, SECRETARY, PENNSYLVANIA

DEPARTMENT OF AGRICULTURE

Thank you, Chairman Lucas, Ranking Member Peterson, and Members of the 

Committee, for the opportunity to provide written testimony regarding the need for 

efficient and effective risk management tools in the farm bill. Such tools play an 

important role in providing our nation’s farmers with financial security in times of 

increasingly volatile crop prices, input costs and the threat of natural disasters. 

With $5.7 billion in cash receipts and $57 billion in total economic impact annually from production agriculture, Pennsylvania farmers and agribusinesses are the 

leading economic driver in our state. The dairy industry generates more than $1.6 

billion in on-farm cash receipts, which represent about 42 percent of Pennsylvania’s 

total agricultural receipts. 

These statistics demonstrate the importance of the 2012 Federal Farm Bill—in 

particular, the risk management and commodity programs to the future strength 

and vitality of Pennsylvania agriculture. Without strong commodity programs and 

crop insurance, natural disasters or downturns in the nation’s economy have the potential to cripple states’ agriculture economies. Because agriculture is so critical to 

our commonwealth, it is imperative to take this opportunity to speak to the importance of maintaining strong commodity programs, risk management tools and crop 

insurance in the next farm bill, offering the following suggestions. 

Livestock Gross Margin for Dairy Cattle 

With commodity prices becoming increasingly more volatile, risk management is 

a critical part of any dairy farm’s business plan. Livestock Gross Margin for Dairy 

(LGM-Dairy) is an important tool for dairy farms in Pennsylvania and across the 

U.S. dairy industry. Dairy producers can purchase an LGM-Dairy insurance policy 

based on the expected margins (milk price minus feed costs) as a means of adding 

more predictability to their cash flow. The program offers flexibility, affordability, 

limited record-keeping requirements, a simplified loss adjustment procedure, and 

does not prevent a producer from realizing the upside of the market. It is also a 

workable tool for new and beginning farmers. 

As you debate the next Federal farm bill, I urge you to include language that 

graduates LGM-Dairy from pilot status, making it available as a regular crop insurance program. LGM-Dairy is available in 48 states and is becoming widely recognized by the industry as a valuable risk management tool. Few programs have been 

as well received. With updated modifications to the program in 2010, the demand 

for LGM-Dairy now far exceeds its availability. In recent months, the policy sold out 

in minutes when limited dollars were allocated to the program, resulting in many 

Pennsylvania producers unable to take advantage of this valuable tool. 

Legislative language for other Federal Crop Insurance tools has underwriting capacity levels at ‘‘such sums that are necessary.’’ Removing the LGM-Dairy program 

from ‘‘pilot status’’ and authorizing funding levels for the program identical to the 

corn and soybean crop insurance programs will provide farm families with a valuable tool to protect their business against the next downturn. 

LGM-Dairy becomes even more important if the next farm bill links market stabilization to margin insurance. Small producers must have viable risk management 

and safety net options if they choose to opt out of the proposal set forth in the Dairy 

Security Act. 

Dairy Policy Recommendations 

• Alternative Risk Management and Safety Net Options for Dairy Producers—Provisions should be included that allow producers to participate in either the 

MILC Program up to a cap 3 million pounds per year, or the Livestock Gross 

Margin for Dairy.

• Federal Milk Marketing Order (FMMO) Reform—The farm bill should not mandate a two-class system for pricing. However, the current system should be simplified and the current end-product pricing formula be streamlined through the 

formal USDA hearing process. Specifically, any ‘‘make allowances’’ and estimated yield factors should be eliminated from the formula.

• Producer Financial Management Tools—Even with proposed efforts to reduce 

margin volatility for producers through changes in milk pricing policy, some volatility in a competitive marketplace will remain. This will mean that producers 

will see wide variation year to year in their gross revenue streams and annual 

profits. Therefore, a new program, as recommended by the USDA Dairy Industry Advisory Committee, to offer dairy producers a tax deferred savings accounts would be a valuable financial management tool.

2316

* Editor’s note: only pages 1–3, and 8 were attached to the record submission. 

• Current Programs—Changes noted above should be done in concert with eliminating the existing Dairy Product Price Support Program and Dairy Export Incentive Program.

Thank you again, Chairman Lucas, and Ranking Member Peterson, and Members 

of the Committee, for your consideration of the Pennsylvania Department of Agriculture’s views on this critical matter and for your service to the United States of 

America in these challenging times. We urge you to reauthorize the farm bill in a 

manner that sustains the integrity and effectiveness of risk management and commodity program funding that meets our national needs. 

SUBMITTED STATEMENT BY GARRETT SMITH, PRESIDENT, AMERICAN POP CORN

COMPANY; ON BEHALF OF POPCORN INSTITUTE

The 2012 Farm Bill Should Not Devalue Acres Currently Planted to Popcorn Nor Dis-incentivize Future Popcorn Production 

Chairman Conaway, Ranking Minority Member Boswell, and Members of the Subcommittee: I am Garry Smith, President of the American Pop Corn Company of 

Sioux City, Iowa. I am submitting these comments on behalf of my company, the 

Popcorn Institute (representing the firms which contract for, process, and market 

the great majority of the popcorn grown in the United States), and those thousands 

of U.S. farmers who grow popcorn as part of their crop rotation. 

One of the basic pillars of farm program modifications has been to ensure that 

those changes do not alter farmer planting decisions or penalize farmers who have 

followed the rules of the current farm program. We respectfully ask the Subcommittee to ensure that program changes do not disadvantage one commodity 

versus another. 

Popcorn is often grown on base acres, just like dent corn and oilseeds. Most farmers grow popcorn under contract, with the price the farmer receives on delivery commonly calculated as a multiple of the price of corn on the Board of Trade. These 

farmers currently receive direct payments on their base acres, including those planted to popcorn, and are subject to conservation and AGI limitations, just like any 

other corn/oilseeds producer. 

As the Subcommittee knows, direct payments were ‘‘decoupled’’ from the crops actually planted under the 2002 Farm Bill. The farmer received direct payments on 

his base acreage no matter what he produced on those acres—with the exception 

of fruits or vegetables. A farmer can grow as much or as little popcorn as he wishes 

on those base acres—it does not affect his direct payments. A farmer who raises 

popcorn for the first time on base acres is still eligible for direct payments. 

Popcorn acreage has been ‘‘considered as regular corn acreage for the purposes of 

establishing corn base acres on the farm’’, since 2003. The acres previously planted 

to popcorn are currently included in the farmer’s corn base. There has been some 

misunderstanding about these modifications to popcorn in the 2002 Farm Bill. Attached to this testimony is a 2003 notice from the Farm Service Agency (FSA) that 

makes abundantly clear the fact that USDA considered popcorn as eligible for the 

benefits afforded to other ‘‘covered commodities’’. (FSA Notice DCP–76, issued October 1, 2003, is attached).* 

We understand and support the necessity that farm program costs be reduced 

sharply. We only ask that whatever is done is not punitive to popcorn producers. 

If ‘‘base acres’’ are ended and replaced by a definition of ‘‘covered acres’’ that leaves 

popcorn out, the popcorn farmer is hurt two ways:

First, under the provisions contained in the Senate Agriculture Committee 

draft, the popcorn producer, while losing direct payments on his acreage counted as corn acres, would be ineligible for any new ‘‘shallow loss’’ coverage on his 

popcorn acres. His risk of growing popcorn increases sharply. A farmer most 

likely will reduce or eliminate his popcorn acres and the cost to the consumer 

(including export markets) of popcorn will increase proportionately.

Second, and very importantly, a farm’s current market value is tied to its economic potential. If a farmer who has grown popcorn on part of his base acres 

loses those acres in the transition, he has immediately lost part of his farm’s 

capital value.

As you know, the Senate’s proposed new ‘‘shallow loss’’ program would provide a 

safety net against revenue losses which are by definition more likely to occur than 

those covered by the present ‘‘deep loss’’ coverage. If direct payments on base acres 

2317

now planted to popcorn are replaced by a new ‘‘shallow loss’’ coverage that does not 

cover popcorn, farmers would lose their incentive to raise popcorn. These acres 

might then be planted to dent corn, soybeans, or other crops eligible for the new 

insurance coverage, increasing the total acreage of those crops. 

In 2011, American farmers in fifteen states (Colorado, Kansas, Kentucky, Illinois, 

Indiana, Iowa, Maryland, Michigan, Missouri, Nebraska, New Jersey, Ohio, Pennsylvania, South Dakota and Tennessee) planted approximately 200,000 acres and 

harvested approximately 860 million pounds of popcorn. Approximately 30 percent 

of the U.S. popcorn crop is exported, with exports the fastest growing market. These 

export markets are very important. They depend on our ability to compete with 

other popcorn producers, most notably those in Argentina (where acreage is rapidly 

expanding). We will quickly lose export markets if a new farm program increases 

the cost of growing popcorn and leads U.S. producers to cut back on popcorn production. Once lost, export markets are slow to regain. 

A question has arisen whether a ‘‘shallow loss’’ or similar revenue insurance program for popcorn is feasible. We believe the answer, clearly, is yes. There is no difficulty determining yields. The RMA has yield data on popcorn covering 405 counties; for 266 of those counties, essentially where all significant popcorn is grown, the 

RMA data covers 5 or more years. 

What about revenue? While there is no Board of Trade value of popcorn, there 

is an easy alternative. The RMA has initiated a new ‘‘deep loss’’ revenue insurance 

program for popcorn this year. Members of the Popcorn Institute have provided a 

contractor approved by the FCIC with grower settlement data covering 5 years and 

approximately 70 percent of the U.S. crop, representing all significant popcorn growing counties. From this data the contractor developed, and RMA approved, a conversion factor to convert the Revenue Protection-Spring Projected Price for corn to a 

value for popcorn. The Pilot Program is in effect for the 2012 growing season. 

An alternate solution would be to consider popcorn ‘‘equivalent to field corn’’ in 

implementation of all aspects of the 2012 Farm Bill. The acres planted to popcorn 

could be reported as corn and the farm’s corn yield applied to those acres. This option would not directly tie a guarantee to actual crop revenue, but would provide 

some level of insurance to popcorn acres. 

We understand that the Farm Service Agency would want to make its own specific guidelines for a program for which it would be responsible. The Popcorn Institute Board of Directors has committed to provide the same data submitted for development of RMA’s revenue insurance program, as well as any other desired, to FSA 

under standard conditions of confidentiality. We are prepared to submit this data 

to FSA tomorrow. 

As the Subcommittee considers changes to the farm bill, we ask that you keep 

popcorn on par with corn and eligible for any new crop insurance programs. Let’s 

make it possible for America’s farmers to include popcorn as part of their diversified 

cropping systems. 

Thank you for your consideration.

2318

ATTACHMENT


112301130.eps

UJ'~[' n STA n ;s nl;I'ARTMI:NT OF AGItICUL TUIU; 

Fann Scr\'ic<: Ag~ncy Notice I>CP-76 

WashinglOn. OC 20250 

For: State and County Ofliccs 

I"dudin ~ Po .. ~om ror I>CI' 0 .... Ac...,.gc 

a nd 2003 Crop \'ear "rull, Vel:,cuble, and Wild I-tlce h Cel'lion 

Appro, d by: Acting [)eputy Administrator. Fann Programs 

A ~c ground 

The Agriculture Appropri:nions ACI of2003 {2003 Act), signed by lhe Pn:sidem On 

February 20. 2003. pro,-ides thaI: 

acreage planted 10. or pre,-ented ITom being planted to. pOlM'orn shall be cO 'lSiden."Il as 

rom acreage for ocr base purpose'! 

if a DCI' pa),ncnl yield for <:om is eSlablished for a fann before adding popcorn acreage, 

the same )'ieki shall be altriooled 10 the popcorn ac ... age 

if DCI' payment yields ha,,, nol been establisho."Il for com on a fam. befo ... adding 

popcorn 3CJ\:og~. the yield uuriootc"llto the popcorn acreage shall be cSl~blisho."Ilto rdk:ct 

the OCP <:orn yield on similar farms. 

As a resull of these changes. cc-nain owners off~rms with popcorn acreage history mayclcct 

to usc a"erage acreage history attriooted 10 popcorn ITom 1998 through 2001 10 ",tablish 

IXI' hases. as applieabio!. 

Owners ha\'c 1T0m now unlil 30 calendar days afler publicalion of the amended rcgulation to 

establish or rc,·is.: base acres and urdate crop )-ields. if applicable. The regulations at 

7 CFR Pan 1412 will be amended. State and Count y Ollkcs will be notilied as soon as the 

rcgulation is publisrn:<J. 

Ilistribution 

October I. 2003 Slate om"",,; Stale O tTlCes relay 10 County 

OtTlC"" 

4-1-03 
2319


112301131.eps

NOIi<~ nc r-76 

A Background (Continued) 

Because of the late jnelusion of popcorn as corn ""reage for DCI' purposes. a special 

2003 crop year fruit. ,·cgelable. and " 'ild ri<:e "xccption ... ·ill be applied to cenain m.it. 

'·<:getable. and wild rice plantings. 

Il pu."o .... 

This !lOticc: 

in fonn" State and County Qlliecs; 

c 

that 1998 thro ugh 2001 popcorn """,.gc history shall be considered corn ""re.ge for 

OCI' com base establis/llnen! purposes 

of t"" yield provision. for popcorn ""reage considered a. com ae""ge for ocr purposes 

that KC_ITSDO will ",a il" !lOtifICation leucr (Exhibit I) on or about April 2. 2003. to 

owners and produecrs with popcorn ""rcage history in any of the 1998 through 2001 

crop years that .re currently acti,'" On a 2002 fann 

that the Slatute provides that 2002 and 2003 OCP direct payments for corn rose 

acreage ,,·ill be issued On Or an"r OclOber 1.2003. if 1998 through 2001 popcorn 

ac",age is uS<.-d to establish the com rose on a fann 

that a 2003 crop y"ar fruit. ' ·"gctable. and wild ricc cc"J>l io n shan be applied 10 

cenain m.iI. '""getable. and wild ricc plantings on base acreage 

instrucls Slale and CounlyOflices 00"' 10 handle popcorn ""reage in the aUlomated 

syslem. 

lla)Ol' ~nd Yield l'ro,·\.5 ion" ror POlH'orn 

A Ae ..... ge /Ii'WI")' Cn-dil 

/ The popcorn ac"'.ge planted and/or prc"cnled from being planted fro'" 1998lhrough 2001 

V shall be considc"TI.-d COm ""reage for DCI' purpose'S. Accordingly. OWlll."TS who ek.",t aase 

Oplion 4 will .... -eei,·" a com base. equ.allo the sum of lhe 1998 Ihrough 2001 average acreage 

o flhe fol lowing ' 

oom 

popcorn. 

4-1-03 I'oge 2 
2320


112301132.eps

"' li<~ IlC I'-76 

2 Base ~nd Yi~1d I'roo-i,ions for I'opoorn (COIllinued) 

B Basi< n~1d I'rn"ision! 

Direcl and counter_q'Clical pa}1nC11t yields for com on a farm ~ha ll be used for popcorn. 

Accordingly. producers arc not n:<luin:d to submil production e,-Klenee on FSA-6S8r for 

popcorn. 

NOI.: Sc-.: subparagrapr..; C and D. 

C Ilir""l Pa)-".enl YIeld s 

/ n.c dire'Cl payrn""T1t yield for com on a farm shall be uS<.>d for the acre.ge plant .. >d 10 popcorn 

on the fann 

4-1-03 

NOI,,: COC shall assign a direct pay""'''t y;.:1d according to I-OCp. subparagraph 103 B if a 

PFC com y;.:1d did not c~i~t and a direct payment yiek! has not already Ix-.:n 

established for a f.rm. 

I) Counl.r-Cydinl Pay nl.nl "itkl. 

n.c counter-c)",lical payme"t yield for com on a farm shall be usc'tl for the acreage planted to 

popcorn on the farm. If the produclion fur a crop year is production from: 

popcorn only. COC shall assign production based on the aCluall"<lm grain yields on Or 

mon: similar farms for the specifIC year. according 10 I-ocr . paragraph 117 

NOlo: n.c assigned produclion is no! limilc>d 10 lhe county ""crage y;.:1d, 

bolh com and popcorn. CountyOflices shall dClermine the 101al production (com and 

popcorn) for lhe specific year. oosc>d on lhe aclU31 produclion y;.:k! of com. and ent ..,. lhe 

lolal production in the automated system according to I.DCP. paragraph 613_ 

[ u n'ple, Producer sutJrnits 12.000 busltcls produClion c,"Klene<.: for 80 acres of com. 

which is 150 bushel, pcr aCTe , The producer planted 60 aCTCS of popcorn in 

the sanlC year. n.c tOlal amounl of production 10 enter in the aUlomated 

s~~tcm is 21.000 bushels. which is the sum oflhe com (12.000 bushels) and 

9.000 bushels (popcorn acreage (60) !imo.'S com )'ickl (150)). 

E 2002 nd 2003 DCI' lli...,cl Pa)-mOIllS 

n.c StatUl e pro,-ides that if 1998 lhrough 2001 popcorn acreage is used to cslablish lhe com 

base on a farnl. 2002 and 2003 ocr dirCC1 payment. for com base acn:age shall nol be issued 

until after O<.:tober 1.2003 See paragraph 7 for instruolions on handling popcorn in the 

aUlOmalc.J s)'Slcm. 
2321


112301133.eps

NOIi<~ nc r -76 

7 H~ndliRg ropeon. ill Ihe I~m \Corllinufd) 

4-1-03 

A O, ~ .... · \C"minufd) 

rro<luccrs can elcct 10 n<)1 receive pay",enlS on Ii.e farm wilh popcorn unlil after 

Octol: .. " I. 2003. If all pro<luC~'fS on the farm ,,-ith popcorn CicCI to 001 rtt<:i"C payrTlCnls 

umil after OclObcr 1.2003. lhe pr!>"isions in (his paragraph do oo( apply, The Co umy O fliec 

will complcle lhe base alid yield e~lion ir.::luding lhe popcorn acres and 00 paymenlS will be 

iss""d on lhe rarm umil after Oclober I. 2003. 

B Base a nd Yield t:k-<:!ion With I' )" nt. 

The following lable pro"ides lhe SICPS 10 lake for a farm with popcorn ocres included in lhe 

com oose: 

lhal already has a base and yield ck.-clion 

p.1)Tl'lCnts ha"c Ilttn issued. 

Step AClion 

, Do nOl .aocel any pa)"",nls. 

, Follow proced ure in I-ocr. subparagraph 636 E lu back out Ihe base and ~ield 

eleclion, 

J Follow proced ure in I·DCr. Part 12 lu do a ocw base and yield clcction that will 

caplure all popcorn acreage , 

• Print and ha,'c lhe produccr(s) sign the ocw CCC-S09. but do nor appro''C 

CCC·S09. 

, Igoore lhe oYl.-rpaymCnllMI will occur as a reSY It of 001 ha"ing an approvfd 

CCC·S09_ 

6 AftcrOctubo..-r I. 2003. CCC·509 that includes the popcom aco.'S Can be arprowd 

and paid as oormal, 
2322

SUBMITTED STATEMENT BY AMERICAN SUGAR ALLIANCE

On behalf of American producers, processors, and refiners of sugarbeets and sugar 

cane, we thank the Committee for the invitation to submit testimony regarding the 

development of the 2012 Farm Bill. Our industry generates more than 142,000 

American jobs in 22 states and nearly $20 billion per year in economic activity. 

The sugar policy in the 2008 Farm Bill has been a resounding success for American consumers and taxpayers. It has helped to ensure reliable supplies of highquality, safe, responsibly-produced sugar at reasonable prices and at zero cost to 

American taxpayers. 

In addition, sugar policy has provided American sugar producers an economic 

safety net and the opportunity to survive. Absent the safety net assurance, banks 

would be reluctant to lend to sugar farmers and processors and, without operating 

capital, producers’ ability to survive would be severely threatened. 

We ask that U.S. sugar policy be extended in the 2012 Farm Bill. The policy has 

run at no taxpayer cost for the past 10 years, is operating at zero cost this year, 

and, according to the latest USDA baseline projections, will run at zero cost through 

the next 10 years. 

Background 

Impact of 23 Years of Low Prices. From 1985 to 2008, the U.S. sugar support 

price was unchanged at 18.00¢ per pound of raw cane sugar. Market prices were 

essentially flat through that entire period. Corrected for inflation, the price producers received for their sugar plummeted 50% over those 23 years (Figure 1). 

The impact on American sugar producers was profound. From 1985 to 2008, more 

than 1⁄2 of all U.S. sugar cane mills and refineries and sugarbeet factories closed—

53 operations in all; there has been only one closure since 2008 (Figure 2). According 

to LMC International, the industry has shed 109,000 jobs just in the past 19 years 

(Figure 3). 

All previous owners of, or investors in, independent beet-processing companies 

exited the business because of the low prices and high risks. Sugarbeet growers, 

desperate to save their investment in beet planting, cultivating and harvesting 

equipment, organized cooperatively and purchased the processing plants—literally 

mortgaging their farms to do so, in many cases. 

Today, 100% of all beet processing capacity and about 90% of U.S. cane sugar refining capacity is owned by growers or employees. This kind of financial investment 

makes our growers extraordinarily dependent on the stability of the U.S. sugar market and on a strong safety net, both of which the farm bill helps to provide. 

Jobs. Despite the job loss, the U.S. sugar industry remains large, dynamic, and 

important. We are the world’s fifth largest sugar-producing country. 

LMC estimates that the industry generates 142,457 jobs nationally, many of these 

in rural areas where sugar is the most vital element of the local economy. The industry pays $4.2 billion in wages annually—at union rates or better—and generates 

$19.5 billion in value-added revenue each year (Figure 3). 

Efficiency. We are good at what we do. Otherwise, we would not be here. 

We are justifiably proud that American sugar producers adhere to standards for 

labor and environmental protection and for food safety that are among the highest 

in the world. Despite these daunting added costs, we are among the lowest-cost 

sugar producers in the world. 

Globally, we are lower-cost than 70 of the 95 sugar-producing countries or regions. 

Our beet sugar producers are the lowest-cost beet sugar producers in the world (Figure 4). The U.S. average cost of producing sugar is 11% below the world average 

(Figure 5). 

Historically, our more efficient U.S. producers cannot compete against higher-cost 

producers whose industries enjoy a broad spectrum of support and protection by 

their governments, and whose surpluses are dumped below cost on the world market. Attached is a table highlighting the subsidies and other government interventions in major sugar producing and consuming countries (Appendix). U.S. sugar policy is a necessary response to the unfair foreign trade practices that threaten our 

more efficient producers. 

Open Market. We are the world’s largest sugar importing country—more open 

to foreign sugar than any other major sugar producer (Figure 6). In recent years, 

we have imported an average of 30% of our needs. 

Under NAFTA rules, we have provided Mexico unlimited duty-free access for its 

sugar since January 1, 2008. The U.S. has honored this commitment, despite the 

fact that the government of Mexico expropriated 1⁄2 of Mexico’s sugar mills in 2001, 

rather than allowing them to fail. The government still owns and operates 1⁄5 of 

Mexico’s mills and is that country’s biggest sugar producer and exporter. 

2323

Mexican sugar exports to the U.S. have soared from as little as 7,000 metric tons 

per year prior to 2008 to nearly 1,600,000 metric tons last year—about 15% of U.S. 

sugar consumption (Figure 7 (1 metric ton = 1.1023 short tons)). Since portions of 

the Mexican market are still in transition from sugar to corn sweeteners, still more 

sugar could be freed up for export to the U.S. in the future. 

In addition, the U.S. complies with WTO rules in providing duty-free tariff-ratequota (TRQ) access for 40 countries every year, at not less than 1.3 million short 

tons per year, whether we need the sugar or not. We also provide duty-free access 

for specific volumes under the CAFTA and other bilateral free trade agreements 

(FTAs). 

Consumer Benefits. American consumers get a great deal on sugar. A May 2012 

global retail sugar survey by SIS International Research examined retail refined 

sugar prices in 24 countries, representing 60% of global sugar consumption. SIS 

found that:

• Grocery store shoppers in the rest of the developed world pay 24% more for 

sugar than American consumers do.

• Globally, even taking major developing countries into account, consumers 

around the world pay, on average, 14% more for their sugar than American consumers do (Figure 8).

Sugar is still given away for free in restaurants and coffee shops, and sugar costs 

account for only about 3% of the retail price of a candy bar (Figure 9). If asked, few 

consumers can even guess the price of a pound of sugar. This is the way it should 

be: Reliable sugar supplies at reasonable prices and a non-issue for American consumers. Food manufacturers have continued to prosper. There are press releases and news 

reports virtually every week about strong profit statements and expanding operations in the food manufacturing sector. 

The candy industry has complained about job losses, but this is not about sugar 

policy, sugar prices, or declining production. In fact, according to U.S. Census data, 

U.S. candy production has been rising steadily—up 9% just since 2004 (Figure 10). 

Job losses in the candy industry, while regrettable, are the result of increased productivity, not decreased production. This is an industry that is flourishing, with rising production, efficiency, and profits, plus new plant openings and expansions. We 

are pleased that our candy company customers are doing well. 

Regrettably, some candy companies have moved some operations to foreign countries, such as Mexico. This is not because of sugar prices, which are roughly the 

same in Mexico as here, but for savings in a host of other costs, such as wages, 

health insurance and other benefits, taxes, and environmental compliance. For example, one candy company fled average wages in Pennsylvania of just under $19 

per hour to open a plant in Monterrey, Mexico, where average wages are a mere 

51¢ per hour (Figure 12). 

An examination of the last prolonged period of stable, or declining, producer prices 

for sugar shows that end-use consumers have not benefited as much as they might 

have, if at all. According to USDA data, for a nearly 2 decade period of 1990 to 

2007, wholesale refined sugar prices (the price grocers and food manufacturers pay 

for sugar) dropped by about 20 percent. How much did consumer prices for sugar 

and products fall? Not at all. In fact, retail prices rose: refined sugar by about 20 

percent and sweetened products such as candy, ice cream, and baked goods by 30–

60 percent (Figure 11). 

Price Recovery, 2009–2011. World sugar prices soared to 30 year highs during 

2009–2011. This was for a variety of reasons completely unassociated with U.S. 

sugar policy—mainly, the WTO-mandated reduction in sugar exports by the European Union and production problems in major producers such as India, Brazil, and 

Australia. The production setbacks, in the face of strong sugar demand, caused a 

steep drop in global sugar stocks. 

As in every other country, U.S. sugar prices rose. And in the United States, as 

in other countries, domestic prices are consistently higher than the so-called world 

sugar market, which is mainly a dumping ground for the surpluses of heavily subsidized producers. 

Over a 20 year period, 1988–2008, the world average cost of producing sugar averaged a staggering 51% higher than the world market price (Figure 13). This begs 

the question: How could the world’s sugar producers survive when the prices for 

their product are so much less than their production costs? 

The answer is that not much sugar is actually sold at the ‘‘world price.’’ In order 

for sugar producers to survive, most governments maintain prices for their own producers that are well in excess of the world price. According to data from the International Sugar Organization, wholesale prices in the major countries that account 

2324

for half of world sugar consumption averaged a whopping 64% higher than the 

world price during 2003–2011 (Figure 14). 

In the United States, as in other countries, domestic prices have moved up with 

world price increases. However, the price rise in the United States has not been as 

great. With the stability offered by U.S. sugar production and the U.S. willingness 

to import additional foreign sugar when needed, American consumers have been 

paying only about 29% more for their sugar during a period, from 2008 to 2011, 

when world prices have doubled, or more (Figure 15). 

The 2009 domestic price recovery came at a critical time for American sugar producers. Sugar operations had been closing at an alarming rate because of the steadily declining real prices, jobs were being lost, and beet and cane plantings were declining. 

The acreage problem became severe in 2008 when prices for competing crops such 

as wheat, corn, and soybeans rose sharply. Beet acreage plummeted by 19%, even 

despite the cooperative structure of the industry. With the recovery of sugar prices 

during 2009–11, sugar could again compete with other crops for acreage. It is worth 

noting, however, that while the sugar price recovery during 2009–11 was significant, 

it was far less dramatic than the increase enjoyed by other major crops. For example, corn prices more than tripled from 2005 to 2011, and wheat and soybeans price 

more than doubled, while sugar prices rose by 79% (Figure 16). 

Producer Prices Again Decline, Consumer Prices Do Not. Unfortunately for 

American sugar producers, prices have been declining again for nearly the past 2 

years. Since August 2010, raw cane sugar prices have declined by more than 12% 

and wholesale refined sugar prices by nearly 20%. But American consumers have 

seen no benefit: Prices for refined sugar on the grocery store shelf have shot up 18% 

over the same period, and retail prices for highly sweetened products such as baked 

goods, candy, and ice cream are all up 4–15% (Figures 17–18). 

Food manufacturers argue American consumers are being harmed by U.S. sugar 

producers. In fact, American consumers are being unnecessarily harmed by the food 

manufacturers, intent on reducing input costs, raising consumer prices, and increasing corporate profit margins. 

U.S. Sugar Policy 

U.S. sugar policy in the 2008 Farm Bill retained a non-recourse loan safety net 

and the inventory management approach that has long been successful, with no 

payments to producers and the goal of zero taxpayer cost. In the interest of managing supply, USDA sets a ‘‘marketing allotment’’ for producers at not less than 85 

percent of domestic consumption. 

The balance of consumption is met by imports, with unlimited access for Mexico, 

plus specific volumes of minimum import access requirements under the WTO, 

CAFTA, and other FTAs. When it appears that imports from these avenues may not 

be sufficient, USDA announces tariff rate quotas (TRQs) for additional duty-free imports. 

There is no restriction on the number, nor the size, of USDA TRQ increases. 

USDA has announced fourteen TRQ increases, totaling more than 2.4 million tons, 

for the marketing years since the 2008 Farm Bill began—these in addition to WTO, 

CAFTA, other FTA, and Mexico imports (Figure 19). 

Imports now fulfill about 30% of U.S. needs and developing-country sugar exporters to the United States, organized as the International Sugar Trade Coalition, are 

strong supporters of U.S. sugar policy. 

Unless there is a supply emergency, the additional TRQs are not announced before April 1 of the October–September year. Market supplies are well in excess of 

demand during the first half of the year, when, on average, 84 percent of U.S. production and 70 percent of Mexican production occurs. 

The so-called April 1 provision has not measurably limited supplies during the 

first half of the marketing year. In addition to most of U.S. and Mexican sugar production occurring during October–March, less than 1⁄2 of U.S. sugar demand occurs 

during that period and nearly 1⁄2 of all imports enter. As a result, supplies have exceeded demand overwhelmingly, by an average of 50%, during October–March (Figures 20–22). 

If U.S. producers produce more than their marketing allotment, they must store 

the excess at their own expense, not the government’s. 

If imports exceed U.S. needs, the government is obligated to remove the surplus 

sugar from the domestic food market, most likely selling it to ethanol producers. 

USDA, however, does not expect any such purchases to occur over the next 10 years. 

Since 2008, U.S. production has not exceeded the marketing allotment levels and 

imports have not exceeded needs. The policy has run at zero cost to U.S. taxpayers, 

as it had since 2002, and is now projected to continue to do through 2022, at least. 

2325

Another important reason the current program is vital to U.S. sugar producers 

is that crop insurance policies do not provide an adequate safety net for many of 

our producers. Cane policies are not affordable or available at high enough coverage 

levels to protect farmers and USDA has yet to approve a cane policy in Hawaii. 

Conclusion 

U.S. sugar policy has been a resounding success during the 2008 Farm Bill and 

deserves to be extended. 

It has achieved its goals of providing reliable supplies of high-quality sugar at reasonable prices, and a critical safety net for producers. It has done so without government expenditure. Furthermore, if extended, USDA predicts zero expenditures 

through 2022. 

American sugarbeet and sugar cane farmers are united in recommending to the 

Committee that it continue current U.S. sugar policy in the 2012 Farm Bill. 

CHARTS

Figure 1

U.S. Raw Sugar Prices, Nominal and Real, 1985–2008

Data Sources: BLS–CPI–U. USDA: Price delivered New York, duty-fee paid; 

annual averages 1985–2008. 


112301135.eps
2326

Figure 2

Since Last Sugar Loan Rate Increase in 1985: More Than Half of U.S. SugarProducing Operations Have Shut Down

Source: American Sugar Alliance, June 2011.


112301136.eps

1985 Total = 102 

54 closures since 1985; 

42 1 since 2008 

Beet Factories I 

2011 Total = 48 

42 +-j Cane Mills I 22 

~ 

18 

18 • I Cane Refineries I 8 • 
2327

Figure 3

Comparing the Economic Impact of the Sugar Industry in 1993/94 With 

Today 

(LMC International, August 2011)

Figure 4

U.S. Costs of Production Ranking Among World’s Sugar Producers, 2010/11


112301137.eps 112301138.eps
2328

Figure 5

Cumulative Cost Curve, World Average Sugar Producers, Average 2010/11—

Average of U.S. Beet and Cane

U.S. combined beet and cane was 11% below world average cost of production for 2010/11. 

Figure 6

United States: World’s Leading Sugar Importer 2008/09–2010/11 Average

Source: USDA/FAS, November 2011; Net imports.


112301139.eps 112301140.eps
2329

Figure 7

U.S. Sugar Imports from Mexico: Huge Year-to-Year Variability

Source: USDA, WASDE. 2011/12 = forecast. 

Figure 8

Developed-Country Average Retail Sugar Price: 24% Higher than U.S.; 

Global Average: 14% Higher than U.S.

Source: SIS International Research, ‘‘Global Retail Sugar Prices,’’ May 

2012, from Euromonitor, International Monetary Fund; 2011 prices.

Surveyed countries represent 60% of global sugar consumption. Developed 

countries include OECD member countries and Hong Kong.


112301141.eps 112301142.eps
2330

Figure 9

Sugar Cost as % of Retail Product Price—Sugar Share Mostly Insignificant—

Source: American Sugar Alliance survey of retail products at a Safeway 

store in Arlington, VA, and Safeway.com June 2010. 

Figure 10

U.S. Chocolate and Non-Chocolate Confectionery Production: Industry 

Thriving, Production Rising

Souce: U.S. Census, June 2011. http://www.census.gov/manufacturing/

cir/historicalldata/ma311d/index.html.


112301143.eps 112301144.eps
2331

Figure 11

Price Changes 1990–2007: Wholesale Sugar Down But Retail Sugar and 

Sweetened Products Up

Sources: Wholesale Sugar—USDA. Retail Products—Bureau of Labor Statistics. Annual averages. 


112301145.eps
2332

Figure 12

Operational Costs for Confectionery Industries In North America

Source: Buzzanell & Associates, Inc., ‘‘The Confectionery Industries in the 

U.S., Canada, and Mexico: Trends in Structure, Domestic Production and 

Use, Trade and Cost Comparisons,’’ August 2009.


112301146.eps

Kern, Unit 

United 

Middle 

States ~ 

Ontario- Borderwith 

~ 

Atlaooc States II Quebec Unted States 

Hourly Wagesll 'II" $18.78 $10.20 $0.51 

Commercial 

Facitity RentalJl Slsq"Wr $5,00 $6.38 $4.65 

Health CareEmployer cost s.yrMoncer $7.680 $1.551 $258 

Taxes, Total'" % 19.10% 36,30% 26.60% 

Electricity$! cenls.n.:Wh 6.6 3.0 8.0 

Sewage S/1,OOOgal $7,04 $3.27 $1.00 

Sugarill cenlsAb 28 21 23 

" Focus on Reading. PennsyllOlnia; Chicago costs substantialty highe< - rentats at $8OIs~ft : ta.es at 42%. 

'1J Wages onty. Woo<e<s in aU countries retei\e addnionat berle!its such as heaUh i", ..... roce and paid wocations, 

Go>emment mand!lted benefits in Me-ito increase eliilctile wages to an estimated St .08Ihour. 

3/ tlctudes propeny lUes. insurance and m!lintenance lees. 

41 Totat 0I1ederai. state or pro>irocial. and k:>cat . Percent 01 irocome. SeNces prQIOded tJjI the IJO"&'Ilmem lor taxes 

in Me.1eo minimal compared with U.S. and Canada, 

$I Cents per kiklwatt hour. Canada rate k':Iw beCause oIgo...-.mm&f1t subsidization and In""'tment in hydroeleCtric """" . .. A>erage ptice-s 01 past se>era! years ; CVO'e<1t prices somewhat rogher. Me-leo maqui ladora (free trade zone) 

price: Me.lean marl<et actual prices much higher, at about 30 cents, 
2333

Figure 13

World Sugar Dump Market Price: Historically Does Not Reflect Actual Cost 

of Producing Sugar

Sources: Price—USDA, New York Board of Trade/ICE, Contract #11, raw 

cane sugar, stowed Caribbean port; Monthly average prices through Feb 

2012.

Cost of Production—‘‘Sugar Production Costs, Global Benchmarking 2011 

Report,’’ LMC International, Oxford, England, September 2011. 

Figure 14

Actual Wholesale Sugar Prices in Major Consuming Countries Much Greater than World Dump Market Price

Data Sources: International Sugar Organization, U.S. Department of Agriculture

* Brazil, China, European Union, India, Mexico, Russia, United States—

represent approximately 1⁄2 of world sugar consumption.


112301147.eps 112301148.eps
2334

Figure 15

Since 2008: World Market Sugar Prices Increase Far More Than U.S. Price

Data Sources: USDA; U.S. Bureau of Labor Statistics.

1 Raw cane sugar, #16 contract, Caribbean ports.

2 Refined sugar, #5 contract, London. 

Figure 16

Changes in U.S. Commodity Prices Since 2005

Source: ERS/USDA, U.S. raw sugar #16. Chicago Board of Trade nearby futures, Corn #2 yellow; Soybeans, #1 yellow, and Wheat, #2 soft red. Annual 

average prices.


112301149.eps 112301150.eps
2335

Figure 17

Consumers Do Not Benefit When Producer Prices for Sugar Fall; Gap Widens Over Past Two Years

Data: USDA/ERS, Monthly average prices, August 2010–present. Linear 

Trendlines. 

Figure 18

Producer Prices for Sugar Fall, But Retail Prices for Sugar and Sweetened 

Products Rise

Sources: ERS/USDA, Sugar Briefing Room. Raw Sugar—http://

www.ers.usda.gov/Briefing/sugar/Data/Table04.xls. Refined Sugar—

http://www.ers.usda.gov/Briefing/sugar/Data/TABLE05.XLS. Retail 

Sugar—http://www.ers.usda.gov/Briefing/sugar/data/Table06.xls. SugarContaining Products—http://www.ers.usda.gov/Briefing/sugar/data/

Table11.xls. May 2012 producer prices: 30¢/lb, raw; 48¢/lb, refined.


112301151.eps 112301152.eps
2336

Figure 19

U.S. Sugar TRQ Increases Since Start of 2002 Farm Bill (short tons, raw 

value)

Data Source: USDA. U.S. sugar tariff-rate quota (TRQ) increases above the 

approximately 1.5 million short tons of required World Trade Organization 

(WTO) and free trade agreement (FTA) imports each year (WTO raw, 1.231 

mst; WTO refined and specialty, ∼120,000 st; CAFTA/DR, Peru, and other 

FTA’s, ∼130,000 st.) 

Figure 20

U.S. Sugar Market Well Supplied During October–March: 84% of Production, Only 48% of Deliveries to Users, FY 1997/98–2010/11 Average

Data Source: USDA. On average, 92.0% of raw cane sugar production occurs during October–March; 76.6% of beet sugar production.


112301153.eps 112301154.eps
2337

Figure 21

Monthly U.S. Sugar Imports from Mexico and under Tariff-Rate Quota 

(TRQ): Nearly Half of All Imports Occur during October–March

Source: United States Customs and Border Protection (CBP), January 2012. 

Tarriff-rate quota (TRQ) entries under WTO and FTA commitments. 

Figure 22

U.S. Production + Imports vs. Deliveries to Users: Supplies Exceed Demand 

by 50% during October–March

Source: USDA. Imports from Mexico and under WTO and FTA tariff-rate 

quota (TRQ) commitments.


112301155.eps 112301156.eps
2338

APPENDIX

Summary Table


112301157.eps 112301158.eps

"' ....... T.,.-T _, ..... c-~. 

.... 

--- ----- _0.. _.d -... 010 

fEt~ ----

-----

ACCOMPAH'fINCI NOTES: 

_ ..... ... ... _ ... ". __ • ___ 

1. 1_1 .... lnIorfll ........ lnIorfll ,.to.-, do<>!'-.rod.;obl ,,~, 

2. 1_. crop p-o.m.r><inI!, ~bon P'O"ioiGn. II,., ... into .. noo _,., _01)' fVoon<inll 

3. M VI .. ,.", ( • . y,) eqo.Walo"" ... "" ... "'" ''''''110 _ ~ lot 2OOoIIO!51O 2006107 . ......... rer., 10 lI>o 'G1UOII~ 

to"" rat. in .. eII eounII)'. in 00 .... co ... , wro boom to ... ,ot . . . ... """'" 0igI>t' Ihtn liiio 10-.4, 

. c. .. _,., _ pr;:" in Chino oro con..- .. Iho proWrciollo'" 

5. Chino Ipplies I 15,., IlIriII 10 In-<tu<>tIIUjllt, """ ~ IlIriII 10 0\.t.()/ ..... 1lI lUgor. 

6. In _ion 10 tho b .. io d<.ty. Oo_ . ppIios. v ... trIo _ _ rvo. _ Vlrio. -=«ling to Iho p-o .. iIing 10",,1 0/_ 

'Ujllr prieH. 

7. AIIrIoog/1lf1oO EU induslry "". I>OnoIiIO<! ~"'" .,port , .. -.... in!hO POll. in trw. r..cu. •. trw. . ,It"' 10 _ trw. E<A'O\>ton 

Co<rmosion 1'riII1I"'''' '~" _. _in. 

a. As pon 011f1oO COr'I1>Onsation lot tt.o......"."., in EU suga' priool.!hO EU ~ _ """' .... po,""'''''10 fo""",", In 

_oion.1ho EU o!so o!Io~ o ..... lIY<:rnp l id 01 U5 per r.octa .. lor _Ill praduc..t 10' .. ""noI. 

9. Tho EU Oon"r'l"riooion PI_ ~I"" OItIonol .... !hough,.,... I,. noI bir>dino. 

10. TIWs impoM duly rdo", 10 tho buic 10" ori)r. 10 _ilion, Iho eu .ppIio. _ ~I ... ~w"d dLily. _ •• rio. wiII1 !hO ...... 

oI _prioo •. 

11 . Indit ... ,.ntt, conttoIo Iho .mount 01 suga' lhat can be .. I ..... onto tt.o Oomoslio """""t .. ell """"h. -.0,. 1tIio P<>Ii<'I 10 ~ 10 1>0 ._ in OctoI>or 200II. 

12. 80111 1_ 0'" Thall"" hovo <llhlnoI pr0ll"'rm>OJ. _ _ . 10 dolt. Ihoro iI no ca .. _ <llhlnoI prO<U:!ion in _ 

"","",riol. 

13. Tho Tha i _ ......... hOI pro"'" In<omo _" 1<1 ~OWO ... "lingo ~ N 01 52 bo~...mc 1r>n 10 nI co .. 

~ TNo hoI _ n ~ through o loan m>m 1l9'k:u ..... 1 bonks to Iho c. .. Stoga, Fund. orr ... tt,o tho .. loa"" .,. 10 be 

..po". 

tl. Tho Thrr i Oomolllicprioo""'" _._10 19bot-.."",{26.1untlilb031.11 bohllUSS)in.<pi 2\DI. 
2339

1For further information, please contact us at [Redacted]. 

SUBMITTED STATEMENT BY HON. JIM COSTA, A REPRESENTATIVE IN CONGRESS FROM

CALIFORNIA; ON BEHALF OF SPECIALTY CROP INSURANCE LEAGUE1

The Specialty Crop Insurance League (SCIL) was formed in 2010 with the sole 

mission of strengthening and improving the crop insurance program for specialty 

crop producers. SCIL is the largest crop insurance agent organization in the nation 

devoted exclusively to representing commodities from almonds to zucchini, and 

every specialty crop in between. We represent the interests of growers and their 

agents from California to New York, and from Florida to Washington. 

The Federal Crop Insurance program is an essential risk management tool for 

America’s farmers. Crop insurance agents are the farmers’ point of contact with the 

entire crop insurance program. Particularly for growers of specialty crops, the expertise and effort of insurance agents is critical for completing timely and accurate applications and claim forms for submission to the 15 private insurance companies. 

In April 2009, the Government Accountability Office issued a report titled ‘‘Crop 

Insurance: Opportunities Exist to Reduce the Costs of Administering the Program.’’ 

The report addressed how Administrative and Operating (A&O) allowances paid by 

USDA to the private insurance companies had tripled between 2000 and 2009, and 

average agent commissions, per policy, had increased by 16 percent per year during 

that period. This increase was almost entirely attributable to the rapid increase in 

commodity prices of corn and soybeans during the second half of that decade, the 

so-called ‘‘program crops’’ defined in section 1001(8) of the 2008 Farm Bill. The average commission paid per policy in the five Corn Belt states (Illinois, Indiana, Iowa, 

Minnesota, and Nebraska) increased by 86% from 2006 to 2007, more than twice 

the rate of the other 45 states, where commodity prices have remained stable. 

The 2011 Standard Reinsurance Agreement (SRA) was negotiated between 

USDA’s Risk Management Agency (RMA) and the private insurance companies, 

with RMA attempting to control the growth of A&O allowances and agent commissions. Instead of crafting a solution that addressed the underlying problem of the 

growth in the price of program crops, or even the growth of A&O allowances and 

commissions in the Corn Belt states, RMA created an agreement with the private 

insurance companies that imposed a nationwide, across-the-board cut in all A&O 

payments and all agent commissions. Under the new SRA, A&O allowances were 

capped at $1.22 billion nationwide, and agent commissions were capped at 80% of 

the total A&O allowances for each state. The commission cap imposed by the SRA 

benefits the private insurance companies, but at tremendous cost to the individual 

agents. No insurance agents, farmers, or groups representing their interests were 

allowed to comment on or in any way participate in these negotiations. 

For the first time since the Federal Crop Insurance program was created during 

the Dust Bowl days of the Great Depression, the Department of Agriculture included language in its agreements with private insurance companies that restricted 

payments by those companies to private insurance agents who were not parties to 

the agreement. Adding insult to injury, the 2011 SRA included a ‘‘covenant not to 

sue’’ that barred the insurance companies and crop insurance agents from bringing 

any challenge to the provisions of the SRA that RMA had imposed. With the stroke 

of a pen and without a word of input, RMA deprived crop insurance agents—particularly those servicing specialty crops—of a substantial portion of their livelihood. 

From Crop Year 2010 to Crop Year 2011, the first year in which the SRA was 

in effect and the only year for which A&O and commission payments have been 

made, the damage from this secret agreement is already being seen. While A&O 

payments per agent continue to rise in the program crop states that created the 

problem that the SRA was meant to fix, agents in specialty crop states are suffering. 

RMA’s own figures as to A&O payments per state and the number of crop insurance 

agents in each state tell the story:

State 2010 A&O Agents 2011 A&O Agents A&O / Agent 

% Change 

Illinois $90,947,981 1,414 $101,790,479 1,420 11%

Indiana $49,090,448 813 $57,064,262 826 14%

Iowa $102,149,352 2,274 $112,048,844 2,241 11%

Minnesota $94,529,253 1,242 $92,037,973 1,258 ¥4%

Nebraska $85,851,131 1,387 $83,556,618 1,410 ¥4%

Texas $116,319,652 582 $136,946,742 596 15%

California $41,333,973 317 $28,223,726 322 ¥33%

Florida $17,475,879 149 $12,592,521 158 ¥32%

Idaho $11,147,736 105 $9,151,742 106 ¥19%

2340

State 2010 A&O Agents 2011 A&O Agents A&O / Agent 

% Change 

Kansas $100,792,364 1,032 $87,359,411 1,070 ¥16%

Michigan $23,082,306 230 $22,942,942 262 ¥13%

Washington $18,416,836 134 $16,284,509 136 ¥13%

In just 1 year, the program crop states have held steady or continued with doubledigit growth, while the specialty crop states are experiencing double-digit losses. 

Hundreds of crop insurance agents in California and Florida have seen 1⁄3 of their 

livelihood taken away overnight, redistributed to 15 large private insurance companies. 

Having been shut out of the negotiation of the document that took these payments 

away from them and prevented from bringing a legal challenge to this agreement, 

specialty crop insurance agents now face difficult choices as to staffing, staying in 

business, and continuing to serve the growers in their local communities. Efforts to 

change the SRA have been rebuffed; RMA and the 15 insurance companies are unwilling to come to the specialty crop agents’ aid and the Agreement is not scheduled 

to be renegotiated until 2015. By then, few of SCIL’s members will still be in business to see what the next agreement brings. 

Congress has twice directed USDA to consider alternative methods for calculating 

A&O allowances and agent commissions; mandated in the 2008 Farm Bill and recommended in the 2009 GAO Report, which called on USDA to ‘‘implement a methodology so that the A&O allowance more closely aligns with expenses, as it did before crop prices rose in 2006’’ since ‘‘[l]inking A&O allowances to reasonable expenses would also help stabilize the allowances that insurance companies receive.’’ 

As the 2008 Farm Bill reaches its expiration, the only solution that USDA has put 

forward is to take income away from specialty crop insurance agents. 

There are two possible legislative solutions to this problem. One approach is legislative language to remove the caps on agent compensation for any contracts other 

than those covering ‘‘program crops’’ under the 2008 Farm Bill. This could be 

achieved by adding the following subparagraph to the end of Section 508(k)(8) of the 

Federal Crop Insurance Act of 1938 (7 U.S.C. 1508(k)(8)):

(F) SPECIALTY CROPS.

(i) IN GENERAL.—Crop insurance contracts covering commodities not defined in section 1001(8) of the Food, Conservation, and Energy Act of 2008 

(7 U.S.C. 8702(8)) or covered under Subtitle C of such Act (7 U.S.C. 8751 

et seq.) shall not be subject to a limit on total administrative and operating 

expense subsidy allowed in a reinsurance year as prescribed in Section 

(III)(a)(2)(G) of the Standard Reinsurance Agreement in effect beginning 

with the 2011 reinsurance year or any other agreement or regulation promulgated to carry out this Act. 

(ii) EFFECT.—Nothing in this subparagraph shall be construed to authorize the limitation on administrative and operating expenses described in 

clause (i) or as statutory assent to the administrative interpretation of this 

Act that resulted in such limitation.

Such a solution would not require any changes to the remainder of the SRA, since 

the 2008 Farm Bill amended the Federal Crop Insurance Act to add the following 

provision:

If Federal law is enacted after the date of enactment of this paragraph that requires revisions in the financial terms of the Standard Reinsurance Agreement 

are made on a mandatory basis by the Corporation, the changes shall not be 

considered to be a renegotiation of the Agreement for purposes of subparagraph 

(A) [of 7 U.S.C. 1508(k)(8)].

An alternative solution would be a reference pricing solution that would achieve 

the goals of long-term stability, while resolving the impact of rising program crop 

prices over time, as compared to the prices of specialty crops. In the first two drafts 

of the 2010 SRA, there were proposals to use ‘‘reference prices’’ to control against 

runaway commodity prices by indexing the prices or allowing them to move up or 

down within narrow bands. This would provide protection against the corn price 

boom that we’ve seen in the past 10 years, offer cost predictability to RMA, the insurance companies, and agents, and avoid the concerns with risk exposure to the 

companies. 

The language necessary to add reference pricing to the existing 2010 SRA would 

be to amend the new farm bill to require RMA to include the language from Section 

III(a)(2)(B)(ii) of the second draft of the SRA (dated February 23, 2010), into the 

2341

SRA as a new Section III(a)(2)(C), renumbering the remaining paragraphs accordingly. We believe that the reference prices were set at levels that would basically 

match the national A&O cap amount (approximately $1.2 billion). Thus, there is an 

opportunity for a clean fix to the dire problem facing specialty crop insurance agents 

and, in turn, specialty crop producers, without upsetting the entire program. 

At stake is nothing less than the continued viability of the Federal Crop Insurance program for specialty crop producers. Agents cannot be asked to suffer annual 

losses of 13%, 19%, or 33% and expect to stay in business selling crop insurance. 

Without agents to work with specialty crop producers, these farmers would be left 

out of the Federal Crop Insurance program. In other situations, RMA has been willing to take steps to encourage specialty crop growers to participate in the program. 

For new crops, coverage under pilot programs such as those added recently for pistachios and olives is not subject to ‘‘factor’’ reductions in A&O allowances like other 

crops, in order to encourage insurance companies, agents, and farmers to insure 

such crops. In areas that RMA has deemed ‘‘under-served’ by the Federal Crop Insurance program, referred to in the SRA as the 17 ‘‘Group 3’’ states, RMA collects 

the 6.5% of the underwriting gains from the insurance companies and distributes 

1.5% of the gains to the companies for distribution to agents in those states. This 

‘‘Net Book Quota Share’’ paid approximately $20 to $25 million to these agents last 

year. For specialty crop agents elsewhere, however, RMA offers no such lifeline. 

In every conversation with RMA, the insurance companies, and Congressional offices, we have been told that everyone recognizes that the SRA had terrible unintended consequences for specialty crop insurance agents. There is no question of the 

injury suffered by our members, particularly those in California. The only question 

is whether Congress is willing to act to save the program and continue to offer protection to the nation’s specialty crop producers. 

Thank you for the opportunity to provide this statement on behalf of the Specialty 

Crop Insurance League. 

SUBMITTED JOINT STATEMENT BY UNITED STATES CONFERENCE OF CATHOLIC

BISHOPS; CATHOLIC RELIEF SERVICES; NATIONAL CATHOLIC RURAL LIFE CONFERENCE

Introduction 

The United States Conference of Catholic Bishops (USCCB), Catholic Relief Services (CRS) and the National Catholic Rural Life Conference (NCRLC) are grateful 

for the opportunity to provide this testimony for the hearing on Formulation of the 

2012 Farm Bill: Commodity Programs and Crop Insurance. The Catholic community 

brings a unique perspective and our everyday experience deeply rooted in this country and around the world, especially rural communities. We see first-hand, farm and 

ranch families losing a way of life, rural communities losing viability and hungry 

children struggling to have a decent life. 

We bring to these discussions moral principles drawn from our faith and everyday 

experience. Our clear directions for U.S. agriculture policy are driven by our conviction that current policies leave too many behind in the communities we serve. By 

our own efforts and our advocacy on public policy priorities we seek to help provide 

adequate nutrition for poor and hungry people at home and abroad; offer support 

to those who grow and harvest our food, fairness to family-run farms and ranches; 

and to promote stewardship of the land through effective conservation programs. In 

our soup kitchens and on our doorsteps, we see the faces of poor and hungry people 

every day. We feed those without work, pregnant women and children, and seniors 

living on a limited income. For many of them, the meal they receive from our ministries is the most nutritious meal they receive that day. 

In For I Was Hungry and You Gave Me Food: Catholic Reflections on Food, Farmers and Farmworkers, the U.S. bishops stated: ‘‘the primary goals of agriculture policies should be providing food for all people and reducing poverty among farmers and 

farmworkers in this country and abroad.’’ As a community of faith, we believe that 

food is a right of all people and that hunger is a direct threat to the life and dignity 

of millions of people. 

Even with a struggling economy, our nation has a moral obligation to ensure that 

people at home and abroad have enough nutritious food to eat. Together, we call 

on Congress to support a farm bill that sustains and strengthens critical food and 

nutrition programs for hungry people, strong conservation programs that promote 

stewardship of creation and fair farm support systems that help family farmers and 

ranchers thrive. 

2342

The Nutrition Title and Catholic Experience 

In 2010, nearly 50 million people lived in households that struggled to put food 

on the table, putting millions of families at risk of hunger and poor nutrition. It is 

reported that one in five children live in a household that at times ran out of food 

and one in four Americans participated in a Federal nutrition and food program. 

Rural America is particularly impacted by hunger, food insecurity and high rates 

of poverty. Sixteen percent of people in rural communities live in poverty, a rate 

higher than those living in metropolitan areas. It is ironic and unacceptable that 

where our food is produced so many people suffer from hunger and food insecurity. 

The free and reduced school lunch and SNAP programs (food stamps) benefit many 

of these families struggling to make ends meet. 

Serving hungry, poor and vulnerable people is an essential mission of our Catholic 

faith. As Christians, we are called to serve the ‘‘least of these’’ and ‘‘bring glad tidings to the poor.’’ In our churches, soup kitchens, schools and charitable agencies 

we serve all people with compassion and respect. In following the Gospel, we serve 

others not because they are Catholic but because our Catholic faith compels us to 

reach out and care for those in need. 

Through our Catholic organizations and institutions we are serving the hungry 

and helping the most vulnerable. For example, in Chicago there are hundreds of 

Catholic organizations that serve the needs of the city. One of those is Catholic 

Charities which provides 2.2 million free meals to the hungry and vulnerable each 

year. That is 6,027 meals a day, in one city. Many of these agencies, parishes, food 

pantries and schools, along with private resources, partner with government to provide food to hungry people through programs such as The Emergency Food Assistance Program (TEFAP) and the Commodity Supplemental Food Program 

(CSFP).

Today, our Catholic parishes and charities and other local agencies are experiencing significant increases in requests for food assistance due to economic hardship 

and occasional natural disasters. People who have lost their homes, the unemployed 

and working people with low wages are turning to us for help. As this need increases, the ability of our organizations to respond becomes more challenging. In 

2011, Catholic Charities USA reported that 64% of its local agencies were unable 

to respond to all requests for assistance in their local communities. A stronger partnership between churches, charities and government must respond effectively to rising needs. 

Policy Priorities 

The Supplemental Nutrition Assistance Program (SNAP—formerly known as food 

stamps) is the first line of defense for people who do not have enough food each 

month. In 2011, SNAP served more than 45 million households throughout the nation. With the purchasing power of food stamp dollars decreasing and food prices 

rising, vulnerable people, especially children and seniors, cannot afford to have their 

benefits cut or reduced. 

As you consider the 2012 Farm Bill, we ask you to protect, support and strengthen critical nutrition programs that serve hungry and vulnerable people:

• The Supplemental Nutrition Assistance Program (SNAP) feeds millions of 

households struggling against hunger, 76 percent include a child, senior or disabled member and 85 percent have incomes that fall below the Federal poverty 

guideline. We urge you to oppose attempts to reduce or make other changes 

that would decrease critical benefits.

• The Emergency Food Assistance Program (TEFAP) helps low-income families, children and seniors struggling to make ends meet. We urge you to support 

TEFAP because it ensures that nutritious commodities are distributed to hungry people in communities through faith-based and charitable organizations 

such as churches, soup-kitchens, food pantries and shelters.

• The Commodity Supplemental Food Program (CSFP) is a vital program 

that primarily works to improve the health of low-income seniors, low-income 

pregnant and breastfeeding women, new mothers, infants and children up to 

age 6. CSFP provides a nutritious monthly food package designed to meet specific nutritional needs and combat poor health conditions. Many of the food 

packages are delivered through Catholic charities and parish ministries.

The 2012 Farm Bill provides an opportunity to strengthen the food and nutrition 

safety net. The reauthorization should provide effective access to nutritious food for 

hungry and vulnerable people at home and abroad, including legal non-citizen residents. 

We offer the following recommendations as you consider the 2012 Farm Bill:

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• Prevent cuts or reductions to the SNAP program. Reductions or technical 

changes that would result in a loss or erosion of benefits to hungry and vulnerable people must be rejected.

• Do not erode benefits or promote barriers to access. States should have 

flexibility in finding effective ways to feed hungry people and respond adequately to local needs but this should not result in a loss or a reduction in benefits, especially for children.

• Maintain the current entitlement structure of SNAP so that it may continue to respond to people suffering as a result of economic hardship or other 

unforeseen crises.

• Maintain ‘‘categorical eligibility’’ for food stamps. People, who receive benefits such as Temporary Assistance for Needy Families (TANF), should also be 

able to receive food stamps to meet their needs without additional bureaucracy 

or paperwork.

• Simplify the application process to better serve working families and seniors who are under-served by the SNAP program.

• Review and repeal the current provisions penalizing low-income families 

headed by a parent with a past drug conviction. 

International Food Security and Development and the Catholic Experience 

The rich body of Catholic social teaching gives priority to our poorest brothers and 

sisters in allocating scarce resources. The Catholic Church works to serve people in 

countries that suffer hunger, drought, war and other hardships. The Church is a 

trusted institutional presence that not only brings aid but also compassion and justice to those in need. 

For 68 years Catholic Relief Services has successfully implemented humanitarian 

development programs in one hundred countries around the world. CRS reaches 

more than 100 million people in more than 100 countries. The mission of CRS is 

to provide assistance to impoverished and disadvantaged people overseas and serve 

people based solely on need, regardless of race, religion, or ethnicity. CRS implements its programs through a network of credible local partners, including the local 

Catholic Church in many countries. This gives CRS the ability to operate in locations that other aid implementers cannot, and to reach a much larger number of 

people than most other aid groups. 

CRS has long been a partner of the U.S. Government in the implementation of 

foreign assistance programs, including both emergency and development programs 

funded by Title II of P.L. 480 Food for Peace, and school feeding programs funded 

by McGovern-Dole Food for Education. 

Title II emergency programs save lives when communities are impacted by natural disasters or human conflict. Over the last 5 years, CRS has implemented six 

Title II emergency assistance programs in countries like Sudan, Zimbabwe, Ethiopia, and Haiti. After the 2010 earthquake in Haiti, CRS fed 90,000 displaced people through school and community-based programs and food-for-work programs. 

CRS also rebuilt critical infrastructure such as roads linking those impacted to critical services. 

CRS’s Title II development programs address chronic hunger, through food distributions of U.S. produced food commodities and through complementary agricultural development, maternal and child health, nutrition, and water and sanitation 

programming. Since 2008, CRS has implemented nineteen development programs, 

twelve of which are still ongoing in Africa, Central America and the Caribbean. One 

of these ongoing programs is in Ethiopia, where CRS works within a consortium to 

implement the Productive Safety Net Program (PSNP). This program provides supplemental food and cash resources to enable participants to save and invest in 

household assets such as livestock or small businesses. These savings help families 

get through disasters, like the devastating 2011 drought, without resorting to negative coping strategies such as eating fewer, less nutritious meals or selling productive household assets such as animals or farming tools. USAID recently reported 

that the PSNP program helped prevent 1.5 million drought-affected Ethiopians from 

needing emergency assistance. 

The McGovern-Dole Food for Education (FFE) programs are carried out by 

CRS primarily as school feeding programs to support education, child development, 

and food security for some of the world’s poorest children. For instance, in Mali, the 

FFE program has provided over five million meals, as well as vitamins and medication, to children in 120 schools, and has increased school enrollment in these schools 

for boys by 18% and for girls by 29%. 

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Policy Priorities 

Maintaining strong Title II and McGovern-Dole food assistance programs will 

allow CRS, local partners and other implementing organizations to meet critical 

human needs in a more effective and efficient manner. 

We offer the following recommendations as you consider international food security and development in the 2012 Farm Bill:

• Title II Funding: Title II funding should be maintained at a level commensurate with the need to address both emergencies and chronic hunger. At a minimum, Title II should be reauthorized at $2 billion each fiscal year, to ensure 

the U.S. continues its exemplary leadership and foresight in providing international food assistance to the world’s poorest people.

• Protection of Development Programs through the Safe Box: Development 

food assistance through Title II’s ‘‘safe box’’ is essential, and at minimum should 

be reauthorized at $450 million each fiscal year. Development programs funded 

through the safe box save lives before an emergency occurs by addressing the 

causes of chronic hunger. Through activities like building irrigation systems, 

digging latrines, distributing highly nutritious foods, and educating local communities on basic health and dietary practices, Title II development programs 

help small farmers increase agricultural output, improve community sanitation 

conditions, and strengthen the health of vulnerable populations. Ultimately, 

these programs prevent or mitigate the need for emergency assistance by helping people develop the tools and ability to better cope with drought or other disasters.

• Build Flexibility in Title II Programs: Flexibility should be built into Title 

II development food assistance to allow the programs to be more cost-effective 

and responsive to the needs of those served. This includes increasing the 

amount of cash available for programs, expanding the use of cash to all core 

programming expenses, and authorizing the use of local and regional procurement in appropriate circumstances.

The moral measure of our society is how we treat the ‘‘least of these.’’ We urge 

Congress to maintain strong funding for the Title II Food for Peace and McGovernDole Food for Education programs as part of the 2012 Farm Bill. These are effective 

programs that feed hungry people abroad and promote development in poor countries. We urge you to resist cuts and changes that would reduce help for hungry 

and vulnerable people. 

The Conservation and Rural Development Titles and Catholic Experience 

There is an integral relationship between the food we grow and eat and the land 

where it is grown. The Catholic Church has a major presence in rural America and 

in rural communities throughout the world. Our diverse Catholic community includes farmers and ranchers and their families, farmworkers, land owners, contract 

growers and business owners. There are people of faith who strive to work the land 

while respecting and caring for the gift God has bestowed on us all. They bring both 

their skills and the desire to care for the land and natural resources in order to be 

good stewards of God’s creation. 

Just one small example, in LaFayette, Oregon, Brother Chris, a Trappist monk 

with a forestry background, maintains the forests and hiking trails surrounding the 

monastery for persons who come on spiritual retreat and reflection. He works to ensure the hills and forests are respected and are a source of inspiration to both members of his religious community and to their many visitors. Brother Chris also manages the forest efficiently to produce periodic income to help meet the financial 

needs of his self-supported religious community. He uses forestry practices that conserve and promote sustainability so that future generations will be able to enjoy the 

resources and beauty of the surroundings. 

Conservation of land and natural resources is one of the Catholic community’s priorities in the 2012 Farm Bill. We believe it is our responsibility to show respect for 

our land and natural resources and to safeguard it for the future. Unlike other elements in the farm bill, conservation programs have been subject to nearly $3 billion 

in cuts through the appropriations process since the last farm bill was enacted. Increased adverse environmental conditions and marginal land being converted to row 

crop production have left the land more vulnerable to severe soil erosion. Conservation programs are important to counteract these affects. 

It is also essential to maintain resource conservation and environmental enhancement programs to help sustain family farms and support rural community development. Rural communities and small towns are the backbone of the social and economic life of America. Family farms remain a treasure to our nation and the CathoVerDate 0ct 09 2002 12:54 Dec 11, 2012 Jkt 041481 PO 00000 Frm 00756 Fmt 6621 Sfmt 6621 I:\DOCS\112-30\74372.TXT BRIAN
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lic community. Rural communities need investment and resources in order to be successful and to contribute to the economy and their local communities. 

Kevin, a former teacher from Wichita, Kansas, recently moved with his family 

closer to his hometown of St. Leo, Kansas to begin a family farm. His family felt 

the need to draw closer to the land and pursue a life where they could be good stewards of creation, farm in a sustainable manner and provide for their family. Kevin 

and his wife Mary, also desire to pass their passion for farming on to their children. 

Their family exemplifies the Catholic community’s commitment to support small to 

medium-sized family farms and ranches as a valuable source of life and economic 

development in rural communities. 

Policies that target support to highly industrialized farming can cause farm consolidation, further depopulate rural communities and adversely affect small and medium-sized farms. Effective policies and programs are needed to encourage rural development and promote the livelihood and well-being of these communities. In these 

times of financial hardship, our public policies should call for shared sacrifice and 

strive to protect rural communities and those most in need. 

Policy Priorities 

The programs in the conservation and rural development titles work to preserve 

the health of America’s rural communities, as well as soil, water, and other natural 

resources essential to the long-term productivity and economic viability of agriculture and forestry. Protecting and responsibly managing our natural resources is 

critical to the well-being and future of American communities and the common good 

of all. 

We offer the following recommendations as you consider reforms to the conservation and rural development titles in the 2012 Farm Bill:

• Support strong funding levels that allow for greater participation in the Conservation Stewardship Program (CSP). Despite great demand, this program 

has been consistently under-funded in previous budgets. We fully support the 

original goal of the CSP program to provide environmental stewardship payments for working farms attuned to the common good.

• Consider the public health benefits of improving water and air quality as part 

of the Environmental Quality Incentives Program (EQIP). We ask that 

EQIP, CSP and other conservation programs always target payments to small 

and moderate size operations. This would encourage wider enrollment while 

also promoting more vibrant rural communities.

• Maintain the full range of conservation casement programs, notably the Conservation Reserve Program (CRP) as well as the reserve programs covering 

Wetlands, Grasslands, and the Farmland Protection Program. Beyond ensuring adequate funding for these programs, we see the need for greater coordination in the application, contract and enforcement of these programs.

• Support and adequately fund Value-Added Producer Grants to help beginning, socially disadvantaged, and small and mid-sized farmers and ranchers.

• Adequately fund the Rural Micro-Entrepreneur Assistance Program 

(RMAP) and ensure access to broad-band telecommunications services to help 

rural businesses and communities prosper.

Even in the face of budgetary constraints, we urge clear priorities and policies in 

the 2012 Farm Bill to promote and maintain strong conservation programs to protect God’s creation and encourage rural development and promote the vibrancy and 

well-being of rural communities. 

Subsidies and the Farm Safety Net 

We believe that farmers, ranchers and farmworkers deserve just wages, safe 

working conditions and benefits for them and their families. Farmers also need an 

effective safety net that helps them mitigate risks from drastic changes in climate 

and weather patterns and trade distorting policies. Fair agriculture policies must 

ensure basic income security and provide opportunities for economic initiative for 

farmers at home and around the world, especially for smaller and medium sized 

farms and ranches. 

Catholic social teaching assesses agriculture and development policies on whether 

they encourage widespread diversity in farm ownership, advance rural development 

and safeguard the livelihood of those who grow and harvest our food. We remain 

concerned that ownership of land and natural resources, and the marketing and distribution of food is controlled by and benefits too few people. We also regret that 

trade distorting practices can lead to higher food costs and that subsidies often negVerDate 0ct 09 2002 12:54 Dec 11, 2012 Jkt 041481 PO 00000 Frm 00757 Fmt 6621 Sfmt 6621 I:\DOCS\112-30\74372.TXT BRIAN
2346

atively impact the livelihood of farmers in developing countries. These increased 

pressures especially impact poor and hungry people and particularly children. 

The 2012 Farm Bill provides the opportunity to reform Title I to respond to the 

requirements of justice and strengthen our commitment to active farmers and rural 

communities offering support where it is most needed as well as redirecting resources to poor and hungry people. 

Policy Priorities 

The commodity title (Title I) was established to provide a safety net for farmers 

and it is important to continue reasonable support for commodity and dairy farmers. 

In these times of national and economic hardship, policies should reflect shared sacrifice. Given current high commodity prices and Federal budget constraints, agriculture subsidies such as direct payments, can be reduced overall. Direct payments 

should be targeted to small and medium-sized farms, especially those represented 

by traditionally underrepresented groups. Government resources should aid those 

who truly need support and who practice environmentally sound and sustainable 

farming practices. 

We also call for a careful reconsideration of the economics and ethics of subsidizing food to produce fuel. With so many people struggling with hunger and higher food prices, social justice and the pursuit of the common good require us to reconsider how our policies impact the hungry in our communities and in poorer nations. 

We offer the following recommendations for your consideration on Title I in the 

2012 Farm Bill:

• Protect small to medium-sized family farms by ensuring they have access 

to safety net programs such as farm/crop insurance to mitigate the effects of adverse weather, climate and trade distorting policies. The farmers with the greatest needs should have first claim on agricultural assistance.

• Establish a reasonable cap on commodity payments so that smaller producers are protected. The current level of assistance disproportionately favors 

larger industrial producers. Simply rewarding production undermines the ability of smaller farmers to compete and thrive. For example, corn and cotton producers receive some of the largest subsidies. This can lead to prioritizing land 

for corn production intended for ethanol for automobiles rather than hungry 

people. Subsidies that lower cotton prices hurt many cotton farmers in poor developing countries by undermining their livelihood.

• Significantly reduce trade distorting support programs that disadvantage farmers in poor countries. Some subsidies, supports, tariffs, quotas and 

other barriers undermine market access for poorer countries and local producers.

• Target and redirect savings from reductions in the commodity title to support programs that assist poor and hungry people and encourage responsible 

stewardship of the land and rural development. Reductions in subsidies should 

be dedicated first to support domestic nutrition and international food aid and 

development programs that help people in need. Second, these resources should 

support adequate funding for conservation and rural development programs 

that promote stewardship of creation and help rural communities prosper. 

Conclusion 

The Catholic community brings a unique perspective to the 2012 Farm Bill. Our 

vision is rooted in our Catholic social teaching tradition and our active presence and 

experience in the life of rural communities in this country and around the world. 

Our teaching and experience provide the Catholic community with a view on how 

agriculture policies affect farm families, hungry children, how the land is cared for, 

and the viability of rural communities. 

These directions for U.S. agriculture policy are shaped by our conviction that current policies leave too many vulnerable people behind. Especially in times of budgetary constraint, a just farm bill must prioritize the life and dignity of the human 

person and the common good of all. 

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SUBMITTED QUESTIONS

Response from Gary D. Schnitkey, Ph.D., Full and Associate Professor, Department of Agricultural and Consumer Economics, University of Illinois 

Questions Submitted By Hon. Robert T. Schilling, a Representative in Congress from 

Illinois 

Question 1. Dr. Schnitkey—We’re in an extremely tight fiscal spot here and this 

Committee must be efficient in providing farmers with risk management programs. 

In your opinion, is PRICE, YIELD, or REVENUE the best metric for the government to focus on when providing such a program? 

Answer. In my opinion, revenue is the most important metric. Costs are paid with 

revenue, not yield or prices. You can have low yield and reasonable revenue if prices 

are high, and vice versa.

Question 2. In your testimony, you indicate that the program is fairly equitable 

based on program crops’ gross revenue. But what about variable costs? Some crops 

are more expensive to grow than others? 

Answer. This is a good point and variable costs do vary across crops. However, 

variable costs of the crop tend to align with crop costs over time. Rice has higher 

variable costs than corn. It also have higher revenue.

Question 3. When corn and soybean farmers in my district tell me they don’t receive a crop insurance payment even when they sometimes have quite large losses, 

how can we correct this? Some tell me that their county has a ‘‘loss ratio’’ of .25. 

Can you elaborate on this situation? 

Answer. Most of the time I hear this, it is because of low prices at the beginning 

of the year. Crop insurance sets its prices used in guarantees during February. If 

prices during that month are low, then crop insurance may not make payments even 

though revenue is low. 

Crop insurance has paid at low rates in Illinois compared to other states. This 

is because Illinois has less yield variability than other states.

Question 4. Regarding crop insurance, are there other crop insurance products 

that we should be encouraging RMA to look at? 

Answer. One of the biggest improvements would be to improve ratings. Moving 

to a point where yields are tied to land quality and location would help the rating 

process.

Question 5. Wouldn’t raising target prices help in protecting farmers when we 

have long-term price declines rather than creating a complicated program that is 

hard to understand? 

Answer. Yes, but sometimes prices will be below target prices and revenue will 

still be reasonable because yields are high. In addition, target prices can distort the 

market if prices are not appropriately set. 

Response from Linda C. Raun, Chairwoman, USA Rice Producers’ Group; 

Partner, LR Farms; on Behalf of USA Rice Federation 

Questions Submitted By Hon. Robert T. Schilling, a Representative in Congress from 

Illinois 

Question 1. It is my understanding that rice producers prefer the target price option and that you do not support the floor price of $13.00 in the proposed ARC program in the Senate reported bill. 

Answer. Yes, rice producers prefer to have the option of either a price-based option or a revenue-based option that growers can choose from rather forcing all into 

one policy. We support including a reference price in both the revenue-based option 

and the price-based option, but we believe the $13/cwt in the ARC program in the 

Senate bill is too low based on our costs of production and other factors.

Question 2. However, the Congressional Budget Office is projecting a long term 

market price average just above that level. Do rice growers need a target price of 

$13.98 that was reportedly in the Joint Committee’s recommendation last fall? 

Answer. Yes, we need a reference price in a price-based option of $13.98/cwt as 

was reportedly included in the recommendations from the Agriculture Committee’s 

last fall. This reference price level is still well below our costs of production based 

on the parameters that were included in the proposal last fall. 

2348

Response from Steve Wellman, President, American Soybean Association 

Questions Submitted By Hon. Robert T. Schilling, a Representative in Congress from 

Illinois 

Question 1. We’re in an extremely tight fiscal spot here and this Committee must 

be efficient in providing farmers with risk management programs. In your opinion, 

is PRICE, YIELD, or REVENUE the best metric for the government to focus on 

when providing such a program? 

Answer. In ASA’s opinion, revenue is the most accurate method for protecting 

farmers against the risks they face, since it reflects both price and yield. Price responds to several factors, including domestic and world production and demand and 

foreign competition. Yield reflects weather and management. Price and yield are 

often inversely related—lower yields in major growing regions frequently result in 

higher prices. Since risk management programs should be designed to protect 

against unavoidable declines in farm income, not solely price or yield, revenue is the 

best metric for providing this protection. ASA agrees we must be fiscally efficient 

in developing risk management programs for farmers. A revenue program that pays 

only when farmers have a revenue loss compared to previous history is a fiscally 

efficient program. Using a combination of price and yield, revenue allows an increase in yield to offset some of the cost outlays when prices decline. Since there 

is not a fixed price, it reacts to current production and market conditions.

Question 2. As a corn and soybean farmer, can you elaborate a little on your 

thoughts about the Agriculture Risk Coverage program posed in the Senate farm 

bill? 

Answer. The Agriculture Risk Coverage (ARC) program in the Senate farm bill 

would partially offset revenue losses incurred by farmers on crops they grow in the 

current year. At the same time, by requiring farmers to incur a loss on individual 

commodities, it would not create an incentive for producers to grow specific crops 

in anticipation of receiving payments that could distort their planting decisions. Finally, since the revenue benchmark established under ARC would be based on a 

moving average of prices and yields, the program would more closely reflect recent 

market and production realities.

Question 3. When corn and soybean farmers in my district tell me they don’t receive a crop insurance payment even when they sometimes have quite large losses, 

how can we correct this? Some tell me that their county has a ‘‘loss ratio’’ of .25. 

Can you elaborate on this situation? 

Answer. The high deductible in crop insurance is often cited by growers as a reason that crop insurance cannot alone provide a safety net. When farmers relate that 

they have suffered, for example, a 25% loss but not received an indemnity, this likely means they purchased a crop insurance policy for 75% coverage or less, leaving 

them uninsured for at least 25% of their crop. Federal crop insurance is also based 

on a 10 year yield history and most crops have increased annual yields over time. 

So the yields farmers are able to insure are lower than their actual yields. The Risk 

Management Agency (RMA) implemented a new option for farmers to increase their 

yield calculation this year, the ‘‘Trend-Adjusted APH Yield Endorsement.’’ History 

has shown that as premium subsidies (including the addition of enterprise units) 

increase, farmers buy higher levels of coverage and are able to decrease their deductible. 

When a county has a 0.25 loss ratio, that means that $25 in indemnities have 

been paid for each $100 collected in premium. A loss ratio of 0.25 indicates that few 

losses have been paid in that county for that year, and that most farmers have had 

a successful crop.

Question 4. Regarding crop insurance, are there other crop insurance products 

that we should be encouraging RMA to look at? 

Answer. Farmers are always interested in improving the crop insurance products 

offered to them. The most long-standing complaint about crop insurance is that it 

does not cover multiple years of declining yields. ASA is aware that RMA fully understands this problem and solutions have been elusive. If such a policy can be developed, it will find a receptive grower market. One product that has been taken 

off the market in some places is the Group Risk Income Protection (GRIP) policy. 

RMA explains that this is likely because of low participation, but can also be due 

to the National Agricultural Statistics Service (NASS) no longer publishing county 

data to be used for the policy. When appropriate, ASA supports increasing availability for the GRIP policy. There are two improvements in the proposed Senate bill 

that achieve crop insurance improvements for farmers: allowing for separate coverage for irrigated and nonirrigated crops for enterprise unit crop insurance, and 

allowing adjustments in actual production history (APH) to establish insurable 

2349

yields to be based on 70% of the applicable transitional yield rather than on 60% 

of the transitional yield. 

Response from Tim Weber, President, Crop Insurance Division, Great 

American Insurance Company 

Questions Submitted By Hon. Robert T. Schilling, a Representative in Congress from 

Illinois 

Question 1. Can you provide your perspective on how the crop insurance program 

performed in 2011? Was it effective? 

Answer. Yes, I believe the crop insurance program performed extremely well in 

2011, proving that it is both an effective risk management tool for farmers and their 

lenders, as well as an efficiently delivered program by crop insurance companies and 

agencies. 

As I said in my testimony, 2011 was a year for the record books. It was perhaps 

one of the most destructive weather years in history, with severe droughts in the 

Southern Plains, hard freezes in Florida, flooding along the Mississippi and Missouri Rivers, tropical storms in the South and Northeast, and a broad swath of destruction in the Central Plains. This weather condition set the stage for the program 

making record indemnity payments, while, as reported by RMA, registering no complaints by policyholders calling for ad hoc disaster assistance. 

I believe this outcome for the year means the program was applied to farmers’ 

enterprises in a manner that provided very appropriate coverage levels and the resulting claims were settled accurately and timely. These outcomes are the hallmark 

characteristics of an effective insurance program, especially for the Federal crop insurance program.

Question 2. What rate of return do the companies need to sustain the current 

level of service being provided to the farmers without disrupting the delivery system? 

Answer. Crop insurance companies require an average rate of return that is competitive with their alternative uses of capital in order to ensure that U.S. farmers 

and ranchers will continue to receive the continued high levels of service and efficiency they have come to expect from the private delivery system. Because companies within the crop insurance industry differ with respect to their scale of operation, regional spread of business, and organizational structure, there is no single 

‘‘rate’’ that can be ascribed to the industry. 

The President’s 2013 Budget proposal seeks to reduce the overall rate of return 

to the companies. Unfortunately, the President’s Budget and other recent statements by the Department of Agriculture regarding the rate of return have confused 

the issue greatly. There are serious questions about the numbers used to define and 

determine the industry’s rate of return. Statements from the Administration confuse 

basic financial concepts used to calculate industry returns and fail to take into account that industry returns vary over time and differ among geographic regions. Industry officials have met with the USDA to discuss these concerns and look forward 

to continued dialogue. 

Among the specific concerns voiced about the Administration’s estimates, which 

are as much as double the industry’s estimates, are that they:

• Assume that government Administrative and Operating expense (A&O) payments to companies on behalf of producers cover all program delivery costs, 

which they do not;

• Fail to account for certain other operational costs such as reinsurance; and

• Ignore recent key changes in the program.

Industry underwriting gains and A&O were reduced as part of the 2011 SRA negotiations. As a result of the 2011 SRA, the funding reduction to the private delivery 

system was approximately $6 billion over 10 years. More recently, RMA revised its 

ratemaking procedures, which sharply reduced premium rates for corn and soybeans. RMA plans a second phase of premium reductions in 2013, which will be beneficial to farmers, but will further reduce underwriting gains. At this point, the anticipated after-tax return on equity for the industry will be well below the level once 

indicated to be sustainable. Once all of the relevant factors are taken into account, 

the industry-wide expected return on equity is expected to be in the low single digits, significantly less than the industry’s cost of capital. 

Additional points to keep in mind are that returns earned by the industry are not 

guaranteed. Companies are exposed to considerable risk that may cause their results to vary widely from year to year, and from region to region. The high degree 

of risk of return to the Industry is not adequately considered in any analysis provided by the government. Furthermore, an adequate rate of return at the national 

2350

level may not ensure an adequate return for individual states. Certain states, particularly in the Southern Plains, have extremely low or even negative expected rate 

of return, which has serious implications for the viability of the private delivery system in those regions. 

As the 2012 Farm Bill debate continues, it is hoped that everyone recognizes that 

the system is working exactly as Congress designed by reducing taxpayer risk and 

speeding relief to growers when they need it the most. That is why farmers and 

their bankers are such proponents of the existing crop insurance structure and have 

asked that it not be weakened further. We are doing more with less and fear that 

additional reductions would undermine the successful public-private partnership 

that took more than 3 decades to build.

Question 3. What are your thoughts on the impact of FSA delivery of any portion 

of crop insurance services to the producer? How does this impact the approved insurance providers currently offering these services? 

Answer. As I said in my testimony, we believe the private sector, not the government, is the best way to provide the individual risk management information and 

tools that are indispensable for producers today. We understand that is the way 

farmers and ranchers want the program to operate. 

The impact of FSA delivery of crop insurance does not have to be left to guesswork. There is a recorded history and it was not a successful experience for farmers 

or the program. In the almost 3 decades since FSA was involved in delivering activities, the crop insurance program has grown in size and complexity. This development suggests it would be even more difficult for agency employees to perform at 

the level of service that is expected by farmers today. Therefore, I believe the greatest impact stemming from government delivery of any part of the crop insurance 

program would be a reduction in service to farmers in terms of satisfaction with coverage decisions and general processing of required reports and claims processing. 

Approved insurance providers have invested in human and capital resources to effectively and efficiently meet the demands of delivering the full array of services association with the Federal Crop Insurance Program. This investment produced the 

excellent result recorded for the record indemnity year of 2011. Carving out some 

responsibility for FSA would compromise the investments made by approved insurance providers to satisfy their commitments under the terms and conditions of the 

SRA. 

The best observation I can make is that our customers—the farmers—are satisfied with private sector delivery of the program and we are pleased to continue serving the risk management needs of farmers with the Federal Crop Insurance Program. Therefore, I encourage Congress to continue the delivery system that is in 

place today. It is working for the farmer. 

(2351)

FORMULATION OF THE 2012 FARM BILL 

(ENERGY AND FORESTRY PROGRAMS) 

FRIDAY, MAY 18, 2012

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON CONSERVATION, ENERGY, AND

FORESTRY, COMMITTEE ON AGRICULTURE, Washington, D.C. 

The Subcommittee met, pursuant to call, at 11:05 a.m., in Room 

1300, Longworth House Office Building, Hon. Glenn Thompson 

[Chairman of the Subcommittee] presiding. 

Members present: Representatives Thompson, Goodlatte, Gibbs, 

Tipton, Southerland, Roby, Huelskamp, Hultgren, Ribble, Noem, 

Holden, Schrader, Owens, Costa, and Walz. 

Staff present: Brent Blevins, Tamara Hinton, Brandon Lipps, 

Josh Maxwell, Mary Nowak, Debbie Smith, Patricia Straughn, 

Lauren Sturgeon, Wyatt Swinford, Suzanne Watson, John Konya, 

Liz Friedlander, Lisa Shelton, Anne Simmons, and Caleb 

Crosswhite. 

OPENING STATEMENT OF HON. GLENN THOMPSON, A 

REPRESENTATIVE IN CONGRESS FROM PENNSYLVANIA 

The CHAIRMAN. Good morning everyone. This hearing of the Subcommittee on Conservation, Energy, and Forestry to discuss energy 

and forestry programs in advance of the 2012 Farm Bill will come 

to order. 

First of all, let me extend my apologies. Votes have a way of getting in the way of things here. And so, I apologize for the delay of 

the convening of this Subcommittee hearing. I really appreciate the 

patience of all those who are here, certainly our witnesses. And we 

are looking forward to hearing your testimony. 

Let me get started by saying this is the final hearing that the 

Subcommittees will hold to review the farm bill programs before 

writing the legislation next month. 

We had witnesses from USDA testify before the Subcommittee 

last summer offering us information on the scope and purpose of 

each program. And today we will hear from stakeholders who work 

with these programs and can offer insight on ways to improve their 

functionality. 

The first energy title was written in the 2002 Farm Bill to help 

spur the development of renewable fuels across rural America. It 

was designed to help develop feedstocks, renewable fuels and increase energy efficiency as well as energy supplies for farmers and 

rural Americans. The 2008 Farm Bill expanded the energy title 

2352

and committed more than $1 billion in mandatory funding to existing and new energy programs. This money was provided for the 

purpose of developing advanced biofuels beyond corn ethanol. 

There are many examples of agricultural resources in my Pennsylvania district that can be used for the production of advanced 

biofuels. Timber is a form of renewable biomass and can be used 

for energy or heat production. Many of our dairy farmers utilize anaerobic digesters to convert waste into renewable energy. 

Programs such as the Biomass Crop Assistance Program, better 

known as BCAP, were created with the purpose of developing dedicated energy crops to foster the creation of the next generation of 

advanced biofuels. And this program has received over $900 million 

in appropriations. It is fair for this Subcommittee to ask whether 

or not this program has achieved its purpose, whether or not it 

needs to be altered in some ways, and if there are new sources of 

biomass established for energy production as a result of this program. 

Other programs, like the Rural Energy for America Program, 

commonly known as REAP, were expanded to better assist rural 

America’s producers and small businesses to implement energy efficiency measures and renewable energy systems. 

We should be certain that farm bill energy programs do not favor 

one region over another and that the programs are operating as 

Congress intended. I should note that the last two farm bills were 

written during more favorable budgetary times than the situation 

we find ourselves today with the Federal deficit and the increasing 

national debt. 

Indeed, 37 programs in the farm bill do not have a budget baseline beyond its expiration, including every core program in the energy title. Now this means that not only will we not have the $1 

billion that was made available for the last farm bill, but we will 

not have allocated any mandatory money for continuing these programs. This is a tremendous challenge in these fiscal times as we 

look for ways to cut spending and make government more efficient, 

yet still achieve our desired goals. 

Our first panel of witnesses will offer us their feedback on what 

is most important to them in the energy title given budget constraints we face moving forward. Our second panel of witnesses 

will discuss forestry in the farm bill. Our Committee shares jurisdiction of forestry matters with the Natural Resources Committee. 

Our Committee’s jurisdiction over forestry includes state and private forestry, landowner assistance programs, forestry research, as 

well as general oversight of the Forest Service. 

Over the past year and a half, this Subcommittee has been very 

engaged with the Forest Service, which, as many of you know, is 

located within the Department of Agriculture. 

Several Members of the Subcommittee, including myself, have 

forest lands in their districts and appreciate the importance of forestry in supporting a healthy and vibrant rural America. But proper forest management and the role of Forest Service goes far beyond the interests of the Members of this Subcommittee. The Forest Service manages 155 National Forests and 20 Grasslands, 

which makes up 193 million acres across this great nation. 

2353

Now since their inception, National Forests have been intended 

for multiple uses, which include timber harvesting, energy production, mineral extraction and recreational activities. The forestry 

title of the 2008 Farm Bill included several diverse provisions pertaining to all aspects of forestry, including the forestry sector’s participation in conservation and energy programs. Though many of 

the forestry programs do not need to be reauthorized this farm bill, 

it is important for us to review these programs to be ensure that 

they are being carried out in a manner consistent with their purpose. 

We will hear ideas for improving program delivery for forest 

landowners and those in the timber industry, and we will also hear 

about tools the Forest Service can use to promote timber harvesting, which is critical for forest health across America. 

In addition to forestry matters, our witnesses in the second panel 

will discuss related topics such as how forestry fits into the discussion of energy and conservation program and the regulation of forest logging roads. 

I want to briefly address the topic of forest road regulations, 

since I know it affects several of our witnesses today. Now I have 

been very concerned about this matter since the Ninth Circuit 

ruled last year that forest roads can be considered a point source 

under the Clean Water Act, and therefore, subject to permitting 

process before any trees can be cut. The Ninth Circuit decision has 

been appealed to the Supreme Court. And if the Court does not 

choose to hear the case, it is likely the EPA will move forward with 

applying the decision nationwide, putting a tremendous economic 

burden on loggers, forest owners and everyone who depends on 

these groups. 

This will be an unnecessary action given that the best management practices administered by states since 1976 have worked effectively and have not put an undue burden on the forest products 

industry. Now we will continue to monitor these developments if 

the EPA moves forward with a nationwide permitting process. I believe Congress must act to clarify the existing state specific best 

management practices that are adequate for protecting our water 

sources. Further regulations are unnecessary and will carry a 

heavy burden for rural America. 

I want to thank our witnesses for being here today, and I look 

forward to working with you as we move forward on this process. 

[The prepared statement of Mr. Thompson follows:]

PREPARED STATEMENT OF HON. GLENN THOMPSON, A REPRESENTATIVE IN CONGRESS

FROM PENNSYLVANIA

Good morning. I want to welcome everyone to this Conservation, Energy, and Forestry Subcommittee hearing to examine farm bill energy and forestry programs. 

This is the final hearing the Subcommittees will hold to review farm bill programs 

before writing legislation next month. 

We had witnesses from USDA testify before the Subcommittee last summer, offering us information on the scope and purpose of each program. 

Today, we will hear from stakeholders who work with these programs and can 

offer insight on ways to improve their functionality. 

The first energy title was written in the 2002 Farm Bill to help spur the development of renewable fuels across rural America. 

It was designed to help develop feedstocks for renewable fuels and to increase energy efficiency, as well as energy supplies, for farmers and rural Americans. 

2354

The 2008 Farm Bill expanded the energy title and committed more than $1 billion 

in mandatory funding to existing and new energy programs. This money was provided for the purpose of developing advanced biofuels beyond corn ethanol. 

There are many examples of agricultural resources in my Pennsylvania district 

that can be used for the production of advanced biofuels. 

Timber is a form of renewable biomass that can be used for energy or heat production. Many of our dairy farmers utilize anaerobic digesters to convert waste into 

renewable energy. 

Programs such as the Biomass Crop Assistance Program—better known as 

BCAP—were created with the purpose of developing dedicated energy crops to foster 

the creation of the next generation of advanced biofuels. 

This program has received over $900 million in appropriations. 

I think it is fair for this Subcommittee to ask whether or not this program has 

achieved its purpose; whether or not it needs to be altered in some ways; and if 

there are new sources of biomass established for energy production as a result of 

this program. 

Other programs, like the Rural Energy for America Program, commonly known 

as REAP, were expanded to better assist rural America’s producers and small businesses to implement energy efficiency measures and renewable energy systems. 

We should be certain that farm bill energy programs do not favor one region over 

another and that the programs are operating as Congress intended. 

I should note that the last two farm bills were written during more favorable 

budgetary times than the situation we find ourselves today with the Federal deficit 

and increasing national debt. 

Indeed, 37 programs in the farm bill do not have a budget baseline beyond its 

expiration, including every core program in the energy title. 

That means that not only will we not have the $1 billion that was made available 

for the last farm bill, but we will not have allocated any mandatory money for continuing these programs. 

That is a tremendous challenge in these fiscal times, as we look for ways to cut 

spending and make government more efficient, yet still achieving our desired goals. 

Our first panel of witnesses will offer us their feedback on what is most important 

to them in the energy title, given budget constraints we face moving forward. 

Our second panel of witnesses will discuss forestry in the farm bill. 

Our Committee shares jurisdiction of forestry matters with the Natural Resources 

Committee. 

Our Committee’s jurisdiction over forestry includes state and private forestry, 

landowner assistance programs, forestry research, as well as general oversight of 

the Forest Service. 

Over the past year and a half, this Subcommittee has been very engaged with the 

Forest Service, which as many of you know, is located within the Department of Agriculture. 

Several Members of this Subcommittee, including me, have forestlands in their 

district, and appreciate the importance of forestry in supporting a healthy and vibrant rural America. 

But proper forest management and the role of the Forest Service goes far beyond 

the interests of the Members of this Subcommittee. The Forest Service manages 155 

National Forests and 20 Grasslands, which makes up 193 million acres across the 

nation. 

Since their inception, National Forests have been intended for multiple-uses, 

which include: timber harvesting, energy production, mineral extraction, and recreational activities. 

The forestry title of the 2008 Farm Bill included several diverse provisions pertaining to all aspects of forestry, including the forestry sector’s participation in conservation and energy programs. 

Though many of the forestry programs do not need to be reauthorized this farm 

bill, it is important for us to review these programs to ensure that they are being 

carried out in a manner consistent with their purpose. 

We will hear ideas for improving program delivery for forest landowners and 

those in the timber industry. We will also hear about tools the Forest Service can 

use to promote timber harvesting, which is critical for forest health across America. 

In addition to forestry matters, our witnesses on the second panel will discuss related topics, such as how forestry fits into the discussion of energy and conservation 

programs. 

I thank our witnesses for being here today and look forward to working with you 

as we move forward in this process.

2355

The CHAIRMAN. And I now yield for purposes of an opening statement to the Ranking Member, my colleague from Pennsylvania, 

Mr. Holden. 

OPENING STATEMENT OF HON. TIM HOLDEN, A 

REPRESENTATIVE IN CONGRESS FROM PENNSYLVANIA 

Mr. HOLDEN. Thank you, Mr. Chairman, and thank you for having this hearing today. And I would like to thank our witnesses 

and guests for being here as well. This hearing presents an important opportunity for Members of the Subcommittee to look at 

USDA’s energy and forestry programs in advance of the next farm 

bill. 

The 2008 Farm Bill included many new provisions to ensure 

American agriculture will play a role in moving our country toward 

energy independence. The bill also expanded many of the renewable energy programs originally authorized in the 2002 Farm Bill. 

The 2008 Farm Bill encouraged a move toward advanced biofuels 

by promoting research, development and demonstration of biomassbased renewable energy. The bill also provided close to $1 billion in investments demonstrating to a promising but fragile industry our commitment, 

demonstrating our commitment to renewable energy production. 

Unfortunately, implementing many of these energy title programs 

has been slow, leading to uncertainty in an industry we intended 

to strengthen and support. It is also unfortunate that the farm 

bill’s energy title does not have mandatory money for these programs once the bill expires. This puts us in a difficult situation 

made even more so during this challenging fiscal environment. 

Similarly, the forestry title which impacts forest land management in the 155 National Forests and 20 Grasslands in the National Forest System does not have any mandatory funding. To accomplish our goal of a well-managed agency dedicated to forest 

stewardship that continues to meet the needs of present and future 

generations, we must make sure that forestry title policies are fulfilling the mission of quality land management for multiple uses. 

At the same time, we have to ensure that forest landowners continue to have access to conservation programs in order to further 

private forest land conservation. To sustain healthy, diverse and 

productive forest and expand domestic renewable energy, we must 

all work together and make certain we spend taxpayers dollars 

wisely. 

Thank you again, Mr. Chairman, for having this hearing and I 

look forward to hearing from our witnesses. 

[The prepared statement of Mr. Holden follows:]

PREPARED STATEMENT OF HON. TIM HOLDEN, A REPRESENTATIVE IN CONGRESS FROM

PENNSYLVANIA

I would like to thank our witnesses and guests for coming today. This hearing 

presents an important opportunity for Members of the Subcommittee to look at 

USDA energy and forestry programs in advance of the next farm bill. 

The 2008 Farm Bill included many new provisions to ensure American agriculture 

will play a role in moving our country toward energy independence. The bill also 

expanded many of the renewable energy programs originally authorized by the 2002 

bill 

The 2008 Farm Bill encouraged a move toward advanced biofuels by promoting 

research, development and demonstration of biomass-based renewable energy. The 

2356

bill also provided close to $1 billion in investments, demonstrating to a promising 

but fragile industry our commitment to renewable energy production. 

Unfortunately, implementing many of these energy title programs has been slow, 

leading to uncertainty in an industry we intended to strengthen and support. It is 

also unfortunate that the farm bill’s energy title does not have mandatory money 

for these programs once the bill expires. This puts us in a difficult situation, made 

even more so during this challenging fiscal environment. 

Similarly, the forestry title, which impacts forestland management in the 155 National Forests and 20 Grasslands in the National Forest System, does not have any 

mandatory funding. 

To accomplish our goal of a well-managed agency dedicated to forest stewardship 

that continues to meet the needs of present and future generations, we must make 

sure that forestry title policies are efficient. At the same time, we have to ensure 

that forest landowners continue to have access to conservation programs in order 

to further private forestland conservation. 

To sustain healthy, diverse and productive forests and expand domestic renewable 

energy we must all work together and make certain we spend taxpayer dollars wisely. 

I look forward to hearing from the today’s witnesses.

The CHAIRMAN. I thank the gentleman. The chair would request 

that other Members submit opening statements for the record so 

the witnesses may begin their testimony and ensure there is ample 

time for questions. 

[The prepared statement of Mr. Schrader follows:]

PREPARED STATEMENT OF HON. KURT SCHRADER, A REPRESENTATIVE IN CONGRESS

FROM OREGON

Last year the 9th Circuit Court of Appeals ruled that forest roads used for timber 

harvest are ‘‘point sources’’ requiring Federal industrial permits under the Clean 

Water Act. This decision ignored Congressional intent and EPA’s 35 year policy recognizing roads as nonpoint sources. It has now been appealed to the Supreme Court, 

which will soon decide whether or not to review the case. 

EPA is also expected to announce that it will amend its rules to address the Ninth 

Circuit decision sometime in 2013. While I appreciate their interest in helping forest 

landowners address concerns raised in the 9th Circuit decision, a rulemaking will 

not provide the certainty needed. 

Federal, state and private sector experts agree that replacing BMPs with permits 

will in fact NOT improve water quality. Requiring permits or some other Federal 

regulatory system for forest roads would needlessly impose potentially billions of 

dollars of new paperwork and monitoring costs on forest owners and states and increase the already staggering amount litigation. A recent study concluded that forest management and timber production costs would increase by $654 million. That 

study also found that the decision would result in over 24,000 jobs lost, over 6,000 

in my state alone. In a time of such economic distress, this is not the time to support initiatives that would reduce jobs and increase spending. 

I am a lead sponsor for a bill that would codify EPA’s 35 year treatment of forest 

roads as a nonpoint source. A short-term provision of this language was passed in 

the Omnibus Appropriations bill last December. If the Supreme Court reviews the 

Ninth Circuit decision, we should extend that language so the Court can do its 

work. If the Supreme Court does not review the case, then Congress will need to 

step in and fix this issue once and for all.

The CHAIRMAN. So I would like to welcome our first panel of witnesses who are now seated at the table. In this first panel we will 

be hearing, we are joined by the Honorable Jim Greenwood, a 

Pennsylvania Congressman and someone I have enjoyed the opportunity to work with going back to his state legislature days. He is 

currently President and CEO of the Biotechnology Industry Organization located here in Washington, DC. 

We are also joined Mr. Ryan Stroschein—Stroschein? You only 

come into this world and leave with one thing and that is your 

name, so I hate to really mess them up—Director of Agriculture 

Energy Coalition here in Washington. Somewhat of a neighbor of 

2357

mine, just over the line from Mifflintown Pennsylvania in Juniata 

County, Mr. Steve Reinford, Owner and Operator of Reinford 

Farms; Mr. Jerry Taylor, President and Chief Executive Officer, 

MFA Oil, Co-Founder of MFA Oil Biomass LLC in Columbia, Missouri; and Mr. Gary Haer, Chairman of the National Biodiesel 

Board, Washington, D.C. 

So welcome, gentlemen. Thank you for being here and bringing 

your expertise and your experience to this Subcommittee hearing. 

And Congressman Greenwood, please begin when you are ready. 

STATEMENT OF HON. JAMES C. GREENWOOD, PRESIDENT AND 

CHIEF EXECUTIVE OFFICER, BIOTECHNOLOGY INDUSTRY 

ORGANIZATION, WASHINGTON, D.C. 

Mr. GREENWOOD. Thank you, Chairman Thompson, Ranking 

Member Holden, and distinguished Members of the Subcommittee. 

I thank you and appreciate the opportunity to be with you today. 

My name is Jim Greenwood, I am the President and CEO of the 

Biotechnology Industry Organization. BIO is the world’s largest 

biotechnology organization with more than 1,100 members worldwide. With its broad membership, innovative industrial and agricultural biotechnology companies are developing new feedstocks 

and biological catalysts for production of advanced biofuels, renewable chemicals and biobased products. 

Because these feedstocks, manufacturing methods, and products 

are based on plants and biological processes, they are more efficient, sustainable and environmentally friendly. Importantly, the 

development and use of biomass for fuels and chemicals in an 

American-biobased economy by necessity cannot be outsourced to 

other countries. Ten years ago this week, less than a year following 

the attacks of September 11, President Bush signed into law a 

farm bill that, for the first time, embraced the vital role American 

farmers and foresters can and must play in producing domestic energy, and therefore, improving national security and rural economic 

prosperity. 

Because of bipartisan Congressional support in 2002, and again 

during the 2008 Farm Bill, agricultural energy programs are revitalizing rural communities, reducing farmer dependence on commodity support programs, and ushering a new generation of advanced biofuels, renewable chemicals and biobased products to the 

cusp of commercialization. 

In short, the farm bill energy programs are working, and BIO 

member companies are beginning to put steel in the ground. And 

please allow me to share with you a few examples. There is the 

first slide. INEOS Bio and its joint venture partner, New Planet 

Energy, are preparing to open the Indian River County Bio Energy 

Center near Vero Beach, Florida, within the next few weeks. The 

biorefinery is a major landmark for this country. It is the first commercial cellulosic refinery. And as you can see, it is for real. It is 

a lot of steel in the ground there. 

The Biorefinery Assistance Program, which is a valuable farm 

bill energy initiative, helped INEOS Bio obtain debt financing from 

a Farm Credit agency with a long history of working with USDA 

lending programs. Lending, in turn, created over $130 million in 

private investment for a project that will produce 8 million gallons 

2358

of cellulosic ethanol and 6 megawatts of renewable electricity per 

year from renewable biomass such as yard waste or municipal solid 

waste and create 380 direct or indirect jobs. 

Raising private capital investments to build this first-of-its-kind 

facility would have been nearly impossible in today’s financial environment without the Biorefinery Assistance Program. 

That is ZeaChem’s project. It is based in Lakewood, Colorado. It 

is using biotechnology breakthroughs to convert fast growing poplar trees to chemicals and cellulosic ethanol in central Oregon. Another valuable farm bill energy program, the Biomass Crop Assistance Program, or BCAP, helps farmers in the counties surrounding 

the facility to grow the trees that will feed both the demonstration 

project and the commercial facility when it is completed in the next 

few years. ZeaChem’s commercial biorefinery will employ 100 people and invest several hundred million dollars in local infrastructure. It will also provide employment opportunities to another 442 

people. 

Coskata, based in Warrenville, Illinois, is leveraging the Biorefinery Assistance Program to secure private capital for a commercial scale cellulosic biorefinery in Greene County, Alabama, that is 

expected to create as many as 1,000 new jobs. 

Farm bill energy programs such as the Biobased Markets Program are also fostering innovation and domestic job creation in the 

renewable chemicals and biobased product sector. 

This is a project of Myriant. It is one of our BIO members invest- ing in the United States by building a $30 million pound per year 

commercial succinic acid biorefinery in Lake Providence, Louisiana. 

The biorefinery will create 50 full-time jobs and will revitalize the 

Port of Lake Providence. 

The Biobased Markets Program is expanding consumer awareness of these promising alternatives to petroleum-derived chemicals 

and products through consumer labeling and preferred procurement procedures. Opening the Biorefinery Assistance Program to 

renewable chemicals would further accelerate these promising technologies. 

My written testimony, which you have before you, includes several additional examples of the tremendous impact energy title programs are having in rural economies. Biotechnology is unlocking 

the potential of agriculture and forestry to create new opportunities 

like these for rural economic prosperity and energy security. Farm 

bill energy programs, such as the Biorefinery Assistance Program, 

BCAP, and the Biobased Markets Program, in combination with 

the complementary Federal policies like the renewable fuel standard and supportive tax policies are speeding technologies to commercial reality. 

It is vital for our nation’s future that we continue investments 

in America’s energy and agricultural futures as the Senate Agriculture Committee acknowledged when it passed mandatory funding for these programs in the bipartisan bill that passed the Committee last month on a vote of 16–5. I urge this Committee to do 

its part as well and to reauthorize farm bill energy programs with 

meaningful mandatory funding. 

Thank you, Mr. Chairman. 

[The prepared statement of Mr. Greenwood follows:]

2359

PREPARED STATEMENT OF HON. JAMES C. GREENWOOD, PRESIDENT AND CHIEF

EXECUTIVE OFFICER, BIOTECHNOLOGY INDUSTRY ORGANIZATION, WASHINGTON, D.C. 

The Biotechnology Industry Organization (BIO) is the world’s largest biotechnology organization, with more than 1,100 members worldwide. Within its broad 

membership, innovative industrial and agricultural biotechnology companies are developing new feedstocks and biological catalysts for production of advanced biofuels, 

renewable chemicals, and biobased products. Because these feedstocks, manufacturing methods, and products are based on plants and biological processes, they are 

more efficient, sustainable and environmentally friendly. Importantly, the development and use of biomass for fuels and chemicals in an American biobased economy, 

by necessity, cannot be outsourced to other countries. 

Ten years ago this week, less than a year following the attacks of September 11, 

2001, President George W. Bush signed into law a farm bill that, for the first time, 

embraced the vital role American farmers and foresters can—and must—play in 

producing domestic energy and therefore improving national security and rural economic prosperity. 

Because of bipartisan Congressional support in 2002, and again during the 2008 

Farm Bill, agricultural energy programs are revitalizing rural economies, reducing 

farmer dependence on commodity support programs, and ushering a new generation 

of advanced biofuels, renewable chemicals, and biobased products to the cusp of 

commercialization. In short this program is working and our member companies are 

beginning to put steel in the ground. Please allow me to share a few examples: 

(1) INEOS Bio and its joint venture partner, New Planet Energy, are preparing 

to open the Indian River County BioEnergy Center near Vero Beach, Florida, later 

this year. This biorefinery is a major landmark for the country—the first commercial cellulosic biorefinery.

INEOS Bio New Planet Energy, Indian River Bioenergy Center, Vero 

Beach, Fla. April 3, 2012.

The Biorefinery Assistance Program, which is a valuable farm bill energy initiative, helped INEOS Bio obtain debt financing from a farm credit agency with a long 

history of working with USDA lending programs. Lending, in turn, created over 

$130 million in private investment for a project that will produce 8 million gallons 

of cellulosic ethanol and 6 megawatts of renewable electricity per year from renewable biomass, such as yard waste or municipal solid waste, and create 380 direct 

or indirect jobs. Raising private capital investment to build this first-of-a-kind facility would have been nearly impossible in today’s financial environment without the 

Biorefinery Assistance Program. 

(2) ZeaChem, based in Lakewood, Colorado, is using biotechnology breakthroughs 

to convert fast-growing poplar trees to chemicals and cellulosic ethanol in central 

Oregon. Another valuable farm bill energy program, the Biomass Crop Assistance 

Program, or BCAP, helps farmers in the county surrounding the facility to grow the 

trees that will feed both the demonstration project and the commercial facility when 

it is completed in the next few years. ZeaChem’s commercial biorefinery will employ 


11230195.eps
2360

100 people and invest several hundred million dollars in local infrastructure; it will 

also provide employment opportunities to another 442 people.

ZeaChem, Inc., Cellulosic Biofuel Demonstration Biorefinery, Boardman, 

Ore. August 2011.

(3) Coskata, based in Warrenville, Illinois, is leveraging the Biorefinery Assistance 

Program to secure private capital for a cellulosic biorefinery in Greene County, Alabama, that is expected to create as many as 1,000 new jobs.

Myriant, Bio-Succinic Acid Commercial Biorefinery, Lake Providence, La. 

April 2012.

Farm bill energy programs, such as the Biobased Markets Program, are also fostering innovation and domestic job creation in the renewable chemicals and 

biobased products sector. Myriant, for example, is one BIO member investing in the 

United States by building a 30 million pound per year commercial succinic acid biorefinery in Lake Providence, Louisiana. The biorefinery will create 50 full time jobs 

and will revitalize the Port of Lake Providence. The Biobased Markets Program is 

expanding consumer awareness of these promising alternatives to petroleum-derived 

chemicals and products through consumer labeling and preferred procurement procedures. 

Biotechnology is unlocking the potential of agriculture and forestry to create new 

opportunities like these for rural economic prosperity and energy security. Farm bill 


11230196.eps 11230197.eps
2361

energy programs, such as the Biorefinery Assistance Program, BCAP, and the 

Biobased Markets Program, in combination with complimentary Federal policies like 

the Renewable Fuel Standard and supportive tax policies, are speeding technologies 

to commercial reality. We must continue investments in America’s energy and agricultural future, much like the Senate Agriculture Committee acknowledged when it 

passed mandatory funding for these programs in the bipartisan bill that passed the 

Committee last month on a vote of 16–5. I urge this Committee to do its part as 

well and to reauthorize farm bill energy programs with meaningful mandatory funding. 

For purposes of my written testimony, I attach hereto the following supporting 

documents as references to the Subcommittee:

Appendices

Appendix A—Timeline and photo book of energy title program results

Appendix B—Energy Title ‘‘program-by-program’’ job creation and other statistics

Appendix C—Detailed justification of Biorefinery Assistance Program

Appendix D—USDA analysis of BCAP program reforms under final rulemaking

Appendix E —Letter of support for farm bill energy programs signed by over 

100 organizations 

APPENDIX A

Farm Bill Energy Title Timeline * of a Successful Policy Initiative 2012

Date Event 

February 13, 2002

Enactment of the Farm 

Security and Rural Investment Act of 2002 

(Pub. L. 107–171) 

Enactment of the first-ever farm bill energy title, with comprehensive approach to agriculture energy development and a focus on 

developing renewable energy, including biofuels and biobased 

products. 

Enactment of Biobased Product Purchasing Requirement Program:

• Required Federal agencies to purchase products from a list of 

environmentally preferable biobased products provided they 

were reasonably comparable in price/performance/availability.

• Funded at $8M over the life of the 2002 Farm Bill.

Enactment of the Biomass Research and Development Grant 

Program for biorefinery construction:

• Awarded grants of up to 50% to offset the cost of developing/

constructing biorefineries to demonstrate the commercial viability of converting biomass to fuels or chemicals.

• Funded $60M over the life of the program.

2002 Cargill-Dow joint venture, which eventually becomes NatureWorks 

LLC, opens PLA resin manufacturing facility in Blair, Neb., producing 70,000 tons and employing 230 people, following 3 years of 

pilot production.

February 10, 2005 Final guidelines issued for designating biobased products for Federal reference.

March 2006 USDA BioPreferred Program designates first six categories of 

biobased products for preferred Federal purchasing: mobile equipment hydraulic fluids; roof coatings; water tank coatings; diesel 

fuel additives; penetrating lubricants; and bedding, bed linens, 

and towels.

November 2006 DuPont Tate & Lyle opens commercial biorefinery, producing 100 

million pounds of PDO annually, in Loudon, Tenn., following 6 

years of pilot production.

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Farm Bill Energy Title Timeline * of a Successful Policy Initiative 2012—

Continued

Date Event 

June 11, 2007 Notice inviting applications for biomass research and development 

grants. This notice, issued 5 years after the 2002 Farm Bill, was 

the first funding opportunity to help with the costs of biorefineries.

May 2008 USDA BioPreferred Program designates additional 27 categories of 

biobased products for preferred Federal purchasing.

May 22, 2008

Enactment of the Food, 

Conservation, and Energy Act of 2008 (Pub. 

L. 110–234) 

Enactment of the Biobased Markets Program:

• Funded at $9M over the life of the farm bill (2008–2012).

Enactment of the Biorefinery Assistance Program:

• Provides loan guarantees for the development, construction, and 

retrofitting of commercial-scale advanced biorefineries.

• Funded at $320M over the life of the farm bill (2008–2012).

Enactment of the Biomass Crop Assistance Program (BCAP):

• Provides payments to rural landowners to establish, produce, 

and deliver biomass feedstocks for biofuels production.

• Funded at ‘‘such sums as necessary’’.

July 2008 U.S. International Trade Commission study, ‘‘Industrial Biotechnology: Development and Adoption by the U.S. Chemical and 

Biofuel Industries,’’ counts 5,700 workers in the biobased industry.

July 2009 NatureWorks LLC doubles production capacity to 140,000 tons of 

PLA at Blair, Neb., biorefinery.

October 2009 USDA BioPreferred Program designates additional nine categories 

of biobased products for preferred Federal purchasing.

December 2009 USDA offers conditional commitment and begins to negotiate loan 

guarantee for Sapphire Energy under the Biorefinery Assistance Program.

October 2010 USDA BioPreferred Program designates additional nine categories 

of biobased products for preferred Federal purchasing.

October 27, 2010 Final Rule issued on the Biomass Crop Assistance Program.

This final rule importantly reformed the CHST matching payment 

program to incentivize collection and delivery of only that biomass 

that would otherwise be uneconomical to retrieve and convert into 

energy.

December 2010 POET Biorefining facilities in Emmetsburg, Iowa, Scotland, S.D. 

and Chancellorsville, S.D. qualify as Biomass Conversion Facilities under BCAP rule. 

Myriant breaks ground on a 30 million pound commercial succinic 

acid facility in Lake Providence, La.

January 5, 2011 USDA offers conditional commitments and begins to negotiate loan 

guarantees for INEOS Bio, Enerkem and Coskata, under the Biorefinery Assistance Program. INEOS Bio has operated a pilot 

biorefinery in Fayetteville, Ark., since 2003. Enerkem has operated a demonstration biorefinery in Quebec since 2009. Coskata 

operated a demonstration biorefinery in Madison, Pa., for 2 years, 

beginning in 2009.

2363

Farm Bill Energy Title Timeline * of a Successful Policy Initiative 2012—

Continued

Date Event 

January 20, 2011 Final Rule issued on the Biobased Markets Program. Final Rule 

issued for ‘‘BioPreferred’’ Voluntary Labeling of Biobased 

Product. By the end of 2011, BioPreferred had received applications for the certification of more than 800 individual products in 

150 different categories, ranging from industrial supplies to personal care items. BioPreferred has identified more than 25,000 

products available on the market.

February 3, 2011 USDA Inspector General Report criticizing the initial implementation of the Biomass Crop Assistance Program and making recommendations for reforming its administration.

February 9, 2011 INEOS Bio New Planet Energy breaks ground in Vero Beach, Fla., 

on the Indian River BioEnergy Center, a biorefinery that will 

produce 8 million gallons of cellulosic ethanol and 6 megawatts of 

power when fully operational. The project creates 175 construction 

jobs.

February 14, 2011 Interim Final Rule issued on the Biorefinery Assistance Program.

March 11, 2011 Notice of Funds Availability (NOFA) inviting applications for the 

Biorefinery Assistance Program through May 10, 2011.

May 2011 Farm Service Agency (FSA) announces the first Biomass Crop Assistance Program project area, with up to 50,000 acres across 39 

counties in central and western Missouri and eastern Kansas, producing up to 150,000 tons per year. 

700,000 potential U.S. jobs could be created pursuant to the Biomass Crop Assistance Program. USDA BCAP Fact Sheet 

http://www.fsa.usda.gov/Internet/FSAlFile/

bcaplupdatelmay2011.pdf.

June 6, 2011 Extension of the NOFA inviting applications for the Biorefinery 

Assistance Program to July 6, 2011.

July 2011 USDA BioPreferred Program designates additional 14 categories 

of biobased products for preferred Federal purchasing. 

Farm Service Agency announces four new Biomass Crop Assistance Program project areas, with more 78,000 acres across more 

than 100 counties in five states.

August 2011 INEOS Bio New Planet Energy closes private financing, supported 

by a Biorefinery Assistance Program loan guarantee, of Indian 

River BioEnergy biorefinery. The project employs 50 permanent 

operators.

September 2011 Farm Service Agency announces four additional Biomass Crop Assistance Program project areas, with more than 19,000 acres 

across 31 counties in four states.

September 15, 2011 Final Rule for Biomass Crop Assistance Program amended to 

provide specifically for prioritizing limited program funds in favor 

of the ‘‘project area’’ portion of BCAP, with any remaining funds 

to be eligible for CHST payments.

November 2011 Sapphire Energy closes financing for an algal biofuel biorefinery in 

Columbus, N.M., supported by USDA Biorefinery Assistance 

Program loan guarantee. Sapphire began construction in June 

2011, and will employ 60 operational personnel. Indirect jobs may 

total 750.

2364

Farm Bill Energy Title Timeline * of a Successful Policy Initiative 2012—

Continued

Date Event 

January 2012 USDA offers conditional commitments and begins negotiations for 

loan guarantees with ZeaChem and Fiberight. ZeaChem began operation of a demonstration biorefinery in Boardman, Ore., in December 2011. Fiberight began a pilot cellulosic ethanol facility in 

Virginia in 2009 and is working to convert an existing Blairstown, 

Iowa waste-to-energy facility. The projects employ 100 people and 

create 338 construction jobs.

January 27, 2012 Notice of Funds Availability for the Biorefinery Assistance Program announces there will be no funds available for the program 

for FY 2012. 

Source: BIO. 

Timeline: BioPreferred


11230198.eps
2365

Timeline: Biorefinery Assistance Program

Timeline: Biomass Crop Assistance Program


11230199.eps 112301100.eps
2366

Abengoa Bioenergy, Hugoton, Kans. 

26.5 million gallons per year, cellulosic ethanol. 

Start Date: 4Q 2013.

Figure 1: Abengoa biorefinery project 

stack yard. 

Figure 2: Abengoa biorefinery construction progress, Feb. 2012. 


112301101.eps
2367

DuPont Tate & Lyle, Loudon, Tenn. 

100 million lbs. per year, 1,3 propanediol. 

Start Date: November 2006.

Figure 3: DuPont Tate & Lyle PDO Biorefinery.


112301102.eps
2368

Fiberight, Blairstown, Iowa 

6 million gallon per year cellulosic ethanol. 

Start Date: 2Q 2013.

Figure 4: Fiberight biorefinery undergoing renovation to cellulosic ethanol. 

Gevo, Luverne, Minn. 

22 million gallon per year biobutanol. 

Start Date: 4Q 2012.

Figure 5: Gevo biorefinery undergoing renovation for biobutanol production.


112301103.eps 112301104.eps
2369

INEOS New Planet Energy, Vero Beach, Fla. 

8 million gallon per year cellulosic ethanol; 6 MW biomass electricity. 

Start Date: 2Q 2012.

Figure 6: INEOS Bio New Planet Energy 

groundbreaking February 2011. 

Figure 7: USDA Sec. Tom Vilsack checks 

construction progress, August 2011. 

Myriant, Lake Providence, La. 

30 million lbs per year of bio-succinic acid. 

Start Date: Q1 2013.

Figure 8: Myriant construction progress March 2012.


112301105.eps 112301106.eps
2370

NatureWorks, LLC, Blair, Neb. 

140,000 tons per year PLA. 

Start Date: 2002.

Figure 9: NatureWorks PLA biorefinery, in operation since 2002. 

POET–DSM Advanced Biofuels, Emmetsburg, Iowa 

25 million gallons per year cellulosic ethanol. 

Start Date: 3Q 2013.

Figure 10: POET–DSM groundbreaking 

March 2012. 

Figure 11: POET–DSM corn stover stack 

yard November 2011. 


112301107.eps 112301108.eps
2371

Sapphire Energy, Columbus, N.M. 

1 million gallon per year integrated algal biorefinery. 

Start Date: 1Q 2014.

Figure 12: Sapphire IABR construction 

progress November 2011. 

Figure 13: Sapphire IABR ground preparation October 2011. 

ZeaChem, Boardman, Ore. 

250,000 gallon per year cellulosic ethanol and acetyl acid. 

Start Date: 4Q 2011.

Figure 14: ZeaChem demonstration biorefinery, aerial view. Figure 14: ZeaChem demonstration facility under construction, September 

2011. 


112301109.eps 112301110.eps
2372

APPENDIX B 

Energy Title Programs—Proven Effective 

REAP

• REAP provides competitive grants and loan guarantees for a broad range of energy efficiency and renewable energy technologies so all agricultural sectors can 

benefit. Grants may not exceed 25% of the project cost. Loan guarantees are 

capped at $25 million per loan.

• REAP is a popular program with applications far exceeding resources, providing 

a long-lasting safety net by cutting input costs and developing revenue sources 

while serving the public by increasing energy security, cutting energy-related 

pollution and sparking rural economic development.

• REAP provides excellent value, as it requires a $3 match for each $1 of Federal 

funds and creates jobs, with the USDA estimating 15,000 jobs created or saved 

in 2010 and 2011.

• REAP has funded over 7,800 projects in every state in the union since 2003, 

benefitting every state.

Biorefinery Assistance Program

• 9003 is the key Federal program enabling the construction and development of 

next generation biorefineries.

• 9003 is a highly efficient program that has already unlocked hundreds of millions of dollars of private capital at minimal public cost.

• The nation’s first commercial cellulosic biofuel production is expected to come 

online this summer at the INEOS Bio biorefinery in Vero Beach, Florida—

thanks to a USDA biorefinery loan under 9003. This project is expected to create 380 high quality jobs in central Florida over the next year.

• The INEOS Bio project—and several more to follow in Mississippi, Iowa, Oregon and elsewhere—will provide a much needed technology demonstration that 

will hasten private investment in additional biorefinery construction and transition the industry to self sustainability.

BCAP

• BCAP provides funding for the establishment and maintenance of purposegrown energy crops and for the collection, harvest, storage, and transportation 

of biomass material to approved energy conversion facilities.

• BCAP is the *only* Federal program targeted at the deployment of next generation biorefinery feedstocks. As such, it is vital to establishing a sustainable and 

reliable feedstock supply for the commercialization of cellulosic biofuels and bioproducts.

• USDA’s October 2010 rulemaking fully resolved issues with the program’s initial roll out.

• BCAP has helped establish innovative purpose-grown energy crop projects on 

over 150,000 acres across ten states, including Arkansas, Pennsylvania, Oklahoma, Kansas, Montana, and elsewhere. It is estimated that these projects will 

create more than 3400 jobs and will provide the feedstocks to produce approximately 2 million gallons of biofuels each year.

Biomass R&D Initiative

• BRDI funds critical research and development of advanced feedstocks and new 

uses of biomass for fuels, chemicals and power.

• BRDI research is paving the way for the transition to next-generation feedstocks, such as perennial grasses, short rotation woody crops, and agricultural/

forestry residues—along with innovative new applications of that biomass

• BRDI funding has supported more than 30 key research projects in dozens of 

states, including South Dakota, Georgia, Nebraska, Iowa, Mississippi, and elsewhere

Biobased Markets Program

• The Sec. 9002 Biobased Markets Program is the key Federal program expanding markets and consumer awareness of renewable chemicals and biobased 

products

2373

• 9002 has helped create hundreds of new American small businesses and thousands of new jobs producing home-grown biobased alternatives to imported petroleum-based products (source: USDA BioPreferred)

• 9002 is also helping to revitalize the domestic chemical manufacturing sector, 

bringing high quality manufacturing jobs back to hard-hit regions of the country, while provide new income opportunities for farmers and reducing our dependence on foreign oil—all at a very small price tag.

Biodiesel Education Program

• It is crucial that the public understands the benefits of biodiesel in order to 

build out the industry and increase demand for this advanced biofuel across the 

country. 

APPENDIX C 

The Biorefinery Assistance Program Is Vital To Advanced Biorefinery Construction & Commercialization 

Background 

The Federal Biorefinery Assistance Program (‘‘the 9003 program’’) was authorized 

in Section 9003 of the Food, Conservation, and Energy Act of 2008 (‘‘2008 Farm 

Bill’’). The 9003 program provides for loans for the development, construction, and 

retrofitting of commercial-scale biorefineries. It also provides for grants to help pay 

for the development and construction costs of demonstration-scale biorefineries. 

The 9003 program is a targeted grant and loan guarantee program in which loans 

are issued by private lenders. It is managed by the U.S. Department of Agriculture 

(‘‘USDA’’), a Federal agency with extensive experience in loan guarantee programs. 

This 9003 program and its signal of Federal support has become vital to unlocking 

private capital for next generation biorefinery construction. 

USDA is the optimum agency to oversee the 9003 program, as it has decades of 

experience successfully administering loan guarantee programs for small businesses 

in rural areas. Despite the small risk of backing emerging technologies, the USDA’s 

loan guarantee programs have been delivering overwhelmingly positive returns to 

taxpayers. In fact, USDA has a loan portfolio of over $100 billion, with more than 

97 percent of those loans up-to-date on payments and supporting good jobs across 

the country. 

Under the 9003 program, loans are issued by commercial banks, not the government. Applicants apply to USDA with a commercial bank partner, who has already 

done due diligence and will take on the majority of the risk. Banks working with 

the USDA also have decades of experience in commercial lending to small businesses. Companies receiving these loans have been required to invest a substantial 

amount of their own funds, so they have a clear incentive to succeed. Successful 

projects cost the taxpayer nothing, other than program administrative costs, making 

the 9003 program one of the most cost-effective Federal programs for technology deployment. 

The purpose of the 9003 program is to help pioneer companies developing new 

technologies that contribute to U.S. energy independence attract private capital for 

construction. The program has just begun to issue awards, but already is helping 

to bridge the ‘‘valley of death’’ for next generation commercial biorefineries. These 

projects are making real progress, meeting benchmarks and creating high-quality 

jobs. Projects that recently received 9003 loan guarantees have been vetted by Federal officials, third party due diligence, and private investors. However, they are 

still vulnerable to external conditions, including economic and policy uncertainty. 

Importance 

This is a cost efficient program which has already spurred construction and development of several next generation biorefineries, including the ones described below. 

These biorefinery projects and advanced biofuels they will produce are yielding concrete results for taxpayers, supporting high-quality jobs, economic opportunity, 

while also contributing to our nation’s energy security and independence. The first 

two loan guarantees listed below have been finalized, and the next two are currently 

working to finalize the loan guarantees they have been granted.

• INEOS New Planet BioEnergy in Vero Beach, Florida, finalized a $75 million 

private loan backed by USDA to build a biorefinery capable of producing 8 million gallons of cellulosic ethanol per year from agricultural vegetative waste, 

yard cuttings, wood and municipal solid waste (‘‘MSW’’). The plant will also 

have an electricity capacity of 6 MW. Construction is already approximately 1⁄3

complete, and is on schedule to be finished by the end of April 2012. Over 85 

2374

percent of the equipment for the project is being supplied by manufacturers in 

the U.S. Associated Jobs: 50 permanent, 380 direct and indirect (including 275 construction jobs) over the next year.

• Sapphire Energy finalized a $54.5 million loan guarantee to demonstrate an 

integrated algal biorefinery process that will cultivate algae in ponds, and will 

use dewatering and oil extraction technology to produce an intermediate that 

will then be processed into drop-in green fuels such as jet fuel and diesel. The 

project will be constructed in Columbus, New Mexico. Associated Jobs: 750 direct and indirect.

• Coskata, Inc. has been granted a provisional $250 million loan guarantee to 

construct and operate a biorefinery facility in rural western Alabama. The 

project will use woody biomass to produce 55 million gallons of ethanol per year. 

Associated Jobs: 700 direct and indirect.

• Enerkem, Inc. has been granted a provisional $80 million loan guarantee to 

build and operate a biorefinery in Pontotoc, Mississippi, which will be capable 

of producing 10 million gallons of ethanol per year, using 100,000 metric tons 

of dried MSW. Associated Jobs: 70 permanent.

Recommendation 

The Biorefinery Assistance Program is one of the most effective programs under 

the energy title of the 2008 Farm Bill. It is very much a public-private program 

whose signal of Federal support has led, and has the opportunity to continue to 

lead, to construction of next generation biorefineries. These biorefineries create good 

long-lasting jobs and help increase U.S. energy independence and security. It is 

critical that the next farm bill reauthorize and fund the Biorefinery Assistance Program, and ensure that it supports the full range of biorefinery 

products. USDA will need new authority to include renewable chemicals and 

biobased products under the 9003 program.

2375

APPENDIX D


112301111.eps

FACT SHEET UNITED STATES DEPARTMENT OF AGRICULTURE 

FARM SERVICE AGENCY 

May 2011 

Biomass Crop Assistance Program (BCAP) 

IICIIP. c",aI<d in ,",,:.'OOl! """ 

lIill. i. a ptimory compon<nl of<ll< 

d<>onnI;,; Otj;ri<ul,...". <P«&Y ...... 

... ,-,ron."..,'" >If:al<iOr 10 ml""" U,S. ",Ii __ on ("",iao ";1, im,,",,', 

_'" <n<I1>' """,,",). «<I""" c,"""" fIOlh ............ 'PX ""', <Woomi< <1<,'<""""",,, ..... JOb c,...ion. 

RCA " P',vHl« i"""",i,-.. to [""". 

Cr> • .-..,... ..... for<>llondo~""" 

"" <SUbIiih. '"''''-'''' ..... I\on' ... 

... ,"""" b hc:at. JIO""C'I'. b<.,.Oascd 

prod""" and biof...,lo. 

llC "r~ . <I ... ""hkk..,· 

Of-<g ct>all<nj!< oround ,he: ..... 

up of c"",,,,,,,,,,.1 ",ale ~ 

OCIi,-j.;<>. If <, .. ",,\m;w·>e.k!riomo<> r.dl i,I ..... (0 IIa,'< ""nki<1ll 

f=l;wo;;b. ,hen. I~< <to:'l!Y 

crop m ... ,,,y, Con,",1''''), ifprof". 

obi< orop p«><Ii.w;1ioo i. '" o«w. ....., \,;.t.k ron.,,,,,,,,, m"" •. ,,,,", 

pun:~ ''''''''''' 

Th< f«k<>1 _~_ r""l. 

Standard (RfS) r<q"'~ 21 billion 

lI"l_of""" __ ~hl);of""l. 

in II>< ""' ..... 1 fod ><JlI!'ly Il}' :1<m ..... """')]><:I"f.,.,."...[«>1-

>1<1<1<> m"" bo: ,,'.'lobI< to m«1 'hIS 

""Iu;,.....""'.M .. ~~ <<<>P> 

rK'Cd ><,-"",1 y ...... '" broJm< <>labI;>hod, M",,)' """"<iY f""ili.i .. 

r>«d ><>=>1) ....... 10 f<'O<h oomm«· 

,i.1 ",. k. IICAI' ••• "' ... <aW)" 

10 ... it< 'h<>< d)n;omlC> b) m!"" i"ll 

thr fo""",i., ri>k for iandov...., ,,"" 

<lecKk",w<>" """"""CI1''''''''<ropII for ...... ""'" ....n;.", 

\\1'" OCAP. crop pro<loc .... .00 

bi<w:n<rJ!) Ilo<ili,i<$ ,.., ~ 

~"'.ubmi' """",,"Is'" USl.lfo. for",k<1;"" ... OCAP 

proj<ct ...... 

If "''''''1«1. crop pro<lLl<ft"> "ill 

I>< clill,N< r", f<' '''bur><m""" 

ofllJl", 1Sf"IT""'of"",_ 

ofnt>bli>hi"ll' ~ 

"""""';aJ crop. P""""""'_ 

«<:ci,', LJfI'O fi,. )-.:..-. of .... 

nklal"')1II<Jt .. f"'....-""'" 

<""""""oody)<fOP",,m .. lor 

J><f<Mi. ,). and up '" IS 1""-' 

of ........ 1 pOl ....... for "oody 

'fOP' ,....,,,,,1 or J><f<Mi. I). 

A"i>un<. for "'" roll<Clion. .....-.:<I-_and __ 

,ion of crop> '0 f"", lu;" "ill .. 

.,·.,lab" for '''0) ....... p<f p«>-

doc«. in "'" form of. m .. d"ni 

",,)m<n' for '" '" S4~ p<" ",. of 

""'tld;"<"f) """,, 

R<fi""",,,,,,, '0 tOt: final IICA r 

"!lui","'" ho,', '"'i"«1 ~ 

"p<ruC> '0 . mort: limned 5<1 ofm .. 

"',;.,,. ....... " . ..., ,hi 0N< for I")'mrnt 

...-..kr ,he: t'0Ii« .ffomdin& "".il· 

obil"y(N0M). 

81~ t. " hlt • • nd ~"". ",. 'Ia .. ;'b <.-t .. ;.-. i ..... , o\ .. <rico: 

TIl< R«<>rd .flXei,;.,., "" "'" IICA I' E."".,..."..,W Impac< Statemen' .."mates ' hOI by :!On up '" 

$8S,j b,l l"", ;n <=rom'" ac';""y 

and 700.000 jobs; """'d I>< CJn1col, 

IICA P """"'" tOt: f,,,,,,,,;., n>k 

fot pro<l"".,. .. "" , 01"",= to 

W<>" <"""' _ "" ."",pI_ ........ 1'oIrnI"lly d~b < CfO!" ,,,,,I..., 

• ,, i"'h~ mif< .......... BiiO"' ..... f .. ,."",,·,"11 ,,00<1)' porlar,ptfO. 

ph>. " i"<. <n<q;)o t:an<. """,.,,,,,, '" 

~. 

f."h •• "", "'''' ",!''';p , ,,d ........ · .. io. m ......... 

I , B"",,- on .... hr ooIl<et<d 

and ...... <>Ied """"";"<1 '0 on "PP"" '<ol ron, ........... r.,...,. 

""'''III,lup. or .. mil .. pion '" 

,....,..,., ><>i' ond ''', .... qltll;,) 

and pmom'O ~ pro<lU<l"';!}' 

;",0"" f"ur<. 

2. N",;,', S<>d <"'_ .. """ .. ",«I 

or.Ie-r IICAP oontra<t., 

J. Crop 001 1«1 ..... """""'ng and 

trano.por1>1ion m"" b< ;. >Ui<1 

..,<O<d:mo< ,,·.th im' .. i,·, I:u" 

>p«te> prot«t''''''" 

I'roI« , ... i>'i.~ .. ood)' ...... 

" 

Hiomw may "'" Q""lif) fot '''''''''" 

""e> ,frSA deI"",,i ... that "'" 

to,."" ... IIwld b< d,,=«1 frum 1"<' 

.. i.toni"""' ... · 

M,intai .. ,I><200S hrn, UBI 

tl<Ii" ".",of,""",,-.I>I<biom ... by 

"'pporIi"ll ,he: LIS< ofbOlh llood)" 

ond ~ m., ... ial. for <n<fJY 

I"'!J><'OC'. TIl< prod"","", ofl><.a, 

1"""' .... biof""I •. ....J bk.-boso<! prod-

"'"' all ratl.1;n .... j>pOt1<d b)' !ICAP. 

.. "'Iu;m! b)' >Ul<JI<, 

Kick·", .. " liqu id «lluio>ic 

";'f.,I.. ,. m,.., IWS ,,, .. ,, 

f'm"i,"", i""onti,'" fOO" ,I>< """ .... of 

biom ... f ... ron,' .... .", '" «lIuio>ic biof"",. that ..,hie,·, 60 ""'"'" 

10"'" I,f«)·d.~p> .... '" 

.... ~1o"hl •• P,)'",,'"" fD .... ~ 

libl< m ...... I •. 

I. Subj«' to",", .... il.bil,,) of 

fuo<l'.11- ,...,.id<> fl,t m"" hi"ll 

I"')m<nts '0 <!;!libl< """ ... ;. 1 

"" ........ , . ""<0($1 f", ... h 

51 r><rdrylOOl"',dby.q""I,. 

foed t>oorn ... ro'u· .... .", r""il")' 

in '" :amoun' "fI'. s.I~ I'<f dry 

!On, An ,'iBi"'" "",<rial .11_ 

'.' 
2376


112301112.eps

FACT SHEET 

Biomass Crop Assistance Program (BCAP) 

1IIlI)' be a prod"" ... of an digibl< I:. .. blishm<n, p.)'moo" 

crop <Jf. pe....,., <Jf <"'ily " 'i,h 

IIH: legal riJlbllO <:011«:, Of ,. CCC " 'ill!'3Y produc.rS up '0 7~ 

han'''' <Iigiblt m.,,,ri.1. By per<C1" ofllH: <,,>1, of c.1ablis!>-

~'" m>1<hinS !'3)'mcn1S maybe ing . peronni.1 crop. Eli~ibl. 

mad< IOcligibl< m"crial "",...,. OOSI. cIo "'" i""lud.: ,I>: ""qui. 

f<Jf. ma"imum of''''o y • .,.. ,i,"" of land or C<juipmen'. 

,. ToqualifY forma"hi!1S!'3),' l;""bli.lu"""!'3)'men" an: "'" 

m"'~ eligible ma'rnal, m"" be ",'.ilable lOr """ual .""",. An· 

eoll .. ",dor han' •• ",'tl dire<lly " ... 1 crop<. howe,,,,. arc eligible 

from.1>: l.rId, .,cri.I' Ca""'" for , n"..,1 po),me"to. 

be ~roll"".«1 or .. ,,-cst«!" ,. J:!igible <""'" can"'" be c""'" 

.n", Iran>P<'f1 ond delil'ory 10. eligible to ,"""il'e poym""" \II>" 

""",'m"" fooili,y. "".Till, I of,he ~OO8 Farm lIill. , llQody eligible n\3.leriol col· or ""y "an' du, i, inl'",i,-" 

Ic<~ <Jf han-eSloo ",,"id<: of 

IICAP "wj«1 :U--C. <","""''' Annu,I"'J'n,t ." 

mus' heo b)'prodOCl of P"'''-''' 

Ii,·, ... .,men" lha, ... mn<JI'OO ,. 111om ... prod""' .... in IICAP 

10 ml"", IIaz.vdou< (",I" lO I""i"" ""' .. c ... r<:eci, .... nua l 

ml"'" or <OIIloIn dis<.,., or poy"""''' up 10 fil'e ye"" f"" 

insc<1 inf, ... .,ion. <Jf 10 ... ,"" ~,biumass (""" ... 1 and 

"",,)'''em 1>:.1110. pcn:nni.l).nd up '" IS ycarS , 1I'oody eligible matori.1 0011«1· for woody biomass (onnual and 

cd 0< han',,,ed """ide .. flICAI' pe",noi.I), 

project .rea COlI""''' mu" "'" ,. Cropland base .nd yidd hi"",), 

be ..,..,,-otcd f""" ma'eri.1 f<Jf .pplkabie to IIH: w.J .nrolled 

higher '-al ... rrod""" a ftcr "". in I I!CAPeon,,,,,,' " 'ill be 

Iii",>, 10. e"""' .... .", f""ilily. f"'<'Cn-oo. 

,. All ciigibl, n\3.",-ri.1 mu" be , AnnUllI!")"""" an: ml....,.J by 

Mn'<S'OO in..,~ "'ilh an • pe",cni3g<: "f,1>: ,-.1"" Qflllc 

'pp<m-cd «lI\S<I'"I'.,k>n. for<" crop and ... y ma,ehing I"'ymrnlS 

>1CII'iU'dsllip. or C<juil'.len, pi .... ~i, «1 as folio"', ' 

< M."hing porm"," a~""I)" 

.. ,.H.b., fOf elijlibl" ",-"ori· (I) I p<fCC"' ifbiumas< sold for 

al. -""<I fo<. f.it ma"'eI ,'al .... rellul.,.ic bkof""I, ((0(1 pcn:<-nt 

Thi, m:Juimrrrnt r<ploccs the ,,""'g~ ..... emi'<i""") 

NOFA ... ,rielion, regardi,,!! (bl 11Iper«nt ifbiomau!iOld 

I .. cd fIaI1Y ,,,,,,,,,,ion and f<Jf ad, >need biofucl. 

maL", ma'chi"llpaym",," IC) 25 pe,,-=' ifbiomass S<>ld 

.. .,H,ble '0 ...... up.1Id oIhcr f"" ..... ,. PO"'" <Jf biobo>Cd 

,'ctlically inICgtOtoo op<r1>,ion<. """~, bu, p"'ICn1S <lTorts 10 ""fca' the Id) 100 pe=n' if mom ... sold 

purpose ofllCAI' by inO .. in~ f<Jf "'rlllin! ",he< Ihan h<.~ 

t>Oonw. pric« 10 goin hijlhcT 1"'""'. biof ... l. or biOO>scd 

m'lChi"g pay"",no.. rrod""", 

,. [I'S,bl. m .. c~.I' do "'" i""l!>de 

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2377

1The Food, Conservation, and Energy Act of 2008, Pub. L. No. 110–234. 

APPENDIX E 

October 21, 2011

Hon. DEBBIE STABENOW, Hon. FRANK D. LUCAS, 

Chairwoman, Chairman,

Committee on Agriculture, Nutrition and 

Forestry, 

Committee on Agriculture, 

U.S. Senate, U.S. House of Representatives, 

Washington, D.C.; Washington, D.C.;

Hon. PAT ROBERTS, Hon. COLLIN C. PETERSON, 

Ranking Minority Member, Ranking Minority Member, 

Committee on Agriculture, Nutrition and 

Forestry, 

Committee on Agriculture, 

U.S. Senate, U.S. House of Representatives, 

Washington, D.C.; Washington, D.C. 

Dear Senators Stabenow and Roberts and Representatives Lucas and Peterson:

We are writing to urge your strong support for agriculture and forestry-based energy programs and policies in the new farm bill. There are a multitude of reasons 

why these Federal investments make great sense. The national security benefits are 

clear. And stable Federal support is essential to help meet rising energy demand 

and rapidly deploy new biofuels, bioproducts and energy crops, renewable and distributed electricity generation, thermal energy, as well as energy efficiency. 

The innovative programs authorized in the energy title of the 2008 Farm Bill,1

such as the Rural Energy for America Program, the Biomass Crop Assistance Program, the Biorefinery Assistance Program, and the Biobased Markets Program, 

have also been particularly valuable to U.S. farmers and the rural economy. These 

programs, administered by the U.S. Department of Agriculture (USDA), have helped 

finance thousands of diverse renewable energy projects and improved energy efficiency at farms, ranches and businesses across rural America. Programs are generally over-subscribed and show no signs of abating even as the economy has 

slowed. 

And numerous reputable studies all come to the same conclusion—that building 

the clean energy economy is likely to create millions of jobs. This is already happening in part due to farm bill clean energy investments that have leveraged hundreds of millions of dollars from the private sector. Of course, these jobs and industries bolster U.S. technological competitiveness as well. 

The benefits of energy title initiatives also come at a very modest cost. Of all the 

programs authorized in the 2008 Farm Bill, the energy title programs account for 

less than one percent of total outlays. Further, as longstanding agricultural safety 

net programs come under increasing budgetary pressure, these energy programs 

will continue to strengthen and diversify the rural economy. 

We recognize the significant budgetary constraints facing Federal policymakers 

and the bold steps Congress is undertaking to address these challenges. The 

daunting scope of the task facing the nation is illustrated by the broad and unprecedented powers—and lofty expectations—bestowed on the Joint Select Committee on 

Deficit Reduction. This deficit reduction effort will require considerable sacrifices 

from many sectors of the Federal Government, including agriculture. 

However, as the House and Senate Agriculture Committees engage with Members 

of the Joint Select Committee on Deficit Reduction and set forth the policy priorities 

of rural America within the next farm bill, for the reasons outlined above, we urge 

you to ensure that the energy title is preserved and robust mandatory funding is 

provided for critically important programs. 

We thank you for your leadership on all of these important issues and pledge to 

work with you to craft farm, forest, and energy policies that work for all of agriculture and rural America. 

Regards,

25x’25 Alliance

Advanced Biofuels Association

Advanced Ethanol Council

Agriculture Energy Coalition

2378

Algal Biomass Organization

American Biogas Council

American Coalition for Ethanol

American Council for an Energy-Efficient Economy (ACEEE)

American Council on Renewable Energy (ACORE)

American Loggers Council

American Nursery and Landscape Association

Association of Equipment Manufacturers

Association of State Energy Research and Technology Transfer Institutions 

(ASERTTI)

Biomass Coordinating Council

Biomass Power Association

Biomass Thermal Energy Council

Biotechnology Industry Organization (BIO)

Distributed Wind Energy Association (DWEA)

Energy Future Coalition

Environment and Energy Study Institute (EESI)

Environmental Law & Policy Center (ELPC)

Florida Renewable Energy Producers Association

Fresh Energy

Growth Energy

Institute for Agriculture and Trade Policy

Iowa Environmental Council

Iowa Solar/Small Wind Energy Trade Association

Iowa Wind Energy Association

Mississippi Biomass and Renewable Energy Council

National Association of Conservation Districts

National Association of State Energy Officials (NASEO)

National Center for Appropriate Technology

National Farmers Union

National Woodland Owners Association

North Carolina Association of Professional Loggers

North Carolina Woodland Owners Association

Ohio Environmental Council

Renewable Fuels Association

Rural Alliance for Renewable Energy

Show Me Energy Cooperative

Society of American Florists

Society of American Foresters

South Carolina Biomass Council

South Carolina Clean Energy Business Alliance

Southeast Energy Efficiency Alliance

Southern Alliance for Clean Energy

Tennessee Renewable Energy and Economic Development Council

Texas Renewable Energy Industries Association

Cc: Joint Select Committee on Deficit Reduction

The CHAIRMAN. Thank you, Mr. Greenwood. 

Mr. Stroschein, go ahead please proceed with your testimony, for 

5 minute testimony. 

STATEMENT OF RYAN W. STROSCHEIN, J.D., CO-DIRECTOR, 

AGRICULTURE ENERGY COALITION, WASHINGTON, D.C. 

Mr. STROSCHEIN. Thank you, Chairman Thompson, Ranking 

Member Holden, good to see you again. I appreciate this opporVerDate 0ct 09 2002 12:54 Dec 11, 2012 Jkt 041481 PO 00000 Frm 00790 Fmt 6601 Sfmt 6601 I:\DOCS\112-30\74372.TXT BRIAN
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tunity. My name is Ryan Stroschein. I am a Co-Director of a group 

called the Agriculture Energy Coalition. I also was raised on a farm 

in South Dakota which my family still operates, and I have seen 

firsthand the positive and growing impacts of rural energy production in rural economies. 

The Agriculture Energy Coalition is a diverse group of agricultural, renewable energy and environmental organizations and private companies that represent a broad spectrum of renewable energy, energy efficiency and advanced biofuel, biopower and bioproduct interest. It was created in part to support the important 

energy programs contained in the farm bill to urge continuation of 

meaningful funding for these programs and to promote policy 

changes that will make them even more effective. 

In the 2002 and 2008 Farm Bills, bipartisan majorities in Congress recognized the potential for American farmers, ranchers, 

rural landowners and entrepreneurs to create clean, domestic renewable energy and bioproducts by providing significant resources 

to the programs in the energy title. These foundational policies 

have transformed the promise of an emerging, clean, renewable, 

sustainable rural energy sector into a growing reality. A continued 

commitment to these goals will accelerate this momentum and is 

a vital component of the all-of-the-above energy strategy that has 

significant bipartisan support here in Congress. 

Across the country, we have already seen successes from these 

initiatives, as Mr. Greenwood pointed out. First-of-their-kind biorefineries will soon be producing advanced biofuels in Florida and 

elsewhere. Wind turbines are powering farms, ranches and rural 

businesses from Maine to California. Solar systems are being used 

for a variety of on-farm business purposes, and biobased products, 

such as bioplastics and solvents being produced in states like Pennsylvania, Michigan and Ohio and other places for industrial applications. And the investments that have delivered these benefits 

have been relatively modest. The 2008 Farm Bill allocated only 7⁄10

of 1 percent of its total funding to the energy title’s programs. Yet 

many new feedstocks, fuels, products and technologies are on the 

cusp of successful commercialization as a result of that investment. 

Those programs have funded projects in all 50 states and have leveraged tens of millions of dollars in state and private sector investments that would not have materialized without these programs. 

It is also a significant job creator. USDA estimates that the 

BCAP and Biorefinery Assistance Programs alone have the potential to create as many as 700,000 new jobs. The biobased markets 

program is estimated to have the capability to create 100,000 new 

jobs. In these three programs, along with the Rural Energy for 

America Program, are among the core programs that our coalition 

is supporting and urging this Congress to reauthorize and fund. 

Without an ongoing commitment to this effort, America’s leadership position on energy and bioproduct innovation will erode. Other 

countries are poised to leap ahead of us in the global race to commercialize clean energy technology, and those jobs will go with 

them. This will undermine our economic, our energy, our environmental and our national security, and could put the U.S. in the poVerDate 0ct 09 2002 12:54 Dec 11, 2012 Jkt 041481 PO 00000 Frm 00791 Fmt 6601 Sfmt 6601 I:\DOCS\112-30\74372.TXT BRIAN
2380

sition of purchasing and importing these technologies from foreign 

companies and foreign countries in the years ahead. 

In the farm bill, energy title programs are at the heart of this 

effort. They cover the entire renewable energy, bioproducts and energy efficiency landscape. Wind power works very well in the Midwest and West, solar power works across the country, particularly 

in the West and the South. Biotechnology is huge in livestock and 

dairy areas, and bioproduct manufacturing has already begun to 

develop new industrial hubs, and the potential to utilize biomass 

exists from coast to coast. In other words, every corner of the country will benefit because these programs allow them to exploit their 

individual, inherent natural resource bases. 

The Senate Agriculture Committee recently agreed that these investments in these energy title programs are worthwhile by adopting a bipartisan farm bill that maintains mandatory funding for 

these programs and makes improvements to several of these core 

energy title programs. The Agriculture Energy Coalition supports 

this outcome and believes that the farm bill, the final farm bill, 

should include these investments. 

Rural America has been at the epicenter of our nation’s burgeoning new renewable energy and bioproducts industries, and 

farmers, ranchers and rural small businesses and rural economies 

have already begun to realize the benefits. American agricultural 

and the rural communities that it supports has demonstrated that 

it has the vision, the entrepreneurialism, the optimism and the tenacity to continue to develop these important and lucrative new industries if it is provided with the tools to do so. 

A continuing commitment to these farm bill energy title programs will promote the expansion of American energy jobs, drive 

innovation, foster cutting-edge technology that we can export to the 

rest of the world, materially benefit our environment, enhance our 

national security and ensure that we continue to lead the world in 

the development of these lucrative new industries. 

For these reasons we urge this Committee and this Congress to 

reauthorize these vital energy programs and provide them with robust mandatory funding that will enable them to continue to do 

their good work throughout the life of this next farm bill. Thank 

you. I look forward to your questions. 

[The prepared statement of Mr. Stroschein follows:]

PREPARED STATEMENT OF RYAN W. STROSCHEIN, J.D., CO-DIRECTOR, AGRICULTURE

ENERGY COALITION, WASHINGTON, D.C. 

Introduction and Background 

Good morning Chairman Thompson, Ranking Member Holden, and other Members of the Subcommittee. Thank you very much for providing me the opportunity 

to testify here this morning. My name is Ryan Stroschein and I am co-director of 

the Agriculture Energy Coalition. The Coalition is a diverse and dynamic group of 

renewable energy, energy efficiency, agriculture, environmental and rural development organizations, and private companies that represent a very broad spectrum of 

renewable electricity, energy efficiency, advanced biofuel, biopower and bioproduct 

interests. This Coalition has come together, in part, to support the important energy 

programs contained in the farm bill, to urge continuation of meaningful funding for 

these programs, and to promote policy changes that will make them even more effective. 

Renewing and funding these successful programs, which work in partnership with 

our nation’s farmers, ranchers, rural small businesses and innovative energy entrepreneurs, will continue to leverage hundreds of millions of additional dollars in priVerDate 0ct 09 2002 12:54 Dec 11, 2012 Jkt 041481 PO 00000 Frm 00792 Fmt 6601 Sfmt 6621 I:\DOCS\112-30\74372.TXT BRIAN
2381

vate investment for these industries and is vital to the commercialization of renewable energy, energy efficiency and biobased products. 

Across the country, we’ve seen some early successes from these initiatives. Firstof-their-kind biorefineries will soon start producing advanced biofuels in Florida and 

elsewhere; wind turbines are powering farms, ranches and rural businesses from 

Maine to California; solar systems are being used for various on-farm or business 

purposes, including to lower irrigation costs in dozens of states; and biobased products such as bioplastics and solvents are being produced in states like Michigan, 

Iowa and Ohio for industrial applications. 

The Senate Agriculture Committee recently agreed that these are worthwhile investments to make. In April they adopted a bipartisan farm bill that maintains 

modest and necessary mandatory funding and makes improvements to several core 

energy title programs. The Agriculture Energy Coalition supports these efforts and 

believes that the final farm bill should include these minimum investments to preserve and grow ag energy jobs across the U.S. 

A Track Record of Accomplishment for the Energy Title 

The 2002 and 2008 Farm Bills recognized the potential of Rural America to deliver clean, domestic, renewable energy, energy efficiency and bioproducts, and provided significant resources for their development across a broad spectrum of technologies in all regions of the country. These foundational policies have transformed 

the promise of an emerging clean, renewable, sustainable rural energy sector into 

a growing reality. A continued commitment to these goals will accelerate this momentum and is a vital component of the ‘‘all-of-the-above’’ national energy strategy 

that has broad bipartisan support in this Congress. 

Conversely, without an ongoing commitment to these goals, our world leadership 

in energy innovation will be fleeting and the U.S. will lose ground to international 

competitors. Other countries are poised to catapult ahead of the U.S. in the global 

race to commercialize clean energy technology, and those jobs will go with them. 

This would undermine our economic, energy, environmental and national security 

and could put the U.S. in the position of purchasing and importing these technologies from foreign companies and nations in the years ahead. 

The core energy title and risk management directives of the existing farm bill perform many functions vital to the continued and accelerated development of the 

emerging clean technology industry. They provide:

• Loan guarantees and grants to fund new biorefineries in every region of the 

country that utilize diverse local feedstocks, accelerate commercialization of innovative technologies and the development of new advanced biofuels, renewable 

chemicals, and bioproducts;

• Labeling and incentives to speed the development of a U.S. renewable chemicals 

and biobased products industry;

• Assistance in improving the energy efficiency of farms and rural businesses to 

cut input costs and boost producer margins;

• Incentives to install distributed renewable energy systems that benefit every 

agricultural sector, including wind, solar, geothermal and biogas;

• Support for developing perennial energy crops grown to benefit both agricultural producers and the environment;

• Research and development funding for biomass feedstocks and renewable chemical technologies;

• Funding to promote the installation of energy systems that use biomass for heat 

and power; and

• Crop insurance and risk management tools that agricultural producers can use 

to mitigate the risks of growing new energy crops. 

Economic Impact: Jobs, Increased Rural Income, New Business Opportunities 

American agriculture is the key to the successful development and commercialization of clean, abundant, renewable, domestic energy and biobased products in this 

country, and the ‘‘core’’ farm bill energy programs provide American farmers, ranchers and entrepreneurs with the tools they need to make it happen. This can be a 

game-changer for rural economies across the country, with the potential to create 

hundreds of thousands of energy-jobs over the coming years. 

Although relatively new, the farm bill energy programs already have had a tremendous positive impact on economic and job growth in rural America, and they can 

do so much more. USDA estimates that the BCAP and Biorefinery Assistance programs alone have the potential to create more than 700,000 new jobs as a result 

2382

of increased cellulosic feedstock production and the construction and operation of 

new biorefineries. Furthermore, based on a survey of companies that could potentially qualify for the Biobased Markets Program, it is estimated that that program 

could create an additional 100,000 American jobs in the coming years. 

Despite the fact that the 2008 Farm Bill allocated only 0.7 percent of its total 

funding for energy, these programs have been very successful. Many new feedstocks, 

processes, fuels and technologies are on the cusp of successful commercialization as 

a result. The impact of these investments is broad, with projects in all 50 states, 

and outsized relative to the total dollar amount allocated because the programs are 

targeted. Moreover, they leverage much more in state and private sector investments than would ever be possible without them. 

These programs also will help us keep energy dollars here at home where they 

have a significant multiplier effect, both in terms of economic development and job 

creation. This is clearly a ‘win-win’ approach to meeting our nation’s economic and 

energy security challenges. 

If the Federal Government retreats from its commitment to clean energy, in the 

farm bill and elsewhere, the U.S. will risk losing even more ground to China, Europe, India, Brazil, and other proactive nations, and the new manufacturing jobs, 

industries and revenue this sector is going to generate in the coming decades will 

migrate overseas. A clean energy future provides domestic economic growth and jobs 

and improves national security and environmental quality. Everyone stands to benefit if we maintain this commitment. The U.S. is a nation rich in renewable resources with core strengths in industrial biotechnology, agriculture and chemical 

manufacturing, among other competencies. For these reasons, it makes competitive 

and economic sense for the U.S. to make the investments necessary to keep it at 

the vanguard of global renewable energy, energy efficiency and bioproduct development. 

Key Programs for Clean, Ag-based Energy Jobs 

The suite of programs contained in the energy title covers the entire renewable 

energy, energy efficiency and bioproducts landscape. Wind power works very well 

throughout the U.S. and especially in the Midwest, West, and offshore, solar works 

well across the country and in particular the South and West, biogas potential is 

huge in dairy, livestock and food processing states, bioproduct manufacturing will 

develop near industrial hubs and significant biomass exists almost everywhere. In 

other words, every state will benefit because these programs allow them to exploit 

their individual, inherent resource bases. 

The Coalition believes that the following programs are the most important initiatives in the energy title of the farm bill and have focused on their reauthorization 

and funding: 

Rural Energy for America Program 

The Rural Energy for America Program provides grants and loan guarantees for 

energy efficiency and renewable energy projects as well as support for feasibility 

studies and energy technical assistance. Of all the farm bill energy programs, REAP 

provides benefits to the broadest spectrum of energy technologies, including the installation of wind, solar and biogas energy systems, biofuels infrastructure and energy efficiency initiatives throughout rural America. These programs also promote 

distributed generation—clean, decentralized energy production that promotes energy 

security and relieves pressure on our national energy grid. Energy efficiency boosts 

producer margins by cutting input costs for the long term and creates jobs in rural 

America. USDA estimates that REAP saved or created 15,000 jobs between 2009 

and 2011. 

Biomass Crop Assistance Program 

The Biomass Crop Assistance Program (BCAP) is the only Federal program that 

assists producers who seek to grow, harvest, store and deliver dedicated energy 

crops to eligible next-generation biorefineries and is the only program that assists 

in the collection, harvest, storage and delivery of the biomass to electric generating 

facilities. Without this program, the agricultural community is reluctant to embrace 

these crops and forest residues due to the risk involved. Farmers and others in rural 

areas are bullish on renewable energy development but energy crops are unfamiliar 

to producers, lenders and insurers of these crops, and they enjoy almost none of the 

safety net components afforded traditional ‘‘farm program’’ crops. These crops can 

also be grown to improve soil conservation and water quality practices. In addition 

BCAP’s promotion of utilizing woody biomass supports healthy forests and contributes to rural economies. 

2383

Biorefinery Assistance Program 

The Biorefinery Assistance Program promotes the construction of the new infrastructure needed to manufacture cutting-edge new biofuels. Only commercial-scale 

biorefineries that produce advanced biofuels and bioproducts derived from renewable biomass are eligible for the program. Given the challenges borrowers in all industries have faced in accessing credit markets in recent years, it is no surprise that 

developers of next-generation, first-of-their-kind biorefineries have faced difficulties 

in finding private credit to fund the construction of these new facilities. Government 

loan guarantees are extremely valuable in economic conditions such as these because they allow promising new technologies to advance while leveraging significant 

private lending and investment that would otherwise remain on the sidelines. 

Biobased Markets Program 

The Biobased Markets Program enables qualifying biobased products to receive a 

‘‘biobased’’ label, and uses Federal purchasing power to build new markets. To date, 

USDA has designated a total of 77 categories and 10,000 products and it continues 

to expand that list. 

On May 1 of this year, Agriculture Secretary Vilsack announced new, expanded 

proposed guidelines for the USDA program that would allow for the designation of 

intermediate ingredients such as fibers, resins, and chemicals so that the products 

made from them could more easily be designated for preferred Federal procurement. 

This inexpensive program has served as a vital springboard for the emerging 

biobased products industry and it will continue to drive innovation and expansion 

of the industry if it is reauthorized and funded. 

Conclusion 

Rural America has been at the epicenter of our nation’s burgeoning new renewable energy and bioproducts industries, and farmers, ranchers, rural small businesses and rural economies have already begun to realize the benefits. American agriculture, and the rural communities it supports, have demonstrated that they have 

the vision, entrepreneurialism, optimism, and tenacity to continue to develop these 

important and lucrative new industries if provided the tools to do so. 

And the progress that has been made to date really is really just the tip of the 

iceberg. If we continue our national investments and policy commitments in these 

areas, the economic and job growth that will follow will exceed what we’ve already 

experienced. As we all hear from business over and over again, resource and policy 

certainty are critical for sustained growth and innovation. 

Continuing these vital farm bill energy title programs will promote the protection 

and expansion of American ag energy jobs, drive innovation, develop cutting-edge 

technology we can export to the world, provide meaningful benefits to the environment, enhance national security, and ensure that we continue to lead the world in 

the development of these vital and lucrative new industries. For these reasons, we 

urge this panel, and this Congress, to reauthorize these vital energy programs and 

provide them with mandatory funding through the life of the next farm bill. 

Thank you and I look forward to your questions.

The CHAIRMAN. Thank you, sir. Now Mr. Reinford, go ahead and 

proceed with your testimony, please. 

STATEMENT OF STEVE REINFORD, OWNER/OPERATOR, 

REINFORD FARMS INC., MIFFLINTOWN, PA 

Mr. REINFORD. Thank you, Chairman Thompson and Members of 

the Committee. I wasn’t aware until I actually got your invitation 

that you are one of my neighbors, so it was a joy to be here with 

another Pennsylvanian here. This is my first time ever doing something like this, and I feel a privilege and an honor to be here. I am 

not quite sure how it all turned out, but I only had an 8 day preparation time here. I want to take the time to thank you guys for allowing me here to share my green experience. I have been in this 

business now probably for 8 years, sharing my experience on renewable energy, how it all happened here at Reinford Farms, and 

thanks so much for the incentives I got from USDA in conjunction 

with some of my bank guys helping me, we actually put up a new 

system, a very profitable system in one of Pennsylvania farms here. 

2384

So I am here to share a little bit of that story. And one of the 

main reasons I did it was because of odor reduction. In Pennsylvania, I did have a gentleman move into my area here, he was a 

police officer from one of the larger cities, and his complaint was 

odor all the time. So actually I went to work and we actually put 

together this system, anaerobic digesters in Pennsylvania, and I 

guess a lot of people are looking at what I am doing. I guess that 

is one of the reasons I am here, to share. I hope they promote this 

technology to continue to move forward in the next years ahead. 

Additional income, I have received from that, the first couple 

years was in the low side. I actually managed to do some other 

technologies and bring other things in the farm, actually now the 

last income statement we got, the net profits a little over $300,000 

on dairy farm and that is pretty good. When you start making as 

much money out of the back end of the cow as you can out of the 

bottom, it is kind of an appealing thing to us here. So that is drawing attention, it is environmentally friendly, the community likes 

me. I haven’t had a complaint since I had it in here now. 

Right now, as I sit here, there are probably 24 active digesters 

in Pennsylvania. I think we are shooting at probably 28 to 29 here 

by the end of this year. So we are kind of a front runner in renewable energy for digesters. I am kind of proud of that along with 

some other states here. 

My experience all started when I sent my son to college, and 

when you do that, you never know what they are going to come 

back with. They actually got me started in this whole technology 

of renewable energy, and I didn’t know anything about it 8 years 

ago. Right now they say I am one of the front runners in Pennsylvania, so I guess I am here to tell my story. And I would much 

rather be back mowing hay all day or planting corn. This ain’t kind 

of my thing. 

But I am here to hopefully promote this technology and continue 

to move forward. It is very economical and practical sort of thing. 

One of the things I want to familiarize you with, I am not going 

to go into the next statement there, but anaerobic digestion is kind 

of a different thing, you take a ton of manure or a ton of food 

waste, you make energy out and you actually can supply energy to 

your neighbors and everybody seems to like that. And so that technology, I can’t explain it but it does work. It is amazing technology, 

and it is really coming alive here, and I know the Commonwealth 

of Pennsylvania, that is why I can say Pennsylvania I haven’t really been in other states. 

I talked to a young—I talked to an older gentleman from Lancaster, and he is the guy that got me started in this whole thing. 

I did a lot of research, a lot of work before I got started here 8 

years ago. So actually, I took a lot of digesters and duplicated it 

and I actually made something that would actually turn around a 

pretty good profit. 

One of the things I want to say, we sized our digester for 1,000 

cows, calls for future expansion, as I will get to later, I have three 

sons working with me, I didn’t know how big we were going to get. 

In Pennsylvania, 500 cows is a fairly large dairy. Anyhow into the 

thing 2 years, I got a phone call from a partner with Wal-Mart and 

some grocery stores wanted to know if I wanted to bring in some 

2385

other source of food waste into that thing. So actually, I started 

putting food waste in my digester and to my amazement, we actually doubled production. Food waste has 31⁄2 times more energy 

than cow manure. So I am hoping somehow down the road we can 

partner with the food waste industry and be a big part of agriculture and especially in the dairy industry and hog industry here. 

We can take that product out of landfills and put it into something 

we can actually make renewable energy. It is a win-win for everybody and for the communities and economy. 

We power right now about 80 and 100 houses plus my whole 

farm, so it is kind of amazing, amazing technology when you take 

cow manure that used to be a waste product for us. In Juniata 

County, people turn that into a commodity. It is just another amazing technology. 

The heat from the generator is actually where we actually make 

a lot of our money off of. We got that technology, we are heating 

the house, the barn, everything in the barn. You can read the paragraph there we pasteurize milk and also dry corn. And latest, I just 

bought my wife a Chevy Volt, and so we are powering our transportation off of energy. And so that is kind of a pretty neat thing for 

us at Reinford Farms, it is getting a lot of attention in that. 

We came down to Washington with our Chevy Volt but we ran 

out of energy coming through, up the road waiting to plug that 

thing in down here, but we couldn’t find any outlets to plug it in. 

A little sidekick there. 

The deciding factor with me for putting this system in play was 

actually because of the grants I got from REAP and also from the 

local banks. And so I am a big supporter of this whole technology 

and since I am kind of running out of time, I just want to say a 

big thank you for my family, I have another picture, you have my 

testimony, I sent down here on the photo addendum. If it weren’t 

for my three sons in this business I wouldn’t be where I am at. So 

I want to say thank you to my sons publicly, and also it actually 

helps bring the next generation into dairy farmers. 

I am passionate—I am not used to running on the time clock 

here so sorry about that. I am passionate about this technology and 

I am willing to stick my neck out now to promote this for future 

generations and for agriculture. I think it is just amazing technology. So thank you, Mr. Chairman. 

[The prepared statement of Mr. Reinford follows:]

PREPARED STATEMENT OF STEVE REINFORD, OWNER/OPERATOR, REINFORD FARMS

INC., MIFFLINTOWN, PA 

Chairman Thompson and Members of the Committee:

I want to take this time to thank you for the invitation to speak about my green 

energy experience. I am here to share my story about manure-to-energy and the 

value added to Reinford Farms in Mifflintown, PA. By utilizing USDA incentives, 

in conjunction with a bank loan, we were able to invest in an anaerobic digester. 

With this digester, I am reducing manure odors, creating cow bedding, drying grain, 

pasteurizing calf milk and producing electricity. This activity results in additional 

income for the farm and public benefits to the community. 

My experience began 8 years ago when we sent one of our three sons to college 

to major in business. He came home after his second year of school and said to me 

that we should be looking at renewable energy and one of the suggestions was an 

aerobic digester. He got my wheels spinning and I educated myself by touring a few 

other digesters in the United States. 

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For those who are not familiar with the process, anaerobic digestion is a series 

of biological processes in which microorganisms break down biodegradable material 

in the absence of oxygen. One of the end products is biogas, or biomethane, which 

is combusted to generate electricity and heat, or can be processed into renewable 

natural gas and transportation fuels. Biogas can be cleaned up and inserted into existing natural gas infrastructure. 

I talked to a very helpful gentlemen from Lancaster, PA, who had 23 years of digester experience. He gave me a few good pointers and I was sold. I found a biogas 

company that had been building digesters for more than 25 years. I had a feasibility 

study done by them to see if it would work. They told me I would need about 800 

cows to make it cash flow. So I decided to enlarge my herd to reach that goal. But 

in the meantime I started adding food waste from local food chains, including 40 

Wal-Mart and Sam’s Club stores in the region. I was surprised to find that it doubled my biogas output which maximized my electricity generation capacity. So I leveled at 500 cows. 

We are powering our whole farm along with 80 to 100 homes. The heat from the 

generator set supplies heat for the large farm house, repair shop, our farm offices, 

hot water for the dairy barn, pasteurizes milk for the newborn calves, and dries 

40,000 bushels of corn per year. We separate the solids for cow bedding and sell 

the excess. The energy savings has been a great benefit to our business and has 

been a benefit to our environment too. 

The deciding factor of whether or not we would go ahead with the digester was 

being able to receive grant money to help finance this project. We received grant 

money from USDA’s REAP program and some from PA Energy Harvest. We also 

applied for low interest money from SEDA-Council of Governments. 

Without the support of the USDA and the state, we will start losing ground in 

this technology on a lot of dairy farms. According to the American Biogas Council, 

there are 8,200 dairy and swine farms nationwide today that could support a digester. However, there are just under 200 farm based digesters in operation today. 

By comparison, there are over 10,000 digesters currently in operation in Europe. 

My feasibility study showed that biogas would be a long-term win-win for my 

farm and the surrounding community. The REAP Program has helped many farmers complete the initial feasibility study to determine whether a digester makes 

sense for them. REAP provides farmers a long-lasting safety net by cutting input 

costs and developing new revenue sources. It also serves the public interest by increasing energy security, and cutting energy-related pollution. And USDA estimates 

that REAP has created or saved 15,000 jobs in 2010 and 2011. 

I am passionate about telling my story so that we can continue to build digesters 

on farms to make us a leader in renewable energy and to promote rural economic 

self-sufficiency. We need the government to be a financial supporter of these projects 

so that we can achieve this goal. 

Thank you again. I’d be happy to answer any questions you may have.

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ATTACHMENT

Reinford Farms Photo Addendum

Reinford Family Reinford Farms Dairy Barn 

Digester Digester Engine and Generator 


112301113.eps 112301114.eps
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The CHAIRMAN. Thank you, Mr. Reinford. 

And we will make sure the folks in Washington who can’t find 

a place to plug in their Volt know that there is a farm in Juniata 

County where they can get that done. 

Mr. Taylor, I recognize you for your testimony for 5 minutes. 

STATEMENT OF JEROME ‘‘JERRY’’ TAYLOR, JR., PRESIDENT 

AND CHIEF EXECUTIVE OFFICER, MFA OIL COMPANY; COFOUNDER, MFA OIL BIOMASS LLC, COLUMBIA, MO 

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

Holden, and Members of the Subcommittee, thank you for the invitation to testify today on the energy bill, the title programs, in particular, the Biomass Crop Assistance Program, or BCAP as it is 

known as. 

I am Jerry Taylor, President and CEO of MFA Oil company, a 

farmer-owned energy cooperative in Missouri with 40,000 members. MFA Oil supplies fuels, lubricants, and propane to customers 

in seven states. Our cooperative has a long history in leading renewable fuels innovation. Starting in the 1960s, MFA Oil company 

produced gasohol. More recently, in early the 2000s we ventured 

into biodiesel production, and in 2008, we began writing the next 

chapter in our renewable energy story, biomass. 

In 2011, we took a major step forward and partnered with 

Aloterra Energy to form MFA Oil Biomass, a separate, small business with the mission of leading the cooperative into this new renewable energy field. 

I will focus today on our experience with BCAP, but for more information about our innovation in the area, please refer to my written testimony. 

When USDA issued the final BCAP rule, they said ‘‘BCAP will 

address a classic chicken-and-egg challenge. If commercial scale 

biomass facilities are to have sufficient feedstocks, then an established, large scale energy crop source must exist. Conversely, if 

profitable crop production is to occur, then a viable consumer base 

must exist to purchase the product.’’ In our experience, this could 

not ring truer. It is a difficult process to educate farmers on a 

strange new plant called Miscanthus Giganteus. Just 2 years ago, 

it was a crop that was too expensive and planted by hand. USDA’s 

approval in 2011 to fund our project areas was our window of opportunity. It allowed us to leverage other resources to develop a 

four-row planter, plant propagation acres and lower the cost of 

planting. To that end, BCAP was essential to bridging the gap with 

our producers to take that leap of faith. 

To date, 225 family farmers have dedicated acres to the new energy crop, and we anticipate this number will grow to over 2,000 

as our combined projects scale up to maturity at 50,000 acres per 

region. All of this is occurring on land that had been underutilized 

or was earning very little. 

BCAP’s most important long-term influence on the renewable energy market is to drive down the cost of the best perennial crops 

and increase the efficiency of which they are planted. No other Federal program has this broad effect on America’s biomass renewable 

energy industry. BCAP is a game changer, but only if it is administered properly and funded consistently. 

2389

While USDA committed resources to fund our first year of a 7 

year model, we had to adapt our model and the pace of implementation due to the drastic funding cuts of 2012. 

Despite our significant successes, the absence of a clear direction 

in Federal policy is forcing us to scale back in each of our project 

areas. We are in a situation where it is impossible to plan 6 

months out, let alone the 3 to 5 years necessary to run a business. 

Consistent funding is the story here. Expanding our renewable 

energy industry cannot be done in a laboratory or in theory. Farming is advanced by doing. You cannot ferret out all the complexities 

of a such a unique crop and independently scale up to 200,000 

acres in four project areas after only 1 year of funding. A BCAP 

program that is funded 1 day and is cut another will ultimately do 

more harm than good. It will set the biomass industry back years 

as farmers will lose faith in the industry. 

I strongly support reducing our nation’s deficit and tackling the 

rising debt. In fact, U.S. farmers have led the way, establishing a 

fiscal record that is unique among Federal policies. 

I understand tight budget constraints will be a major issue in the 

2012 Farm Bill and encourage careful review of all the programs. 

In doing so, I believe you will find that BCAP is worthy of continuing, and should any funding be available for the energy title, 

I strongly encourage you to direct it toward this game-changing 

program. 

Beyond reauthorization and the potential for funding, my written 

testimony offers suggestions related to the program’s functions. 

Most importantly, USDA needs to have the flexibility to see existing projects through to maturity. 

In closing, MFA Oil Biomass has harnessed America’s agricultural pioneering spirit to advance opportunities for our farmer 

members, and we are overcoming the chicken-and-egg problem by 

successfully leveraging BCAP the way it was intended. Again, I 

thank you for this opportunity to testify and look forward to any 

questions. 

[The prepared statement of Mr. Taylor follows:]

PREPARED STATEMENT OF JEROME ‘‘JERRY’’ TAYLOR, JR., PRESIDENT AND CHIEF

EXECUTIVE OFFICER, MFA OIL COMPANY; CO-FOUNDER, MFA OIL BIOMASS LLC, 

COLUMBIA, MO 

Chairman Thompson, Ranking Member Holden, and Members of the Subcommittee, thank you for the invitation to testify today on farm bill energy title programs, in particular the Biomass Crop Assistance Program (BCAP). 

I am Jerry Taylor, President and Chief Executive Officer of MFA Oil Company. 

I also serve on the boards of Mid America Biofuels, the National Cooperative Refining Association, and the National Council of Farmer Cooperatives. 

Formed in 1929, MFA Oil Company is a farmer-owned energy cooperative in Missouri with 40,000 members. Before ethanol as we know it today, MFA Oil Company 

was producing fuel grown by our farmers. Prior to the oil embargo of the 1970s, 

MFA Oil was one of the early producers of gasohol, which started America on the 

long road towards energy security and energy independence. MFA Oil was able to 

make that bold move because of its lasting history in Missouri and strong relationship with the region’s farmers. 

From those days of gasohol, MFA Oil today supplies fuels, lubricants, and propane 

to customers in Missouri, Arkansas, Oklahoma, Kansas, Indiana, Kentucky, and 

Iowa. Through a subsidiary, MFA Oil operates Break Time convenience stores in 

Missouri and Arkansas, and Jiffy Lube and Big O Tire franchises in Missouri. MFA 

Oil also is an investor in a biodiesel production facility in Missouri, offers E85 at 

2390

over 50 locations, and has a ten percent ethanol blend at more than 300 MFA Oil 

fueling stations. 

In 2008, we began laying the groundwork to expand our energy services and take 

on America’s most important and most difficult renewable energy sector—biomass. 

Beyond our willingness to consider new fuel opportunities, our pursuit of this expansion was triggered when I was informed by one of our members in southwest 

Missouri that they were switching from propane to solid fuel pellets because of the 

significant operational cost savings and the elimination of big price swings in the 

oil markets. This change was driven by our innovative farmers and our cooperative 

has an obligation to find the best fuel prices for our farmers. Those conversations 

spurred our dive into using Miscanthus Giganteus as a new energy source for rural 

America. Also important were lots of policy changes like Missouri’s Proposition C 

that mandated a renewable electricity standard of 15 percent by 2021. The latter 

has triggered significant activity among electricity providers, including among coal 

plants exploring co-firing coal with biomass products. 

In addition to Missouri’s renewable energy law, we saw an opportunity in the 

state’s high rate of underutilized, marginal farm land, combined with a significant 

density of poultry farmers who are very vulnerable to a rise in heating costs necessary to heat poultry barns. 

MFA Oil Company’s biomass initiative took a major step in 2011 when we 

partnered with Aloterra Energy LLC to form MFA Oil Biomass LLC (MFAB), a separate small business with the mission of leading the cooperative into the renewable 

energy field. MFAB is utilizing our existing knowledge of farming and the energy 

markets to form a completely vertically integrated renewable energy supply chain. 

This vertically integrated system provides farmers an energy crop source, unique 

harvesting and planting equipment for the crop’s rhizomes, specialty harvesting 

services for the mature crop, processing technology, and marketing services to get 

the best return for the farmer and the cooperative. 

Our story is one of entrepreneurial spirit inherent in American agriculture—we 

saw a need, assessed our options, and applied know-how, skill and hard work to develop a solution. It is also a story of the role that cooperatives play in bringing individual farmers and ranchers together to seize new opportunities in the marketplace 

that they would never be able to take advantage of as individuals. As a co-op, we 

are able to work hand-in-hand with producers as valued, trusted business partners, 

allowing farmers to boost their earnings from the marketplace and diversify their 

income streams. 

For more information about our feedstock and our vertically integrated system, 

please refer to Appendix A following this testimony. 

Solving the Chicken and Egg Problem 

In October 2010 when the U.S. Department of Agriculture (USDA) issued the 

final rule for BCAP, they noted the following:

BCAP will address a classic chicken-and-egg challenge: if commercial-scale biomass facilities are to have sufficient feedstocks, then an established, large-scale 

energy crop source must exist. Conversely, if profitable crop production is to 

occur, then a viable consumer base must exists to purchase the product.

In our experiences, this could not ring truer. It is hard to articulate just how difficult it was, and still is, to educate farmers on a strange new plant called 

Miscanthus Giganteus. This was not an attempt to plant a known crop in a new 

industry, but an unknown crop in a non-existent industry. Add to that a crop that 

was too expensive (at $1,400 per acre) and was being planted by hand. And we were 

asking farmers to spend capital without a return on investment for 3 years. 

Our strategy since the 2008 Farm Bill was enacted has been to leverage BCAP 

funding to take the best energy crop in the U.S., mechanize all logistics, and use 

cutting edge technology to quickly mature the industry. In FY 2011, USDA approved $14.6 million in BCAP funding for MFAB’s three project areas—central Missouri, southwest Missouri and northeast Arkansas. USDA also approved $5.7 million for one project area in Ohio and Pennsylvania sponsored by our partners, 

Aloterra Energy LLC. 

This money is going to local farmers to establish Miscanthus Giganteus to be used 

as an energy feedstock. Leveraging BCAP funding, MFAB and Aloterra Energy LLC 

have signed up a combined 18,000 acres to grow Miscanthus Giganteus in these four 

project areas. To date, 225 family farmers have dedicated acres to the new energy 

crop and we anticipate this number will grow to over 2,000 as our projects scale 

up to maturity at 50,000 acres per region. These families will be the backbone that 

will help reduce our dependence on foreign oil by displacing the current fossil fuels 

that are used for agricultural heating and power plants. All of this is occurring on 

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land that had been underutilized or was earning very little. Our target farmland 

is marginal and/or under-productive that is not used for row crop production. 

The 2011 BCAP funding was a critical first step and allowed us to leverage our 

resources to develop a four-row planter, plant massive propagation acres, and get 

the costs down below $750 per acre. To that end, the BCAP funding was essential 

to bridging the gap with our producers to take that leap of faith. 

We believe in starting with the farmers and the feedstock—the rest will follow. 

We would not leverage our future or BCAP dollars on an unproven technology, but 

instead started with proven markets and the proven technology of solid fuel pellets. 

It was the only thing that made sense to us and our farmers. At maturity MFAB’s 

three project areas will have 150,000 acres and produce 1.8 million tons of biomass 

per year. In liquid fuel language, this would create a twenty-year reserve of 

93,000,000 barrels of liquid fuel, using the same language and conversion methods 

of the oil and gas industry. (150,000 acres × 12 tons per acre = 1,800,000 tons ×

15.5 MMBTU/ton = 27,000,000 MMBTU / 5.8 MMBTU per barrel of crude oil = 4.66 

million barrels of crude oil × 20 year life of crop = 93 million barrels of crude oil 

equivalent) 

The results of our work through BCAP have been both exciting and stunning. Almost immediately following USDA’s funding to start our BCAP project areas, we 

witnessed a flurry of activity from national and international entities to introduce 

dozens of cutting-edge technologies and manufacturing projects to convert our crops 

into green fuels, green chemicals, solid fuel pellets, and consumer products ranging 

from car parts to construction materials. 

BCAP Uncertainty 

While USDA committed resources to fund our first year of a 7 year model to have 

50,000 acres planted in each region by 2014, we had to adapt our model and pace 

of implementation due to the drastic funding cuts to BCAP in FY 2012. As a result, 

we submitted BCAP applications to the Farm Service Administration (FSA) that 

had comprehensive and pragmatic adjustments to our past budgeting projections 

with the goal of maintaining the significant momentum and success that has been 

created. Our goal is to ensure that the BCAP dollars already invested will result 

in a successful project. 

However, funding uncertainties—BCAP funding cut from $432 million in FY 2011 

to $17 million in FY 2012—the timing of the farm bill reauthorization, and inconsistent Federal energy policies make us seriously question continued investments at 

current levels in this renewable energy industry. Despite our significant successes 

and ability to sign up 18,000 acres in partnership with Aloterra Energy LLC in only 

3 months, the absence of a clear direction in Federal policy is forcing us to scale 

back each of our project areas. 

We recognize that the energy security problems in the U.S. cannot be fixed overnight. We also recognize that we need to consider the entire portfolio of petroleum 

and renewable tools to solve our problems. However, those of us tackling the most 

difficult part of this industry and likely the most promising for rural America—biomass—are in a situation where it is impossible to plan 6 months out, let alone the 

3 to 5 years necessary to properly run a company. 

America needs farmer participation if we are to solve our energy problems. We 

will need millions of tons of biomass for biobased products and liquid fuels. I truly 

believe we need programs like BCAP to solve the chicken and egg problem. However, a BCAP program that exists one day and is gone another, that is funded one 

day and is cut another, will ultimately do more harm than good. It will set the biomass industry back 10 years because farmers will lose faith in the industry. 

Why is BCAP so important to solving our energy security problems while also creating rural manufacturing? Because most of the entities in the renewable energy industry are focused on one technology—liquid fuel—the biomass to feed that technology is an afterthought. In contrast, we and other similar companies are using 

BCAP to accomplish the following:

1. Educate farmers about this new cash crop and industry.

2. Develop all of the custom farming equipment necessary to make this possible.

3. Develop thousands of acres of energy crops and prepare our farmers for that 

breakthrough technology when it does occur.

4. Simultaneously develop multiple biomass markets in solid fuel pellets, 

biobased products, and biobased chemicals.

5. Make solid advancements in fiber based processes to replace a host of petroleum products ranging from Fiberglass to car parts.

2392

No other Federal program has this broad effect on America’s renewable energy 

industry. BCAP is going to change the economies of rural America and therefore all 

of America. Not to be forgotten, while we are developing all of these other product 

lines, we are also primarily responsible for supplying the much needed test tonnage 

so liquid fuel companies can develop the breakthrough that will change how we fuel 

America. BCAP is a game changer, but only if administered properly and funded 

consistently. 

All efforts are being made to reduce the per-acre planting costs of Miscanthus 

Giganteus and to move the industry quickly to a point that BCAP is no longer necessary. To support our words with actions, both MFA Oil Biomass and Aloterra Energy have offered to sign a contract that we will not request BCAP dollars in the 

future if we were to receive a guarantee of 3 years of adequate funding to properly 

plan and invest our way away from government subsidies. Consistent funding is the 

story here. Consistent funding is critical because expanding our renewable energy 

industry cannot be done in a laboratory or in theory. Farming is advanced by doing. 

Our farmers are learning about Miscanthus Giganteus and the equipment by getting into the fields with us, observing, and then providing great ideas and pragmatic 

solutions to problems. You cannot ferret out all of the complexities of such a unique 

rhizome-based crop and independently scale up to 200,000 acres in the four project 

areas after only 1 year of funding. Because we own the planting supplies, the BCAP 

funding is not leaving the project area, but is instead being reinvested in the local 

economy while also reducing planting costs. 

As is the case with many farm bill titles (research, rural development, energy, 

etc.), programs that are authorized but never funded are of no help. Likewise, programs that are deprived during the appropriations process never reach their full potential. We hope this will not be the case for BCAP going forward. 

BCAP Reauthorization 

Our co-op and its farmer-owners support reducing our nation’s deficit and tackling 

the rising debt. In fact, U.S. farmers have led the way, establishing a fiscal record 

that is unique among Federal policies. We understand tight budgetary constraints 

will be a major issue in the 2012 Farm Bill and encourage careful review of all programs. In doing so, I believe you will find BCAP is worthy of continuing and should 

any funding be made available for the energy title, I strongly encourage you to direct it toward this game-changing program. 

BCAP, if reauthorized in the 2012 Farm Bill, will be viewed in the future as a 

sleeper program that changed the trajectory of renewable energy forever. BCAP’s 

most important long-term influence on the renewable energy market is to drive 

down the cost of the best perennial crops and to increase the efficiency with which 

they are planted. That is how we change our future, grow our own oil fields, and 

make ‘‘energy security’’ a meaningful phrase. 

Beyond a simple reauthorization, we offer the following suggestions and reactions 

to existing legislative proposals related to the functionality of the program. 

Reimbursement Rates. As it is implemented today, BCAP acknowledges the 

need to incentivize farmers to take on the risk of energy crops and weather the 2 

maturation years with little or no income on their crops. Important to obtaining 

farmer participation is maintaining the 75 percent reimbursement rate for establishing the crops. 

BCAP is not a loan guarantee program for a specific technology, nor is it a program that bets on any technology to convert biomass into a biobased product or fuel. 

Rather, BCAP is intended to solve the front-end problems of this industry—getting 

feedstock planted and using BCAP to reduce the historically prohibitive perennial 

crop planting costs. BCAP has placed us on the path to accomplish exactly that. Two 

things are accomplished through 75 percent reimbursements:

1. The farmer can take a risk on an unknown industry despite many issues that 

could harm a project; and

2. The project sponsor can find ways to reduce costs.

MFA Oil Biomass is leveraging BCAP to amass assets in seed sources and equipment that will allow America’s farmers to plant this ten to fifteen ton per acre crop 

at $250 an acre in about 3 years. As previously noted, prior to BCAP this cost was 

at $1,400 or above. This eliminates the need for BCAP entirely and allows us to 

make BCAP a stepping stone program and not a new long-term farming subsidy. 

Reducing the establishment reimbursement rate forces a project sponsor to forego 

long-term planning and instead focus on a short-term strategy to do whatever it 

takes to convince a farmer to pay fifty percent of the costs and get acres planted. 

This eliminates progress, breakthroughs, and the ability to have a project sponsor 

work in a true partnership with their farmers. A concrete example could be a deciVerDate 0ct 09 2002 12:54 Dec 11, 2012 Jkt 041481 PO 00000 Frm 00804 Fmt 6601 Sfmt 6621 I:\DOCS\112-30\74372.TXT BRIAN
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sion to continue the hand planting of the crop and to forego long-term investments 

in manufacturing mechanized planting systems. 

Instead, the program could cap funds to plant new acres under BCAP to 3 years. 

For example, MFA Oil Biomass intends to scale up each project to 50,000 acres. We 

averaged about 4,000 acres per project area with 2011 funding. BCAP could limit 

our project to 2 more years of new acres. So, if the FSA funds 7,000 acres in 2013 

and 10,000 in 2014—that would be the final year. MFA Oil Biomass would be forced 

to work out a funding mechanism with its farmers to plant the final 29,000 acres. 

After 3 funding years, a project area should be able to reduce planting costs to no 

longer need BCAP or obtain traditional financing after proving the economics of the 

specific project. However, this can occur only with consistent Congressional funding 

and a 3 year plan. Our current experience with project funding uncertainty makes 

planning for the future impossible. 

Environmentally sensitive lands. As previously stated, our efforts are occurring 

on land that had been underutilized or earning very little. Our target farm is comprised of marginal and/or under-productive land that is not used for row crop production. The entire biomass industry is based on the premise that it will not take 

land from food acres. To push us to compete with row crop acres is to push us back 

towards the very problem we are trying to solve with cellulosic ethanol. 

We do not have an issue with eliminating land that has never been farmed—as 

the existing rule dictates. We completed a thorough Environmental Assessment 

under the National Environmental Policy Act (NEPA) that assesses whether or not 

growing Miscanthus Giganteus would have a significant impact on the environment, 

which included assessing the effects on wildlife. Additionally, USDA’s Natural Resources Conservation Service (NRCS) receives funding to complete mandatory conservation plans with each field planted taking into account the effects on endangered species and wildlife. For our project areas, NRCS mandated a 25 foot border 

around each field as well as mandatory monitoring and reporting expectations. This 

is a second layer of protection for the environment. In our experience, we have found 

existing Federal law being used as intended and fully protecting environmentally 

sensitive lands. To place further limitations on eligible land may hurt future opportunities. 

Geographic and Feedstock Diversity. Years of economic analysis goes into a 

biomass project area before a private company decides to invest. Therefore, the markets are already vetting the appropriate geographic regions for a biomass crop or 

technology, which is determined on a host of inputs that include existing regional 

farming practices, local transportation infrastructure, access to markets, climate for 

specific crops, and more. MFAB would recommend that the FSA administer BCAP 

applications based on what comes to the program from the private market and not 

give preference to a region because it has fewer or no existing projects or a new energy crop. There are economic reasons why more arid or dry regions will see less 

activity. Conversely, there are economic reasons as to why highly productive row 

cropping regions will not see large projects but regions with marginal acres will see 

more activity. Likewise, there are reasons why regions with access to transportation 

infrastructure will see more activity. Legislation should work in cooperation with 

the markets to produce more economical projects. 

Funding for Existing Projects. MFAB also encourages the Subcommittee to 

consider how the program treats existing projects that have received funding. It is 

important to allow continuation of funding of such project sponsors to ensure project 

maturity. We base this recommendation on our experience with BCAP for 2 straight 

years. We have been consistently told that current regulations dictate the assessment of other projects to ensure crop diversity. This has the ill-advised effect of pulling the plug on existing projects that may be performing very well but are not yet 

mature enough to stand alone. USDA needs to have the flexibility to continue funding programs to ensure projects are seen through to maturity and to ensure the FSA 

has the tools needed to be a good steward of public funds. I look forward to working 

the Subcommittee on legislation language that ensures existing projects are not put 

at disadvantage when funding decisions are made. 

In closing, meeting the food and energy needs of a growing world population is 

a daunting task but one that will be accomplished by fostering American agriculture’s pioneering spirit. MFA Oil Biomass has harnessed that spirit to advance 

opportunities for our farmer members and we are overcoming the proverbial chicken-and-egg problem by successfully leveraging BCAP the way it was intended. 

Our farmer-owners see incredible opportunities as this endeavor takes off. They 

recognize the potential to offer America’s rural communities permanent manufacturing jobs, a new cash crop for farmers, and a local source for green heating, renewable liquid fuel sources, biobased chemicals, green building materials, water 

treatment systems, soil reclamation systems, and consumer packaging. 

2394

Again, thank you for the opportunity to be with you today and I am happy to respond to any questions. 

APPENDIX A: MFA OIL BIOMASS LLC 

Project Description 

About Our Crop 

MFAB recognized early on that having a versatile feedstock, something able to be 

used in multiple products, was critical to success. MFAB’s extensive research confirmed the potential of Miscanthus x. Giganteus as not just a viable feedstock but 

one with incredible potential. Miscanthus Giganteus is rated to grow from hardy 

zones 4–9, and unlike other similar species, it can grow in temperatures as low as 

43° F. A Miscanthus Giganteus stand is estimated to last 15 to 20 years or more 

after the initial planting. 

Miscanthus Giganteus is a C4 warm season perennial grass that is a noninvasive, sterile hybrid that moves slowly by rhizome expansion. The plant also is 

drought and pest resistant, and needs less fertilizer than food crops, which translates into less run-off into the region’s water systems. In fact, a Biomass Crop Options and Supply Chain Feasibility study performed by Missouri Biomass Farmer 

Supply Chain Consortium and funded by the Missouri Agricultural and Small Business Development Authority (MASBDA) found that Miscanthus can filter run-off, reduce the use of fertilizers, act as a disposal option for animal waste, improve water 

quality and soil health, and more. 

The grass is also extremely efficient in sequestering carbon from the air which 

is an added benefit as carbon markets further develop. We are in the process of confirming third party studies showing that Miscanthus has a ratio of 53:1 in terms 

of carbon sequestered per acre versus the carbon emitted in farming/harvesting the 

crop itself. Furthermore, producers have found that by planting Miscanthus, their 

soil quality has improved due to decreased compaction and increased soil organic 

matter. This latter information has dramatic consequences for America’s farmers. 

Regarding efficiencies, third party studies (and we are confirming with our own 

teams) establish Miscanthus as having a 36:1 energy-in to energy-out ratio, making 

it very efficient and the consumers of this product will therefore not have to address 

assertions that energy or biobased products sourced from Miscanthus are not truly 

renewable. Last, at 10–15 tons per acre, Miscanthus doubles its nearest competitor 

in tonnage and increases the farmer’s return. It is also projected to produce three 

times more gallons of ethanol per acre than corn. 

Below is a rough comparison of the economics of Miscanthus, long considered cost 

prohibitive, against the funding of all other BCAP projects funded in 2011.

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Name Main Crop Estimated 

Acres for 

2011

Estimated 

Annual Yield 

of Per Acre 

Cost per Acre Total Cost MMBTU/Ton Life of Crop 

(Years) 

Total 

MMBTU’s 

Over Life of 

Crop 

Cost per 

MMBTU 

Over Life of 

Crop

BCAP Project Area 1 Switchgrass ′′ 20,000 4.00 $310 $6,200,000 14.4 10 11,520,000 $0.54BCAP Project Area 2 Miscanthus 6,588 12.00 $877 $5,775,000 15.5 15 18,380,520 $0.31BCAP Project Area 3 Miscanthus 3,400 12.00 $1,124 $3,822,000 15.5 15 9,486,000 $0.40BCAP Project Area 4 Miscanthus 3,850 12.00 $1,251 $4,815,000 15.5 15 10,741,500 $0.45BCAP Project Area 5 Miscanthus 5,344 12.00 $1,067 $5,700,000 15.5 15 14,909,760 $0.38BCAP Project Area 6 Camelina * 1,000 0.48 $370 $370,000 20.5 1 9,840 $37.60BCAP Project Area 7 Switchgrass 20,000 4.00 $310 $6,200,000 14.4 10 11,520,000 $0.54BCAP Project Area 8 Camelina * 50,000 0.48 $490 $24,500,000 20.5 1 492,000 $49.80BCAP Project Area 9 Poplar # 7,002 5.00 $2,446 $17,127,000 16.0 15 8,402,400 $2.04* Assumes 1.2 ton per acre yield of camelina seed with 40% oil composition.′′ Assumes same price as Project Area 7 due to lack of funding information.# Assumes 15 year cycle per ZeaChem website with five harvests, 15 tons per harvest, or 5 tons per year.

One Acre 

Comparison ∼

Main Crop BTU’s per 

ton 

Estimated 

Annual Yield 

of Per Acre 

# of Harvests One Acre 

Total 

MMBTU’s 

Over Life of 

Crop 

Cost per 

MMBTU 

Over Life of 

Crop

One Acre Miscanthus 15.5 12.00 15 2,790 $0.39One Acre Poplar 16.0 5.00 15 1,200 $2.04One Acre Switchgrass 14.4 4.00 10 576 $0.54One Acre Camelina 20.5 0.48 1 10 $43.70∼ Used per acre cost average for each individual crop. 

2396

Two significant points above—Miscanthus has no equal in MMBTUs over the life 

of the crop and we have the cheapest per BTU cost using BCAP funding. We believe 

these points create a strong argument that we are a very good investment of BCAP 

dollars. This data strongly supports our approach and our emphasis on a vertical 

integration model that allowed us to plant more efficiently than the above crops 

(switchgrass, camelina, and poplar) that have well over a decade head start, have 

existing planting systems, and are well known crops to potential farmers. We are 

singularly focused on getting crop costs down and into the hands of our farmers. 

Finally, in order to garner approval under BCAP, we had to complete a thorough 

Environmental Assessment under the National Environmental Policy Act (NEPA). 

The Final EA (available on USDA’s website) confirmed that the crop has a scientifically sound and clearly established record and will not have a significant environmental impact on the region. 

About Our Model 

We use the phrase ‘‘vertical integration’’ frequently in our daily work. This model 

grew out of 2 years of research and frustration in trying to understand the best way 

to enter into the biomass industry. Growing, harvesting, and processing crops whose 

sole use is an energy source is something that is in its infancy. MFAB’s owners realized that to develop farmer support we had to understand each aspect of our supply 

chain and be able to answer every question to ease farmer concerns and gain commitment. After extensive research, we came to the conclusion that the only way to 

control our destiny in this nascent industry was to rely on ourselves and become 

experts in each area of our own supply chain that we controlled. Also, the economics 

of biomass—high volume and low margins—dictates this model for survival. 

From our vertically integrated model and emphasis on making Miscanthus 

Giganteus inexpensive to plant evolved our approach to our biomass acres as ‘‘oil 

fields’’ of liquid fuel biomass reserves. Focusing on a true ‘‘feedstock first’’ viewpoint, 

we are agnostic as to conversion technologies. We are only interested in what makes 

economic sense and what has the best risk-reward profile. 

MFA Oil is already supplying fuel, including propane to thousands of farmer 

members and non-members in each state where we operate. Therefore, MFAB is 

well positioned to introduce a new fuel source to existing customers and to create 

new fuel markets. MFAB is developing biomass supply and heating systems for existing MFAB members that already purchase propane—specifically Farm to Fuel—

a new start up that has designed and is producing a high efficiency biomass furnace. 

With approximately 100 of our pellet stoves in operation today, many customers are 

already transitioning their heating systems to be compatible with our pellets. Last, 

if necessary, locating our facilities near transportation infrastructure allows MFAB 

to access international pellet markets. 

Most other entities in this industry are focused on one technology and biomass 

is an afterthought. In contrast, MFAB is not only developing the biomass but is also 

simultaneously developing multiple biomass markets in pellets, biobased products, 

biobased chemicals, and we are making solid advancements in fiber based processes 

to replace a host of petroleum products ranging from Fiberglass to car parts. While 

this is occurring, we are also supplying significant test tonnage to liquid fuel companies developing their different types of liquid fuel technologies. 

Our future plans entail building biorefineries inside our biomass reserve areas 

that make multiple higher value products that each replace part of a barrel of oil. 

This allows a conservative and methodical approach, instead of betting our future 

on the success of a specific conversion technology. Dedicated energy crops require 

the cultivation of farmer relationships and a vertically integrated model that 

assures the farmer that all of the pieces are in place for success. Our emphasis is 

on working in partnership with our farmers from soil to market. 

Our Potential 

The 4 year goal of MFAB is to establish approximately 50,000 acres of Miscanthus 

Giganteus in each of its three project areas. The 50,000 acre goal will enable each 

area to process approximately 600,000 tons of biomass per year. Each ton contains 

about 15,500,000 BTUs, which means at full maturity each project area can produce 

enough energy to power 65,000 homes or produce 1,600,000 barrels of renewable liquid fuels each year. 

For all three project areas combined, third party feasibility studies prepared by 

Environ International Corporation anticipate a $150 million annual economic impact from growing this new energy crop, while creating 2,700 new jobs. 

Additionally, we have seen our potential fuel pellet markets serving agricultural 

heating needs explode. To keep up with demand, MFAB has purchased a pellet 

stove company and is rapidly developing this market. Displacing only 35 percent of 

2397

the propane market in southwest Missouri and northwest Arkansas would create an 

annual pellet market of 600,000 tons. MFAB has also completed extensive side by 

side comparisons to propane with Tyson growers with outstanding results for the 

Miscanthus pellets. 

The existence of MFAB backed by our committed farmers has led to dozens of 

meetings with technology providers from around the U.S. as well as international 

companies, all seeking to leverage our existing acres and assess establishing liquid 

fuel plants in our project areas. This has triggered several interactions with our 

state economic development agencies and we are currently assessing the use of several funding sources to accelerate our manufacturing projects. 

Beyond the quickly developing liquid fuel and biobased chemicals markets, MFAB 

is implementing a model to assist small towns across the U.S. in complying with 

EPA wastewater discharge requirements. Rather than requiring small towns to 

build multi-million dollar water treatment facilities, MFAB is working with state 

level environmental agencies to help municipalities comply with regulations by 

using Miscanthus Giganteus to filter the water in conjunction with drip line technologies. This has enormous implications for America’s small towns to save money 

in a tough economic period and to properly clean water to the standards of the EPA 

without massive capital expenditures. 

Another benefit is the reclamation of mine land. Mining companies across the 

Midwest are working with MFAB to plant Miscanthus to increase organic matter, 

sequester carbon, improve soil drainage and water retention, reduce soil erosion, reduce nutrient leaching, increase wildlife habitat, and reduce water runoff. Hundreds 

of thousands of acres of mine land are currently sitting idle, but are also continuing 

to contaminate nearby communities, which is why the planting of Miscanthus is 

critical to stabilizing soil and creating a new source of biomass for regional ‘‘green’’ 

projects. 

Regarding power needs, the city of Columbia, Missouri, has instituted a self-mandated 15 percent renewable energy requirement and the University of Missouri is 

putting in place a biomass boiler, which will be online June 2012. 

MFAB also is working with the Missouri based USDA—Agricultural Research 

Service, the University of Missouri, and Arkansas State University on several research projects related to Miscanthus. We have taken on the role of bringing industry to the table as advisors and to assess new projects and opportunities for the region’s businesses and farmers. This includes potential joint projects with the corn 

growers associations using corn stover, retrofitting underutilized regional power 

plants to burn biomass, and assessing technologies of Missouri-based companies to 

commercialize liquid fuel projects. Additionally, we are exploring joint projects with 

Missouri equipment dealers to assess harvesting and storage techniques and to spur 

local equipment sales, as well as a 200 ton Miscanthus pellet test burn with the 

City of Columbia to test equipment.

The CHAIRMAN. Thank you, Mr. Taylor. 

Now will I recognize Mr. Haer for 5 minutes testimony please. 

STATEMENT OF GARY L. HAER, CHAIRMAN, NATIONAL

BIODIESEL BOARD; VICE PRESIDENT, SALES AND

MARKETING, RENEWABLE ENERGY GROUP®, INC.,

WASHINGTON, D.C. 

Mr. HAER. Thank you. Chairman Thompson, Ranking Member 

Holden, Members of the Subcommittee and full Committee, on behalf of the National Biodiesel Board, I am grateful for the opportunity to testify today regarding the farm bill energy title. I am 

Gary Haer, Vice President of Sales and Marketing for Renewable 

Energy Group®, a leading U.S. biodiesel producer headquartered in 

Ames, Iowa. Our company has biodiesel production facilities in 

Minnesota, Texas, Iowa, Illinois, and we are working to reopen biodiesel facilities in Louisiana, New Mexico and Kansas. 

Our focus is on converting natural fats, oils and greases into advanced biofuels. And currently, I have the privilege of serving as 

Chairman of the National Biodiesel Board, the U.S. biodiesel trade 

association that I will refer to as NBB. 

2398

Biodiesel is a renewable low carbon diesel replacement fuel. Like 

diesel fuel, it is used in trucks, trains, agricultural equipment, mining operations, generators and heating oil. Biodiesel is used in existing diesel engines without modification. And it is made from a 

broad diversity of feedstocks, including recycled cooking oil, agricultural oils and animal fats. 

There are approximately 200 biodiesel production facilities across 

the country. And last year, those plants produced a record 1.1 billion gallons of advanced biofuel breaking the billion gallon mark for 

the first time in our industry’s short history. By comparison, the 

U.S. uses approximately 55 billion gallons of petroleum diesel fuel 

each year. 

Our trade association, the NBB, works closely with a number of 

diverse feedstock organizations including the National Renderers 

Association, the American Soybean Association, the United States 

Canola Association, and National Restaurant Association. 

Our industry has production facilities in all but a few states 

across this land. In fact, 13 of the distinguished Members on this 

Subcommittee have at least one plant in your districts, including 

Representatives Lucas, Peterson, Thompson, Holden, Stutzman, 

Gibbs, Huelskamp, McIntyre, Walz, Owens, Pingree, Fudge, and 

Noem. 

The other nine Members of this Subcommittee have biodiesel 

production facilities located in your states, and NBB estimates that 

those plants and others like them across this country, supported 

more than 39,000 jobs in all sectors of the U.S. economy in 2011. This generated household income of more than $2.1 billion, and created more than $3.8 billion in GDP. Many of our production facilities are located in rural America where, in many cases, they are 

the primary economic engine for the local community. 

In addition to creating direct manufacturing jobs, our diversified 

feedstocks and coproducts represent expanding markets for U.S. 

farmers, livestock producers, renderers and restaurant owners. 

Given this overview, you can understand why programs supporting 

biodiesel are a critical piece of the next farm bill. In particular, we 

have a strong interest in two existing farm bill energy title programs, the Biodiesel Fuel Education Program, section 9006, and 

the Bioenergy Program for Advanced Biofuels, section 9005. 

First, the education program plays a vital role in helping expand 

marketplace acceptance and use of biodiesel, and we urge you to 

continue modest funding for the program. 

With the help of the Biodiesel Fuel Education Program, the industry has conducted market outreach, industry coordination, fleet 

and trucker outreach, petroleum supply chain education, biodiesel 

research, and we work cooperatively with the Petroleum Marketers 

Association of America, the PMAA, the International Liquid Terminals Association, the ILTA, and the Society of Independent Gasoline Marketers, or SIGMA, on key infrastructure education. 

We have also garnered significant support from engine manufacturers. Currently 34 U.S. auto makers and engine manufacturers 

warranty their engines to accept the use of B5 or B20, that is biodiesel blends of five percent or 20 percent. 

Many manufacturers are now actively promoting their biodiesel 

capacity and capability. And, for example, Ford has recently begun 

2399

featuring a B20 emblem prominently on the side of every new Ford 

Super Duty diesel truck. 

Finally, because this Agriculture Committee we should talk 

about tractors, biodiesel blends are covered under warranty for use 

in John Deere, Case IH, New Holland, and International Navistar 

equipment as well as lawn equipment such as YanMar, Ferris, and 

Toro. 

In fact, many New Holland and Case IH tractors are warrantied 

up to B100. In addition, to the education program, the NBB is urging the Committee to reauthorize the Bioenergy Program for Advanced Biofuels. This program has helped the industry to maintain 

a stable and expanding manufacturing base as we work to establish ourselves in the competitive marketplace with the entrenched 

petroleum diesel industry. 

Biodiesel is a part of the all-of-the-above energy strategy, and recent oil price spikes should remind us all why this is important, 

with domestically-produced alternatives to oil, we can reduce the 

influence that global forces, such as OPEC, have over our economy, 

a concept that is well understood by consumers who purchase gasoline and diesel fuel. 

A recent Gallup poll found that roughly 2⁄3, including majorities 

from both political parties, support continued incentives for developing American-made alternative fuels. 

In conclusion, the U.S. biodiesel industry is proud to produce the 

only domestic commercial scale advanced biofuel that is readily 

available and accepted across the country. We have both the capacity and available feedstocks to increase production and further expand markets for agricultural feedstocks, and the farm bill programs we have discussed will help our small but growing industry 

gain a sustainable presence in the U.S. fuels marketplace. 

Again, I appreciate the opportunity to testify on behalf of the 

U.S. biodiesel industry. We look forward to working with you on 

the development of a farm bill and continuation of programs that 

support the growing U.S. biodiesel industry. Thank you. 

[The prepared statement of Mr. Haer follows:]

PREPARED STATEMENT OF GARY L. HAER, CHAIRMAN, NATIONAL BIODIESEL BOARD; 

VICE PRESIDENT, SALES AND MARKETING, RENEWABLE ENERGY GROUP®, INC., 

WASHINGTON, D.C. 

Chairman Thompson, Ranking Member Holden, and Members of the Subcommittee and full Committee, on behalf of the National Biodiesel Board (NBB) I 

am grateful for the opportunity to testify today regarding the farm bill energy title. 

I am Gary Haer, Vice President of Sales and Marketing with Renewable Energy 

Group®, a leading U.S. biodiesel producer headquartered in Ames, Iowa. Our company has biodiesel production facilities in Minnesota, Texas, Iowa, and Illinois, and 

we have purchased and are updating biodiesel facilities in Louisiana, New Mexico 

and Kansas. Our focus is on converting natural fats, oils and greases into advanced 

biofuels. Currently, I serve as Chairman of the National Biodiesel Board (NBB). 

Biodiesel is a renewable, low carbon diesel replacement fuel. Like diesel fuel, it 

is used in trucks, trains, agricultural equipment, mining operations, generators and 

heating oil. Biodiesel is used in existing diesel engines without modification, and it 

is made from a broad diversity of feedstocks including recycled cooking oil, animal 

fats, algae, secondary use agricultural oils from soybeans and canola, and inedible 

corn oil derived from the ethanol production process. There are approximately 200 

biodiesel production plants across the country with a capacity in excess of 3 billion 

gallons. In 2011, the biodiesel industry produced a record 1.1 billion gallons, breaking the billion-gallon mark for the first time in our short history. By comparison 

this country uses approximately 55 billion gallons of petroleum diesel fuel each year. 

2400

1 Attached is a list of biodiesel producers. 

NBB is the national trade association representing the biodiesel industry. NBB 

has significant roots and ties to U.S. agriculture. It was founded in 1992 with significant investment from the U.S. soybean industry, and since that time, NBB has 

developed into a comprehensive industry association that coordinates and interacts 

with a broad range of collaborators including industry, government and academia. 

NBB’s membership is comprised of biodiesel producers; feedstock and feedstock 

processor organizations; fuel marketers and distributors; and technology providers. 

Of specific interest to this Committee we work closely with a number of diverse 

feedstock organizations including the National Renderers Association, the American 

Soybean Association, the United States Canola Association and the National Restaurant Association. 

The industry has production facilities in all but a few states. In fact, 13 of the 

distinguished Members on this Subcommittee have at least one plant in your districts, including Reps. Lucas, Peterson, Thompson, Holden, Stutzman, Gibbs, 

Huelskamp, McIntyre, Walz, Owens, Pingree, Noem, and Fudge. The other nine 

Members of this Subcommittee have biodiesel facilities located in your states.1

NBB estimates that those plants and others like them across the country supported more than 39,000 jobs in all sectors of the U.S. economy in 2011. This generated household income of more than $2.1 billion to be circulated throughout the 

economy, and created more than $3.8 billion in GDP. 

Biodiesel facilities are organized as farmer-owned cooperatives, other farmerowned companies, agribusinesses, and independently owned producers. The facilities, together with the American Soybean Association, United Soybean Board, numerous state soybean associations, the U.S. Canola Association and the National 

Renderers Association, play an active and important role in the NBB and its Governing Board. 

The biodiesel industry is extremely proud of our contribution to creating domestic 

energy and domestic jobs. Many of our production facilities are located in rural 

America, where we are an integral part of the local community and have become 

the primary economic engine driving the local economy. In addition to creating direct manufacturing jobs, our diversified feedstocks and co-products are expanding 

markets for farmers, livestock producers, renderers, and restaurant owners. In fact, 

just like the biodiesel facilities in your states, most of the more than 200 biodiesel 

production facilities in the U.S. are located in rural areas, and a majority of the 

feedstock used to produce biodiesel is grown or originates in rural areas. 

The development of the biodiesel industry isn’t just important to America’s agriculture and manufacturing sectors. It also plays a key role in diversifying our energy supplies so that our nation is not so dependent on global petroleum prices that 

can be so damaging to our economy. Biodiesel is part of the ‘‘all-of-the-above’’ energy 

strategy outlined by many energy leaders across the country, and daily, we add new 

domestic liquid fuels to the energy independence of this country. The recent oil price 

spikes should remind us all why this is important. With domestically produced alternatives to oil, we can reduce the influence that global forces such as OPEC have 

over our economy. Americans increasingly understand this. A recent Gallup poll 

found that roughly 2⁄3 of Americans—including majorities from both political parties—support continued incentives for developing American-made alternative fuels 

like biodiesel. 

About Biodiesel 

Biodiesel is the first and currently the only fuel being produced on a commercial 

scale nationwide that qualifies as an Advanced Biofuel under the EPA’s Renewable 

Fuel Standard, which means that it achieves a minimum of 50 percent greenhouse 

gas emissions reductions relative to petroleum. Along with significant reductions in 

greenhouse gas emissions, it dramatically reduces most major toxic air pollutants, 

according to the EPA. 

Biodiesel is primarily marketed as a five percent (B5) blending component with 

conventional diesel fuel, but can be used in concentrations up to twenty percent 

(B20). In all cases, it must meet a strict technical specification and is distributed 

utilizing the existing fuel distribution infrastructure with blending occurring both 

at fuel terminals and ‘‘below the rack’’ by fuel jobbers. 

As mentioned previously, biodiesel is proving to be a valuable alternative in unconventional applications such as heating oil and mining. In the mining industry, 

for example, the U.S. Department of Labor’s Mine Safety and Health Administration has documented that replacing diesel fuel with biodiesel at high blend levels 

will dramatically improve air quality and improve workers’ health. 

2401

Biodiesel & the Farm Bill 

Given its agricultural roots and the benefits it provides to U.S. farmers and rural 

communities, programs supporting biodiesel are a critical piece of the farm bill. 

NBB has a particular interest in two existing farm bill energy title programs—the 

Biodiesel Fuel Education Program (Section 9006) and the Bioenergy Program for 

Advanced Biofuels (Section 9005). NBB recognizes that the energy title programs do 

not have baseline funding beyond 2012, which creates a significant challenge to extending these programs and building on the benefits they have provided. 

Section 9006, Biodiesel Fuel Education Program 

The Biodiesel Fuel Education Program plays a vital role in helping expand marketplace acceptance and use of biodiesel as a low-carbon, addition or replacement 

to diesel fuel. NBB urges the continuation of this program with a relatively small 

investment of $2 million annually in mandatory funding in the 2012 Farm Bill. 

In addition to assisting biodiesel to expand into new markets and broaden public 

awareness, this program supports technical outreach efforts to engine manufacturers, truckers, and fuel marketers. Biodiesel’s presence in modern communication 

tools is just a small part of an all-inclusive education campaign that offers direct 

education to original equipment manufacturers (OEM’s) truck dealers, mechanics, 

safety experts, fuel distributors, health professionals, and community leaders among 

countless others. 

Since the program began, the number of distributors carrying biodiesel has grown 

from 800 to more than 1,500. Today more than 150 petroleum terminals carry biodiesel and biodiesel retailers have grown from 200 to more than 1,350. 

With the help of the Biodiesel Fuel Education Program, the industry has conducted market outreach, industry coordination, fleet and trucker outreach, petroleum supply chain education, biodiesel research and we have worked cooperatively 

with the Petroleum Marketers Association of America (PMAA), the International 

Liquid Terminals Association (ILTA), and the Society of Independent Gasoline Marketers (SIGMA) on key infrastructure education. 

Since 2003, NBB has achieved great success in garnering and promoting OEM 

support for biodiesel through the OEM biodiesel education program. Currently, 34 

major U.S. automakers and engine manufacturers warranty their engines to accept 

the use of B5 or B20. The OEM biodiesel education program continues to play a 

large role in building the automakers’ trust in, and support for, biodiesel blends. 

Our industry has conducted more than 30 corporate biodiesel education sessions together with numerous direct meetings with OEM’s, which has helped all level of 

OEM personnel more accurately answer biodiesel questions from consumers. Many 

OEM’s are now actively engaged in promoting their positive positions on biodiesel 

blends. 

For example, Ford and General Motors continue to be vocal advocates for B20 biodiesel, partnering with the National Biodiesel Board to promote biodiesel at major 

venues like the North American International Auto Show in Detroit. Ford even features a prominent B20 emblem on the side of every new Ford Super Duty diesel 

truck. 

In the world of medium duty diesel trucks both Isuzu and Hino have announced 

support for B20 in their new 2011 and newer models. Isuzu Commercial Trucks has 

been America’s No. 1 selling low cab forward truck every year since 1986. Hino 

Trucks, a Toyota Group Company, is the World’s No. 3 manufacturer. 

Finally, because this is the Agriculture Committee we should talk about tractors, 

biodiesel is covered under warranty for use in John Deere and Case IH equipment. 

In fact many new Case IH tractors are warrantied up to B100, and John Deere warranties their engines for B20. 

Section 9005, Bioenergy Program for Advanced Biofuels 

Section 9005 of the 2008 Farm Bill also authorized and provided mandatory funding for USDA to implement the Bioenergy Program for Advanced Biofuels to make 

payments to producers of advanced biofuels and bioenergy to support a stable and 

expanding production base. The Bioenergy Program has been beneficial to many biodiesel producers as the industry is still working to establish itself in the competitive 

marketplace with the entrenched petroleum diesel industry, which enjoys the benefit of decades of infrastructure and market development. Therefore, we urge the 

Committee to reauthorize this program. 

Section 9007, Rural Energy for America Program (REAP)/Infrastructure:

NBB also supports efforts by USDA to utilize REAP to support biofuels infrastructure investments. Biodiesel is compatible with existing fuel infrastructure. However, 

the industry would benefit from increased terminal infrastructure dedicated for bioVerDate 0ct 09 2002 12:54 Dec 11, 2012 Jkt 041481 PO 00000 Frm 00813 Fmt 6601 Sfmt 6621 I:\DOCS\112-30\74372.TXT BRIAN
2402

diesel. We encourage the Committee to consider support for biofuels infrastructure 

as a component of the next farm bill. 

Conclusion: The U.S. biodiesel industry is proud to produce the only domestic, 

emissions-reducing, commercial-scale Advanced Biofuel that is readily available and 

accepted in the marketplace across the country. The industry has both the capacity 

and available feedstock to increase production and further expand markets for agricultural feedstocks. 

We are proud of the significant economic, energy, and environmental benefits associated with biodiesel production. Accordingly, the industry and the thousands of 

employees it represents urge continued mandatory funding for the Biodiesel Education Program as well as reauthorization of the Bioenergy Program for Advanced 

Biofuels. These investments and support help the small but growing biodiesel industry gain a sustainable presence in the U.S. fuels marketplace. 

* * * * * 

Again, I appreciate the opportunity to testify on behalf of the U.S. biodiesel industry. We look forward to working with you on the development of the farm bill and 

the continuation of the programs that support the growing U.S. biodiesel industry. 

ATTACHMENT 1

Biodiesel Plants in Oklahoma 

Company City 

Annual

Capacity

(Gallons/Year) 

U.S. Representative 

F&F Automotive Inc. dba SEOBio (South East Oklahoma 

Biodiesel) 

Valliant 3,000,000 Dan Boren 

High Plains Bioenergy Guymon 30,000,000 Frank D. Lucas Frank D. Lucas

Total Capacity: 33,000,000 Jobs Capacity: 1,288

Actual 2011 Production: N/A Total Jobs Supported in 

2011: **

1,199

** Employment figures show number of direct and indirect jobs supported in each state considering 2011 production volumes. 

The IMPLAN economic model was used which includes direct and indirect jobs. 

Feedstock Approved by the EPA for Biodiesel Production: Animal Fats, Biogenic Waste Oils and Grease, Soybean Oil, Canola Oil, Oil from Annual Cover Crops, Algal Oil, Non-Food Grade Corn Oil. 

Biodiesel Plants in Minnesota 

Company City 

Annual

Capacity

(Gallons/Year) 

U.S. Representative 

Minnesota Soybean Processors Brewster 30,000,000 Tim Walz Tim Walz

REG Albert Lea, LLC Albert Lea 30,000,000 Tim Walz Tim Walz

Ever Cat Fuels, LLC Isanti 3,000,000 Chip Cravaack 

FUMPA BioFuels Redwood 

Falls 

3,000,000 Collin C. Peterson Collin C. Peterson

Total Capacity: 66,000,000 Jobs Capacity: 2,576

Actual 2011 Production: 56,707,822 Total Jobs Supported in 

2011: **

2,221

** Employment figures show number of direct and indirect jobs supported in each state considering 2011 production volumes. 

The IMPLAN economic model was used which includes direct and indirect jobs. 

Feedstock Approved by the EPA for Biodiesel Production: Animal Fats, Biogenic Waste Oils and Grease, Soybean Oil, Canola Oil, Oil from Annual Cover Crops, Algal Oil, Non-Food Grade Corn Oil. 

Biodiesel Plants in Pennsylvania 

Company City 

Annual

Capacity

(Gallons/Year) 

U.S. Representative 

American Biodiesel Energy, Inc. Erie 4,000,000 Mike Kelly 

Lake Erie Biofuels dba HERO 

BX 

Erie 45,000,000 Mike Kelly 

Pennsylvania Biodiesel, Inc. Monaca 25,000,000 Jason Altmire 

Eagle Bio Diesel Kane Kane 5,000,000 Glenn Thompson Glenn Thompson

US Alternative Fuels Corp. Johnstown Mark Critz 

United Oil Company Pittsburgh 5,000,000 Michael Doyle 

Smarter Fuel, Inc. Wind Gap 15,000 Charlie Dent 

2403

Biodiesel Plants in Pennsylvania—Continued

Company City 

Annual

Capacity

(Gallons/Year) 

U.S. Representative 

Middletown Biofuels LLC Middletown 4,000,000 Tim Holden Tim Holden

Keystone BioFuels, Inc. Camp Hill 24,000,000 Todd Russell Platts 

Soy Energy, Inc. New Oxford 2,500,000 Todd Russell Platts 

Environmental Energy Recycling 

Corp, LLC 

Allentown 0 Charlie Dent 

Nittany Biodiesel Boalsburg 15,000,000 Glenn Thompson Glenn Thompson

Total Capacity: 129,515,000 Jobs Capacity: 5,055

Actual 2011 Production: 40,818,098 Total Jobs Supported in 

2011: **

1,593

** Employment figures show number of direct and indirect jobs supported in each state considering 2011 production volumes. 

The IMPLAN economic model was used which includes direct and indirect jobs. 

Feedstock Approved by the EPA for Biodiesel Production: Animal Fats, Biogenic Waste Oils and Grease, Soybean Oil, Canola Oil, Oil from Annual Cover Crops, Algal Oil, Non-Food Grade Corn Oil. 

Biodiesel Plants in Indiana 

Company City 

Annual

Capacity

(Gallons/Year) 

U.S. Representative 

Heartland Biofuel Flora 500,000 Joe Donnelly 

Louis Dreyfus Agricultural Industries, LLC Claypool 80,000,000 Marlin A. Stutzman Marlin A. Stutzman

Triton Energy LLC Waterloo 0 Marlin A. Stutzman Marlin A. Stutzman

Alternative Fuel Solutions, LLC Huntington 800,000 Dan Burton 

Integrity Biofuels Morristown 5,000,000 Dan Burton 

E-biofuels, LLC Middletown 15,000,000 Jeb Hensarling 

Countrymark Cooperative Indianapolis 15,000,000 Andre Carson 

Bio-Aiternative Covington 15,500,000 Larry Buschon 

Bioenergy Development Group 

LLC 

Fishers 0 Dan Burton 

Global Energy Resources New Haven 0 Marlin A. Stutzman Marlin A. Stutzman

Total Capacity: 131,800,000 Jobs Capacity: 5,144

Actual 2011 Production: 105,361,581 Total Jobs Supported in 

2011: **

4,112

** Employment figures show number of direct and indirect jobs supported in each state considering 2011 production volumes. 

The IMPLAN economic model was used which includes direct and indirect jobs. 

Feedstock Approved by the EPA for Biodiesel Production: Animal Fats, Biogenic Waste Oils and Grease, Soybean Oil, Canola Oil, Oil from Annual Cover Crops, Algal Oil, Non-Food Grade Corn Oil. 

Biodiesel Plants in Ohio 

Company City 

Annual

Capacity

(Gallons/Year) 

U.S. Representative 

FINA LLC (FELDA IFFCO, 

LLC) 

Cincinnati 60,000,000 Steve Chabot 

Peter Cremer NA Cincinnati 30,000,000 Steve Chabot 

Jatrodiesel Inc. Miamisburg 5,000,000 Michael Turner 

Agrifuels, LLC Bremen 1,000,000 Steve Austria 

Ambiol Flex Fuels, LLC East Toledo 2,000,000 Marcy Kaptur 

Midwest Bio Renewables Toledo 1,500,000 Marcy Kaptur 

Center Alternative Energy Company Cleveland 5,000,000 Marcia L. Fudge Marcia L. Fudge

Chieftain BioFuels, LLC Logan 2,000,000 Bob Gibbs Bob Gibbs

Arlington Energy, LLC Mansfield 4,000,000 Jim Jordan

Total Capacity: 110,500,000 Jobs Capacity: 4,312

Actual 2011 Production: 4,978,489 Total Jobs Supported in 

2011: **

194

** Employment figures show number of direct and indirect jobs supported in each state considering 2011 production volumes. 

The IMPLAN economic model was used which includes direct and indirect jobs. 

Feedstock Approved by the EPA for Biodiesel Production: Animal Fats, Biogenic Waste Oils and Grease, Soybean Oil, Canola Oil, Oil from Annual Cover Crops, Algal Oil, Non-Food Grade Corn Oil. 

2404

Biodiesel Plants in North Carolina 

Company City 

Annual

Capacity

(Gallons/Year) 

U.S. Representative 

Piedmont Biofuels Pittsboro 3,300,000 Renee L. Ellmers Renee L. Ellmers

Patriot Biodiesel, LLC Greensboro 6,900,000 Howard Coble 

Triangle Biofuels Industries, Inc. Wilson 3,000,000 Walter Jones 

Leland Organic Corporation Leland 10,000,000 Mike McIntyre Mike McIntyre

Foothills Bio-Energies, LLC Lenoir 5,000,000 Patrick McHenry 

Blue Ridge Biofuels Asheville 1,200,000 Heath Shuler

Total Capacity: 29,400,000 Jobs Capacity: 1,147

Actual 2011 Production: 2,127,334 Total Jobs Supported in 

2011: **

83

** Employment figures show number of direct and indirect jobs supported in each state considering 2011 production volumes. 

The IMPLAN economic model was used which includes direct and indirect jobs. 

Feedstock Approved by the EPA for Biodiesel Production: Animal Fats, Biogenic Waste Oils and Grease, Soybean Oil, Canola Oil, Oil from Annual Cover Crops, Algal Oil, Non-Food Grade Corn Oil. 

Biodiesel Plants in New York 

Company City 

Annual

Capacity

(Gallons/Year) 

U.S. Representative 

Aufbau Renewable Energy, Inc. Blue Point 110,000 Tim Bishop 

Metro Fuel Oil Corp Brooklyn 110,000,000 Nydia Vela ́zquez 

TMT Biofuels, LLC Port Leyden 250,000 John McHugh 

Northern Biodiesel, Inc. Ontario 20,000,000 Anne Marie Buerkle 

Adirondack Biodiesel St. 

Johnsville 

1,500,000 William L. Owens William L. Owens

R–3 Energy Tarrytown 1,500,000 Nita M. Lowey 

NAGSCO Corporation Larchmont 0 Nita M. Lowey

Total Capacity: 133,360,000 Jobs Capacity: 5,205

Actual 2011 Production: 792,530 Total Jobs Supported in 

2011: **

31

** Employment figures show number of direct and indirect jobs supported in each state considering 2011 production volumes. 

The IMPLAN economic model was used which includes direct and indirect jobs. 

Feedstock Approved by the EPA for Biodiesel Production: Animal Fats, Biogenic Waste Oils and Grease, Soybean Oil, Canola Oil, Oil from Annual Cover Crops, Algal Oil, Non-Food Grade Corn Oil. 

Biodiesel Plants in Maine 

Company City 

Annual

Capacity

(Gallons/Year) 

U.S. Representative 

Maine Standard Biofuel Portland 1,500,000 Chellie Pingree Chellie Pingree

Total Capacity: 1,500,000 Jobs Capacity: 58.5405

Actual 2011 Production: N/A Total Jobs Supported in 

2011: **

0

** Employment figures show number of direct and indirect jobs supported in each state considering 2011 production volumes. 

The IMPLAN economic model was used which includes direct and indirect jobs. 

Feedstock Approved by the EPA for Biodiesel Production: Animal Fats, Biogenic Waste Oils and Grease, Soybean Oil, Canola Oil, Oil from Annual Cover Crops, Algal Oil, Non-Food Grade Corn Oil. 

Biodiesel Plants in Kansas 

Company City 

Annual

Capacity

(Gallons/Year) 

U.S. Representative 

Emergent Green Energy Minneola 2,000,000 Tim Huelskamp Tim Huelskamp

R–3 Energy, LLC Cottonwood 

Falls 

0 Tim Huelskamp Tim Huelskamp

REG Emporia, LLC Emporia 60,000,000 Tim Huelskamp Tim Huelskamp

Kansas Biofuels Wichita 1,800,000 Mike Pompeo 

Healy Biodiesel, Inc. Sedgwick 1,200,000 Mike Pompeo

Total Capacity: 65,000,000 Jobs Capacity: 2,537

2405

Biodiesel Plants in Kansas—Continued

Company City 

Annual

Capacity

(Gallons/Year) 

U.S. Representative 

Actual 2011 Production: 819,478 Total Jobs Supported in 

2011: **

32

** Employment figures show number of direct and indirect jobs supported in each state considering 2011 production volumes. 

The IMPLAN economic model was used which includes direct and indirect jobs. 

Feedstock Approved by the EPA for Biodiesel Production: Animal Fats, Biogenic Waste Oils and Grease, Soybean Oil, Canola Oil, Oil from Annual Cover Crops, Algal Oil, Non-Food Grade Corn Oil. 

Biodiesel Plants in South Dakota 

Company City 

Annual

Capacity

(Gallons/Year) 

U.S. Representative 

Hanson County Oil Producers, 

LLC 

Alexandria 7,000,000 Kristi L. Noem Kristi L. Noem

Total Capacity: 7,000,000 Jobs Capacity: 273

Actual 2011 Production: N/A Total Jobs Supported in 

2011: **

3

** Employment figures show number of direct and indirect jobs supported in each state considering 2011 production volumes. 

The IMPLAN economic model was used which includes direct and indirect jobs. 

Feedstock Approved by the EPA for Biodiesel Production: Animal Fats, Biogenic Waste Oils and Grease, Soybean Oil, Canola Oil, Oil from Annual Cover Crops, Algal Oil, Non-Food Grade Corn Oil. 

Biodiesel Plants in Illinois 

Company City 

Annual

Capacity

(Gallons/Year) 

U.S. Representative 

Loyola University Chicago Chicago 0 Janice Schakowsky 

REG Seneca, LLC Seneca 60,000,000 Adam Kinzinger 

Stepan Company Millsdale 22,000,000 Adam Kinzinger 

lncobrasa Industries, Ltd. Gilman 32,000,000 Timothy V. Johnson Timothy V. Johnson

REG Danville, LLC Danville 45,000,000 Timothy V. Johnson Timothy V. Johnson

BioVantage Fuels, LLC Belvidere 3,600,000 Donald A. Manzullo 

Midwest Biodiesel Products, 

LLC 

South Roxana 12,000,000 Jerry F. Costello

Total Capacity: 174,600,000 Jobs Capacity: 6,814

Actual 2011 Production: 96,032,317 Total Jobs Supported in 

2011: **

3,748

** Employment figures show number of direct and indirect jobs supported in each state considering 2011 production volumes. 

The IMPLAN economic model was used which includes direct and indirect jobs. 

Feedstock Approved by the EPA for Biodiesel Production: Animal Fats, Biogenic Waste Oils and Grease, Soybean Oil, Canola Oil, Oil from Annual Cover Crops, Algal Oil, Non-Food Grade Corn Oil. 

Biodiesel Plants in Tennessee 

Company City 

Annual

Capacity

(Gallons/Year) 

U.S. Representative 

Southern Alliance for Clean Energy Knoxville 380,000 John J. Duncan, Jr. 

Sullens Biodiesel, LLC Morrison 2,000,000 Scott DesJarlais Scott DesJarlais

TN Bio Energy Manchester 5,000,000 Scott DesJarlais Scott DesJarlais

Milagro Biofuels of Memphis Memphis 5,000,000 Steve Cohen

Total Capacity: 12,380,000 Jobs Capacity: 483

Actual 2011 Production: 542,681 Total Jobs Supported in 

2011: **

21

** Employment figures show number of direct and indirect jobs supported in each state considering 2011 production volumes. 

The IMPLAN economic model was used which includes direct and indirect jobs. 

Feedstock Approved by the EPA for Biodiesel Production: Animal Fats, Biogenic Waste Oils and Grease, Soybean Oil, Canola Oil, Oil from Annual Cover Crops, Algal Oil, Non-Food Grade Corn Oil. 

2406

Biodiesel Plants in Colorado 

Company City 

Annual

Capacity

(Gallons/Year) 

U.S. Representative 

Biofuels of Colorado (Denver) Denver 15,000,000 Diana DeGette

Total Capacity: 15,000,000 Jobs Capacity: 585

Actual 2011 Production: N/A Total Jobs Supported in 

2011: **

0

** Employment figures show number of direct and indirect jobs supported in each state considering 2011 production volumes. 

The IMPLAN economic model was used which includes direct and indirect jobs. 

Feedstock Approved by the EPA for Biodiesel Production: Animal Fats, Biogenic Waste Oils and Grease, Soybean Oil, Canola Oil, Oil from Annual Cover Crops, Algal Oil, Non-Food Grade Corn Oil. 

Biodiesel Plants in Florida 

Company City 

Annual

Capacity

(Gallons/Year) 

U.S. Representative 

Agri-Source Fuels, LLC Dade City 10,000,000 Rich Nugent 

Eco Venturs Group, Inc. Groveland 3,600,000 Rich Nugent 

Smart Fuels Florida, LLC Fruitland 

Park 

500,000 Cliff Stearns 

Quantic Energy Corporation Orlando 5,000,000 Daniel Webster 

Viesel Fuel LLC Stuart 3,650,000 Thomas J. Rooney Thomas J. Rooney

Green Biofuels Corporation Miami 0 Frederica Wilson 

Heartland Bio Energy, LLC Palm Beach 

County 

5,000,000 Allen West 

Genuine Bio-Fuel Indiantown 6,000,000 Alcee Hastings 

Greenwave Biodiesel Ft. 

Lauterdale 

3,600,000 Alcee Hastings 

Johnson Biofuels Fort Lauderdale 1,000,000 Alcee Hastings 

Green Gallon Solutions of North 

America 

North Ft. 

Meyers 

2,000,000 Connie Mack 

Southeast BioDiesel, LLC Sanford Sanford 10,000,000 John Mica 

Biofuel Consultants of North 

America 

Estero 0 Connie Mack 

Chemline Products, Inc. Clearwater 0 C.W. Bill Young

Total Capacity: 50,350,000 Jobs Capacity: 1,965

Actual 2011 Production: 3,803,023 Total Jobs Supported in 

2011: **

148

** Employment figures show number of direct and indirect jobs supported in each state considering 2011 production volumes. 

The IMPLAN economic model was used which includes direct and indirect jobs. 

Feedstock Approved by the EPA for Biodiesel Production: Animal Fats, Biogenic Waste Oils and Grease, Soybean Oil, Canola Oil, Oil from Annual Cover Crops, Algal Oil, Non-Food Grade Corn Oil. 

Biodiesel Plants in Alabama 

Company City 

Annual

Capacity

(Gallons/Year) 

U.S. Representative 

Castle Rock Industries Selma 40,000,000 Terri A. Sewell Terri A. Sewell

Southeastern Biodiesel Solutions Creola 1,300,000 Jo Bonner

Total Capacity: 41,300,000 Jobs Capacity: 1,612

Actual 2011 Production: N/A Total Jobs Supported in 

2011: **

0

** Employment figures show number of direct and indirect jobs supported in each state considering 2011 production volumes. 

The IMPLAN economic model was used which includes direct and indirect jobs. 

Feedstock Approved by the EPA for Biodiesel Production: Animal Fats, Biogenic Waste Oils and Grease, Soybean Oil, Canola Oil, Oil from Annual Cover Crops, Algal Oil, Non-Food Grade Corn Oil. 

Biodiesel Plants in Wisconsin 

Company City 

Annual

Capacity

(Gallons/Year) 

U.S. Representative 

Bio Blend Fuels, Inc. Manitowoc 2,600,000 Thomas Petri 

2407

Biodiesel Plants in Wisconsin—Continued

Company City 

Annual

Capacity

(Gallons/Year) 

U.S. Representative 

Sanimax Energy, Inc. Deforest 20,000,000 Tammy Baldwin 

Sun Power Biodiesel Cumberland 30,000,000 Sean Duffy 

Walsh Bio Fuels, LLC Mauston 5,000,000 Ron Kind

Total Capacity: 57,600,000 Jobs Capacity: 2,248

Actual 2011 Production: 0 Total Jobs Supported in 

2011: **

0

** Employment figures show number of direct and indirect jobs supported in each state considering 2011 production volumes. 

The IMPLAN economic model was used which includes direct and indirect jobs. 

Feedstock Approved by the EPA for Biodiesel Production: Animal Fats, Biogenic Waste Oils and Grease, Soybean Oil, Canola Oil, Oil from Annual Cover Crops, Algal Oil, Non-Food Grade Corn Oil. 

Biodiesel Plants in Oregon 

Company City 

Annual

Capacity

(Gallons/Year) 

U.S. Representative 

Aspen Biofuel Portland 0 Earl Blumenauer 

Beaver Biodiesel, LLC Albany 940,000 Peter A. DeFazio

Total Capacity: 940,000 Jobs Capacity: 37

Actual 2011 Production: N/A Total Jobs Supported in 

2011: **

0

** Employment figures show number of direct and indirect jobs supported in each state considering 2011 production volumes. 

The IMPLAN economic model was used which includes direct and indirect jobs. 

Feedstock Approved by the EPA for Biodiesel Production: Animal Fats, Biogenic Waste Oils and Grease, Soybean Oil, Canola Oil, Oil from Annual Cover Crops, Algal Oil, Non-Food Grade Corn Oil. 

Biodiesel Plants in Virginia 

Company City 

Annual

Capacity

(Gallons/Year) 

U.S. Representative 

Virginia Biodiesel Refinery West Point 8,000,000 Robert Wittman 

RECO Biodiesel, LLC Richmond 1,700,000 Bobby Scott 

Red Birch Energy, Inc. Bassett 3,000,000 Morgan Griffith 

Synergy Biofuels, LLC Pennington 

Gap 

3,000,000 Morgan Griffith 

Shenandoah Agricultural Products Clearbrook 300,000 Frank Wolf

Total Capacity: 16,000,000 Jobs Capacity: 624

Actual 2011 Production: 1,514,068 Total Jobs Supported in 

2011: **

59

** Employment figures show number of direct and indirect jobs supported in each state considering 2011 production volumes. 

The IMPLAN economic model was used which includes direct and indirect jobs. 

Feedstock Approved by the EPA for Biodiesel Production: Animal Fats, Biogenic Waste Oils and Grease, Soybean Oil, Canola Oil, Oil from Annual Cover Crops, Algal Oil, Non-Food Grade Corn Oil. 

The CHAIRMAN. Thank you, Mr. Haer. 

There are votes on the House floor called just a minute or so ago. 

My intention is that we will get through probably about 10 minutes 

of questioning, and then we are going to have to recess until after 

this vote series is over on the House floor. So the plan will be that 

we will reconvene 10 minutes from the start of the last vote on the 

House floor to give everybody a benchmark. And I appreciate 

everybody’s patience on that. 

So the chair would like to remind Members that they will be recognized for questioning in the order of seniority for Members who 

were here at the start of the hearing. After that, Members will be 

recognized in order of arrival. And I appreciate Members’ understanding. I now recognize myself for 5 minutes. 

2408

Mr. Reinford, you mentioned that biogas can be utilized in existing natural gas infrastructure. 

Can you elaborate, talk a little more about this and what kinds 

of future applications and opportunities might there be for this energy, given your on-the-field, on-the-ground experience on your 

farm that you have seen? 

Mr. REINFORD. That is good. Yes, I have access to methane right 

now, so we are looking at CNG-ing, compressing it, and using it in 

some of our farm pickup trucks, and using it in some of our dump 

trucks we haul forages in, utilizing that technology. There was a 

farm out in Indiana they are actually hauling, compressing, hauling their milk, so that is the kind of thing we are looking at as the 

next generation. We are actually flaring right now. We are making 

too much gas, as Jim said. There are other opportunities. We are 

actually self-sufficient. If we could bring something else in here, we 

could be a fossil fuel free. If I could get something like that in this 

other technology coming in on the farm. So that is what we are 

looking at right now. 

The CHAIRMAN. When you are looking at the CNG with your 

trucks, tractors that type of thing——

Mr. REINFORD. That is correct. 

The CHAIRMAN. Have you really looked at the numbers? Is that 

economically something that works for you in terms of making that 

conversion? You obviously have the fuel readily available if you are 

flaring off that methane. 

Mr. REINFORD. That is good. The numbers are about $1.60, $1.70 

for me right now for me in my size. The larger I get, the better we 

see the numbers come down. So right now that technology needs 

to be improved yet. I think they are still working on that to make 

it more affordable for dairy farms. The technology is there, it is just 

a matter of making it more affordable. 

The CHAIRMAN. Thank you. 

Mr. Greenwood, you suggested that energy programs such as the 

Biobased Market Program are fostering innovation and cited a biorefinery in Louisiana. Can you give me any other examples of how 

these programs help drive innovation, especially innovation of new 

technologies? 

Mr. GREENWOOD. Certainly. Thank you for the question. 

The newest part of all of this is really the ability to convert cellulose into sugars that can then be distilled into ethanol. We have 

known how to take the starch part of the plants and convert it into 

sugar since they have been making corn whiskey, and before then. 

But the cellulosic part of the plant, the stems, the stalks, the 

woody parts, they evolved over millions of years to be structural 

and to be hard to break down. And so the challenge was how can 

we find, how can we use biotechnology to develop enzymes and bacteria that can actually break down that material? 

And that is what our companies have succeeded in doing now, 

and that is what we are moving towards commercialization with. 

The ability to then use, for farmers to take two crops when they 

take their corn kernels and sell them the way they ordinarily do, 

but to be able to use their corn cobs and the corn stalks and the 

stover to be able to use byproducts from the forestry industry, to 

2409

be able to use Miscanthus and switchgrass, all of that on land that 

might not be that usable for normal agriculture. 

This is the advanced biofuels which our nation is ultimately, if 

we succeed at this, is going to depend upon and which will give us 

all of the benefits that you have heard from others about energy 

independence and a more environmentally sustainable way of producing energy. 

The CHAIRMAN. Thank you. 

Mr. Taylor, what kinds of policy or eligibility changes would you 

suggest to help ensure that BCAP dollars are being spent where 

they were intended? 

Mr. TAYLOR. As we all know, BCAP got off to a rough start with 

matching payments, and I think that is a testimony to the difficulty of solving this chicken-and-egg problem. But the one recommendation that we would make would be that the projects, there 

is a tendency in the rule to try to spread the money among as 

many projects as possible. My suggestion would be to allow USDA 

and FSA to see projects through to maturity would be probably the 

number one recommendation. 

The CHAIRMAN. Okay. Thank you. I now recognize, for 5 minutes 

of questions, Mr. Holden. 

Mr. HOLDEN. Thank you, Mr. Chairman. And Mr. Reinford just 

to set the record straight, besides you and Chairman Thompson, 

Mr. Greenwood and myself are proud Pennsylvanians as well. And 

we know your home county is pronounced Juniata not Juanita as 

a U.S. Senator did in 1992. That didn’t work out too well. 

Look, those of us on this Committee who were here in 2002 and 

2008 are proud of the work that we did in the energy title. But we 

are in a jam. The Super Committee had no mandatory funding, the 

United States Senate Agriculture Committee has $800 million. We 

want to fund as much as possible, but we are in difficult waters 

right now. 

If we could only fund three programs, what three would you recommend funding and where would you suggest we take the money 

from to fund those? Ryan used to be my neighbor. 

Mr. STROSCHEIN. I think that is a fair question. It is a difficult 

question. 

Mr. HOLDEN. That is what we are facing. 

Mr. STROSCHEIN. I know you are. Clearly the budget situation 

here is very austere, and you have to make some tough decisions. 

I don’t know that I could name three. I did name four in my testimony that we are very supportive of as members of the Ag Energy 

Coalition. We think that these programs, the energy programs, 

have demonstrated their value and their is some real national interest here in finding the resources to keep this funding going, we 

are very supportive and appreciative of the work the Senate was 

able to do to find $800 million for these programs. It is less than 

the 2008 bill had, but it is still a significant investment. 

We think there are environmental, national security and economic benefits to doing this. And so we encourage the Committee 

to do that. I don’t know that I have a silver bullet answer for you 

as to how to find that money or where it should come from. But 

we are here to make the case that these are very vital programs, 

and we will work with you to try to find that funding. 

2410

Mr. HOLDEN. Anybody else? Mr. Greenwood. 

Mr. GREENWOOD. Our priorities would be the Biorefinery Assistance Program, BCAP and the Biobased Markets Program. And certainly as one who has served with you for 12 years, I understand 

the dire straits that this nation is facing in terms of our spending 

problems and our budget. 

The farm bill, as a whole, is a subsidy bill, and it is a question 

of establishing priorities. And my message to you folks on this 

Committee is to be very visionary in terms of where is the future 

for our children? And I would argue that the future is going to depend upon our ability to make fuels in ways we haven’t been able 

to before. The science has brought us to this point. And shortly, 

commercial—the market will take us the rest of the way. What we 

need from this Committee is the bridge, the bridge to enable these 

entrepreneurs out there to demonstrate the commercial ability of 

these technologies. And we are quite confident that once they do 

with these loan guarantees and so forth that the commercial bankers will move in and this country will be off on a grand adventure. 

Mr. HOLDEN. Does anyone else care to comment? 

Mr. TAYLOR. Yes, thank you. I think the priorities are not just 

amongst the decisions within the Subcommittee, the programs, but 

as well as national priorities. Most analysts would predict that 

what we will see in global BTU or energy costs for the next decade 

are going to be substantially higher on an average level than we 

saw in the last decade. So a lot of these programs, particularly 

BCAP, which was a very difficult chicken-and-egg problem to solve, 

this has made the possibility of very successful results more possible because the bar has, in essence, been lowered because of the 

price of energy being significantly higher. I think that is one reason. 

And the other, when we try to set priorities, that 75 percent of 

the oil in this country is transportation fuels, is used as transportation fuels. And cellulosic fuel on the Renewable Fuel Standard 2 

to be 36 billion gallons by 2022 is a very important goal. If that 

is to be achieved, we are now just on the cusp of making the breakthroughs that we needed to make. And largely because of higher 

prices in oil markets, there is a greatly deal of activity, of entrepreneurial activity to solve these problems. 

To cut the legs out from underneath these programs at this time, 

at least in my opinion, would be bad timing because it is all starting to work at this point. 

Mr. HOLDEN. Thank you Mr. Chairman. Our time has expired 

and for the vote as well. 

The CHAIRMAN. I thank the panel. And I would ask your patience. We will have a recess. We will reconvene for further questions 10 minutes following the start of the final vote. 

So thank you. 

[Recess.] 

The CHAIRMAN. The Subcommittee on Conservation, Energy, and 

Forestry will reconvene. I once again apologize for the recess we 

had to take. The only good news I can share is that votes are done 

for the day, so no more votes to interrupt. 

So, at this time, I am pleased to recognize the gentleman from 

Ohio, Mr. Gibbs, for 5 minutes. 

2411

Mr. GIBBS. Thank you, Mr. Chairman, and thank you for holding 

this hearing. I think I have always been excited about agriculture 

being a major solution to our energy, making us move toward energy independence. 

Mr. Reinford, a couple questions. On your digester, when you run 

your dairy manure through it, after it is digested, what is left? 

What is the byproduct? You know, what are the nutrient levels, or 

what is the material that is left? 

Mr. REINFORD. After we digest it, we run it through a screw 

press, and what you see in here, we actually take all the solids out 

of it, and actually after the solids are taken, we actually use that 

for cow bedding, and that is one of the biggest incomes that has 

come off this technology now. We are actually bedding cows with 

that and getting a very good response on somatic cell counts—we 

are running right around the 120, 120 mark, and that is really a 

big plus for the dairy industry. The last 3 years, we have been getting a 60¢ bonus because of good quality milk, so that is a big area. 

The nutrients, it does not change, doesn’t take the nutrients out, 

but it does change the form of nutrients. It is more available in the 

first year of planting, so that is a big plus for us farmers. We are 

actually, we actually double crop a lot. In our farms, we actually 

use up a lot of the nutrients, so we actually buy no commercial fertilizer P and K, except the nitrogen, we need a little extra nitrogen, 

so it is a big plus all around for us guys. 

Mr. GIBBS. I couldn’t quite hear you; you said the nutrient part 

for the first year, it was a bigger plus, because is it more available? 

Mr. REINFORD. That is exactly right. It changes the form of the 

nitrogen to more of a hydrogen sulfite or sulfur, so it is more available to your crops, that is actually your P and K. 

That is through the Penn State University’s studies, so the guy 

is telling me in the first year, you use up almost all your nutrients. 

If you don’t go through digestion, it takes sometime up to 3 years, 

and that is a big plus for digesters, too, in the whole way of the 

watersheds. We are using up the nutrients right away. We do notilling—we do all no-tilling, no conservation tillage, so it is a winwin for Pennsylvania. 

Mr. GIBBS. That is one of the reasons why I have been so excited 

about this digesting is because it creates an energy source, and it 

also enhances the environment. You just said that because let’s use 

phosphorous—the crops, what you are putting on the crops use it 

in the first year, so it is not sitting around there in the bank of 

soil, and if you have any erosion or wash off, it becomes soluble 

phosphorous, so it is enhanced. So agriculture is playing a big part 

in enhancing the environment. 

Second question, Mr. Reinford. You know, I know there are lots 

of digesters over in Europe, Germany. We are doing some in my 

area, but there are still only about 200 in the country. What is 

the—what do you see, when you talk to other farmers—has been 

the big roadblock for livestock operations to put in digesters? 

Mr. REINFORD. That is a good question, too. The number one 

thing is for us farmers, educating us, and I am out doing some of 

the pioneer work, I am actually training some, going to different 

places and educating farmers, and at some of the seminars, we actually sold another four digesters in Pennsylvania just by seeing 

2412

the efficiency of the digestion. Germany, right now, I know they 

had like 6,800 digesters the last I studied about that. They have 

it over there. They actually have 100 cow dairies, and they are telling us here we need 800 cows. I disagree with that. We can go to 

smaller farms and be very profitable with smaller digesters. 

Mr. GIBBS. What ballpark would you think would be an initial 

capital investment for a small digester, and how many—since you 

are in the dairy operation, how many cows would make it feasible 

would you have to have? 

Mr. REINFORD. Well, that is a good question. If you allow us to 

put food waste in there, we can go down as low as 200 cows, 300 

cows, and that is the thing that is making me so profitable. We are 

bringing in some of the other food stocks in here, like food waste 

from Wal-Marts, and there are two other food chains; they want me 

to come on board with bringing that, but I need more digesters, so 

we can go down as low as 200, 300 cows. 

Mr. GIBBS. What kind of capital costs do you think that would 

require? 

Mr. REINFORD. My digester cost me $1.1 million. That is top 

notch. That is everything. That is the whole thing. I think with 

some of the regulations now with some of the new motors, we are 

talking maybe a million and a half, something like that. I am proving it can be done. It can self-sustain itself, but we need a little 

bit more support just to keep farmers encouraged; say, look, there 

is some money out there that may be available to keep this technology going. But, yes, it is good stuff. 

Mr. GIBBS. Just a quick question for Mr. Taylor. BCAP, what can 

we do to make it better? 

Mr. TAYLOR. Congressman, I think the one issue is this strong 

tendency to try to diversify and take as many projects into play as 

possible. Even though I can’t commend the people at FSA and 

USDA enough for sorting out the complexity of these different programs because they are very complex and trying to understand 

them, but the emphasis needs to be on seeing programs through to 

maturity, not just shotgunning. They need to have more of an emphasis on the whole maturation process so the money just doesn’t 

fall down rat holes, so to speak. 

Mr. GIBBS. Thank you. 

Thank you, Mr. Chairman. 

The CHAIRMAN. I thank the gentleman. 

I have a question I want to ask and extend to whoever on the 

panel would like to respond to it. Obviously the initial goal of the 

energy title in the 2008 Farm Bill was to spur the development of 

commercially viable cellulosic ethanol and advanced biofuels. However, I am not sure that a single gallon of commercial cellulosic 

ethanol has been blended into the fuel supply, so it is a two-part 

question for the panel, anyone on the panel that would like to respond to it. What challenges need to be addressed in order to address that issue? And does the current energy title provide the 

tools to move towards the advancement of commercially viable cellulosic ethanol? 

Congressman, if you would like to start. 

Mr. GREENWOOD. Mr. Chairman, as I mentioned, first of all, let 

me say, I understand the impatience. We have been impatient as 

2413

well. The science has progressed nicely. One of the things that 

slowed us down was the recent recession. It made it tough. But as 

I mentioned in my original opening testimony, this plant, INEOS 

plant, is literally weeks away, it is completed. The structure is 

completed, and they are going to be producing cellulosic ethanol literally within the next couple of weeks, so we have demonstrated 

now that the science is there. I think we have demonstrated with 

the construction of this plant that you can build a commercial facility, and now being able to demonstrate that we can move those 

fuels into the fuel stream for motorized vehicles is the final step 

to prove the whole concept. 

Mr. TAYLOR. Congressman, if I may, one short quick statement 

on that. Since it has become common knowledge globally that we 

are actually amassing a significant amount of biomass, as an example, it takes 1,000 acres, even at 12 tons an acre that we produce, 

to produce a million gallons of cellulosic ethanol on the known conversion rates today. 

In Missouri, we have had companies as far as Japan come to 

Missouri because of the awareness now by cellulosic ethanol technology owners of the fact that, one, the price of oil is significantly 

higher, so they are more competitive, but number two is they are 

finally figuring out the chicken and the egg problem, which is you 

can develop all the technologies, but if you don’t have the biomass, 

you have a mismatch, and it does take a significant amount of—

and because of BCAP and what has happened just in our Ohio, 

northern Ohio, Congressman, in our project area up there, one in 

northern east Arkansas, the two in Missouri, we have had numerous global players come to Missouri to investigate. 

Mr. HAER. And, Chairman, you asked about advanced biofuels, 

and while I can’t speak to cellulosic, but certainly biodiesel is an 

advanced biofuel, and it is one that is commercially available 

today. From our standpoint, the Biodiesel Education Program, 

which has a modest amount of funding, we ask that that continue 

because it does help, and it is very vital to us having marketplace 

acceptance of our fuel in the marketplace, and so from an advanced 

biofuel standpoint, it is here, it is available, it is being accepted in 

the marketplace. We just need to continue that effort. 

The CHAIRMAN. Well, thank you. 

I now recognize the gentleman from Colorado, Mr. Tipton, for 5 

minutes. 

Mr. TIPTON. Thank you, Mr. Chairman, and I thank the panel for 

being here. 

I guess the first kind of comment, Mr. Reinford, you are giving 

me hope with manure in terms of becoming a fuel. If you need a 

little more supply, we have some horses and a very productive 

llama that I would be happy to send out to you. 

Mr. Taylor, I guess I would like to ask you a question because 

I am intrigued. We have held a Subcommittee hearing in Small 

Business that I chaired, talking about the Miscanthus Giganteus 

as a very productive crop to be able to put out. Is that a fairly low 

water usage crop? Is that applicable for areas like mine in Colorado 

and the High Sonoran Desert? 

Mr. TAYLOR. It is water tolerant. 

Mr. TIPTON. Once established? 

2414

Mr. TAYLOR. Yes, more water, it does better, but it can survive 

on less water. In fact, in our 300 acre propagation field, which is 

northwest of Wichita, Kansas, received only 7 inches of rain in 12 

months last year, it was the only thing alive out there, produced 

half a crop and survived it. So it does survive in it, but it prospers 

in areas that would be typically east of there less arid than what 

you expect. 

Mr. TIPTON. Great. You commented in your testimony that we 

need to be able to see the existing projects through to maturity. 

Can you define for me a little bit what maturity is and when we 

expect to be able to receive that because part of our job obviously 

here as well is to be good stewards of taxpayer dollars, and we 

want to be able to see these—it needs to be all of the above. Our 

alternative fuels need to be able to reach a point where they are 

actually competitive and affordable without subsidization ultimately in the marketplace. Can you speak to that a little for me, 

please? 

Mr. TAYLOR. Yes, Congressman. 

I have spent several days in Washington in the last year since 

we have applied for the BCAP funding last winter, 2 winters ago 

now, and I have had almost no conversations about exit strategies. 

In other words, the conversations are about initial funding, what 

you are going to do, and what is your vision. But the programs 

themselves don’t seem to have an emphasis on, okay, if we get 

started, what is your exit strategy to get off the public trough, 

when do we start to see a return on this investment? And we think 

we clearly pointed that out, that we needed 3 years because biomass is different than if you are funding a single technology. We 

are not trying to do that. 

What we are trying do is break the chicken-and-egg cycle. We 

have to get enough biomass in place to encourage the technologies 

and bring them even to this country, if not to our particular locales. 

Mr. TIPTON. So you effectively see a 3 year window, and it will 

be sustainable on its own; we will be able to build those reserves? 

I believe it is going to be the next panel, Mr. Chairman, we actually have a lot of reserves in my area on public lands, dead and 

downed standing timber. 

Mr. TAYLOR. There are reserves there. But we have all over the 

central part of the country a CRP program, crop set-aside, which 

pays farmers not to plant. A lot of that ground we have had several 

people who have CRP land who would like to get out of that program and come into this program, put a productive crop on it. It 

is a perennial. Even though you have 1 year of exposure of erosion, 

you have—it is in place for 15 to 20 years, so from a conservation 

standpoint, it works very nicely. Those types of pieces need to be 

put in place. 

Mr. TIPTON. You know, one thing many of us have a problem 

with is the continual overreach of government when it comes to the 

regulatory process that we are seeing, and in your testimony, the 

current regulations dictate assessment and other projects, the illadvised effect of pulling the plug. Can you tell us how some of the 

regulations that you are incurring right now are inhibiting your 

ability to be able to make a cash-flowing productive product? 

2415

Mr. TAYLOR. Well, the whole EA, the environmental assessment 

process is very worthwhile, particularly in a crop that has never 

been planted in any numbers in this country. But the regulations, 

I am not sure in that statement, if I understand it right, whether 

we are looking at regulations as it pertains just to this crop or——

Mr. TIPTON. I was just trying to go actually off your statement 

where you had noted some regulatory inhibitions in terms of being 

able to move forward. 

Mr. TAYLOR. I think what I am referring to there is how the regulation is written. The FSA has a tendency even now, we had 1 

year worth of funding, we had made an application this year and 

may not receive anything, which seems preposterous to us when we 

are actually a successful proven direction in making the progress 

because the emphasis is on spreading the—in starting to do many 

new projects so they can get going rather than seeing through to 

fruition a project that is already going, particularly in biomass because it is not a 1 year event. It takes a long time. You have to 

do it to get it done. 

Mr. TIPTON. Thank you, Mr. Chairman. 

I yield back. 

The CHAIRMAN. I thank the gentleman. 

I now recognize the gentleman from Wisconsin, Mr. Ribble, for 

5 minutes. 

Mr. RIBBLE. Thank you, Mr. Chairman. 

Thanks to the panel for coming. 

I will start right away with Mr. Reinford. Did I pronounce that 

correctly? 

Mr. REINFORD. That is correct. 

Mr. RIBBLE. Great. I come from the part of Wisconsin that is the 

second largest dairy-producing area in the United States. Digester 

technology is pretty popular and becoming more popular by the 

day. Would you mind sharing with the panel, if you are willing, 

what type of capital expense you had to invest to put in digester 

technology at your farm? 

Mr. REINFORD. Yes. Back in 2008, our digester cost me $1.1 million. 

Mr. RIBBLE. A million point one dollars. How much of that was 

subsidized through some type of Federal program, not a loan but 

actual pure subsidy grant? 

Mr. REINFORD. We had 50 percent grant money that went 

through REAP, also through Pennsylvania Energy Harvest Grant. 

Mr. RIBBLE. Okay, 50 percent? 

Mr. REINFORD. Fifty percent, and that is low interest—well, I 

shouldn’t say low. Right now, it is low interest money, four percent 

money. 

Mr. RIBBLE. So roughly about $550,000? 

Mr. REINFORD. That is correct, yes. 

Mr. RIBBLE. True capital investment. 

Mr. REINFORD. Yes. 

Mr. RIBBLE. How long will it take to pay it back? 

Mr. REINFORD. Two years. 

Mr. RIBBLE. Okay. Am I safe to say without this subsidy, would 

it have taken 4 years to pay it back? 

2416

Mr. REINFORD. This past year, we had an extremely good year 

simply because we are bringing food waste in from other sources, 

and that is a tipping fee, and so that gives us about a third a percent of our income was coming from tipping fees. So for the farmers 

that don’t have that access to that, you are going to be looking 

down a road probably 5, 6, 7 years, I am not sure. But I will say 

this, my son’s business is going through the process right now, he 

has a farm down the road that is actually raising our replacement 

animals and dry cows. He is actually putting a digester in; with the 

new regulations, he is at $1.6 million. So the regulations have 

changed since I was there, so the cost is going to be higher. But 

we are finding ways that we can make it profitable, more profitable, let’s put it that way. 

Mr. RIBBLE. Are other forms of manure just as effective as cow 

manure? 

Mr. REINFORD. Horse manure, no, you can keep that in Colorado, 

but pig manure is good. We have a central Pennsylvania pig manure operation going, and he is doing real well with it. Chicken 

manure, it has got to be a liquid type of manure; that is correct. 

I was at a conference in Wisconsin here at Madison, Wisconsin, 

so I know all about Wisconsin digesters, good place. 

Mr. RIBBLE. We have good things going. 

Mr. Taylor, I appreciate your comments on an exit strategy. 

Comments around this building are that the closest thing to eternal life is a government program. One of my concerns is with all 

of these programs, and really, Mr. Taylor, if you could respond and 

anybody else that would like to within the time frame that we have 

here, it seems to me, and I am a former business owner, it seems 

to me that business owners have a tendency to build pricing based 

on whatever the subsidy is. Then, without an exit strategy, they 

are always back here wanting the program continued because now 

they have established a marketplace that has been based on a false 

market premise about below-price product. How do we know we are 

not just falling into the same trap here with you all? 

Mr. TAYLOR. Well, and I can only speak to the biomass portion 

of that, but the FSA rule as it was written was absolutely, the 

thinking was so dead-on when they talked about the chicken-andegg problem. The payments that we received in biomass did not go 

to MFA Oil Biomass, they went to the farmers to get them to commit acres into the program, and knowing that they are in the program, then we went ahead and invested the money in the environmental assessments, which are hundreds of thousands of dollars, in 

designing a planter with an English company actually that we are 

now producing in the center of Kansas to plant this, it was planted 

by hand 2 years ago. The equipment now is being manufactured 

here. 

MFA Oil Biomass is making all of those investments, and what 

is happening and the other, what MFA Oil Biomass, the role that 

they play is the integrator, the vertical integrator. That biomass, 

it was a very complex problem to solve because nobody knew where 

to start with it. It is not only a nonexistent crop for the most part 

in this country; it is a nonexistent industry. So where to start was 

a huge problem. Hence, some of the fits and starts with the wood 

2417

industry and BCAP originally. It was not what it was intended to 

do. 

It was intended to break the chicken-and-egg problem. The crop 

now is in fact being planted, but you need to plant enough of it so 

you have a critical mass to support the processing facilities, to attract a 25 or 50 million gallon ethanol, cellulosic ethanol plant, 

which we know that technology is advancing takes 25,000 to 50,000 

acres of Miscanthus. In our one project in central Missouri, we had 

to demonstrate with our EA that there was three times that 

amount of available non—this is land that doesn’t compete in the 

food versus fuel debate. This is land for the most part that is nonproductive. And so in our particular case, it was very effective 

money spent, and it did exactly what it was supposed to do, but 

it can’t be done in 1 year. It takes 1, 2, 3 years, because we didn’t 

even have a planter when we started. We were planting 5, 10 acres 

a day. 

Mr. RIBBLE. Right. Well, is it possible we are going to be here 

5 years from now and we are still going to be hearing we need another 3 years? 

Mr. TAYLOR. In the technologies, I couldn’t answer that. 

Mr. RIBBLE. The concern is—and, Mr. Chairman, would you yield 

2 more minutes? Thank you. The concern obviously is that as technology advances there is always going to be a need to fund more 

technology, and at some point, the industry has to fund its own 

technology, and so I appreciate your feedback on that. 

I would like to go to Mr. Greenwood. 

Go ahead. 

Mr. TAYLOR. Just one. What we have done specifically to bridge 

that gap is we have three projects underway: One is traditional 

pelletizing in a furnace operation, which we developed to be able 

to supply agricultural heating, that is in play with a hundred furnaces. The second one we have done is this plant is rather remarkable in how it changes the soil structure down 4 and 5 feet. Missouri is made up of a foot of somewhat topsoil, and then there is 

a hard clay pan, and it is very drought resistant—drought prone 

because the water doesn’t go in. In northern Arkansas, the reason 

we are in Arkansas is the State of Arkansas wanted us there because they have a lot of that soil that has been abused. We now 

have had it in four places. At 5 feet down, in a hard clay pan, you 

can actually break that soil apart because the huge amount of biomass that is up above, there is a similar amount of organic matter 

in the soil, and we are now changing the soil complexions that we 

are in the process now of signing contracts on our first four installments of sewer, of wastewater, the EPA and the wastewater 

projects that are paralyzing cities in the Midwest right now. We 

are actually planting Miscanthus, which is changing the soil complexion with forced below-ground irrigation, drip irrigation, and 

contracting to take that waste. Even those types of kind of offshoots would never have happened if it wasn’t for the BCAP program that started to establish this crop. 

So what we are doing is finding several industries around it to 

bridge the gap to get off the public trough. We know when that 

happens, it happens, and we have a plan, very solid plan for 3 

years. 

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Mr. RIBBLE. Okay. I will go ahead and stop you there. 

Mr. Greenwood, you have a unique perspective on this because 

you have seen both sides. What is your take? 

Mr. GREENWOOD. Well, thank you, Congressman. I think you are 

wise to express that concern. We have looked across the energy 

spectrum. There are sources of energy, whether it is nuclear power, 

whether it is oil and gas, that have been subsidized for a very, very 

long time, and particularly if the price builds in that subsidy, it 

can’t compete without it, and then you have the closest thing to 

eternal life. 

That is not our vision. Our vision is that we will, in a relatively 

short period of time, because of the assistance of these loan guarantees, which have provided the private sector with some sense of 

confidence that they can invest in the INEOS plant $130 million 

of private dollars in a plant that is now ready to produce cellulosic 

ethanol. And our scientists believe that this product, once we go 

through this scale-up pilot plan to full-scale commercialization 

phase will be able to compete head to head with gasoline, particularly as we know when the price of oil is not headed in the long 

run down but up. So we think we will be competitive, and we don’t 

think we will have to be back here year after year after year when 

you have all been replaced by others with the same story. I think 

we will have a success story to tell. 

Mr. RIBBLE. Thank you very much and thanks for being here. 

Mr. Chairman, I yield back. 

The CHAIRMAN. I thank the gentleman. 

I thank the members of the first panel. Thank you for bringing 

your experience and your testimony, and if there is—we would ask 

if any of the Members have further questions, and we forward 

them in your direction, we expect a prompt response back, that 

would be greatly appreciated. So thank you. 

At this time, I would like to call forward the witnesses for the 

second panel. Welcome our second panel witnesses. We have Mr. 

John Burke III, a Virginia tree farmer and the Chairman of the 

Board of Trustees of the American Forest Foundation from 

Woodford, Virginia; Mr. C. Randy Dye, State Forester of West Virginia, and he is President of the National Association of State Foresters out of Charleston, West Virginia; Mr. Charles A. Holmes, 

Chairman, Forest Resource Policy Group, the National Association 

of Conservation Districts in Demopolis, Alabama; Mr. Richard 

Schwab, procurement manager of M.A. Rigoni, Incorporated, on behalf of the American Loggers Council and Southeastern Wood Producers Association from Perry, Florida; and Mr. Michael T. 

Goergen, Jr., Executive Vice President and CEO of the Society of 

American Foresters in Bethesda, Maryland. 

It looks like our second panel is all seated, so I now recognize 

Mr. Burke, if you would please begin with your 5 minutes of testimony. 

STATEMENT OF JOHN W. BURKE III, CHAIRMAN, BOARD OF 

TRUSTEES, AMERICAN FOREST FOUNDATION; TREE

FARMER, WOODFORD, VA 

Mr. BURKE. Good afternoon. Thank you for allowing me to appear before you this afternoon. I extend that thank you to ChairVerDate 0ct 09 2002 12:54 Dec 11, 2012 Jkt 041481 PO 00000 Frm 00830 Fmt 6601 Sfmt 6601 I:\DOCS\112-30\74372.TXT BRIAN
2419

man Thompson and to Ranking Member Holden, as well as the 

other Members of the Subcommittee. 

A bit of an introduction. We manage a family forest in central 

Virginia. I also have the pleasure of working with the American 

Forest Foundation, a nonprofit organization whose mission is, 

among others, to encourage healthy forests. We speak for ten million landowners, whether those are family forest or private landowners. 

Allow me to set the stage a bit for my testimony. The property 

that I manage for our family has been in our family for six generations. We grow both pine and hardwood, and from those trees, we 

produce paper products or paper products are produced, pallets, 

hardwood lumber, dimensional lumber, cabinets, flooring, fuel 

wood, and other uses. 

In addition to these very important products, which are important to the economy of our state and produce jobs, we also pride 

ourselves on the water quality because the forest is really the watershed for our water. We also pride ourselves on the wildlife. Forests are nothing more than habitat for many of the species that we 

cherish. 

What I would like to do is to refer you to my written testimony. 

I will try to truncate my oral testimony so that we end on time, 

and I am going to focus my comments in two particular areas. The 

first area is to thank and to encourage this Committee and to recognize the importance of the farm bill in strengthening conservation programs. The second area of testimony is to speak a bit about 

the need to focus or refocus the USDA’s Biobased Markets Program 

to better recognize certain products that are not properly recognized now, we believe. 

There are a number of stories in my written testimony about 

landowners who work hard on their property and who benefit from 

the forest conservation programs. Since I am before you today, I 

will share with you some of the things that we have done on our 

farm. Through programs, such as WHIP, EQIP, CRP, and CSP, we 

have been able to do things which would not in and of themselves 

have been financially viable without the assistance of these programs. We have improved wildlife habitat, water quality, and reduced the risk of fire through certain techniques. We have created 

jobs for the local loggers and have improved the health of the forest. 

We realize that this Committee and Congress as a whole faces 

a significant budget issue, and my request to you would be with 

that recognition if cutting has to occur that forestry and conservation programs not be cut disproportionately. 

My second area of focus in my oral testimony—and, by the way, 

I will refer you to the written testimony for additional details on 

the first point as well as the second point—is that the USDA’s 

Biobased Markets Program is misfocused or in interpretation it 

does not fully support products that come from our farm with respect to labeling and Federal purchasing, despite the fact that the 

legislation refers to forestry materials. We are pleased that Chairman Thompson and Congressman Schrader are considering this inequity and are considering a bill, which probably will be entitled 

the Forest Products Fairness Act, to better square what is going on 

2420

with what should be going on, and in particular this is a program 

that could be changed without incurring any additional cost. It 

would stimulate and open and level the markets for biobased products, particularly with respect to traditional forest products, and it 

could be done with little or no cost, which seems like a win-win all 

around. 

In conclusion, we appreciate the work of this Committee, both 

past and future, and hope that you will continue these forest conservation programs to enable landowners like myself to continue to 

be good stewards of our land. Thank you, and I look forward to 

your questions. 

[The prepared statement of Mr. Burke follows:]

PREPARED STATEMENT OF JOHN W. BURKE III, CHAIRMAN, BOARD OF TRUSTEES, AMERICAN FOREST FOUNDATION; TREE FARMER, WOODFORD, VA 

Families and individuals steward more of America’s forests than the Federal Government or corporations, owning 35 percent of our nation’s forests. Our forests provide clean air, clean water, recreation, renewable resources that build and power 

our homes and communities, and good-paying rural jobs. Our families invest their 

own time, resources, and energy to keep forests healthy and ensure our children and 

grandchildren have the same opportunities. 

My family owns farmland and forests in central Virginia that have been in the 

family for six generations. Our forestland is certified by the American Tree Farm 

System®, a sustainable forest certification system and outreach and education program of the American Forest Foundation. I manage the farm and forest for my family, where we grow both pine and hardwood trees for paper products, dimensional 

lumber, pallets, flooring, cabinets, molding, veneer, fuel, and other uses. We pride 

ourselves in the wildlife habitat we create, and we keep our forests healthy so the 

rivers and streams that run through them are clean. Our property borders the 

Mattaponi River, which eventually combines with a few other rivers to flow into the 

Chesapeake Bay. 

But sometimes, events outside our control overtake us and family forest owners 

need help, both technically as well as financially—help which can be provided by 

the conservation, forestry, and energy programs in the farm bill. 

America’s family-owned forests, are facing a ‘‘perfect storm:’’ ongoing and increasing threats of wildfires, invasive species and insects and diseases, pressures from 

development, significant declines in markets for timber products, and an impending 

demographic shift with over 170 million acres of America’s forests changing hands 

in the next 3 decades. More than 170 million acres are owned by people 55 years 

or older. 

While some traditional American agriculture producers have seen record prices for 

crops like corn, America’s forestry producers—family forest owners and Tree Farmers—are facing record low prices for their timber and a housing market that is the 

worst it’s been since the Great Depression. This means, not only is it harder for 

families like mine to keep our forests as forests—even just paying the taxes is difficult. It also means the jobs in rural America that rely on family forests and the 

forest products industry are suffering. The forest industry has lost over 322,000 jobs 

since 2005. Since families and private landowners supply about 90 percent of the 

timber used in forest products manufacturing in the U.S., what happens to private 

landowners will have an incredible impact on the forest industry. 

To protect the many public benefits that forests provide and to maintain strong 

rural communities, we need to ensure that family forest owners have the tools, technical information, and policy support to keep their forests as forests for current and 

future generations. This is why the American Forest Foundation leads the Forests 

in the Farm Bill Coalition, a diverse coalition of over 60 organizations dedicated to 

protecting forest owner and forest conservation interests in the farm bill. Our farm 

bill-related recommendations contained here largely reflect the recommendations of 

the Coalition. 

The American Forest Foundation is a nonprofit conservation organization that 

works on the ground through a variety of programs including the American Tree 

Farm System, representing 89,000 certified Tree Farmers across the country who 

sustainably manage more than 27 million acres. Our mission is to help these families be good stewards and keep their forests healthy and intact for future generations. 

2421

Because we know that conserving our forests also means preparing the next generation to manage and care for them, AFF is also home to the largest environmental 

and natural resource education program, Project Learning Tree® (PLT). Our network of coordinators in all 50 states helps train more than 30,000 teachers each 

year in peer-reviewed curricula, correlated to state standards. Since its inception, 

PLT has reached 75 million students, helping them learn ‘‘how to think, not what 

to think,’’ about complex environmental and natural resources issues. 

As you know, the 2008 Farm Bill included significant improvements for forest 

owners, supporting more forest conservation and good forest management across the 

country. Farm bill’s conservation, forestry, and energy programs give forest owners 

support to face the growing threats, to keep out forests healthy, and to keep forests 

as forests. In the 2012 Farm Bill, we hope to build on the success of the 2008 Farm 

Bill and make further improvements. 

All this being said, we understand the current fiscal constraints this Congress is 

facing. We believe the budget cuts that this Committee worked to identify in the 

build up to the Super Committee process, while not without impact, represent a reasonable approach to address the current financial situation. We hope this Committee will work hard to ensure that the $23 billion in cuts agreed to last fall remains intact. We know this Committee is facing pressure to make further cuts beyond this and we urge that if the Committee does make further reductions, conservation and forestry programs are not cut disproportionately to other programs. 

With the challenges and threats facing private forests, the 2012 Farm Bill should 

include a focus on enabling forest conservation and good forest management on private forests and surrounding rural landscapes. The 2012 Farm Bill should also support the creation and maintenance of forest-dependant rural jobs and strong rural 

economies in forest communities. This can be achieved by focusing on five key areas 

that will better enable forest conservation and management on private forests:

• Improving Conservation Programs for forests;

• Strengthening forestry outreach, education, research, and inventory programs;

• Combating forest-related invasive species;

• Improving forest market opportunities; and

• Educating the next generation. 

Improving Conservation Programs for Forests 

Farm Bill Conservation Programs, especially EQIP, WHIP, and CSP, offer a variety of tools for private forest owners to improve their management practices as well 

as help keep their forests intact and economically viable. Funds spent on forestry 

from many of these programs have more than doubled since the last farm bill, 

meaning landowners like me are leveraging cost-share dollars with their own time, 

energy, and investment to implement conservation practices on forest land. Not only 

have landowners received a helping hand for practices they couldn’t have otherwise 

afforded, but they are also gaining valuable on-the-ground expertise that make them 

better stewards in the long-run. 

Tim and Sue Gossman have owned a 100 acre Tree Farm in Minnesota for over 

25 years. The Gossmans enrolled in farm bill programs to improve their highly erodible land and do their part to improve water quality in the Mississippi River watershed. Without farm bill program assistance, the Gossmans wouldn’t have been able 

to complete these practices. 

Tim says, ‘‘these farm bill programs provide a financial incentive to conserve the 

land through practices like erosion control dams. It’s not enough to cover the cost 

of all the work that needs to be done. We do the rest because we truly care about 

the land.’’

Another example that highlights the economic benefits of the conservation programs is the story of Andy Abello and Amanda Russell in Maine, who with WHIP 

funding were able to build access to a track of their forestland that they previously 

could not access. In the process they made a number of wildlife habitat improvements. Now that they can access this tract, they can manage it keep it healthy as 

well as begin to shape it into an economically viable tract that will eventually—

maybe 30–40 years from now—support rural jobs, like loggers, foresters, and furniture makers. This is a perfect example of how farm bill programs can help support 

economically viable improvements while also aiding wildlife habitat. 

In addition to these families across the country, my family has also participated 

in farm bill conservation programs which have helped create healthier forests, enhanced wildlife habitat, improved water quality, and improved the economic viability of the land for future generations. 

Through the Conservation Reserve Program (CRP), the Wildlife Habitat Incentive 

Program (WHIP), and the Environmental Quality Incentives Program (EQIP) we 

2422

have been able to improve the quality and health of our woodlands and waterways 

and create essential habitat for game species. We’ve restored logging decks and skid 

trails as food plots and game corridors; sustainably reforested tracts with site preparation, re-planting, and practices to reduce invasive and unwanted competition for 

the seedlings; thinned hardwood stands and released crop trees to create healthier 

habitat and a more viable stand for future generations; and established filter strips 

along our streams to protect the water quality from nutrients from our farmland. 

Through CRP, we are approximately 20 years into a 30 year warm season grass 

planting, which creates incredible wildlife habitat and also protects water quality. 

In addition to these improvements, we’ve also undertaken an experiment on our 

farm, planting bald cypress trees in an area that is the species northern most range. 

We are trying to determine whether we can bring the species back, restoring it to 

its historic range. This of course is a very long range experiment, since bald cypress 

have at least a 500 year life cycle. 

Recently, we also decided to enroll in the Conservation Stewardship Program 

(CSP). We already do a lot for conservation and this Program rewards us for our 

good practices that we’ve already been doing and encourages us to do better. With 

some incentives and encouragement from CSP, we are doing a series of thinnings 

to improve forest health; improving hardwood stands by releasing crop trees; burning the understory of our pines for wildlife; leaving snag trees, dens, and piles for 

habitat—which reduces the income from a timber sale; protecting streamside management zones and doing other water quality improvements; managing our roads 

and logging decks to promptly stabilize them after a harvest and create wildlife corridors; and developing a fire protection plan for our forest—something we’ve never 

had but are now investing in—which will help my family and our neighbors, including the neighboring state wildlife refuge. We also are encouraged to do our herbicide 

spraying using GPS technology to ensure spraying precision. Many of these are 

practices we are paying for because CSP encourages it. 

Now many ask the question, if you’re generating income from your land, why do 

we need an incentive payment for these practices? Well the reason is this: for my 

family, we are managing our forest for future generations, just like my ancestors 

did. My sisters and I will not likely see the return on investment for these practices 

in our lifetime and just like farmers, we are running a business. We could not economically justify many of these practices we are doing with these programs—some 

of which will improve the economic viability of our forest for the next generation 

and some of which will improve public benefits like wildlife habitat and water quality—if it weren’t for the cost-share assistance. On top of this, as an added benefit 

for our local community and economy—we put foresters and loggers to work when 

we implement these practices. 

It is because of all this great work that is going on in the mosaic of family forests 

across the country, we urge the Subcommittee to maintain forest owner access to 

important cost-share programs like EQIP and WHIP as well as remove the cap on 

forest enrollment in the Conservation Stewardship Program, so forest owners have 

full access to that program. 

We also urge the Committee to strengthen incentives for mid-contract management on forested CRP lands, to ensure that landowners can continue to steward 

these lands and create the wildlife habitat and healthy forests that are so critical. 

Strengthening Forestry Outreach, Education, Research, and Inventory 

Forestry outreach and education activities are essential for engaging private forest owners in conservation and management activities on their land. In contrast to 

traditional farming, forestry is a long-term, long-rotation endeavor, and most forest 

owners do forestry as their second or third job. Many don’t have a management plan 

or have really even thought about the future of their land. And, many forest owners 

think leaving their forest alone is the best option—even when the science tells us 

that active forest management is critical to supporting all the benefits from forests—wildlife habitat, clean water and air, and timber production. 

Forestry outreach and extension help engage these landowners so they know how 

to take care of their land, giving them the knowledge and tools to take the next 

steps and practice responsible management on their land. This education and outreach must be informed by solid forestry research and a comprehensive forest inventory that provide real-time information on health and condition of our forests. 

Among many important programs, the Forest Stewardship Program is a priority 

for many of our Tree Farmers and a surefire way to work with state forestry agencies to boost technical assistance capacity for forest owners. While not directly a 

‘‘farm bill’’ program, this Program is essential to get landowners to a place to be 

able to implement EQIP, WHIP, or CSP practices. In March, more than 1,200 forest 

landowners from 48 states, signed a letter in support of the Forest Stewardship ProVerDate 0ct 09 2002 12:54 Dec 11, 2012 Jkt 041481 PO 00000 Frm 00834 Fmt 6601 Sfmt 6621 I:\DOCS\112-30\74372.TXT BRIAN
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gram, demonstrating the strong value this program is providing for owners on the 

ground. 

Additionally, we hope this Committee will reaffirm the importance and strategic 

direction for the Forest Inventory and Analysis Program and reauthorize forestry 

extension—through the Renewable Resources Extension Act. 

Combating Forest-related Invasive Species 

According to the U.S. Forest Service, roughly 58 million acres of forests are at risk 

of increased mortality due to insects and disease. The Southern Forests Futures Report points to continuing infestations, especially of invasive species, with severe impacts on our forests. 

Many of our Tree Farmers constantly worry about the long-term health of their 

Tree Farms. They fear they are losing tree species that will never come back on the 

landscape due to invasives—meaning their entire way of life is threatened. Jo 

Pierce, a Tree Farmer from Maine, can’t help but wonder what he will pass on to 

his grand kids. With pests like the emerald ash borer, the hemlock wooly adelgid, 

and beech bark disease, Jo has no idea what his forest will look like in 20 years 

and whether the health of his fifth generation family forest will be ecologically sustainable in the long-term. 

Maintaining the Farm Bill’s Plant Pest and Disease Management and Disaster 

Prevention Program will help build and preserve critical plant health safeguarding 

initiatives. 

Improving Forest Market Opportunities Recommendations 

Without strong markets for both traditional and emerging forest products, forest 

owners have difficulty keeping their land forested and keeping it healthy. As many 

will tell you: ‘‘no cash, no conservation.’’ Strong markets also provide landowners 

with resources to reinvest in their land. While markets are driven in large part by 

private sector activities, there are a number of policies and tools that Congress uses 

to stimulate markets. 

Unfortunately, we’ve seen a dramatic loss of the traditional industry across the 

country. According to the U.S. Forest Service, since 2005, nearly 1,000 mills have 

closed across the country, resulting in more than 322,000 jobs lost. In that same 

time, we’ve seen a 75 percent reduction in housing starts, a key driver in forest 

products markets. As a result, harvesting is down by 40 percent on private lands, 

including family forests. 

This loss of the traditional forest industry is concerning not just for forest owners 

but for the rural communities that rely on these jobs and industries to survive. I 

see the impact of this decline first-hand in my home state of Virginia. Cash flow 

is critical to the proper management of healthy forests. Sound management cannot 

occur in a vacuum and requires markets for the full range of forest products to 

make proper forest management economically viable. Many forest owners can’t afford to be good forest stewards, and it greatly troubles them. 

This loss of traditional industry also means the infrastructure is disappearing 

too—the foresters, loggers, and truckers that forest owners like me rely on to help 

with our forest management are harder to find. 

To help maintain and restore some of these traditional markets and alleviate 

some of the financial burden so many of America’s forest stewards are facing, Congress can modify the USDA Biobased Markets Program in the farm bill’s energy 

title to better incorporate forest products as renewable, biobased products. With this 

change, Congress would ensure that USDA promotes the use of our traditional and 

new products with a labeling program and the Federal Government purchases our 

products—stimulating new markets and helping to mitigate the devastation with 

which the industry is dealing. 

Under current policy, most traditional forest products are excluded from this program, despite their biobased content, because USDA has excluded so called ‘‘mature 

products’’ from the program. Even products made with wood from my forest, like 

veneer, pallets, or flooring products, are currently not eligible for the program. On 

the other hand, other products that directly compete with our American products, 

like bamboo paneling which is primarily imported, are considered ‘biobased’ by the 

program. 

We want to thank Chairman Thompson and Representative Schrader along with 

a number of Members on this Subcommittee and many others in the House, for introducing the Forest Products Fairness Act, to fix this problem. With this legislation 

the Federal Government will purchase our products and USDA will promote our 

products, just as they are currently doing for our competitors. We applaud these efforts and urge this important legislation be included in the farm bill reauthorization. 

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In addition to traditional forest markets, the growing renewable energy market 

is also critical to forest landowners. The farm bill’s energy title contains a number 

of programs that will help support the development of this market. Given that most 

of the opportunity for using forest biomass for energy is in the electricity and combined heat and power arena, we believe the energy title’s Community Wood Energy 

Program and the Renewable Energy for America Program offer the most potential 

to create markets and use forest biomass for energy now. 

Educating the Next Generation 

Family forest owners know all too well the need to educate the next generation 

about forests. With over 60% of private forests owned by people age 55 or older, the 

fate of the nation’s private forests will be in the hands of the next generation very 

soon. 

Unfortunately, today’s youth spend, on average, 27% of their time with electronic 

media and only 1% outdoors. And most Americans today cannot even pass a basic 

quiz about our natural resources. While there are a number of USDA supported 

education efforts, most of these efforts are after-school activities that are prevalent 

in rural communities; however, many new family forest owners are absentee landowners and city dwellers. The farm bill can strengthen existing USDA efforts to 

focus on engaging kids in the classroom, during school hours, in efforts to learn 

about our natural resources, ensuring kids are equipped to take on the management 

of this important resource. 

Forest Roads Regulatory Issues 

All of these farm bill programs are important in providing voluntary, incentive 

based approaches to help family forest owners conserve their land and the values 

and benefits for every American. Unfortunately, there is an effort underway, following a ruling in the 9th Circuit Court of Appeals, to regulate forest roads as point 

sources of pollution requiring permits under the Clean Water Act. Regulating forest 

roads as point sources will have many negative consequences on the voluntary conservation and stewardship that the nation’s family forest owners practice. In fact, 

one recent study estimated that a permit requirement for family forest owners could 

add costs of as much as $750 per harvested acre, reducing returns by as much as 

70 percent. With all the other threats and challenges I’ve mentioned already, these 

added costs will have the unintended consequence of making it nearly impossible 

for most family forest owners to continue the good management on their land. 

Congress has clearly acknowledged through investments in forest conservation 

programs that voluntary, incentive-based approaches really do help keep our air and 

water clean. We also know this is the case because of a number of studies that have 

evaluated the effectiveness of best management practices in protecting water quality. If EPA moves forward with a rule to regulate forest roads as a point source, 

this will directly conflict with the current approach to protecting water quality in 

forests, as addressed in the farm bill. 

We urge Congress to pass the Silviculture Regulatory Consistency Act, H.R. 2541/

S. 1369 to ensure that we continue the strong voluntary incentive based approach 

to protecting water quality in forests. 

To conclude, AFF recognizes that the Agriculture Committees must work hard to 

balance spending reductions and effective on-the-ground conservation. We simply 

hope that this Subcommittee will keep America’s more than ten million family forest 

owners and 500,000 PLT educators in mind whilst writing the 2012 Farm Bill. 

I thank the Subcommittee for giving me the opportunity to provide some insight 

on farm bill programs and appreciate your consideration of my testimony. I am more 

than happy to answer any questions on any of AFF’s recommendations.

The CHAIRMAN. Thank you, Mr. Burke. 

Mr. Dye, please go ahead and proceed when you are ready. 

STATEMENT OF C. RANDY DYE, FORESTER, WEST VIRGINIA

DIVISION OF FORESTRY; PRESIDENT, NATIONAL

ASSOCIATION OF STATE FORESTERS, CHARLESTON, WV 

Mr. DYE. Chairman Thompson, Members of the Subcommittee, 

thank you for the opportunity to appear today on behalf of the National Association of State Foresters. 

As stewards of more than 2⁄3 of America’s forest in state and private ownership, State Foresters deliver outreach, technical, and fiVerDate 0ct 09 2002 12:54 Dec 11, 2012 Jkt 041481 PO 00000 Frm 00836 Fmt 6601 Sfmt 6601 I:\DOCS\112-30\74372.TXT BRIAN
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nancial assistance as well as wildfire protection in partnership 

with the U.S. Forest Service, NRCS, and other USDA agencies. 

My comments this afternoon, recommendations for the 2012 

Farm Bill, are endorsed by State Foresters that support the conservation and management of the nation’s forest. My written statement includes a complete set of priority recommendations from 

NASF. 

The development of statewide forest resource assessments and 

strategies was an important outcome of the 2008 Farm Bill. These 

forest action plans provided analysis of forest conditions and trends 

in each state and delineated a priority role in urban forest landscape issues and areas. Common among the threats to forests identified in the forest action plan included forest pests, invasive species, fuel loads in wildfire, loss of forest to development, threats to 

urban and community forests. 

The forest action plans also provide long-term strategies for applying state, Federal, and other resources to where they can most 

effectively stimulate and leverage desired action and engage multiple partners. State Foresters recommend that the 2012 Farm Bill 

provide the necessary financial and analytical support to implement and update the forest action plans. NASF joins the Forests 

in the Farm Bill Coalition in supporting recommendations that 

help implement the forest action plans. The coalition recommends 

including strong provisions for forest and conservation programs, 

strengthening forestry outreach, education, research, and inventory 

programs, combating forest-related invasive species, improving forest market opportunities. 

Included in the strong provisions for forest in the conservation 

programs, NASF supports potential consolidation of conservation 

title programs providing that forest landowners’ eligibility is maintained in a streamline program. We recommend the ten percent cap 

on the number of forest acres enrolled in CSP be removed to allow 

forest landowners the same access to the program enjoyed by farmers and ranchers. 

Strengthening forest outreach, education, research, and inventory programs, the Forest Inventory and Analysis program managed by USDA Forest Service is the nation’s only comprehensive 

forest inventory system for assessing the health and sustainability 

of the nation’s forests across all ownerships. FIA provides essential 

data related to forest species composition, forest growth rates, and 

forest health data, and delivers baseline inventory estimates used 

in state forest action plans. NASF supports providing strategic direction for implementation of FIA programs, including completing 

transition to fully implementing the program in all states, engaging State Foresters and other users of FIA data to reevaluate the 

list of core data variables, and fostering greater cooperation between State Foresters and the research station leaders. 

Combatting forest-related invasive species: The Early Plant Pest 

Detection and Surveillance Improvement Program of the USDA 

Animal and Plant Health Inspection Service is vital to rapid detection and response to destructive invasive species. NASF supports 

continued authorization and funding. 

Improving forest market opportunities. Reauthorization of Stewardship Contracting authorities is essential to helping the Forest 

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Service restore healthy forest ecosystems and provide sustainability 

and employment opportunities in rural communities. NASF supports the reauthorization of Stewardship Contracting authorities, 

which is currently set to expire in 2013. These recommendations 

represent conclusions and consensus viewpoints driven by forest action plans authorized, in part, by the last farm bill. Thank you for 

this opportunity, and I stand ready to answer any questions you 

may have. 

[The prepared statement of Mr. Dye follows:]

PREPARED STATEMENT OF C. RANDY DYE, FORESTER, WEST VIRGINIA DIVISION OF

FORESTRY; PRESIDENT, NATIONAL ASSOCIATION OF STATE FORESTERS,

CHARLESTON, WV 

The National Association of State Foresters (NASF) appreciates the opportunity 

to submit written public testimony to the House Agriculture Subcommittee on Conservation, Energy and Forestry regarding the reauthorization of the farm bill. State 

Foresters deliver technical and financial assistance, and forest health, water and 

wildfire protection for more than 2⁄3 of America’s forests. The USDA Forest Service 

and Natural Resource Conservation Service provide vital support for delivering 

these services alongside other socioeconomic and environmental health benefits in 

both rural and urban areas. 

The Food, Conservation, and Energy Act of 2008 (2008 Farm Bill) set into motion 

landmark changes in the way trees and forests will be managed, conserved, used 

and enjoyed today and for future generations. It provided new guidance on how forestry agencies and programs identify and prioritize national, regional and state forest management goals. Specifically, each state and U.S. territory was called on to 

complete a Statewide Forest Resource Assessment and Strategy. These ‘‘Forest Action Plans’’ provide an analysis of forest conditions and trends in each state and delineate priority rural and urban forest landscape issues and areas. Further, they 

provide long-term plans for investing state, Federal, and other resources to where 

they can most effectively stimulate or leverage desired action and engage multiple 

partners. 

State Foresters completed their Forest Action Plans in June 2010 and management activities are now underway to respond to the following trends, issues and priorities: 

Forest Pests and Invasive Plants 

Among the greatest threats identified in the Forest Action Plans are exotic forest 

pests and invasive species. The growing number of damaging pests is often a result 

of the introduction and spread by way of wooden shipping materials, movement of 

firewood and through various types of recreation. These pests have the potential to 

displace native trees, shrubs and other vegetation types in forests. The Forest Service estimates that hundreds of native and nonnative insects and diseases damage 

the nation’s forests each year. In 2009, approximately 12 million acres suffered mortality from insects and diseases.1 These losses impact the availability of clean and 

abundant water, wildlife habitat, clean air and other environmental services. Further, extensive areas of high insect or disease mortality can set the stage for largescale, catastrophic wildfire. 

Fuel Loads and Wildland Fire 

More people in fire-prone landscapes, high fuel loads, drought and at-risk landscapes are among the factors that have led State Foresters to identify wildland fire 

as a significant priority issue in their Forest Action Plans. These factors have created a wildland fire situation that has become increasingly expensive, complex and, 

in many cases, threatens human life and property. In 2011, over 74,000 wildland 

fires burned more than 8.7 million acres.2 In the wake of these larger fires, the 

number of structures destroyed also surpassed the annual average with over 5,200 

structures, including nearly 3,500 residences.1 Of the 66,700 communities across the 

country currently at risk of wildland fire, only 21 percent are prepared for wildland 

fire.3

Forest Loss and Impairments to Forested Watersheds 

Working forest landscapes are a key part of the rural landscape and provide an 

estimated 900,000 jobs, in addition to clean water, wood products and other essential services to millions of Americans. For instance, 80 percent of renewable biomass 

2427

energy comes from wood, 53 percent of all freshwater in the U.S. originates on forest 

land and more than $200 billion in sales of consumer products and services are provided through the nation’s forests each year.4 Working forests are necessary to help 

the forest products industry recover and (re)employ nearly 300,000 full-time jobs 

that have been lost over the past 5 years as a result of the economic downturn.5

Private forests make up 2⁄3 of all the forestland in the United States and support 

an average of eight jobs per 1,000 acres.6 The ability of working forests to continue 

providing jobs, renewable energy, clean and abundant water and other important 

services is in jeopardy as private forests are lost to commercial and residential development. The Forest Service estimates that 57 million acres of private forests in 

the U.S. are at risk of conversion to urban development over the next 2 decades. 

Urban and Community Forest Management Challenges 

Urban forests provide environmental, social and economic benefits to the more 

than 84% of Americans who live in metropolitan areas. Forest Action Plans identified a number of benefits associated with urban forests including energy savings, 

improved air quality, neighborhood stability, aesthetic values, reduced noise and improved quality of life for communities across the country. At the same time, the 

plans reported a number of threats to urban and community forests including fire 

in the wildland urban interface (WUI), urbanization and development, invasive 

plants and insects, diseases and others. 

As the House Agriculture Committee considers reauthorization of the farm bill, 

State Foresters recommend that the 2012 Farm Bill provide the necessary financial and analytical support for implementing (and updating) the Forest 

Action Plans. Further, NASF joins the Forests in the Farm Bill Coalition in supporting the following four key priorities in the 2012 Farm Bill and offer recommendations within each priority area that, if enacted, would provide the essential 

tools for responding to priorities identified in the Forest Action Plans: 

Including Strong Provisions for Forests in Conservation Programs 

Farm bill conservation programs are crucial to helping private forest landowners 

to address stewardship of their forests. Through voluntary partnerships and cooperative conservation efforts between USDA, State Foresters, conservation districts and 

private landowners, conservation title programs help to sustain the long term productivity and economic viability of forestry by helping manage private forest lands. 

The demand for programs such as the Conservation Stewardship Program (CSP) 

and the Environmental Quality Incentives Program (EQIP) outstrip available funds 

by two to three times. Through the appropriations process, mandatory farm bill conservation programs have been cut by over $2 billion since the last farm bill. Conservation title programs have already contributed to deficit reduction via appropriations and should not be asked to contribute more than their fair share. 

NASF supports potential consolidation of conservation title programs provided 

that forest landowner eligibility is maintained in a streamlined program. We recommend the 10% cap on the number of forested acres enrolled in CSP be removed to allow forest owners the same access to the program enjoyed by 

farmers and ranchers.

Strengthening Forestry Outreach, Education, Research, and Inventory Programs 

The Forest Inventory and Analysis (FIA) program, managed by the USDA Forest 

Service, is the nation’s only comprehensive forest inventory system for assessing the 

health and sustainability of the nation’s forests across all ownerships. FIA provides 

essential data related to forest species composition, forest growth rates, and forest 

health. The program also delivers baseline inventory estimates used in state Forest 

Action Plans. The Program provides unbiased information that serves as the basis 

for monitoring trends in wildlife habitat, wildfire risk, insect and disease threats, 

predicting spread of invasive species and responding to priorities identified in the 

Forest Action Plans. NASF supports providing strategic direction for implementation of the FIA program including (among other things):

• Completing transition to a fully annualized program including Interior Alaska

• Reporting information on renewable biomass supplies and carbon stocks

• Engaging State Foresters and other users of FIA data in re-evaluating the list 

of core data variables

• Fostering greater cooperation among the FIA program, research station leaders, 

and State Foresters

• Understanding and reporting on changes in land cover and use

• Implementing an annualized inventory of trees in urban settings 

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Combating Forest-Related Invasive Species 

The Early Plant Pest Detection and Surveillance Improvement Program at the 

USDA Animal and Plant Health Inspection Service is vital to rapid detection and 

response to destructive invasive pests. NASF supports continued authorization 

and funding for the program ($50MM/yr) as authorized in the last farm bill. 

We also recommend direction and emphasis be given to APHIS to continue 

delivering the program in response to forest insect and diseases in coordination with the Forest Service.

Improving Forest Market Opportunities 

The Biobased Markets Program was authorized in the farm bill and was designed 

to ‘‘increase the purchase and use of biobased products.’’ USDA has excluded most 

forest products in the program citing that Congress intended the program for ‘‘new’’ 

markets. The exclusion of forest products in the program has created a market disadvantage even though forestry materials are some of the most biobased products 

in existence. State Foresters support amending the program to clarify that forest 

products are allowed to participate in the program regardless of their date of entry 

into the marketplace. 

The Stewardship Contracting authority has been successfully used throughout the 

U.S. to improve forest health, stimulate forest-based economies and to improve collaborative project development among diverse constituencies. NASF supports the 

permanent authorization of the Stewardship Contracting authority, which is currently set to expire in 2013. Permanent authorization will help to ensure that the 

authority is institutionalized within the Forest Service and Bureau of Land Management as one of the tools available to natural resource managers to address ongoing 

forest health issues. Following permanent reauthorization, NASF stands ready to 

work with our partners to improve the effectiveness of the authority by addressing 

issues such as the potential for longer term contracts. 

NASF recommends reauthorizing the Cooperative National Forest Products Marketing Program given the changing markets and economic trends identified in the 

Forest Action Plans. The program is designed to aid small and medium-sized firms 

(and private forest landowners) with marketing efforts to improve the competitiveness of the U.S. forest products industry. State Foresters recommend placing emphasis on market development and assistance consistent with the Forest Action 

Plans. 

In addition to the above recommendations related to the Coalition priorities, 

NASF supports the following forestry-related provisions as part of any reauthorization of the farm bill:

• Reauthorize the Watershed Forestry Assistance Program. To help states 

and their partners address impairments to forested watersheds, NASF recommends reauthorizing the Watershed Forestry Assistance Program with program delivery guided by priorities in the Forest Action Plans. The program provides technical and financial assistance in support of projects in urban and 

rural areas that used trees and forests as solutions to water quality problems.

• Authorize study of the role of private forestlands and their contribution 

to national security. NASF recommends that the 2012 Farm Bill authorize a 

USDA lead study in coordination with the Secretaries of Defense and Interior 

to assess needs, opportunities and recommendations for pilot projects for enhancing and rewarding the management of private forestlands that directly or 

indirectly contribute to the missions of military bases and installations, promote 

energy independence, assure the availability of large scale water supplies and 

other matters of consequence to critical infrastructure in the U.S.

• Confirm that the BMP approach is the appropriate regulatory option for 

forestry activities by including H.R. 2594 as part of the farm bill reauthorization. Under the Clean Water Act, non-point sources of runoff from forest roads and forestry activities have been successfully addressed through statedeveloped BMPs and related state laws, regulations and guidance for the past 

35 years. In May 2011, the NEDC v. Brown decision in the 9th Circuit Court 

of Appeals ruled that stormwater runoff from forest roads are ‘‘point sources’’ 

and subject to National Pollutant Discharge Elimination System permitting requirements under of the Clean Water Act. This decision was delivered despite 

the fact that the nation’s 750 million acres of forests (1⁄3 of the land base in the 

U.S.) contribute to less than five percent of river and stream miles identified 

as water-quality impaired. The efficacy of state-based BMP programs must be 

recognized to avoid unnecessary and burdensome regulations that forest landowners will be subject to and state agencies will lack the resources to adminVerDate 0ct 09 2002 12:54 Dec 11, 2012 Jkt 041481 PO 00000 Frm 00840 Fmt 6601 Sfmt 6621 I:\DOCS\112-30\74372.TXT BRIAN
2429

ister. Congress must provide the certainty needed for long-term management of 

this critical national resource by both public and private owners.

• Eliminate duplicative permitting requirements for pesticide applications by including H.R. 872 as part of the 2012 Farm Bill. NASF holds 

concerns regarding the new NPDES permitting requirements for pesticide applications under the Clean Water Act. The Federal Insecticide, Fungicide, and 

Rodenticide Act has provided sufficient protection for the past 3 decades by requiring rigorous examinations of potential impacts of pesticides on water quality and environmental and human health. Maintaining the environmental integrity of a watershed often involves the use of pesticides to control invasive species, manage riparian areas and reestablishing forests.

These recommendations represent conclusions and consensus viewpoints driven by 

Forest Action Plans authorized in part by the last farm bill, and are offered as a 

source of guidance that we trust will be helpful to you in developing forest policy 

provisions in the next farm bill. State Foresters greatly appreciate the significant 

task as Congress works to reduce the Federal deficit. We know the Agriculture Committees will continue to work to ensure that cuts affecting forestry are proportionate 

and fair to other sectors of the economy. We greatly appreciate the opportunity from 

the Subcommittee to submit oral and written testimony regarding the forestry, conservation and energy provisions of the 2012 Farm Bill. 

Endnotes 1Man, Gary. 2010. Major Forest Insect and Disease Conditions in the United 

States: 2009 Update. Last accessed on March, 7, 2012 at: http://www.fs.fed.us/

foresthealth/publications/ConditionsReportl09lfinal.pdf. 2 National Interagency Fire Center, Historical Wildland Fire Summaries, pg. 9. 

Last accessed February 1, 2012 at http://www.predictiveservices.nifc.gov/intelligence/2011lstatssumm/introlsummary.pdf. 3 National Association of State Foresters, Communities at Risk Report FY 2011.

Last accessed February 1, 2012 at http://www.stateforesters.org/files/2011-NASFfinalCAR-report-FY11.pdf. 4Society of American Foresters. The State of America’s Forests. 2007. 5Guldin, R.W. and W.B. Smith. Forest Sector Reeling During Economic Downturn.

2012. Last accessed on-line at: http://www.nxtbook.com/nxtbooks/saf/

forestrysourcel201201/index.php?startid=1. 6Forest2Market. The Economic Impact of Privately-Owned Forests. 2009.

The CHAIRMAN. Thank you, Mr. Dye. 

Mr. Holmes, you are now recognized for 5 minutes. 

STATEMENT OF CHARLES A. HOLMES, CHAIRMAN, FOREST

RESOURCE POLICY GROUP, NATIONAL ASSOCIATION OF 

CONSERVATION DISTRICTS, DEMOPOLIS, AL 

Mr. HOLMES. Thank you, Chairman Thompson and Members of 

the Subcommittee. 

On behalf of the National Association of Conservation Districts, 

our 3,000 member districts, and our 17,000 supervisors across this 

country, I thank you for this opportunity to be here today. I currently serve as a board member from the State of Alabama for 

NACD, as well as Chairman of the NACD Forest Resources Policy 

Group. 

My wife and I own Holmestead Company, a sole proprietorship 

in Marion, Alabama, where we are a cow/calf and tree farm operation. My family has used a variety of conservation practices over 

nearly 200 years, including cross fencing, rotational grazing, padded water troughs and prescribed burning. 

We received our first farm plan in 1939, and we have been a certified tree farm since 1941. We have a mix of pine and hardwoods 

on our property, and in 1999, we reintroduced longleaf to our property. We currently have a forest management plan and a registered 

forester to assist us with our forest management. 

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The importance of conservation cannot be stated enough. That is 

why NACD supports the passage of the 2012 Farm Bill. Conservation districts throughout this country have been strong participants 

and supporters of the forest stewardship programs, which provide 

technical assistance via our state partners to nonindustrial private 

forest owners. Since the program’s creation, it has produced over 

270,000 resource management plans for more than 31 million acres 

of private forest land. 

Developing a sound resource management and conservation plan 

is the principal tenet to NACD. NACD is one of the four partners 

of the Joint Forestry Team, including the Forest Service, NRCS, 

and my fellow panelist, the National Association of State Foresters. 

The forest management plan template that team has helped develop serves as a primary guidance to NRCS forestry technical 

service providers. 

I served as Chairman of the Joint Forestry Team in 2010 and 

saw firsthand the value that the team provided to not just the 

stewardship program but to the forest industry as a whole. 

On my own land in the southeastern United States, I have seen 

direct benefit of the forest stewardship program. My work with the 

longleaf pine restoration has been in part a product of the stewardship program. To date, I have restored more than 700 acres of 

longleaf pine in an effort to restore this native tree to our forests. 

Second, the Forest Legacy Program has been an important part 

of conservation district work by allowing landowners to help protect environmentally important forest areas from expansion and by 

engaging with the locally led process to develop conservation plans. 

While the Senate 2012 Farm Bill framework now includes a program cap of $200 million annually, I do not believe this cap will 

be a negative impact on being able to successfully carry out responsible conservation. 

Insects continue to wreak havoc on our forests. Pine beetles have 

been particularly devastating in the forests throughout the western 

United States. Insect infestation and disease have a direct impact 

on our members and, furthermore, puts their livelihood at danger 

due to the loss of timber and the increased risk of wildfire. Conservation districts feel that more needs to be done to address this 

mounting problem, and the farm bill framework we have seen is a 

step in the right direction. 

In conclusion, these farm bill programs show a track record of 

success, and every dollar spent has seen a return. The forest title 

is critical in ensuring the health and sustainability of our forests 

for generations to come. I am happy to answer any questions you 

or the Subcommittee may have. Thank you, sir. 

[The prepared statement of Mr. Holmes follows:]

PREPARED STATEMENT OF CHARLES A. HOLMES, CHAIRMAN, FOREST RESOURCE

POLICY GROUP, NATIONAL ASSOCIATION OF CONSERVATION DISTRICTS, DEMOPOLIS, 

AL 

Good morning, Chairman Thompson, Ranking Member Holden, and Members of 

the Subcommittee. On behalf of the National Association of Conservation Districts 

and our 3,000 member districts and 17,000 supervisors across the country, I thank 

you for the opportunity to be here today. 

I currently serve as the Board Member from the State of Alabama for NACD as 

well as the Chair of the Forest Resource Policy Group, a subcommittee of NACD’s 

2431

Natural Resources Policy Committee. My wife and I own Holmestead Company, a 

sole proprietorship in Marian, Alabama, where we are a cow/calf and tree farm operation. My family has used a variety of conservation practices over the nearly 200 

years on our land, including cross fencing, rotational grazing, padded water troughs, 

and prescribed burns. We received our first farm plan in 1939 and have been a certified tree farm since 1941. We have a mix of pine and hardwoods on our property 

and in 1999 we reintroduced longleaf onto our property. We currently have a forest 

management plan and a Registered Forester to assist with forest management. 

The importance of conservation cannot be stated enough. Conservation is a common sense, long-term solution with a high return on investment. The desire to put 

conservation practices on the ground is why NACD supports the framework of the 

2012 Farm Bill designed by the Senate and specifically the forestry title. The forestry title helps provide resources to landowners who are looking to protect and conserve wooded and forest land on their property. Conservation Districts and private 

landowners have been directly involved with many of the programs within the forestry title, such as the Forest Stewardship Program and the Forest Legacy Program. 

Also, many Districts are working on insect infestation and the negative impacts that 

critical issue is having on landowners. 

For starters, Conservation Districts throughout the country have been strong participants and supporters of the Forest Stewardship Program. The Stewardship Program provides technical assistance, via our state partners, to nonindustrial private 

forest owners to help with long term forest management. Since the program’s creation, it has produced over 270,000 resource management plans for more than 31 

million acres of private forest land. Developing sound resource management plans 

and conservation plans is one of the principle tenants of NACD. 

NACD is one of four partners, along with the National Association of State Foresters, which I have the pleasure of sharing the panel with today, as well as the 

Forest Service and the Natural Resources Conservation Service, that make up the 

Joint Forestry Team. The Team provided input in the common forest management 

plan template to be used by the Forest Service, NRCS and partner organizations. 

The template the Team helped develop serves as the primary guidance to NRCS forestry technical service providers. I served as the chair of the Joint Forestry Team 

in 2010 and saw firsthand the benefit and resources that the Team can bring to the 

table to benefit not just the Stewardship Program, but the forest industry as a 

whole. 

On my own land in Alabama, I have seen the direct benefit of the Forest Stewardship Program. My work with longleaf pine restoration has been, in part, a product 

of the Stewardship Program. To date I have restored more than 700 acres of 

longleaf pine in an effort to restore native forests to the southeastern United States. 

Second, the Forest Legacy Program has been an important part of Conservation 

Districts work since its creation. The Legacy Program has allowed landowners to 

help protect environmentally important forest areas from expansion. The Program 

works with local and state entities to develop conservation plans to be carried out. 

NACD focuses on developing and sustaining cooperative working relationships between Federal, state, and local agencies to achieve conservation through a locally 

led process. The Legacy Program continues to work to make that strategy a reality. 

While the 2012 Farm Bill framework now includes a program cap of $200 million 

annually, I do not believe the cap will have a negative impact on being able to successfully carry out responsible conservation. 

Insects continue to wreak havoc on our forests. Pine beetle has been particularly 

devastating to forests throughout the western United States. Insect infestation and 

disease has a direct impact on our members and furthermore puts their livelihood 

in danger due to a loss of timber and an increased risk of wildfire. Conservation 

Districts feel that more needs to be done to address this mounting problem, and the 

framework we have seen is a step in the right direction. 

In conclusion, these farm bill programs show a track record of success, and every 

dollar spent has seen a return. Because of the 2008 Farm Bill, we are better prepared to meet future resource needs, and we must continue to fund these programs 

in the 2012 Farm Bill. The forestry title is critical in ensuring the health and sustainability of our forests for generations to come. 

Chairman Thompson, Ranking Member Holden, thank you again for the opportunity to testify this morning. I am happy to answer any questions you and the Subcommittee may have.

The CHAIRMAN. Thank you, Mr. Holmes. 

Now I yield to the gentleman from Florida, Mr. Southerland, for 

the purpose of an introduction. 

2432

Mr. SOUTHERLAND. Thank you, Mr. Chairman. 

I would like to thank you for the opportunity to hold this hearing 

to review forestry and the energy programs within the 2012 Farm 

Bill. 

As many people may not be aware, my home State of Florida’s 

highest valued agriculture product is trees. Over $16 billion is infused into Florida’s economy from the manufacturing and distribution of forest products each year. Florida’s products industry and 

forestry contributes and supports many communities in our Congressional district and currently over 133,000 employees of Florida’s forest industry. It just provides an enormous, enormous economic bedrock to our ag community. 

The Apalachicola National Forest is the largest U.S. National 

forest in the State of Florida, and it resides in my Congressional 

district. 

I am proud today to welcome a witness from our district. It is 

an honor to welcome Richard Schwab of Perry, Florida, in my Congressional district, a third generation logger with over 22 years of 

experience in the forestry industry. He is representing Southeastern Wood Producers Association, including over 500 businesses 

in Florida and south Georgia, as well as the American Loggers 

Council. 

I commend Mr. Schwab for his commitment to strengthening the 

future of forestry for his family and for our community. I yield 

back. 

The CHAIRMAN. Thank you. 

Mr. Schwab, go ahead and proceed with your 5 minutes. 

Mr. SCHWAB. Thank you, Chairman Thompson, and Congressman Southerland, thank you very much for the introduction and I 

appreciate the opportunity to be here. 

The CHAIRMAN. Mr. Schwab, if you could just give me a second 

here. I apologize, I kind of missed. 

I do just want to do a housekeeping thing. I introduce Mr. Costa 

for the purpose of a unanimous consent request. 

Mr. COSTA. Thank you very much, Mr. Chairman, for your courtesy and thank the witnesses for your testimony on an issue that 

is important for our Subcommittee to deal with. 

Unfortunately, I am going to have to go, but I would like to have 

unanimous consent to submit testimony statement of Land Trust 

Alliance from the Iowa Natural Heritage Foundation, the Pacific 

Trust, the Forest Trust, the Society for the Protection of New 

Hampshire Forests, the Vermont Land Trust before the House Subcommittee on Energy and Conservation on giving states more conservation options for implementing the USDA Forest Legacy Program, and I have some questions also that I would like to submit 

for the record and have unanimous consent on that and thank my 

colleagues for the courtesy and would like to submit that for the 

record. 

[The document referred to is located on p. 2455.] 

The CHAIRMAN. Without objection. Thank you. 

Mr. COSTA. Thank you very much. We need to work together for 

all of the right reasons. Thank you so much. 

The CHAIRMAN. Thanks, Mr. Costa. 

2433

I apologize, Mr. Schwab, so go ahead and start over with your 

5 minutes of testimony. 

STATEMENT OF RICHARD W. SCHWAB, PROCUREMENT

MANAGER, M.A. RIGONI, INC., PERRY, FL; ON BEHALF OF 

AMERICAN LOGGERS COUNCIL AND SOUTHEASTERN WOOD 

PRODUCERS ASSOCIATION 

Mr. SCHWAB. Thank you, Chairman Thompson, I appreciate that. 

I am Richard Schwab, I am a third generation logger who has 

worked in the forest industry for the past 22 years. I have been 

educated and trained by the guidelines of Florida’s Best Management Practices, and I am a proud Florida master logger. 

I am here today representing my family’s small business, M.A. 

Rigoni, Incorporated. We are a timber harvesting company in 

Perry, Florida, and we have been practicing sustainable forestry for 

52 years. I am also representing Southeastern Wood Producers Association, which represents 500 businesses in Florida and Georgia, 

as well as the American Loggers Council, a national organization 

representing professional timber harvesters in 30 states. 

Our first concern is directed toward the Forest Inventory and 

Analysis program as well. The FIA program is the best resource 

that we have available to measure outcomes and plan for the future of forests. The data is also being used to create jobs today. I 

personally work with other companies to help develop their new 

markets in our region of the country. These new markets are established and located in part based on the available FIA data. We 

would ask you to reaffirm the U.S. Forest Service Forest Inventory 

and Analysis program to enhance the program’s efficiency and effectiveness. 

Next we would like to talk about the Stewardship Contracting 

program. It offers forest managers the use of alternative contracting methods on Federal forest land. Stewardship contracts are 

used for treatments that promote healthy forests and reduce fire 

hazards while expanding business and job opportunities. My family’s small business has worked on two stewardship sales in Florida 

since they were first authorized. It was great to see revenues from 

the timber sale used on two different National Forests in Florida 

at the same time. Fire lines, roads, and wildlife habitats were either improved or created. We urge Congress to permanently reauthorize the Stewardship Contracting authority in the 2012 Farm 

Bill. 

Next we would ask you to reauthorize the National Institute of 

Food and Agriculture’s Renewable Resources Extension Act, maintaining the current funding levels. My company has personally 

worked with the University of Florida’s IFAS extension by harvesting new types of biomass and other timber crops on their 

projects. I have personally seen these crops and am very excited 

about the future growth of different forest crops. Without extension, I don’t know if this research would happen to date. 

The other item found in the current farm bill is Section 8401, 

which is a provision for qualifying timber contract options. Since 

the passage of the 2008 Farm Bill, it would be safe to say that our 

sector of the economy is in a state of economic depression. Federal 

timber purchases that are contracted for Federal timber sales durVerDate 0ct 09 2002 12:54 Dec 11, 2012 Jkt 041481 PO 00000 Frm 00845 Fmt 6601 Sfmt 6601 I:\DOCS\112-30\74372.TXT BRIAN
2434

ing this time are left holding contracts that are now priced too high 

for them to be able to harvest without incurring substantial financial losses. I personally know many of these small family-owned 

businesses and know that they contribute greatly to the communities where unemployment rates are still hovering between 15 and 

20 percent. These small family-owned businesses need additional 

time on these contracts as we continue to wait for our markets to 

recover. Please extend 8401 for timber sales that were awarded 

during the period beginning January 1st of 2008 and ending on December 31, 2010. 

There are also some areas in the energy title of the 2008 Farm 

Bill that have the attention of the timber harvesting community, 

the first being the definition of renewable biomass found there. We 

would like to see the current definition, as written, maintained in 

the 2012 Farm Bill. We need as broad a based definition for renewable biomass in any energy policy. This is very important to my 

business because 2⁄3 of our production is now based on producing 

in-woods chips for renewable energy production. 

We also don’t favor any program that would allow for the artificial manipulation of existing markets. The Biomass Crop Assistance Program, BCAP, is a prime example of a well-intended Federal program gone awry. Our company personally took part in the 

BCAP program and experienced nothing but major market disruptions and extra paperwork. While existing wood-consuming facilities lowered delivered prices to cut their operating costs, there was 

no new facilities or markets established in our area of operation as 

a direct result of the BCAP program. The BCAP program might 

have worked well for the agriculture sector, but it was a disaster 

for our business and other businesses in the timber harvesting 

community. 

The last program that I would like to address is the Biobased 

Markets Program. Under the current law, forest products have received an unfavorable position in the program. We would like to 

see language in the 2012 Farm Bill that would create parity between forest and other biobased products by inserting the language 

that would focus on products that apply an innovative approach to 

producing biobased products regardless of the date of entry into the 

marketplace. I am personally working with a company called American Process, which is a company that has completed construction 

on a pilot wood ethanol plant. It is located in Alpena, Michigan. 

They will be taking wastewater from an existing particle board 

plant and using this waste to cook and produce wood ethanol. It 

is a perfect example of American entrepreneurialism at its best. 

The company saw a need, realized what it took to solve the need, 

and made the investment. 

Thank you for allowing me to provide testimony and comments 

as you formulate the forest industry titles of the 2012 Farm Bill, 

and I will be happy to try to answer any questions that you might 

have. 

[The prepared statement of Mr. Schwab follows:]

2435

PREPARED STATEMENT OF RICHARD W. SCHWAB, PROCUREMENT MANAGER, M.A. 

RIGONI, INC., PERRY, FL; ON BEHALF OF AMERICAN LOGGERS COUNCIL;

SOUTHEASTERN WOOD PRODUCERS ASSOCIATION

Chairman Thompson and distinguished Members of the Subcommittee on Conservation, Energy and Forestry, my name is Richard Schwab and I am a third generation logger who has worked in the forest industry for the past 22 years helping 

to manage our small family business. I have been educated and trained on how to 

practice the art of forestry by the guidelines of Florida’s Best Management Practices 

and am a Florida Master Logger. I am here today representing M.A. Rigoni, Inc. 

We are a full service forest management business, including timber harvesting, in 

Perry, Florida. We have been practicing sustainable forestry for 52 years. I am also 

representing the Southeastern Wood Producers Association which represents 500 

businesses in Florida and Georgia, as well as the American Loggers Council, a national organization representing professional timber harvesters in 30 states across 

the U.S. I am pleased to have the opportunity to address the areas which our sector 

of the industry believes are deserving of your attention during the reauthorization 

of the farm bill. 

The first concern is directed towards the Forest Inventory and Analysis program. 

There is real value in the information that the FIA program provides. As we continue to be concerned over the health of our nation’s forest and how to sustainably 

manage those forests for the greatest good for all of our nation’s people, the FIA 

program is the best resource that we have available to measure outcomes of past 

forest management decisions and to make plans and adjustments for the future of 

those forests. 

Data gathered in the FIA allows us to recognize trends in forest management 

practices that are impacting forest health, insect and disease patterns, fuel loads, 

and wildlife habitat. 

The data is also being used to create jobs. Our industry is one of the primary 

users of the FIA data in determining where to build new infrastructure such as a 

biomass plant or pellet mill that could create new markets that we as timber land 

owners and professional timber harvesters need in order to generate income from 

our forests to encourage sustainable management. 

My job with our small family business is Procurement ‘‘the buying of all wood that 

our company harvests’’ and New Business Development ‘‘the estimating of all service jobs’’ that we do as well as work with companies to help develop their new markets in our region of the country. These new markets are established and located, 

in part, based on available FIA data. Committee Members, I cannot stress enough 

of the importance to our industry to have this data and it be accurate so that those 

of us that want to make our products from the forest can know where the best area 

is to locate and create new jobs in the rural regions of the country. 

We would ask that you reaffirm the importance of the U.S. Forest Service’s Forest 

Inventory and Analysis program to the private sector and direct the Agency to enhance the program’s efficiency and effectiveness to ensure the program is fully implemented in all states and to enhance the program’s ability to address emerging 

forest data needs such as biomass and new forest products markets. 

The Stewardship contracting program offers forest managers the use of alternative contracting methods on Federal forest land to achieve forest management objectives. 

Stewardship contracts are used for treatments that promote healthy forests and 

reduce fire hazards, while expanding business and job opportunities. Stewardship 

contracting encourages collaboration and long-term commitments among agencies, 

contractors, timber dependent communities, and other interested stakeholders that 

are important for economic stability and to complete restoration projects. 

While Stewardship Contracting does not replace traditional timber sale contracts, 

this program provides a critical tool for forest management, helps address the need 

for restoration activities in much of our National Forests, and can compliment timber sale contracting. 

My family’s small business has worked on two stewardship sales in Florida since 

they were first authorized. We were able to complete the service work along with 

the timber harvest in a very quick and efficient manner. It was great to see the 

revenues from the timber sale used on two National Forests in Florida. Fire lines, 

roads and wildlife habitats were either improved or created. Everyone won; the U.S. 

Forest Service, our business, industry, local jobs, and the public. Stewardship contracts work. 

We urge Congress to permanently reauthorize the Stewardship Contracting Authority in the 2012 Farm Bill. 

2436

Next we would ask that you reauthorize the National Institute of Food and Agriculture’s Renewable Resources Extension Act, maintaining the current funding authorization level. This program supports forestry extension and outreach conducted 

by the universities, which often serve as a gateway for engaging landowners in conservation and management of their land. 

Our company has personally worked with the University of Florida’s IFAS Extension by working with them to harvest new types of biomass crops. I have personally 

seen these crops and am very excited about future growth of different forest crops 

and how they respond to weather, different soil types, and how they need to be managed in order to maximize yields. Without Extension I don’t know if this research 

would happen. Extension helps to keep our industry from stagnating and we all 

know that anything that is stagnated is dying. 

While I am addressing education opportunities, I would like to point out that 

under current law, farmers and ranchers have the opportunity to bring their 16 and 

17 year old children out to the farms and ranches to learn the trade under an agricultural exemption found in the labor laws. Agriculture is a generational industry, 

just like logging, yet because logging is classified under an industrial occupation 

code rather than an agricultural occupation code; we have to wait until our children 

reach 18 years of age before we can bring them out to the woods to begin their 

training. I would like the same opportunity as tree farmers for the forestry community that the farmers and ranchers have in the agricultural community to bring this 

next generation into the workforce. I am a third generation logger, and I would like 

for my son to be the fourth generation. If we wait until they are 18 or older I am 

afraid that we will have already passed the age of building interest in our industry 

and lost ground in building a strong work ethic. 

The other item found in the current farm bill is Section 8401 which is a provision 

for qualifying timber contract options. As you are all well aware, our nation has 

been suffering under an economic recession for some years now, and housing starts 

and markets for the products which we produce, logs and other forest products, have 

been restrained or disappeared all together. Since the passage of the 2008 Farm 

Bill, things have not gotten any better for our industry; in fact it would be safe to 

say that they have deteriorated even further. 

Our nation’s loggers are in trouble, and a recent study completed by the Wood 

Supply Research Institute indicates that we have lost close to 40% of the logging 

capacity here in the United States. Almost all of our timber sale contracts are 1–

3 years in length and most have been made in good faith, with an understanding 

that markets would be reasonably stable. The unprecedented length of a weak housing market has affected everyone in the supply chain, from the loggers to the home 

builders, far greater than can be remembered in the last 80 years. Federal timber 

purchasers that contracted for Federal timber sales during this time are left holding 

a contract that is now priced too high for them to be able to harvest and deliver 

to the existing markets without, in some cases, incurring substantial financial 

losses. I personally know many of these small, family-owned businesses and know 

that they contribute greatly to communities where unemployment is still hovering 

between 15 and 20 percent. These small, family-owned enterprises need additional 

time on these contracts as we continue to wait for our markets to recover. The 

United States is the world’s largest consumer of forest products and as the economic 

recovery continues, we will see the demands for the products derived from our forests rise. We would prefer promoting job creation and economic stability here in the 

United States through a viable U.S. workforce rather than become increasingly dependant on foreign imports. 

With no real certainty as to when we might see a recovery in our sector, we ask 

that you please extend Section 8401 for timber sales that were awarded during the 

period beginning on January 1, 2008, and ending on December 31, 2010. 

There are also areas in the energy title of the 2008 Farm Bill that have the attention of the timber harvesting community, the first being the definition of renewable 

biomass found in the 2008 Farm Bill. We would like to see the current definition 

as written maintained in the 2012 Farm Bill. In order for woody biomass to be considered as a real component of a renewable energy future, we need as broad based 

a definition of renewable biomass in any energy policies proposed that does not artificially restrict the use of woody biomass for energy production. I encourage Members of this Committee and Congress to retain the current definition of renewable 

biomass as written in the 2008 Farm Bill. This is very important to my business 

because 2⁄3 of our production is now based on producing in-woods chips for renewable energy production. 

We are supportive of all programs in the energy title that offer short term incentives to help create renewable biomass markets which in turn will create jobs. 

2437

I am personally working with American Process which is a company that is completing construction on a pilot wood ethanol plant. It is located in Alpena, Michigan. 

They will be taking waste water from an existing particle board plant and using 

this waste to cook and produce wood ethanol. This is a perfect example of American 

entrepreneurialism at its best. The company saw a need, realized what it took to 

solve the need, and made the investment. The process will help to address U.S. renewable energy issues, air quality issues, and create both markets and jobs for the 

forest products industry. 

We do not favor any program that would allow for the artificial manipulation of 

existing markets. The Biomass Crop Assistance Program (BCAP) is a prime example 

of a well intended Federal program gone awry. Rather than meet the intent of Congress to stimulate new markets for woody biomass and help to recover some of the 

costs associated with the collection, harvest, storage and transportation of woody 

biomass, what we saw was up to a 50% reduction in rates for delivered wood to consuming mills and were being told that we could be made ‘‘whole’’ by signing on to 

the program. 

Our company personally took part in the BCAP program and experienced nothing 

but major market disruptions and extra paper work. While existing wood consuming 

facilities lowered delivered prices to cut their operating costs, there were no new facilities or markets established in our area of operation as a direct result of the 

BCAP program. 

The BCAP program might have worked well for the agriculture sector, but it was 

a disaster for our business and others in the timber harvesting industry. 

The last program that I would like to address is the Biobased Markets Program. 

Under the current law, forest products have received an unfavorable position in the 

program due, in part, to the maturity of the products. We would like to see language 

in the 2012 Farm bill that would create parity between forest and other biobased 

products by inserting language that would focus on products that apply an innovative approach to growing, harvesting, procuring, processing, or manufacturing 

biobased products regardless of the date of entry into the marketplace. 

As a final note, there is a bill currently working its way through the House and 

the Senate entitled the Silviculture Regulatory Consistency Act, H.R. 2541/S. 1369. 

The bill seeks to codify a 35 year exemption for silvicultural operations from the 

National Pollution Discharge Elimination System (NPDES) permitting process allowed by the EPA, following a Ninth Circuit Court decision which denied those exemptions. I can think of no other regulatory burden that would have a greater negative impact on our industry if the Ninth Circuit’s decision is left to stand. The 

delays in obtaining those permits alone would cost the industry millions of dollars 

in lost production. Our industry has proven that with the use of both mandatory 

and voluntary Best Management Practices established by the states and approved 

by the EPA, that water quality issues from Silvicultural operations are negligible 

and that implementation of the permitting process would have no net benefit to the 

environment. 

With the poor market conditions and loss of infrastructure that is currently impacting our industry, an attempt to further regulate our industry and add additional 

costs will certainly lead to forest land conversions to other higher value uses, and 

the sustainability of our forests and our forests operations will be in jeopardy. We 

urge Members of Congress to pass the Silviculture Regulatory Consistency Act. 

Again, thank you for allowing me to provide testimony and comments as you formulate the energy and forestry titles of the 2012 Farm Bill, and I would be happy 

to try and answer any questions that you might have.

The CHAIRMAN. Thank you, Mr. Schwab. 

Now I would recognize Mr. Goergen for 5 minutes of testimony, 

please. 

STATEMENT OF MICHAEL T. GOERGEN, JR., EXECUTIVE VICE 

PRESIDENT AND CHIEF EXECUTIVE OFFICER, SOCIETY OF 

AMERICAN FORESTERS, BETHESDA, MD 

Mr. GOERGEN. Thank you very much, Mr. Chairman, Members of 

the Committee. 

My name is Michael Goergen. I am the Society of American Foresters Chief Executive Officer and Executive Vice President. I really appreciate the opportunity to be here today to talk with you 

2438

about some very important programs, and really an important part 

of the American economic picture when we think about forests. 

I am very pleased with this panel. Much of what I would like to 

tell you this morning actually has been said by my colleagues here 

today, which is outstanding, and I will try to save as much time 

on your busy schedules as I can. 

With that said, I do want to point out that we represent more 

than 12,000 people across the country who have really dedicated 

their lives to the professional management, care, and protection of 

America’s forests. These folks have really committed themselves to 

ensure that the forests of the United States are taken care of and 

managed in the best possible way, and some of the programs that 

are contained within the farm bill are very important to their ability to do their jobs. 

We have heard about some of them today, and I will touch on 

them as well. There are also some other items I would like to discuss with you as well, including Stewardship Contracting authority 

and also the damaging bark beetle issue that we have, particularly 

in the western part of the United States. 

When I think about Stewardship Contracting in particular, I 

really want to talk about the success of a program that really started off as a pilot project. We are going to see how things work. We 

are going to make sure that the tool is something that can actually 

be used on the ground in the Forest Service and the Bureau of 

Land Management can truly benefit from and actually be a benefit 

for the taxpayer as well. And the truth is the Stewardship Contracting authority has been very successful for both of these agencies. 

We also would like to advocate for permanent reauthorization of 

Stewardship Contracting, and really it is a big success story. We 

treated over half a million acres in the United States with stewardship contracts at this point in time. We have actually awarded 

somewhere over 900 stewardship contracts just in the last 5 years, 

and we continue to increase those contracts. As many as 200 were 

conducted last year in 2011. 

Now, with the authority expiring in 2013, we are concerned that 

if it is not permanently reauthorized, a lot of the momentum that 

the Forest Service and the Bureau of Land Management have put 

into Stewardship Contracting may be scaled back or not be invested the way we think it should be. 

This is an important tool because it allows these agencies to act 

like a business. Many of you own land, you understand what happens when you have a project being done on your particular land. 

Someone comes in to do some forest management to reduce some 

fire risk on your property. Maybe there was a culvert that needed 

to be replaced. You get that contractor to do that work as well. 

This is something that can be done through Stewardship Contracting that really wasn’t allowed for these Federal agencies before. They had a separate contract for that, a separate contract for 

another piece, and this allows them to put it all together, select 

good contractors, and get the work done. 

When I think about the western pine beetle and particularly the 

mountain pine beetle, I have to tell you it is a very sad story. Since 

1997, bark beetle mortality has devastated more than 41.7 million 

2439

acres across all ownerships in the U.S. The Forest Service estimates that up to 100,000 dead trees that are killed by beetles alone 

fall to the ground every day in southern Wyoming and northern 

Colorado, 100,000 trees falling every day that have been damaged 

by these beetles. We have to do something, and we have to do 

something soon. 

Much of the forests in the West have really created a perfect 

storm for problems. We have had warm winters not killing off the 

beetles. We have poor forest management situations in many of 

these places, and we need to do something about this in a critical 

and rapid fashion. We are encouraged by many in Congress who 

are calling for increased forest management actions in these affected areas, and we really support trying to do something about 

it and including language in the farm bill that can help expedite 

the Forest Service’s treatment of these stands throughout the West. 

I would also like to touch on SAF broad recommendations for the 

2012 Farm Bill. The 2008 Farm Bill included several improvements 

for forestry by supporting forest conservation and agro-forestry 

practices throughout the country. In the 2012 Farm Bill, we are 

really hoping that the Committee will pay close attention to the 

recommendations of the Forest and the Farm Bill Coalition which 

we very much support. 

We understand the budget pressure that you are under. This is 

a very difficult time to be thinking about spending money. But 

some of these programs are really quite critical, and so we ask you 

to think about programs that improve conservation programs for 

forest, strengthening forestry outreach, education, research, and 

particularly the Forest Inventory and Analysis program, which we 

have all touched on as one of the most fundamental building blocks 

of research in this country for forests, and really doing what we 

can to improve market opportunities for forests and really focus on 

this fantastic green building material that we have in the United 

States. Thank you very much for your time, and I look forward to 

your questions. 

[The prepared statement of Mr. Goergen follows:]

PREPARED STATEMENT OF MICHAEL T. GOERGEN, JR., EXECUTIVE VICE PRESIDENT

AND CHIEF EXECUTIVE OFFICER, SOCIETY OF AMERICAN FORESTERS, BETHESDA, MD 

Good morning, Mr. Chairman and Members of the Subcommittee. My name is Michael Goergen and I am the Executive Vice President and CEO of the Society of 

American Foresters (SAF). I am here today to testify on behalf of our 12,000 members. 

SAF believes in responsible management and stewardship of the nation’s public 

and private forests. Funding for several of our priority programs and tools are provided for within the Agriculture Reform, Food, and Jobs Act of 2012 (Farm Bill), 

and are particularly important to maintaining and improving our nation’s forested 

landscapes. Though only a small section of the total Farm Bill, the forestry programs and funding provide the ability to sustain healthy forests and provide for future generations. We also value the conservation title and the many programs that 

provide forestry solutions for landowners and the environment. 

We thank the Subcommittee for the opportunity to testify today and for your continued support of forestry in the U.S. There are currently 751 million acres of forests in the U.S. today; roughly the same as 100 years ago, which was shortly after 

the founding of SAF. While the extent of our forests is a positive result of attention 

given, these lands are subject to pressures from wildfires, insects, disease, invasive 

species, changing climates, development market access, and more. At the same time, 

people are increasingly relying on forests for clean water and air, recreational opportunities, hunting, fishing, forest products, scenic values, and more. 

2440

1 U.S. Forest Service (USFS). 2009. Basic Stewardship Contracting Concepts. Available online 

at http://www.fs.fed.us/forestmanagement/stewardship/documents/stewardshiplbrochure.pdf. last accessed May 14, 2012. 2 U.S. Forest Service (USFS). 2011. Stewardship Contracting. Available online at http://

www.fs.fed.us/forestmanagement/stewardship/aboutus/16usc2104note.shtml. last accessed May 

14, 2012. 3Pinchot Institute for Conservation. 2012. The Role of Communities in Stewardship Contracting: FY 2011 Programmatic Monitoring Report to the USDA Forest Service. Available online 

at http://www.fs.fed.us/forestmanagement/stewardship/reports/documents/2011/

FinalFY11USFSMonEvalReport.pdf; last accessed March 2012. 

SAF understands the budget pressures that continue to dominate the decisions 

and funding priorities facing Congress and the nation. We believe the budget cuts 

this Committee identified during the Super Committee process, though not without 

impact, represent a reasonable approach to address the current fiscal situation, and 

we urge that, if further reductions are made, the conservation and forestry programs are not cut disproportionally. As we cannot focus on all the important programs before your committee today, our testimony will focus on:

• Permanent Reauthorization of the Stewardship Contracting Authority

• Acceleration of Bark Beetle Mitigation Efforts

• SAF 2012 Farm Bill Recommendations 

Stewardship Contracting Authority 

Across the country, our forests, particularly our federal forests, are unhealthy and 

we are concerned about the loss of management infrastructure in several regions. 

These forest health issues and lost infrastructure result in fewer jobs and lack of 

economic growth; increases in invasive species; unnatural insects and disease outbreaks; forests with far too many trees and increased fuel that result in unnatural 

fires that negatively impact ecosystems. These forest health issues have the potential to devastate watersheds and landscapes and lead to costly repairs to protect our 

water supply and other infrastructure, public safety, and treatments to restore our 

forested lands. 

The Stewardship Contracting Authority is one of the tools utilized by the U.S. 

Forest Service and the Bureau of Land Management to increase economic opportunity and create jobs in rural communities, restore and maintain healthy forest 

ecosystems, achieve landscape-scale management goals at reduced costs, and provide for other services that benefit National Forests and all that depend upon them. 

First enacted as a successful pilot program in the FY 1999 Interior Appropriations 

Bill and then reauthorized in 2003 as part of the Omnibus Appropriations bill, the 

current authority will expire in 2013. We ask that Congress permanently reauthorize this important forest management contracting tool. 

Unique to Stewardship Contracting is the ability to keep receipts and revenue obtained from forest management treatments to be used for management goals and 

treatments that would not otherwise pay for themselves. This practice is called trading goods for services, and the tool allows any receipts retained to be available without further appropriation.1 Land management goals of a project may include, among 

other things: 2

1. Road and trail maintenance or obligation to restore or maintain water quality;

2. soil productivity, habitat for wildlife and fisheries, or other resource values;

3. setting of prescribed fires to improve the composition, structure, condition, 

and health of stands or to improve wildlife habitat;

4. removing vegetation or other activities to promote healthy forest stands, reduce fire hazards, or achieve other land management objectives;

5. watershed restoration and maintenance;

6. restoration and maintenance of wildlife and fish habitat; and

7. control of noxious and exotic weeds and reestablishing native plant species.

To date, the authority has encouraged and allowed local, state, and Federal collaborative efforts among interested stakeholders to work toward restoring communities and forests at risk. Stewardship contracting also allows for other factors to 

be evaluated (i.e., past performance, training, etc.) when selecting contractors for the 

stewardship project. From 2006 to 2011 approximately 900 Stewardship contracts, 

which treated 545,625 acres, were awarded, including 208 contracts in 2011.3

SAF strongly supports the reauthorization of this important tool and we ask that 

the House Agriculture Committee include permanent reauthorization of StewardVerDate 0ct 09 2002 12:54 Dec 11, 2012 Jkt 041481 PO 00000 Frm 00852 Fmt 6601 Sfmt 6621 I:\DOCS\112-30\74372.TXT BRIAN
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4 Bentz, et. al. 2009. Bark Beetle Outbreaks in Western North America: Causes and Consequences. Bark Beetle Symposium. Snowbird, Utah. last accessed May 14, 2012. 5 U.S. Forest Service (USFS). Western Bark Beetle Strategy for Human Safety, Recovery and 

Resiliency. Available online at: http://www.fs.usda.gov/Internet/FSElDOCUMENTS/

stelprdb5338089.pdf. last accessed May 14, 2012. 6 U.S. Forest Service (USFS). Western Bark Beetle Strategy for Human Safety, Recovery and 

Resiliency. Available online at: hhttp://www.fs.usda.gov/Internet/FSElDOCUMENTS/

stelprdb5338089.pdf. last accessed May 14, 2012. 7D.A. Leatherman, I. Aguayo, and T.M. Mehall. Colorado State Forest Service (CSFS). Trees 

& Shrubs: Mountain Pine Beetle. Available online at: http://csfs.colostate.edu/pdfs/MPB.pdf.

last accessed May 14, 2012. 8D.A. Leatherman, I. Aguayo, and T.M. Mehall. Colorado State Forest Service (CSFS). Trees 

& Shrubs: Mountain Pine Beetle. Available online at: http://csfs.colostate.edu/pdfs/MPB.pdf.

last accessed May 14, 2012. 

ship Contracting, without changes, in the 2012 Farm Bill. We have been and will 

continue to work with partnering organizations including The Nature Conservancy, 

the National Association of State Foresters, The National Association of Forest 

Service Retirees, and Sustainable Northwest to advocate for this effort. We look forward to working with the Subcommittee and staff on this important issue. 

Bark Beetle 

Western Bark Beetle, and more specifically, the Mountain Pine Beetle continues 

to be a major issue affecting the health of our forests and is a priority issue for SAF. 

The current Mountain Pine Beetle (known as MPB) epidemic has been labeled as 

the largest pine bark beetle outbreak in recorded history.4 Since 1997, bark beetle 

mortality has devastated more than 41.7 million acres across all ownerships.5 The 

U.S. Forest Service estimates that up to 100,000 dead trees killed by beetles alone 

fall to the ground every day in southern Wyoming and northern Colorado.6

The Mountain Pine Beetle is a native species to the forests of western North 

America.7 The Mountain Pine Beetle attacks pines, particularly lodgepole, ponderosa, and limber pine. The MPB targets large, mature trees that have become 

stressed due to conditions such as overcrowded forest stands, limited water and nutrient availability, old age, and/or poor site conditions.8 Much of our forests in the 

West have created the ‘‘perfect storm’’ for a beetle infestation of this magnitude, and 

the number of dead trees will continue to grow until the bark beetle runs out of 

live host trees. 

SAF is supportive of the actions being taken by the U.S. Forest Service to increase 

restoration efforts and actions to mitigate MPB infestations, but the effort is falling 

short. SAF wishes to see more projects and plans to treat infested forests. We believe the U.S. Forest Service desires this outcome as well, but is hindered by budget 

and regulatory issues that prevent the agency from achieving more. 

SAF supports increasing forest management and restoration efforts in affected 

areas and National Forests to address public safety and property, wildfire risk, and 

watershed health. We need to act now in order to address these critical issues. We 

are encouraged by many in Congress who are calling for increased forest management actions in affected stands. We hope you will continue to advocate for intensified treatments, and we look forward to continuing to work with both the Senate 

and the House of Representatives on this issue. 

SAF 2012 Farm Bill Recommendations 

The 2008 Farm Bill included significant improvements for forestry by supporting 

forest conservation and agroforestry practices and activities across the country. For 

the 2012 Farm Bill, we hope to build on the success of the 2008 Farm Bill, while 

respecting the current budget reality. With the current challenges and threats facing private forests, SAF encourages the House of Representatives’ Agriculture Committee to focus on the Forests in the Farm Bill Coalition’s recommendations in four 

key areas:

• Improving Conservation Programs for Forests

• Strengthening Forestry Outreach, Education, Research, and Inventory Programs

• Combating Forest-Related Invasive Species

• Improving Forest Market Opportunities 

Improving Conservation Programs for Forests 

Farm Bill conservation programs are critical to assisting private landowners improve the management of their forests, often with the help of a professional forester. 

Programs including the Conservation Stewardship Program (CSP), the Environmental Quality Incentives Program (EQIP), and the Wildlife Habitat Incentive ProVerDate 0ct 09 2002 12:54 Dec 11, 2012 Jkt 041481 PO 00000 Frm 00853 Fmt 6601 Sfmt 6621 I:\DOCS\112-30\74372.TXT BRIAN
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9Smith, B.W., and Guldin, R.W. 2012. Forest Sector Reeling during Economic Downturn. THE

FORESTRY SOURCE January, 2012. Available online at http://www.nxtbook.com/nxtbooks/saf/

forestrysourcel201201/index.php; last accessed March 2012. 

gram (WHIP) provide the tools to for landowners to keep their forests as working 

forests while also sustaining the economic viability of the land. SAF urges the Subcommittee to maintain forest owner opportunities and access to important cost-share 

programs like EQIP, CSP, and WHIP. We also support the removal of the cap on 

forest enrollment in the Conservation Stewardship Program to allow forest owners 

to have full access to the program. 

Strengthening Forestry Outreach, Education, Research, and Inventory Programs 

Forestry and agroforestry outreach and education activities are essential for engaging forest owners in conservation and management activities on their land. 

These programs and activities provide the tools, knowledge, and expertise to maximize the benefits of responsible management of private forests. 

The U.S. Forest Service’s Forest Inventory and Analysis Program (FIA) is an important tool utilized by the agency to address emerging forest data needs such as 

biomass, forest carbon, forest species composition, forest health data, and baseline 

inventory estimates used in State Forest Resource Assessment and Strategies. FIA 

provides landowners with unbiased information that assists in monitoring trends 

that include wildfire risk, insect and disease threats, and wildlife habitat. This data 

also helps the entire forestry community make appropriate decisions on how to 

sustainably care and manage our forests. SAF supports providing strategic direction 

for implementation of the FIA program including:

• Completing the transition to a fully annualized program

• Reporting information on renewable biomass supplies and carbon stocks at the 

local, state, regional, and national level;

• Engaging users of FIA data in re-evaluating the list of core data variables with 

emphasis on demonstrated need;

• Fostering cooperation among the FIA program, research station leaders, State 

Foresters, and other users;

• Improving the timeliness and accessibility of the annualized information on the 

database;

• Expanding existing programs to promote sustainable forest stewardship 

through increased understanding by all stakeholders. 

Combating Forest-Related Invasive Species 

A critical threat to the health of America’s private and public forests is the spread 

of invasive species. According to the U.S. Forest Service, roughly 58 million acres 

of forests are at risk of increased mortality due to insects and disease. SAF supports 

maintaining the Plant Pest and Disease Management and Disaster Prevention Program as the funds help build and preserve critical plant health safeguarding initiatives that protect forests and mitigate invasive species damage. 

Improving Forest Market Opportunities 

Private forests depend on markets to ensure long-term forest sustainability. A viable forest products industry is only successful if there are strong markets for both 

traditional and emerging forest products. Without a viable forest products industry, 

forest owners have difficulty keeping their land forested, and instead fall to economic pressures that can cause them to fragment their landscape. Forest owners 

need strong markets that will allow them to reinvest in their lands to keep to them 

working and healthy. 

This is of great concern as it means that not only does the forestry community 

continue to see dramatic loss of jobs, infrastructure, and capabilities, but it also 

means that our public and private forests suffer from negative impacts. From 2005 

to 2010 primary (forestry and logging, paper, wood manufacturing, etc.) and secondary (residential construction, furniture, etc.) employment have seen a combined 

reduction of 920,507 total jobs. In fact, total U.S. annual timber harvests are at 

their lowest levels since the 1960s. This lack of production led to the closure of more 

than 1,000 mills from 2005 to 2009, which decreased overall sawmilling capacity by 

15 percent, and lowered production levels below 50 percent of capacity at the remaining mills.9

To help maintain and restore some of these traditional markets, and to improve 

market opportunities for private forest owners, SAF recommends that Congress 

modify the USDA Biobased Markets Program in the farm bill’s energy title to better 

incorporate appropriate forest products as renewable, biobased products. 

2443

In closing, SAF would like to address the efforts underway by some to regulate 

forest roads as point source pollutants under the Clean Water Act. As you are 

aware, the 9th Circuit Court ruled that storm water runoff from forest roads and 

forestry activities should be subject to National Pollutant Discharge Elimination 

System (NPDES) permitting requirements. In past years, forest roads were considered nonpoint source pollutants that were exempt from the NPDES requirements, 

and effectively addressed through state-developed BMP’s and forest practice acts. 

This is of significant concern as a permitting process would increase costs per forest 

acre harvested, create a complex and arduous process, and cause unnecessary burdens on forest landowners and for agencies to administer. SAF urges Congress to 

pass the Silviculture Regulatory Consistency Act, H.R. 2541 and S. 1369, to ensure 

forest roads and forestry activities remain exempt from NPDES requirements. 

On behalf of the Society of American Foresters, I thank you again for this opportunity.

The CHAIRMAN. Thank you, Mr. Goergen 

And I will proceed with our questioning. 

I will take the liberty of the first 5 minutes. My first question 

is actually for you, Mr. Goergen. I appreciate your observations. We 

are in difficult challenges. I think that one of the unique opportunities we have in our Subcommittee and the Agriculture Committee 

is the forests can be a great source of revenue, given all the public 

lands that have been secured and continue to be sitting, some of 

those, idle with just tremendous resources for this country. It could 

be a great return on investment, if we are promoting the proper 

healthy management, which includes harvesting. You talked in 

your remarks about the Stewardship Contracting authority. What 

makes the Stewardship Contracting authority unique and/or different from other contracts? 

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

You know, it is really interesting you talk about the Forest Service in particular and the asset that they have because it really is 

an asset, and if you go back and read a book by a gentleman 

named Kaufman from the 1950s called, The Forest Ranger, he talks 

about the Forest Service being one of the very best agencies in the 

Federal Government. Not only in terms of the way that they were 

structured, the way that they were able to do management, but 

also the fact that they returned money to the Treasury every year. 

You are exactly right; this is a tremendous asset that we have on 

our hands. 

Now Stewardship Contracting is different for the Forest Service 

and the Bureau of Land Management because they are able to address multiple needs under one contract. They are able to keep 

money locally to get that work done. They are able to actually use 

the sale of forest products from one part of the treatment they may 

be trying to accomplish on part of a particular forest stand and use 

some of that money to improve something somewhere else. So if the 

Forest Service wants to build a campground because there is a demand for recreational opportunities, they can sell a little bit of timber over here, build a recreational facility over here. If there is a 

water issue because a culvert has blown out, they can use some of 

the assets they have right there on the ground and improve that 

work somewhere else in the forest, and the fact of the matter is 

this authority can really help the agency and help the Congress in 

terms of trying to ensure that the assets that we have in our forests are used in the best possible way. I would really encourage 

permanent reauthorization for this important authority. 

2444

The CHAIRMAN. Thanks, Mr. Goergen. 

Mr. Burke, you mentioned that right now USDA’s Biobased Markets Program doesn’t recognize products made from your forest as 

biobased. Can you tell us why this is the case? 

Mr. BURKE. Well, the way the legislation has been incorporated 

with the regulations that have been drafted, there is language that 

requires that it be a new product with a certain date. And if you 

look at products, for example, that come off of my farm, an example 

would be hardwood that is made into pallets. There are pallets that 

come from overseas that are made of hemp which compete and get 

the labeling, and also would be what a Federal agency would have 

to procure over and instead of the product that is made locally on 

my farm. 

And I think that is an unintended consequence of the legislation. 

And our recommendation is that the playing field be leveled so that 

all biobased products, whether they are traditional or new would 

be recognized. That would create more jobs and stimulate the economy. And that is particularly important in the forest industry at 

this time, because the forest industry is still struggling with one 

of the worst downturns since the Depression. 

The CHAIRMAN. Similarly, I have concerns that the current rating system utilized by the Leadership in Energy and Environmental Design, commonly known as LEED also disadvantages forest products. Do you agree with this? Is that your observation? 

Mr. BURKE. Well, I think that what we would like to see is, 

again, a level playing field so that procurement can be LEED or 

comparable or other recognized sustainable resources. So we would 

like to see a level playing field with respect to procurement across 

all of those categories. 

The CHAIRMAN. I have seen data suggesting that in Pennsylvania, we have lost over 13,500 jobs in the forestry sector in the 

last few years. And I appreciate your mentioning that. Actually I 

will soon be introducing legislation to fix the Biobased Markets 

Program to better recognize forest products. And I am supportive 

of the goal that this fix will help bring back, or at least stabilize 

our job losses, not just in the Commonwealth of Pennsylvania but 

throughout the country, and I appreciate your earlier remarks. I 

was just checking to see if you would agree that that is a step in 

the right direction. 

Mr. BURKE. I will be blunt. We think it is a brilliant solution because it is cost neutral, it will stimulate markets, it will create 

jobs, and it is a very wise and sound decision. 

The CHAIRMAN. I appreciate that. I have been called a lot of 

things. This may be the first time my name and ‘‘brilliance’’ has 

ever been associated in the same statement though. 

I will recognize for the purpose of 5 minutes of questions, Mr. 

Gibbs, of Ohio. 

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

all for coming in today. 

Mr. Dye, in your testimony, you talk about H.R. 872 it is a bill 

I sponsored that passed out of the U.S. House of Representatives 

in March a year ago, 2011, by a super bipartisan majority, and it 

is sitting in the United States Senate, so I know you share my frustration. 

2445

And I wanted to ask you a couple of things about that. You talk 

about the duplication and of going to get NPDES permits. The first 

question on that aspect, are you starting to see delays since this 

was delayed all through last year now the U.S. EPA and states 

have to start implementing it? And then the second part of the 

question, there is a report a couple weeks ago I saw that there is 

a concern that because of this there might be pesticides used, that 

in a less than full strength manner, I don’t know how else to say 

it, that we won’t get a good kill of invasive species of both plants 

and pests. You mentioned here in your testimony you talk about 

what can happen, problems with reestablishing forests and managing riparian areas. So do you want to comment on those two 

areas? 

Mr. DYE. Yes. The use of herbicides, all pesticides are essential 

in certain forestry operations to establish regeneration, new forest. 

And we have worked with chemicals for years and find that some 

are just much more effective, cost effective and are environmentally 

safe and sound. And a duplication of regulation does not seem to 

make sense. I guess I answered question number two first. 

What was your first question again? 

Mr. GIBBS. Since the legislation hasn’t passed, when U.S. EPA 

and the states now have to move forward, one of the things I 

talked about last year was the concern that there could be literally 

thousands, whatever, of permit applications and it just overwhelmed the regulatory—the agencies, the EPA, state and Federal 

level. Are we starting to see that or a backlog? What is happening 

in the permitting? 

Mr. DYE. Quite frankly, I cannot answer that question right now, 

but I can find out and will report that to the Committee. 

Mr. GIBBS. I am really concerned too. It is not just pesticides 

here in use for, in the forestry or the agriculture sector, but also 

in mosquito control districts, and we are going to see some very 

negative consequences this coming summer, mosquito season. 

Another question for Mr. Dye, and I don’t know if Mr. Burke 

might want to get into it. The Ninth District Court ruling on making forest roads point source? Can you explain a little bit how best 

management practices versus just going to get an NPDES permit 

to be a point source? What is the best workable solution and how 

big of a problem is this issue? 

Mr. DYE. Sir, being from the neighboring State of Ohio, West Virginia, as you may be aware, I want to cite we have an excellent 

program and in that state and other states, surrounding states do 

also, very similar, where we work with the logging community, and 

ensure that BMPs are installed. BMPs are basically handling 

water in small quantities to prevent erosion and sedimentations of 

the state’s waters. And all states across the nation have varying 

degrees of this program, but it is something that the state forestry 

agencies have handled for 35 years or more. 

We recognize the importance of it, and we feel that this is being 

handled and anything further would simply be duplication, added 

expense. 

Mr. GIBBS. Would you agree that just going, enforcing producers, 

farmers whatever, to go out and get an NPDES permit and they 

set certain levels, it doesn’t really solve the problem. It would be 

2446

extra burdensome regulation on them, and even if they were to 

doing the best management and hopefully most of them are doing 

best management practices, it is duplication that just adds cost and 

paperwork? Is that true, it wouldn’t really have a significant favorable impact to get to where we want to be? 

Mr. DYE. Correct. I totally agree with that. 

Mr. GIBBS. Mr. Burke. 

Mr. BURKE. I would like to drop a couple of footnotes there. I 

would like to add a little bit to that. 

I think in addition to adding cost, it could create some unintended consequences. We could discourage a recovering market 

with forestry. We don’t need those regulations because this farm 

bill had the wisdom to realize that voluntary, incentive-based programs are really more effective than the hammer of legislation. I 

think that the bill, the Silviculture Regulatory Consistency Act, 

that proposed piece of legislation would be a good solution to remove the uncertainty that now hangs over the head of forest landowners. 

I don’t think the regulation is needed. I think clarification of the 

statute would be appropriate, and I fear that if it were enforced as 

some think it might be under the Ninth Circuit, we could clearly 

have an unintended consequence of discouraging forestry. 

Mr. GIBBS. Indulge me. 

The CHAIRMAN. Without objection. 

Mr. GIBBS. Thank you. It is hard for me to believe that this issue 

is an issue that really is causing a big major problem, sediment 

contamination. Obviously, on forest roads when there is maybe timbering going on in that area, there would be more traffic, but lots 

of times those are dormant and the vegetation grows up. Could you 

just quickly let me know if it is a big deal? How big of a deal is 

this? Should EPA be focused on other areas? 

Mr. BURKE. I candidly think they should focus their attention 

elsewhere because a properly-managed forest road is a nonevent 

with respect to water quality. Under Virginia’s BMPs, that is going 

to manage the water quality in that voluntary way. On our farm, 

for example, we reestablish promptly any road that is disturbed. A 

road by definition is to avoid random compaction, so you put your 

roads in a smart place, you design them properly with water bars, 

you use those roads when you need to, and then you promptly reestablish a cover on them. And if you do those things, and that is 

what most good stewards do, and that is what the BMPs encourage, we have a nonissue as it relates to a point source and EPA. 

Mr. GIBBS. Thank you. Thank you, Mr. Chairman. 

The CHAIRMAN. I thank the gentleman. I recognize the gentleman from Colorado, Mr. Tipton, 5 minutes for questioning. 

Mr. TIPTON. Thank you, Mr. Chairman. You are running a brilliant Subcommittee hearing here. I wanted it to happen twice. I 

would like to thank our panel for taking time to be able to be here. 

Mr. Goergen, you spoke to something that speaks directly to my 

heart out in the western United States in my third Congressional 

district in Colorado western slope, better than 70 percent of the 

land is either Federal, state or tribal lands. A lot of the forests, 

100,000 trees per day that you mentioned are falling in our forests 

right now are creating an incredible challenge in terms of mainVerDate 0ct 09 2002 12:54 Dec 11, 2012 Jkt 041481 PO 00000 Frm 00858 Fmt 6601 Sfmt 6601 I:\DOCS\112-30\74372.TXT BRIAN
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taining healthy forests, in terms of the fire threat. And could you 

maybe speak to because we are talking, Mr. Burke was noting a 

bit about water quality issues; if these forests burn, what type of 

impact is that going to have on water quality? 

Mr. GOERGEN. Absolutely devastating, sir. If you look at what 

happened after some of the big fires in Colorado to the Denver watershed in particular, the costs are astronomical. And those are individuals paying a great deal more in the City of Denver because 

they are relying on water from other parts of the state to be clean 

and healthy. And the fact of the matter is, when these trees burn 

and the soil is scorched, it doesn’t hold the water, it doesn’t filter 

the water, and we have tremendous impacts on our reservoirs because they fill up with sediment. 

Mr. TIPTON. Would it be accurate to be able to say that if we do 

not follow some of the prescriptions that Mr. Burke and others are 

speaking to now to manage healthy forests, we can literally sterilize the soil with a high fire going through these areas, and when 

we are talking about protecting our water, protecting our watersheds in the West where we have maybe 12, 14 inches of rainfall 

that comes in a total year, it is in the best interests of this country, 

the Environmental Protection Agency, our states and our nation to 

actively manage these forests? 

Mr. GOERGEN. There is no question, sir. Absolutely. That is absolutely what we should be doing today. And I would actually ask the 

Congress and this Committee to even take a look at, could we clarify parts of the Healthy Forest Restoration Act to ensure that the 

Forest Service can get this work done on an emergency basis as 

well. 

Mr. TIPTON. So would you agree we just held a Subcommittee 

hearing that I chaired out in Colorado trying to get an actual answer to the point. Is the bark beetle an imminent threat? 

Mr. GOERGEN. There is no question. 

Mr. TIPTON. No question it is an imminent threat, so in the interests of this country the Forest Service, the BLM should be allowing the flexibility to be able to address this properly? 

Mr. GOERGEN. Absolutely, and they have the skills to do it. The 

problem is the process. 

Mr. TIPTON. And the process. And that leads me back to Mr. 

Burke when you are talking about some of the regulatory compliance, and you will find this shocking but across the board, we continue to hear about over-regulation, duplicative regulation, which 

is inhibiting our ability to be able to make commonsense decisions, 

increasing costs. 

When we are talking about the forests, don’t they actually filter 

water for us? Isn’t that one of the clean sources coming out. 

Mr. BURKE. That is correct. If you think again of the forest as 

our watershed, it is accomplishing several things. It is allowing the 

water to proceed to streams and rivers gently and carefully but 

also filters it. On our farm, for example, under CRP, we have filter 

strips that are grassy areas that filter the nutrients before they 

reach the streams. On our forested areas in compliance with many 

of the farm bill programs, again, not regulatory compliance but incentive-based voluntary compliance, we are leaving forested buffers 

under the BMPs which protect the water quality. 

2448

And I will second your concern about fire, even though we speak 

for a group of private landowners, the health of the forest on Federal lands is very important to us because we are your neighbor, 

and if a bug outbreak gets to roaring, or if there is improper forest 

management on adjacent property, there can be fire risks to us as 

neighbors to Federal property. So forest health is important across 

the board, and these farm bill programs are set to do that and 

should continue. 

Mr. TIPTON. Great, I appreciate that. 

Mr. Schwab, you have some counterparts in Colorado that share 

your concern when it comes to some of the forest contracts. Colorado, we have one mill remaining in the State of Colorado and it 

is under receivership. We have 100,000 trees falling every day creating a fire threat into our areas, biomass plants are ready to go 

if they could just get the approval out of the Forest Service to move 

forward. 

Do you have a recommendation in regards to how to be able to 

structure those contracts so that you can make your business work 

so we can make healthy forests and we can be working with some 

common sense in terms of forest management? 

Mr. SCHWAB. I personally have worked with the Stewardship 

Contracting system, and it works really, really well. So the easier 

you can make it to where your contractors are willing to place a 

bid on it as close to your markets and other things, the better off 

you are all the way going to be. 

But to simplify the contracting process, to make it work for everybody would be super, but really the biggest hurdle that we experience as loggers trying to bid on Federal contracts is getting the 

contract the timber sale approved to begin with, to get it and to 

go through all of the environmental studies and the archeological 

studies and just the bureaucratic red tape that everybody has to 

deal with in order to put this valuable resource that this country 

owns on the marketplace to be able to get it to be sold is a nightmare. 

And so if you could somehow increase the efficiency through the 

government and bureaucracy side of it, then I think we could be 

moving forward and Stewardship Contracting is a great way to do 

that because you take, in essence, two contracts and fold them into 

one, and you are taking the resource over here and applying it to 

needs over there whether it is road building or fire line creation. 

Even if it is a cost situation of getting beetle kills down, buffer 

strips around these beetle kills, you can fold that right on into 

stewardship. 

So making it simple and giving your foresters on the ground the 

ability to be able to make a decision and then follow through with 

those decisions would be crucial in being able to solve these problems. 

Mr. GOERGEN. Just to jump in very quickly, in many cases, on 

the Federal side it can take 18 months for them to get a project 

done in some of these beetle areas. 

Mr. Burke has pine beetle problems in Virginia. And we were 

talking earlier and he was telling me the trees that I have with 

pine beetles were at the mill before the beetles woke up from the 

2449

winter. That is what we need to be doing in our Federal lands as 

well. 

Mr. TIPTON. I thank the gentleman. I yield back, Mr. Chairman. 

The CHAIRMAN. I thank the gentleman. I now recognize the gentleman from Florida, Mr. Southerland, for questions. 

Mr. SOUTHERLAND. Mr. Schwab, I am continuing on the note 

there from my good friend from Colorado, you had mentioned in 

your testimony, our nation’s loggers are in trouble. In a recent 

study completed by the Wood Supply Research Institute indicates 

that we have lost close to 40 percent of logging capacity here in the 

United States. 

I personally know many of these small, family-owned businesses 

and know that they contribute greatly to communities where unemployment is still hovering between 15 and 20 percent. The United 

States is the world’s largest consumer of forest products, and we 

would prefer promoting job creation and economic stability here in 

the United States. 

Could you quickly elaborate on the major challenges you face 

today in your industry? Because I know your family business, I 

know the impact you have on your community, and I know it is a 

sacrifice for you to be here, and I certainly appreciate your presence. So just what are maybe one of the top two things that you 

feel are the biggest threat to you and your livelihood? 

Mr. SCHWAB. Today, it is over-regulation. We in the forest, the 

logging side of the forest industry have tremendous amount of capital invested in our equipment. Today, to buy a new piece of equipment we are spending anywhere from $20,000–$50,000+ per unit 

per piece of equipment just to comply with EPA air regulations for 

our new diesel engines. And what that is doing is increasing the 

cost of my equipment but not just that, but I am not getting any 

more production out of that piece of equipment because of that cost. 

Uncertainty, with the Ninth Circuit Court ruling on water runoff 

on forest roads and calling that a point source pollution which is 

asinine, that is causing uncertainty in our industry where we have 

possibly new business development coming along or new markets 

being developed, they are wanting to know what is this increased 

regulation going to cost me? What is going to happen here? So that 

is uncertainty. 

And then the other thing is access to resource. The Congressman 

from Colorado mentioned that he has beetle problems in his forest. 

Well there are regions of this country where 80 percent of the land 

base in rural America is owned or managed by the Federal Government. We do not have access to those forests today as timber harvesters, to be able to manage that resource that doesn’t cost this 

country anything to grow. It should be putting money into the coffers. 

I heard another Congressman mention, the first panel about 

where are we going to get the money from? How are we going to 

pay for these Federal programs? Gentlemen you have the money 

growing in the forest right now. And it is time for us as Americans 

to be able to go out there and harvest that resource that God put 

on that ground for us to harvest and enjoy, and be able to put that 

money back into the coffers. 

2450

Most of the men at this table right here are not standing here 

with their hand out asking you for money. We are wanting to put 

money in the Treasury. We are wanting to create jobs. So if you 

eliminate regulation from stifling our industry, and you eliminate 

bureaucracy on trying to cut your—our timber, our timber on Federal lands, I think that our industry could have a great chance of 

recovering in a quick way. 

Mr. SOUTHERLAND. Thank you, Mr. Schwab. 

Mr. Holmes, I am familiar with your neck of the woods. You have 

some pretty nice deer hunting up there in the Black Belt, and so 

my family enjoys your area. Let me ask you, being from Alabama, 

talk about, we have talked about the Ninth Circuit and what has 

occurred. It seems to me that the EPA, in many ways, produces solutions that are looking for problems. And so tell me about your 

area. I know you are several, a couple hundred miles north of us, 

but relating to that issue and even piggy-back off of what Mr. 

Schwab has said. 

Mr. HOLMES. Yes, sir. One of the other things that I would like 

to address that Mr. Schwab said that I think would be beneficial 

to you, is in the South, we also have the pine beetle. We have the 

southern pine beetle in the South, and it has devastated us back 

in the 1980s, really devastated us. 

He was talking about the cost of his equipment and getting 

things done. And we used to have, in Florida, we had little pulpwood trucks, and in Alabama we had those little pulpwood trucks 

running around with people get out of and take care of these small 

areas of southern pine beetle, and I am wondering what is going 

to happen we already missed one cycle of pine beetles in the Southeast, we are due for another big slam. And what is going to happen 

when you call up Mr. Schwab that has to bring $1⁄2 million worth 

of equipment to come in and cut 20 acres of pine beetle infestation? 

He is going to laugh at you. 

And I am very worried about what is going to happen now because we had small bases that could go in and cut out these areas 

and tend to that. We don’t that have that now. And it is going to 

be something to look at. But as Mr. Burke said, our log roads, I 

have 4,000 acres of timber on my farm, the whole family has about 

18,000 acres of timbered land. We maintain our own roads. When 

we cut timber, we try not to have large timber sales. We take out 

a retainer up front, they pay us an amount of money to make sure 

that our roads are reestablished, our water bars are put back in, 

if there are any stream crossings that were disturbed, they are to 

be put back to the way that they were. 

We can handle this, and being the soil and water conservation 

districts, we really speak a lot of being locally led, and this is locally led but it is also a volunteer movement with us having best 

management practices, having SMZ guidelines to go on, I see this 

as a nonissue. 

Mr. SOUTHERLAND. Right. Many of us do as well. 

Mr. GOERGEN. Very briefly to echo this point, you have all made 

excellent points about over-regulation in a sense. 

The Chief of the Forest Service, the nation’s chief forester, has 

said that voluntary and in some cases mandatory BMPs are doing 

2451

* The documents referred to: (1) Assessing the Effectiveness of Contemporary Forestry Best 

Management Practices (BMPs): Focus on Roads, Special Report No. 12–01, January 2012; (2) 

Compendium of Forestry Best Management Practices for Controlling Nonpoint Source Pollution 

in North America, Technical Bulletin No. 966, September 2009; (3) A Review of Waterbodies Listed as Impaired by Sivicultural Operations, National Association of State Foresters and the Society of American Foresters, June 2000; (4) The Effectiveness of Forestry Best Management Practices for Sediment Control in the Southeastern United States: A Literature Review, SOUTH. J. 

APPL. FOR. 35(4) 2011, pp. 170–177; and (5) Trends for Forestry Best Management Practices Implementation, JOURNAL OF FORESTRY, September 2010, pp. 267–273, are retained in Committee 

file. 

the job. I actually have the research data to back that up and 

would be happy to provide the Committee with that information.* 

The CHAIRMAN. Without objection. I would ask that be added to 

the record. 

Mr. GOERGEN. I think the real issue here is the National Alliance 

of Forest Owners estimates that the cost could be almost $6 billion 

if this were a regulatory action that came down from EPA. Now we 

know it is not necessarily EPA’s fault, the courts are overzealous, 

et cetera, but $6 billion that we could be spending on improving forest habitat for wildlife, improving it for people, improving it for 

water quality, there is much better use of money than on this regulation. Thank you. 

Mr. SOUTHERLAND. Thank you. I yield back. 

The CHAIRMAN. One final question, actually for all the panelists 

that would like to weigh in on. The purpose of regulation and the 

role, the impact of over-regulation I guess is what my question is 

about. We talk about healthy forests, and we talk about you have 

to manage a forest for it to be healthy. That means timbering, that 

means dealing with the fire load, that means preventing wildfires, 

that means managing the invasive species that have been mentioned here today. So whether it is over-regulation as related to 

being declared as a point source, regulation in terms of road, the 

Ninth Circuit ruling with roads is just over-regulation in general. 

We have talked about jobs, we have talked about economic impact, 

those type of things, I just want to focus on with my final question, 

a healthy forest, has to be managed to be healthy. How devastating 

is over-regulation to having healthy forests in this country? 

Mr. SCHWAB. Mr. Chairman, it is very devastating because we 

have proven, this industry as a whole, nationwide, has proven that 

we can create our best management practices ourselves. We can police ourselves. In Florida, where I am from, we are at 99 percent 

compliance to the best management practices that we put in place 

ourselves. We don’t need the EPA to come and tell us that our air 

quality coming out of our equipment that we are using to harvest 

the forest where the air is the cleanest is too dirty. We don’t need 

the EPA or the Ninth Circuit Court coming in and telling us that 

our roads, that rain is a point source pollution running off of a 

road. It is insane. 

And what it is going to cause is the economic advantage of going 

in here and doing the first time thinning or doing a clear-cut on 

a stand that needs to be clear-cut because it is beetle infested or 

whatever it is to regenerate new growth is not going to be economically advantageous for us as an industry to go and do this. So, the 

forests will continue to fall in disrepair, fire hazards will happen, 

and then your water quality actually will go down. So over-regulation is what is stifling what we are doing as an industry. 

2452

The CHAIRMAN. Go ahead, Mr. Holmes, please. 

Mr. HOLMES. Just to follow up again on what Mr. Schwab said, 

about 30 years ago, I was in Perry County with an 8 year old child 

and we were going on a logging road, and I had a piece of ground 

flagged, and my son said, daddy, what are you going to do, what 

is going on? And I says well son, I said, we are going to clear-cut 

this tract of timber right here and we were having an infestation 

of bugs, we had lost a good many of the pine trees. A lot of them 

were over 100 years old from old fields that had grown back up 

into trees. And so he starts crying, because that is one of the places 

he liked to hunt, and he killed his first deer there when he was 

8 years old. And I said, son, trees are just like people. And I said 

we all have a lifetime. And to maintain a healthy forest and to 

maintain the beauty and the aesthetics and the wildlife that you 

want to see, sometimes we have to remove some of this. 

And I have been to Alaska and I have seen the beetle outbreaks 

there and I have been to Colorado and I have seen the outbreaks 

there. And we have scientific proof, research done that shows that 

if we can keep the understory removed out from under some of this 

forest and if we can keep a thinning on some of these trees that 

we have a healthier forest that provides abundance of wildlife, 

water quality, air quality and everything else. 

And so I agree with Mr. Schwab. Why can’t we do something 

about using those moneys that we, as Americans, all have to take 

care of the needs that needed to be taken care of and also have a 

healthier forest? 

The CHAIRMAN. Very good. Go ahead, Mr. Burke. 

Mr. BURKE. Let me just share an example of where regulation 

with respect to roads would be negative as opposed to a more positive approach. 

If you required a road permit, the cost would be significant. It 

would not benefit the land directly and you will see why in a 

minute. It would simply be an additional cost which would make 

the cost on the landowners and the cost to loggers more to conduct 

healthy forests harvesting and thinning. Compare that to the voluntary incentive based leverage, if you will, when farm bill money 

is put into the hands of private landowners. The private landowner 

adds his or her own additional money; they add sweat equity, and 

then they do practices which will last for a long, long time. 

Those benefits give him significant leverage effect and provide 

much better forest protection, they provide better water quality 

protection, and better fire management. So that is a much better 

approach than to regulate. 

The CHAIRMAN. Mr. Dye, did you have comments? 

Mr. DYE. Regulations are meant to protect us from something 

but if you look at the list of activities in the forest and what is regulated, it has gone 180° the other way. Because of regulations, we 

have increased forest fires, increased bug outbreaks, a worsening 

economy, uncertainty for those that want to invest in businesses, 

which leads to declining employment. So regulations to protect ourselves from—has gone 180° of its actual intent. 

The CHAIRMAN. Very good. I want to thank all the members of 

the second panel. I want to thank you for your expertise, thank you 

for your experience and thank you for your endurance for joining 

2453

us today. Hopefully, as you saw from the interests, and even, I 

would say, the passion of the Members of the Subcommittee, this 

Subcommittee takes its responsibility very, very seriously, and 

today we have had the opportunity obviously in this kind of final 

Subcommittee hearing on the energy and forestry titles to get some 

excellent input and information. 

Our next step really is to write a farm bill using the information 

that we have here. So we will be under the leadership of Chairman 

Lucas. We will be starting that process. Certainly any additional 

resources and we look forward to the data that you have talked 

about, but any open invitation to continue to forward any additional information you think would be helpful in the process. I 

speak on behalf of all the Members of our commitment to do our 

due diligence in our preparation so we have the best possible farm 

bill for all the titles within the farm bill. 

And so given that, under the rules of the Committee the record 

of today’s hearing will remain open for 10 calendar days to receive 

additional material and supplementary written responses from the 

witnesses to any questions posed by a Member. This hearing of the 

Subcommittee on Conservation, Energy, and Forestry is adjourned. 

[Whereupon, at 2:35 p.m., the Subcommittee was adjourned.] 

[Material submitted for inclusion in the record follows:] 

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2455

SUBMITTED STATEMENT BY HON. JIM COSTA, A REPRESENTATIVE IN CONGRESS FROM

CALIFORNIA; ON BEHALF OF RAND WENTWORTH, PRESIDENT, LAND TRUST ALLI- ANCE; MARK ACKELSON, PRESIDENT, IOWA NATURAL HERITAGE FOUNDATION; LAU- RIE WAYBURN, PRESIDENT, PACIFIC FOREST TRUST; JANE A. DIFLEY, PRESIDENT/

FORESTER, SOCIETY FOR THE PROTECTION OF NEW HAMPSHIRE FORESTS; GIL LIV- INGSTON, PRESIDENT, VERMONT LAND TRUST

May 15, 2012

Dear Congressman Costa and Members of the Subcommittee,

As you prepare for the upcoming hearing on energy and forestry programs in the 

2012 Farm Bill, we thank you for the opportunity to submit this testimony on behalf 

of working forest landowners, state agencies, and the land trusts that partner with 

them in ensuring the long-term sustainability of our nation’s forest resources. 

We speak as representatives of the Land Trust Alliance (LTA), a Washingtonbased national association representing more than 1,700 nonprofit land conservation 

organizations, and the Iowa Natural Heritage Foundation (INHF), Pacific Forest 

Trust (PFT), Society for the Protection of New Hampshire Forests (Forest Society), 

and the Vermont Land Trust (VLT), conservation organizations and policy advocates 

from across the country that are dedicated to the protection of private working 

lands. Collectively, the nation’s land trusts have the privilege of working with a 

wide range of landowners to help them conserve their land. From small family 

forestlands and farms to large industrial timberlands, many of these landowners 

have been on their lands for generations, and for generations the economic and environmental benefits their lands provide have been central to the health, livelihoods, 

and well-being of rural communities. 

We thank you for the opportunity to discuss an important improvement to a program that is instrumental in helping conserve these lands, the U.S. Department of 

Agriculture’s Forest Legacy program. While Forest Legacy is one of the most important funding sources for the conservation of our nation’s private forests, the minor 

change we discuss below would significantly increase the effectiveness, cost-savings, 

and flexibility of this important program. We thank you for your time and consideration on this issue, and look forward to continuing to work together as the House 

moves forward on the 2012 Farm Bill. 

Executive Summary 

From the beginning of the Forest Legacy program (FLP), nonprofit conservation 

organizations have served as facilitators of many Forest Legacy projects. These 

groups act as a transactional—and sometimes financial—bridge between private 

landowners and state agencies. Under current law, however, land trusts cannot directly hold the conservation easements funded through Forest Legacy. We believe 

giving states this additional tool will unlock the full potential of the Forest Legacy 

program to conserve our nation’s private forests. It will stretch Federal dollars further by fully engaging the private philanthropic sector. It will reduce the long-term 

burden on state agencies that already are struggling to fulfill their stewardship 

commitments, and it will bring more landowners into the pool of possible projects. 

We also believe it can be done in a way that smoothly integrates with the existing, 

highly regarded program. 

Proposal in Brief 

• States would be given the option to have qualified private land trusts act as 

the easement holders and monitors of Forest Legacy easements. Each state lead 

agency would decide whether it wanted the land trust option or not. For those 

states that did, the land trust role would be examined on a project-by-project 

basis through the existing competitive process run by each state.

• All other aspects of the existing program would remain unchanged. Forest Legacy grants would continue to go to the states via the designated state lead agency, not to land trusts directly. The state lead agency would continue to have 

final authority over all easement language, management plans, etc. Proposed 

projects in which a land trust will be the primary holder of the Legacy easement would go through the same state and Federal ranking process as all other 

projects (i.e., those where states would hold the easement).

• States would still hold a direct interest in the easement, but this could be 

achieved through the state taking an executory (‘‘back up’’) interest, that could 

be exercised if the land trust went out of business or was not upholding its 

stewardship responsibilities.

• All FLP requirements would apply for a land trust-held easement. For example, 

all easements would have to be consistent with Forest Legacy program requireVerDate 0ct 09 2002 12:54 Dec 11, 2012 Jkt 041481 PO 00000 Frm 00867 Fmt 6621 Sfmt 6621 I:\DOCS\112-30\74372.TXT BRIAN
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1 Brown, T.C., et al. 2005. The source of water supply in the United States. RMRS–RWU–4851 

Discussion Paper. 57 p. Unpublished report. On file with: U.S. Department of Agriculture, Forest Service. Rocky Mountain Research Station, Fort Collins, CO. 2Garrett-Peltier, H. (2010). Political Economy Research Institute, University of Massachusetts, Amherst. 3Stein, S.M., et al. 2009. Private forests, public benefits: Increased Housing density and other 

pressures on private forest contributions. PNW–GTR–795 General Technical Report. U.S. Department of Agriculture, Forest Service. Pacific Northwest Research Station, Portland, OR. 

ments, and be subject to Forest Service review. Project appraisals would have 

to be completed using Federal appraisal standards, and all cost-share projects 

would need to completed within the grant period.

• There would be a mechanism for ensuring land trusts are fully qualified to hold 

and steward Forest Legacy easements. We would propose the Forest Legacy 

program work with LTA on developing these criteria as part of their rigorous 

new accreditation process for the nation’s land trusts. 

Why Make the Change? 

• Stretch Federal dollars—Today, the demand for Forest Legacy funds clearly outstrips available resources. Private foundations and individual donors partner 

regularly with the nation’s private land trusts, but typically do not underwrite 

the activities of public agencies. Allowing land trusts to hold Forest Legacy 

easements would bring these important private philanthropic resources fully to 

bear at the project level.

• Reduce stewardship burden on the states—States must find room in already 

tight budgets for the ongoing stewardship and monitoring responsibilities that 

come with holding Forest Legacy easements. In many states, the land trust 

community’s capacity for land stewardship is equal to or greater than that of 

state agencies. Despite this, these stewardship resources are left on the sidelines because land trusts cannot hold FLP easements.

• Reach more forest landowners—In addition to fiscal considerations, Forest Legacy’s current rules also compromise the ability of the program to work with 

landowners who will not accept a governmental agency holding an easement on 

their lands. By not fully engaging land trusts, FLP is losing a category of landowners who may in fact hold some of the most important lands to protect. 

Who Supports the Idea? 

A wide range of private forest landowners, timber industry representatives, land 

trusts, and state foresters support this change, and have indicated their support in 

the attached sign-on letters. 

Improving Forest Legacy 

Why Private Forests Matter 

The value of the nation’s private forest lands is in no way limited to their owners 

alone. Private forests play a critical role in sustaining rural economies and providing forest products and essential ecosystem services that benefit us all. More 

than 1⁄2 of the United States’ entire freshwater supply originates from forests,1 and 

forest biomass is an important renewable energy alternative to imported fossil fuels. 

Per dollar of investment, forests create more jobs than any other economic sector, 

and are the lifeblood of many rural communities.2

Despite the great importance of these lands, their future is uncertain. Our nation’s private forests are increasingly threatened by conversion and development as 

populations trend ever upward and drive sprawl into our forests.3 At the same time, 

today’s tough economy has made earning a livelihood from working forestlands increasingly difficult. This fiscal strain coupled with conversion pressures challenge 

the ability of private forest landowners to maintain their lands as forest. When 

these lands are lost to conversion, it is not only vital ecosystem services that are 

sacrificed; for the families and communities that have depended on these lands for 

generations, it also spells the end to a way of life. 

The Forest Legacy Program 

Since 1990, the USDA’s Forest Legacy program has been a critical source of funding for the permanent conservation of our nation’s private forests. Under Forest 

Legacy, which is administered by the U.S. Forest Service, USDA provides grants to 

designated state agencies to purchase conservation easements from willing landowners. Because of its use of easements, Forest Legacy allows for the conservation 

of working forestlands while keeping these lands in private ownership and on local 

tax rolls. This is an attractive option for both landowners and communities that do 

2457

not wish to pursue conservation if it means removing lands from private ownership. 

Since its inception, Forest Legacy has conserved more than 2.2 million acres in 43 

states and territories. 

Why Forest Legacy Needs a ‘‘Land Trust Option’’

Today, the Forest Legacy program has reached a point where demand for its 

funds is clearly outstripping its available resources. On the demand side, ever more 

states are participating in the program (53 states and territories as of writing this), 

which means that the total number of projects being proposed for Legacy funding 

each year continues to increase. At the same time, the average cost of a Forest Legacy project also is increasing relentlessly due to rising land values. On the supply 

side, Forest Legacy funding has essentially plateaued at $50–$60 million a year. 

This extremely effective and popular program either needs to see dramatic increases 

in overall funding, or it needs to find ways to stretch its resources further. We 

would argue strongly that both of these things need to happen, but will focus the 

balance of this testimony on one way we think USDA can make limited Forest Legacy dollars go further. 

The Role of Land Trusts 

From the beginning of the Forest Legacy program, nonprofit conservation organizations (known as ‘‘land trusts’’) have acted as facilitators of many Forest Legacy 

projects. These organizations have served as originators, and as a transactional—

and sometimes financial—bridge between private landowners and state agencies. 

Under the current program, however, land trusts cannot directly hold conservation 

easements funded through Forest Legacy. As a result, these state agencies must 

find room in already stretched budgets for the ongoing stewardship and monitoring 

responsibilities that come with holding an easement. In many states that participate 

in Forest Legacy, the land trust community has an equal or greater capacity for 

land stewardship when compared to state agencies. However, despite this great potential, these stewardship resources are left on the sidelines because land trusts 

cannot hold the easements. Further, not allowing land trusts to hold Forest Legacy 

easements also cuts off a critical source of capital that could otherwise be used to 

stretch Forest Legacy dollars: the private philanthropic sector. Private foundations 

and individual donors partner regularly with private land trusts, but are largely unwilling to directly subsidize the activities of public agencies. 

An amendment to Forest Legacy enabling state lead agencies, at their discretion, 

to allow qualified, nonprofit conservation organizations to hold Forest Legacy easements would overcome both of these financial hurdles. Once established, the change 

would cost the Federal Government nothing, save state forestry agencies time and 

money, and greatly stretch the effectiveness of Forest Legacy in preventing the loss 

of private forestlands. Adding the land trust option to Forest Legacy would allow 

it to mirror analogous USDA land conservation programs, such as the Farm and 

Ranch Lands Protection program (FRPP), that already take advantage of the substantial cost-savings that a full partnership with land trusts can afford. 

Saving Money and Supporting States 

Land trusts have a strong track record of easement stewardship, and states 

should have the right to utilize this asset if they so choose. States regularly work 

with land trusts in the implementation of their own conservation programs, and 

multiple state implementing agencies have expressed frustration with the current 

inflexibility of Forest Legacy, including Missouri, Washington, and California. In a 

letter to California’s Senators, Ken Pimlott, the director of the California Department of Forestry and Fire Protection, articulated the difficulties the agency is encountering when trying to implement Forest Legacy:

‘‘In California, the Federal requirement for the state or another public entity 

to hold the easement creates substantial difficulties when trying to combine 

Federal Forest Legacy program funding with state conservation bond funds and 

private funding sources. If Federal Forest Legacy program funds are involved, 

the state or another government agency must hold the easement, rather than 

allowing a qualified nonprofit land trust to play that role. This limitation in the 

Federal law places administrative burden on the Department of Forestry and 

Fire Protection, and can make it difficult for conservation projects to leverage 

Federal Forest Legacy program funds with other funds.’’

These sentiments and their timeliness were echoed in a letter from Peter Goldmark, the Washington State Commissioner of Public Lands, to Senator Patty Murray:

2458

4 Id.

‘‘Forest land conservation partners of the Washington State Department of Natural Resources and elsewhere in the country are seeking statutory authorization for qualified land trust organizations to hold title to conservation easements under Forest Legacy. I support this objective, and the matter seems a 

timely one given that regular order hearings on the 2012 Farm Bill reauthorization are scheduled to begin soon. Along with project benefits, this change would 

provide new opportunities for private fundraising that complements and leverage Federal contributions to Forest Legacy.’’

Working with Private Landowners 

In addition to fiscal considerations, the lack of flexibility under Forest Legacy’s 

current rules also compromises the ability to work with landowners who will not 

accept having a governmental agency hold an easement on their lands. In many 

cases, local nonprofit groups may be better equipped than state agencies to work 

with landowners and build ongoing community support for a project. The current 

inflexibility of the Forest Legacy program can prevent states from utilizing local 

nonprofits in this capacity, and preclude the conservation of critical forestlands. 

While it is true that the Forest Legacy program is already ‘‘oversubscribed,’’ by not 

fully engaging land trusts, it is losing a category of landowners who may in fact hold 

some of the most important lands to protect. 

In New Hampshire, where the state motto of ‘‘live free or die’’ still resonates with 

many private landowners, the Forest Society has had several potential Forest Legacy projects not proceed for this reason. One example is a 3,000 acre family forest 

parcel in the upper Merrimack River watershed, an area considered by the U.S. Forest Service to be the most threatened watershed in the nation in terms of private 

forest loss.4 The project is an ideal fit for Forest Legacy in terms of the land resource and management approach, but the landowners would only accept the Forest 

Society as the easement holder—the Forest Society has built relationships with forest owning families that in some cases go back generations. To date, the Forest Society has been unable to find an alternate approach to funding the project, and the 

land still remains very much at risk. 

Are Land Trusts Qualified? 

The nation’s land trust community includes a wide variety of organizations, including many with expertise and capacity that matches (and in some case surpasses) that of public agencies in their given service area. Founded in 1901, the Society for the Protection of New Hampshire Forests came into being at the same moment in conservation history as the U.S. Forest Service, with the same mission of 

conservation and stewardship through good forestry. The Society was New Hampshire’s de facto forestry agency until the 1940s, when the state created its forestry 

and parks agencies. Today, with 10,000 members and 40 full-time staff, the Society 

is New Hampshire’s largest private conservation landowner, owning 170 forest reservations in more than 95 communities, comprising 50,445 acres, and over 600 conservation easements covering more than 100,000 acres. This includes numerous 

properties where state or Federal funds (FRPP, NOAA, etc.) were used to purchase 

property interests held and managed by the Society. 

Since 1993, the Pacific Forest Trust has been dedicated to conserving and sustaining America’s vital, productive forest landscapes. Working with forest owners, 

communities and an array of partners, PFT advances innovative, incentive-based 

strategies to safeguard our nation’s diverse forests. In so doing, the organization ensures forests continue to provide people everywhere—from rural communities to 

urban centers—with a wealth of benefits, including clean water, sustainably harvested wood, green jobs, wildlife habitat and a livable climate. Pacific Forest Trust 

actively pursues this mission through land conservation, and currently holds 24 conservation easements on nearly 50,000 acres in both California and Oregon. In addition to these lands, PFT also holds fee title to more than 4,500 acres in these two 

states. Pacific Forest Trust has worked in close collaboration with state agencies in 

the development of these easements, and to date has received more than $22.3 million in state funding for their acquisition, as well as $200,000 in pre-project support. 

Key Considerations 

We believe adding a land trust option to Forest Legacy can and should be made 

in a way that is minimally disruptive to the administration of the existing program. 

With this in mind, we would propose the following key framing principles for how 

the change should be made:

2459

• Forest Legacy grants would continue to go to the states via the designated 

state lead agency, not to land trusts directly.

• Proposed projects in which a land trust will be the primary holder of the Legacy 

easement would go through the same state and Federal ranking process

as all other projects (i.e., those where states would hold the easement).

• There would be a filtering mechanism for making sure land trusts are 

fully qualified to hold and steward Forest Legacy easements. States could 

elect to work only with certified land trusts, or the Forest Legacy program could 

partner with the Land Trust Alliance (LTA) to develop these criteria.

• States could still hold an interest in the easement. This would be achieved 

by the state taking an executory (‘‘back up’’) interest that could be exercised if 

the land trust went out of business or was not upholding its stewardship responsibilities. In the case of Legacy funds being used to purchase fee interest 

in land that would be owned and managed by a land trust, the state could hold 

a reverter interest in the fee, so that if the land trust fails in its obligations 

under the grant, the state would take title to the land.

• All FLP requirements would apply for a land trust-held easement. For example, all easements would have to be consistent with Forest Legacy program 

requirements, and be subject to Forest Service review. Project appraisals would 

have to be completed using Federal appraisal standards, and all cost share need 

to completed within the grant period.

In sum, we believe a simple change to the Forest Legacy program giving states 

the option to have private land trusts to hold and monitor Forest Legacy easements 

will unlock the full potential of the program to conserve the nation’s private forests. 

It will stretch Federal dollars further by fully engaging the private philanthropic 

sector. It will reduce the long-term burden on state agencies already struggling to 

keep their stewardship commitments, and bring more landowners into the pool of 

possible projects. We also believe it can be done in a way that causes minimal disruption to the existing, highly regarded program. 

Thank you very much for your consideration of our proposal. We look forward to 

more detailed discussions in the weeks and months ahead as the House does its critical work on the 2012 Farm Bill.

RAND WENTWORTH,

President, 

Land Trust Alliance;

MARK ACKELSON, 

President, 

Iowa Natural Heritage Foundation;

LAURIE WAYBURN, 

President, 

Pacific Forest Trust;

JANE A. DIFLEY, 

President/Forester, 

Society for the Protection of New Hampshire Forests;

GIL LIVINGSTON, 

President, 

Vermont Land Trust. 

ATTACHMENT

March 21, 2012

Hon. DEBBIE STABENOW, 

Chairwoman, 

Senate Committee on Agriculture, Nutrition, and Forestry, 

Washington, D.C.;

Hon. FRANK D. LUCAS, 

Chairman, 

House Committee on Agriculture, 

Washington, D.C.;

Hon. PAT ROBERTS, 

Ranking Minority Member, 

Senate Committee on Agriculture, Nutrition, and Forestry, 

Washington, D.C.;

Hon. COLLIN C. PETERSON, 

2460

Ranking Minority Member, 

House Committee on Agriculture, 

Washington, D.C.

Dear Chairwoman Stabenow, Chairman Lucas, and Ranking Members 

Roberts and Peterson:

As you begin work on the upcoming farm bill, we write to ask your help in 

streamlining the Forest Legacy program to both reduce costs and more fully realize 

its potential in protecting our nation’s private forestlands. 

The Importance of Forests 

Private forests play a critical role in sustaining our rural economies and providing 

essential ecosystem services. More than 1⁄2 of the United States’ entire freshwater 

supply originates from forests, and forest biomass is a potential renewable energy 

alternative to imported fossil fuels. Per dollar of investment, forests create more jobs 

than any other economic sector, and are the lifeblood of many rural communities. 

Despite the importance of these lands, however, their future is uncertain. The loss 

of private forestlands not only sacrifices crucial ecosystem services, but destroys the 

foundation of sustainable rural jobs, as well. With the United States projected to 

lose up to 75 million acres of forest over the next half century, the conservation of 

these lands is paramount to protecting a resource that countless Americans depend 

upon for their jobs, livelihoods, and well-being. 

Strengthening Forest Legacy 

Forest Legacy helps states protect our vital forest resources by funding conservation easements on private forestlands. Easements provide a powerful tool for landowners and communities to conserve their working forestlands while keeping them 

in private ownership and on local tax rolls. Partnering with nonprofit conservation 

organizations in holding easements can substantially reduce administrative burden 

for state implementing agencies, and improve overall program efficiency. 

While analogous agricultural land conservation programs, such as the Farm and 

Ranch Lands Protection program, already take advantage of the substantial costsavings partnering can afford, Forest Legacy currently does not allow state lead 

agencies to partner with nonprofits. As a result, state agencies must find room in 

already overextended budgets for the ongoing stewardship and monitoring responsibilities that come with holding an easement. This places undue administrative 

burden on state agencies, and can prevent important conservation projects from 

moving forward.

Simply allowing state lead agencies the option of partnering with qualified nonprofits to hold conservation easements funded through Forest Legacy would overcome this unnecessary but substantial obstacle to land conservation.

This new Federal flexibility would strengthen Forest Legacy by:

• Facilitating co-investment from states, local governments, and private funding 

sources to better leverage Forest Legacy funds;

• Minimizing long-term monitoring and stewardship costs by partnering with 

community-based groups capable of generating ongoing local support;

• Fostering the development of landscape-scale conservation by promoting publicprivate partnerships across multiple jurisdictions; and

• Enabling the development of large-scale projects through the combination of 

multiple conservation tools, such as easements, acquisitions, and tax incentives. 

Saving Money and Saving Forests 

In this time of fiscal constraint, finding ways to reduce agency costs and sustain 

rural economies is critical. By allowing state lead agencies to partner with nonprofit 

organizations on the Forest Legacy program, we have a unique opportunity to do 

just that. As you begin work on the upcoming farm bill, we urge your support for 

this important improvement to Forest Legacy. We look forward to working together 

to both save money and strengthen this important tool for rural communities and 

conservation. 

Sincerely,

Alabama Land Trust Georgia Land Trust Peconic Land Trust 

Appalachian Mountain Club 

Bitter Root Land Trust 

Hancock Timber Resource Group 

Humboldt Redwood Company 

Pennsylvania Land Trust Association 

Chattowah Open Land Trust Iowa Natural Heritage Foundation Port Blakely Companies Potlatch 

California Department of Forestry 

& Fire Protection 

Land Trust Alliance 

Land Trust of Arkansas 

Prickly Pear Land Trust 

Roseburg Forest Products 

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1The document referred to is located on p. 2439. 

2The documents referred to: (1) Assessing the Effectiveness of Contemporary Forestry Best 

Management Practices (BMPs): Focus on Roads, Special Report No. 12–01, January 2012; (2) 

Compendium of Forestry Best Management Practices for Controlling Nonpoint Source Pollution 

in North America, Technical Bulletin No. 966, September 2009; (3) A Review of Waterbodies Listed as Impaired by Sivicultural Operations, National Association of State Foresters and the Society of American Foresters, June 2000; (4) The Effectiveness of Forestry Best Management Practices for Sediment Control in the Southeastern United States: A Literature Review, SOUTH. J. 

APPL. FOR. 35(4) 2011, pp. 170–177; and (5) Trends for Forestry Best Management Practices Implementation, JOURNAL OF FORESTRY, September 2010, pp. 267–273, are retained in Committee 

file. 

California Forestry Association The Lyme Timber Co. Sedgwick Land Company 

The Collins Companies Mendocino Redwood Company Serenity Forests, LLC 

Colorado Conservation Trust 

Columbia Land Trust 

Conservation Forestry, LLC 

National Alliance of Forest Owners 

National Woodland Owners Association 

Society for the Protection of New 

Hampshire Forests 

Tall Timbers Research Station &

Conservation Northwest Forest 

Guild 

Northland Forest Products 

Northwest Connections 

Land Conservancy 

Vermont Land Trust 

The Forestland Group, LLC Northwest Natural Resource Group Washington Environmental Council 

Gallatin Valley Land Trust Pacific Forest Trust Western Pennsylvania Conservancy 

SUPPLEMENTARY MATERIAL SUBMITTED BY SOCIETY OF AMERICAN FORESTERS

On behalf of the 12,000 members of the Society of American Foresters, I would 

like to thank Chairman Thompson, Members, and staff of the House Agriculture 

Subcommittee on Conservation, Energy, and Forestry for affording Michael Goergen 

the opportunity to testify about important forestry programs in the farm bill on May 

18th. Please accept the attached copy of the SAF written testimony 1 with five documents that outline the effectiveness and success of forest best management (BMP) 

programs across the country referenced by Michael Goergen during the question 

phase of the hearing last week. 

The attached research 2 includes two Journal of Forestry articles that review BMP 

implementation rates, a study commissioned by the Society of American Foresters 

and the National Association of State Foresters that reviewed the methods and data 

used by the EPA to identify impaired watersheds due to silvicultural activities, and 

two documents recently published by the National Council on Air and Stream Improvement that review forest best management practices and analyze the effectiveness of these programs on water quality. 

Thank you again and please contact me if you have any questions. 

Best,

JOHN R. BARNWELL,

Assistant Director, Forest Policy, 

SOCIETY OF AMERICAN FORESTERS. 

SUBMITTED STATEMENT BY TOM JULIA, PRESIDENT, COMPOSITE PANEL ASSOCIATION

Chairman Thompson, Ranking Member Holden, distinguished Members of the 

Subcommittee on Conservation, Energy, and Forestry, and on behalf of the Composite Panel Association (CPA), thank you for the chance to submit comments on 

the formulation of the 2012 Farm Bill, specifically regarding its energy and forestry 

programs. 

I am writing to underscore the critical need to revise the definition of ‘‘Renewable 

Biomass.’’ It is essential for our industry and many others who use wood fiber as 

their feedstock, that government programs not encourage the diversion of these materials and byproducts away from their current use in higher valued products and 

into boilers as fuel. Diversion of this sort adds to our costs and sometimes even impacts the availability of our raw materials. We believe that public policy should encourage growing the sources of renewable biomass for energy programs, not the diversion of materials that are now productively used for higher valued products. 

The Composite Panel Association, founded in 1960, is headquartered in Leesburg, 

Virginia. Our 157 members are located throughout the United States, Canada and 

Mexico and represent manufacturers of particleboard, hardboard, engineered wood 

siding, engineered wood trim and decorative surfaces, which are used in retail, 

healthcare, residential and commercial applications. 

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board. We also represent most of the companies making wood-based decorative surfacing materials, as well as others affiliated with the composite panel industry. 

Composite panel manufacturing and the use of our products in both construction 

applications and home and office furnishings, is a major worldwide industry. In the 

U.S. alone, our mills employ more than 20,000 workers, and affect more than 

350,000 additional jobs, typically in small rural communities throughout the nation. 

We pride ourselves as being among the greenest industries in the world, as almost 

all of our members’ panel products are made with 100% recycled, residual or postconsumer wood. Indeed our industry is predicated on recycling and always has been. 

The CPA itself is a world leader in quality assurance, product testing and certification, sponsorship of voluntary industry standards, and development of technical 

data about industry products. 

One of the energy programs in the 2008 Farm Bill that we wanted to highlight 

today is the Biomass Crop Assistance Program (BCAP). We agree that the BCAP 

program, when established, was well intentioned and had a laudable goal of reducing our nation’s reliance upon foreign and non-renewable energy sources. As you 

know, its goal was to tap into our domestic agricultural and engineering resources 

and infrastructure and develop reliable, renewable domestic energy. 

The funding for the program was intended to help incentivize farmers, ranchers, 

and forest landowners to participate in this new marketplace by developing and 

growing new ‘‘energy crops’’ or sending waste products to biomass conversion facilities where they would then be used for bioenergy. However, as with many well intentioned programs, there were unintended consequences. 

The Composite Panel Association and the Wood Fiber Coalition who represent 

longstanding U.S. manufacturing, agricultural and service industries that depend on 

a reliable supply of wood fiber quickly identified one major flaw with the BCAP program after it was first unveiled. Our members recognized that the matching payment portion of the BCAP program began creating a diversion of wood by-products, 

such as sawdust, shavings and woodchips away from established markets and uses 

in the composite panel industry to bioenergy facilities. Manufactured products such 

as composite wood panels used in wood-based furniture, cabinets, doors, flooring, architectural moulding and millwork and other commercial uses of fiber such as landscape mulch and commercial growing media rely exclusively upon these wood byproducts as their only available raw material. As BCAP was rolled out, these materials were diverted away from the wood fiber industry. 

After considerable consultation and tens of thousands of written comments from 

the public, USDA established a rule to prevent this specific market distortion by 

emphasizing that the purpose of the program was to incentivize ‘‘. . . cultivation of 

new biomass for new markets rather than divert biomass from existing markets.’’ 

The rule goes on to define sawdust, shavings, woodchips and softwood and hardwood 

bark that has existing markets as a high-value material is not eligible for BCAP 

funding. Additionally, the biomass material that could be considered to be eligible 

for subsidy must be collected or harvested directly from the land before delivery to 

a biomass conversion facility. I would encourage the members of the House Agriculture Committee to retain the spirit of preventing market distortion as they move 

forward in the 2012 Farm Bill process and consider the future of BCAP and other 

energy programs in the farm bill and other energy related legislation. 

The current statute defines ‘‘renewable biomass’’ in relevant part as ‘‘. . . any organic matter that is available on a renewable and recurring basis . . .’’ Although 

there is an exclusion in the statute for materials from public lands that are used 

in higher valued products, the exclusion is not explicit regarding such materials 

from private lands. Byproducts such as bark, sawdust, shavings and woodchips 

could be considered to be eligible for subsidies in programs promoting bioenergy. 

Manufactured products such as composite wood used in wood-based furniture, 

cabinets, doors, flooring, architectural moulding and millwork and other commercial 

products such as landscaping mulch and commercial growing media rely exclusively 

on these wood by-products as their only available raw material. A definitional exclusion of biomass from private lands for use in higher valued products is needed in 

order to eliminate the incentive to divert basic raw materials away from existing 

industries that would be put at risk. At the same time, it would encourage the expansion of America’s fuel supply and the development of new sources of renewable 

energy. 

Renewable Biomass used for energy should emphasize unmerchantable and unused materials such as forest thinnings, stumps and agricultural waste. Only wood 

collected or harvested directly from the land that cannot be used for a higher value 

product or specifically grown for energy should be incentivized as fuel. 

The American Nursery and Landscape Association testified in a hearing before 

the House Agriculture Committee on May 8, 2012 and discussed this topic as well. 

2463

We have the same request that they do on this issue. Congress should embrace 

a Federal definition of renewable biomass that excludes materials that 

could be used for higher-value products, including, but not limited to, composite wood panels, lumber, finished or other manufactured wood products, mulch, nursery media, paper and packaging. Only biomass materials 

collected or harvested directly from the land should be federally 

incentivized. In doing so, Congress would recognize that forest and wood mill byproducts are essential feedstocks for existing industries supplied through an established, competitive and sustainable free market. A definitional exclusion of biomass 

for goods already used in higher valued products would eliminate the incentive to 

divert basic raw materials away from existing industries. 

We would ask the Members of the Agriculture Committee to support an amendment to the definition of ‘‘Renewable Biomass’’ that excludes bio-based materials 

from public and private land that are used for ‘‘higher value products.’’ This change 

is critical for our industries because many legislative initiatives now and in the future will look to the definition of ‘‘renewable biomass’’ found in the farm bill as a 

template for other energy proposals. The correction should be made now. 

Thank you for the opportunity to submit comments and please do not hesitate to 

contact me if you have any comments or questions. CPA looks forward to continuing 

to support the work of the Congress on this important matter. 

Sincerely,

TOM JULIA, President, 

Composite Panel Association. 

SUBMITTED LETTER BY PHILIP RIGDON, PRESIDENT, INTERTRIBAL TIMBER COUNCIL

May 31, 2012

Hon. GLENN THOMPSON, 

Chairman, 

Subcommittee on Conservation, Energy, and Forestry, 

House Committee on Agriculture, 

Washington, D.C.;

Hon. TIM HOLDEN, 

Ranking Minority Member, 

Subcommittee on Conservation, Energy, and Forestry, 

House Committee on Agriculture, 

Washington, D.C.

Re: Testimony Submitted for the Subcommittee’s May 18, 2012 Hearing on the Next 

Farm Bill’s Energy and Forestry Issues

Dear Chairman Thompson and Ranking Member Holden:

On behalf of the Intertribal Timber Council (ITC), I hereby submit testimony for 

your consideration and inclusion in the Subcommittee’s formal record of its May 18, 

2012 hearing on the next farm bill’s energy and forestry issues. 

The ITC is a 36 year old association of 60 forest owning tribes and Alaska Native 

organizations that collectively manage more than 90% of the 18 million acres of 

timberland and woodland that are under BIA trust management. These forests 

cover about 1⁄3 of the Indian trust land base and are a primary source of revenue 

for tribal governments. They support thousands of jobs and many millions of dollars 

in economic activity in and around Indian Country, as documented by such studies 

as the 2008 University of Wisconsin evaluation of the Regional Economic Impacts 

of the Menominee Tribal Enterprises Forestry and Mill Operations. Beyond their 

economic importance, tribal forests also store and filter the water and purify the air 

to sustain life itself. They sustain habitats for the fish and wildlife that provide sustenance for our people. They produce foods, medicines, fuel, and materials for shelter, transportation, and artistic expression, and are vital to our cultural and spiritual lives. 

The ITC proposes that the next farm bill include the items discussed below (not 

in order of priority): 


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Authorize Forest Service Tribal Assistance Programs 

The U.S. Forest Service (USFS) shares over 2,500 miles of common border with 

Indian tribes. There is a clear need for transboundary landscape-scale management 

to reduce threats from wildfire, insects, and disease to resources held in trust by 

the United States for Indians. In addition, tribes have reserved treaty, cultural and 

other rights and interests on millions of acres of land administered by the USFS. 

Yet, the USFS lacks basic ongoing programmatic authority to support cooperative, 

collaborative resource management with tribal governments. Such USFS authority 

has long existed for state government. To rectify this void, we request that the next 

farm bill authorize USFS financial, technical, educational and related assistance to 

tribal governments for—

(A) Tribal consultation and coordination with the USFS on:

—access and use of USFS land for traditional and cultural purposes,

—coordination and cooperative management of shared resources,

—provision of tribal traditional and cultural expertise or knowledge,

—substantive participation in the development and revision of NFS forest 

management plans;

(B) Tribal conservation education and awareness projects and activities; and

(C) Technical assistance for tribal forest resources planning, management and 

conservation. 

Change the Name of USFS State and Private Forestry to ‘‘Tribal, State and Private 

Forestry’’

We request that the farm bill instruct the USFS to change ‘‘State and Private Forestry’’ (S&PF) to ‘‘Tribal, State and Private Forestry.’’ S&PF, charged with working 

with non-Federal entities, has included the Office of Tribal Relations since its inception in 2003. We believe the name change is needed to honor government-to-government relationships and to acknowledge the USFS’s trust responsibilities and increasingly important engagement with tribal governments. The USFS has been reluctant to make the change on its own volition. 

Eliminate the Trust Land Prohibition in the Open Spaces Program 

The 2008 Farm Bill (the Food, Conservation and Energy Act of 2008, P.L. 110–

234) Section 8003 authorized the Community Forest and Open Space Conservation 

Program (CFP). Tribal governments are among entitles eligible for USFS grants to 

acquire in fee forestland threatened with conversion to non-forest use. All grant recipients must manage the acquired forest pursuant to a community forest plan that 

seeks to assure its continued utilization as forest. Local governments and qualified 

nonprofits can, however, sell the CFP forest or convert it to non-forest use, but must 

reimburse the USFS for the sale price of the CFP forest and are barred from further 

participation in the program. Additionally, CFP forestlands acquired by local governments become local government land, subject to local jurisdiction and not subject 

to taxation. Tribal governments are prohibited from having CFP-acquired land 

taken into trust (Sec. 8003(c)(6)(B)). There is no explanation for this discriminatory 

tribal treatment in the legislative history. If there is concern that land taken into 

trust may be converted to non-forest use, such as gaming, the general provisions of 

the CFP would make the tribe liable for the penalty and prohibit it from future participation, just as state and local governments and nonprofit organizations. If the 

specter of gaming is the issue, it must be recognized that BIA regulations for converting fee land into trust would bar gaming, subject to a Secretarial two-part gaming determination and concurrence of the state governor. It is unfair and unreasonable to require a tribal government, using the CFP to acquire forest land for its citizens, to subject that forest land to the jurisdiction and taxation of some other government. 

Make Stewardship Contracting Permanent 

Stewardship Contracting authority, established in the 1999 Interior Appropriations Act (16 U.S.C. 2104 note, Public Law 105–277) (as amended by section 323 

of the FY 2003 Interior Appropriations Act (117 Stat. 275)), enables the USFS or 

BLM to enter collaborative agreements with tribes and local communities to perform 

forest management activities on USFS or BLM land. 

Proceeds from the sale of merchantable material harvested under stewardship 

contracts can be used to help offset costs under ‘‘goods for services authority’’, fund 

additional service work through the same contract, or finance other approved stewardship contracting projects. The stewardship contracting authority also enables 

several projects to be bundled together to reduce costs and increase administrative 

2465

efficiency. Stewardship contracts can last up to 10 years and can be awarded on a 

‘‘best value’’ basis, which allows consideration of other criteria for selection besides 

lowest bid, such as local employment. 

Tribes can utilize stewardship contracting authority when performing activities on 

USFS or BLM land, including those performed pursuant to the Tribal Forest Protection Act (TFPA, P.L. 108–278) authority to protect trust lands. Stewardship contracting authority expires in 2013. We join a host of other entities in supporting permanent stewardship contracting authority as an effective and cost-efficient forest 

management tool. Additionally, we request that stewardship contracts be allowed to 

extend for at least twenty years to provide a stable source for investment in workforce and infrastructure development. 

Tribal Forest Protection Act Revisions 

The ITC requests that the farm bill incorporate two minor revisions to the TFPA 

to improve its implementation. Since 2004, a total of only 11 TFPA projects have 

been approved. Because Tribes have frequently not been informed of USFS refusal 

to enter into TFPA projects, we request that section 2(d) be revised by changing the 

word ‘‘may’’ to ‘‘shall’’. In addition, there is a need to make consideration of the factors listed in section 2(e) mandatory, by changing the word ‘‘may’’ to ‘‘shall.’’

(d) NOTICE OF DENIAL.—If the Secretary denies a tribal request under subsection (b)(1), the Secretary shall issue a notice of denial to the Indian tribe, 

(e) PROPOSAL EVALUATION AND DETERMINATION FACTORS.—In entering into 

an agreement or contract in response to a request of an Indian tribe under subsection (b)(1), the Secretary shall—

Permanent Tribal Watershed Assistance Funding Authority 

Section 302 of the Healthy Forests Restoration Act (P.L. 108–148) established the 

Tribal Watershed Forestry Assistance Program to provide technical, financial and 

related assistance to Indian tribes for the purpose of supporting tribal stewardship 

capacities and activities on land under the jurisdiction of or administered by the Indian tribes. Subsection (e) authorized up to $2.5 million a year for Fiscal Years 

2004–2008. However, the program has never received an appropriation. We request 

that the farm bill amend the program to authorize ‘‘such sums as necessary’’ for this 

program without fiscal year limitation. 

Tribal ‘‘Anchor Forest’’ Pilot Program 

Many tribes know firsthand that harvesting, transportation, management, and 

processing infrastructure are essential to maintain forest health, ecosystem services 

and productivity, generate revenues to provide governmental services, and provide 

employment opportunities for rural communities. Without the ability to economically harvest forest products, this infrastructure can be quickly lost and be extremely difficult to replace. The ITC is currently exploring the concept of ‘‘anchor 

forests’’ as a means to maintain economically viable infrastructure. We request that 

the next farm bill authorize the Secretary of Agriculture to work in concert with 

the Interior, Commerce, Labor, and Energy Departments to organize and deliver, in 

a one-stop-shopping arrangement, convenient access to existing Federal programs 

that could be employed to assist the preservation of forest infrastructure. In addition to organizing and delivering existing programs, the Secretary of Agriculture 

would be further authorized to devise and deliver such further assistance as is otherwise necessary to maintain efficient regional harvesting, transportation, management, and processing infrastructure. Such authority could include, for instance, operating subsidies, manufacturing facility modernization grants, or long-term access 

to timber from nearby National Forests. The Agriculture Secretary should be allowed to exercise great flexibility to design and deliver the needed additional assistance to the identified pilot forest-dependent tribal and other communities and governments. As a pilot program, application of the authority would be limited to one 

or more forest-dependent tribal and other communities. The pilot program would be 

evaluated after 10 years and a report on the efficacy of anchor forests would be prepared for appropriate Congressional Committees and the Administration. 

On the behalf of the ITC, I express our advance appreciation of the Subcommittee’s effort to address Indian Country’s ideas and comments for the next farm bill. 

It is a large but essential task, and we hope the Subcommittee finds our suggestions 

merit its support. As you may gather from our testimony, the reach of ideas is 

broad. Some would involve changing only a few words, while others are, at this 

point, only general concepts that will be further developed and refined. We look forVerDate 0ct 09 2002 12:54 Dec 11, 2012 Jkt 041481 PO 00000 Frm 00877 Fmt 6621 Sfmt 6621 I:\DOCS\112-30\74372.TXT BRIAN
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ward to working with you in preparing a new farm bill that will benefit Indian forestry and all of Indian Country. 

Sincerely,

PHILIP RIGDON, 

President,

Intertribal Timber Council. 

SUBMITTED STATEMENT BY KEVIN WASLASKI, CHAIRMAN, U.S. CANOLA ASSOCIATION

Chairman Thompson, Ranking Member Holden, and Members of the Subcommittee and full Committee, the U.S. Canola Association (USCA) is pleased to 

provide this written statement for the record on the energy title programs for the 

next farm bill and their role in expanding markets for farmers and economic growth 

for rural America. 

There are several energy title programs in which canola producers have a strong 

interest, including the Biobased Market Program (Section 9002), the Biodiesel Fuel 

Education Program (Section 9006), and the Bioenergy Program for Advanced 

Biofuels (Section 9005). USCA recognizes that the energy title programs do not have 

baseline funding beyond 2012, which creates a significant challenge to extending 

these programs and building on the benefits they have provided. However, USCA 

supports the Biobased Market Program and the Biodiesel Fuel Education Program 

and we believe that the relatively low cost and the benefits provided through these 

programs warrant their continuation with an increased level of mandatory funding. 

Section 9002, Biobased Market Program: The Biobased Market Program continues and expands the Federal biobased procurement program and voluntary labeling program. This is an effective and important program for promoting the emerging 

biobased industry, which has significant potential to enhance agricultural markets, 

displace foreign petroleum and fossil fuels, and contribute new ‘‘green’’ jobs to the 

economy. Under the Biobased Market Program, USDA administers the BioPreferred 

Program, which is a preferred procurement program for all Federal agencies. 

The Biobased Market Program, established and expanded through previous farm 

bills, plays an important role in the development of the biobased products industry 

in the United States. By providing a procurement preference for Federal Government purchases, the program helps pull products into the market and encourages 

investment and development of biobased products. 

The Biobased Market Program received mandatory funding totaling $9 million for 

FY 2008–2012. With the expansion of the BioPreferred and biobased labeling program, USCA supports providing increased mandatory funding for USDA to administer the programs and further promote biobased markets. USCA supports mandatory funding of $3 million per year for the Biobased Market Program, as provided 

in the farm bill passed by the Senate Agriculture Committee. 

Section 9006, Biodiesel Fuel Education Program: The Biodiesel Education 

Program plays a vital role in helping expand marketplace acceptance and use of biodiesel as a low-carbon, renewable diesel replacement fuel. It supports technical outreach efforts to engine manufacturers, truckers, and fuel marketers that will eventually allow the use of higher biodiesel blends in conventional diesel applications. 

The education program serves to expand and increase market penetration, thus promoting growth for the entire industry. This translates into higher production, more 

jobs, and more economic value, especially in rural communities. 

Specifically, the biodiesel education program had a large part to play in building 

automakers trust in, and support for, biodiesel blends. Since 2003, the industry has 

achieved great success in garnering support from engine manufacturers for biodiesel 

through the biodiesel education program. Currently, 34 major U.S. automakers and 

engine manufacturers accept the use of B5 and up to B20. 

The biodiesel industry produced a record 1.1 billion gallons in 2011, which supported over 39,000 jobs, generated income over $1.7 billion, and created more than 

$3 billion in GDP. Biodiesel also makes a significant contribution to rural economic 

development. All but a handful of the approximately 170 biodiesel production facilities in the U.S. are located in rural areas and nearly all of the feedstock used to 

produce biodiesel is grown or originates in rural areas. The U.S. Energy Information 

Administration (EIA) data for biodiesel production in 2011 showed that 847 million 

pounds of canola oil was utilized for biodiesel production. While not the primary biodiesel feedstock, it does represent an important and growing market for canola producers. 


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Biodiesel is providing energy, economic, and environmental benefits and USCA urges the continuation of this program with a relatively small investment of $2 million annually in mandatory funding in the 2012 Farm Bill. 

Section 9005, Bioenergy Program for Advanced Biofuels: The Bioenergy Program for Advanced Biofuels is a program of significant interest and opportunity for 

biodiesel producers. However, USCA also recognizes the funding challenges and the 

many priorities in the farm bill. The industry is still working to establish itself in 

the competitive marketplace with the entrenched petroleum diesel industry, which 

enjoys the benefit of decades of infrastructure and market development. USCA believes that the Bioenergy Program for Advanced Biofuels can continue to play a role 

in supporting the development of advanced biofuels and we support the reauthorization of the program. 

We appreciate the Committee holding this hearing on the farm bill energy and 

forestry programs and providing USCA the opportunity to submit this statement for 

the record. As always, we look forward to working with you on the development of 

a farm bill that includes an Energy Title and mandatory funding for priority programs. 

Sincerely,

KEVIN WASLASKI,

Chairman,

U.S. Canola Association. 

SUBMITTED STATEMENT BY STEVE WELLMAN, PRESIDENT, AMERICAN SOYBEAN

ASSOCIATION

Chairman Thompson, Ranking Member Holden, and Members of the Subcommittee and full Committee, the American Soybean Association (ASA) is pleased 

to provide this written statement for the record on the energy title programs for the 

next farm bill and their role in expanding markets for farmers and economic growth 

for rural America. 

There are several energy title programs in which soybean producers have a strong 

interest, including the Biobased Market Program (Section 9002), the Biodiesel Fuel 

Education Program (Section 9006), and the Bioenergy Program for Advanced 

Biofuels (Section 9005). ASA recognizes that the energy title programs do not have 

baseline funding beyond 2012, which creates a significant challenge to extending 

these programs and building on the benefits they have provided. However, the 

Biobased Market Program and the Biodiesel Fuel Education Program remain as 

high priorities for ASA and we believe that the relatively low cost and the benefits 

provided through these programs warrant their continuation with an increased level 

of mandatory funding. 

Section 9002, Biobased Market Program: The Biobased Market Program continues and expands the Federal biobased procurement program and voluntary labeling program. This is an effective and important program for promoting the emerging 

biobased industry, which has significant potential to enhance agricultural markets, 

displace foreign petroleum and fossil fuels, and contribute new ‘‘green’’ jobs to the 

economy. Under the Biobased Market Program, USDA administers the BioPreferred 

Program, which is a preferred procurement program for all Federal agencies. 

The soybean industry is also partnering with companies and investing resources 

into biobased product development. Funding from the farmers’ checkoff dollars, administered by the United Soybean Board has been provided to companies for 

projects to develop soy biobased products. 

The Biobased Market Program, established and expanded through previous farm 

bills, plays an important role in the development of the biobased products industry 

in the United States. By providing a procurement preference for Federal Government purchases, the program helps pull products into the market and encourages 

investment and development of biobased products. 

The Biobased Market Program received mandatory funding totaling $9 million for 

FY 2008–2012. With the expansion of the BioPreferred and biobased labeling program, ASA supports providing increased mandatory funding for USDA to administer 

the programs and further promote biobased markets. ASA supports mandatory 

funding of $3 million per year for the Biobased Market Program, as provided in the 

farm bill passed by the Senate Agriculture Committee. 

Section 9006, Biodiesel Fuel Education Program: The Biodiesel Education 

Program plays a vital role in helping expand marketplace acceptance and use of bioVerDate 0ct 09 2002 12:54 Dec 11, 2012 Jkt 041481 PO 00000 Frm 00879 Fmt 6621 Sfmt 6621 I:\DOCS\112-30\74372.TXT BRIAN

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diesel as a low-carbon, renewable diesel replacement fuel. It supports technical outreach efforts to engine manufacturers, truckers, and fuel marketers that will eventually allow the use of higher biodiesel blends in conventional diesel applications. 

The education program serves to expand and increase market penetration, thus promoting growth for the entire industry. This translates into higher production, more 

jobs, and more economic value, especially in rural communities. 

Specifically, the biodiesel education program had a large part to play in building 

automakers trust in, and support for, biodiesel blends. Since 2003, the industry has 

achieved great success in garnering support from engine manufacturers for biodiesel 

through the biodiesel education program. Currently, 34 major U.S. automakers and 

engine manufacturers accept the use of B5 and up to B20. 

The biodiesel industry produced a record 1.1 billion gallons in 2011, which supported over 39,000 jobs, generated income over $1.7 billion, and created more than 

$3 billion in GDP. Biodiesel also makes a significant contribution to rural economic 

development. All but a handful of the approximately 170 biodiesel production facilities in the U.S. are located in rural areas. Approximately 1⁄2 of the annual biodiesel 

production is from soybean oil, but significant portions are also produced from rendered animal fats, waste grease, and canola oil. Nearly all of the feedstock used to 

produce biodiesel is grown or originates in rural areas. Biodiesel provides a valuable 

market for soybean oil that has historically provided a drag on overall soybean 

prices. Biodiesel has provided an outlet and market for soybean oil, which has experienced declining demand for use in food production due to trans fat issues. As soybeans are 80% meal and only 20% oil, use of soybean oil for biodiesel also has a 

positive impact on livestock feed markets as any soy oil demand or increased soybean crushing also increases soybean meal supplies. 

As you can see, biodiesel is providing energy, economic, and environmental benefits and ASA urges the continuation of this program with a relatively small investment of $2 million annually in mandatory funding in the 2012 Farm Bill. 

Section 9005, Bioenergy Program for Advanced Biofuels: The Bioenergy Program for Advanced Biofuels is a program of significant interest and opportunity for 

biodiesel producers. However, ASA also recognizes the funding challenges and the 

many priorities in the farm bill. The industry is still working to establish itself in 

the competitive marketplace with the entrenched petroleum diesel industry, which 

enjoys the benefit of decades of infrastructure and market development. ASA believes that the Bioenergy Program for Advanced Biofuels can continue to play a role 

in supporting the development of advanced biofuels and we support the reauthorization of the program. 

We appreciate the Committee holding this hearing on the farm bill energy and 

forestry programs and providing ASA the opportunity to submit this statement for 

the record. As always, we look forward to working with you on the development of 

a farm bill that includes an Energy Title and mandatory funding for priority programs. 

Sincerely,

STEVE WELLMAN,

President, 

American Soybean Association. 

SUBMITTED STATEMENT BY WOOD FIBER COALITION

Chairman Thompson, Ranking Member Holden, distinguished Members of the 

Subcommittee on Conservation, Energy and Forestry, and on behalf of the Wood 

Fiber Coalition, thank you for the chance to submit comments on the formulation 

of the 2012 Farm Bill, specifically regarding its energy and forestry programs. 

The Wood Fiber Coalition (WFC), which represents longstanding U.S. manufacturing, agricultural and service industries that depend upon a reliable supply of 

wood fiber for the production and use of biobased consumer products, is concerned 

about possible unintended consequences resulting from biomass energy policies proposed by Congress this year.

In particular, we believe that Federal energy definitions should be written to promote the development and expansion of new resources and not 

the diversion of existing resources from biobased products that have been 

supporting jobs and the economy for decades.

For the domestic furniture industry alone, Census Bureau data shows 18,572 establishments, 338,262 employees, and a GDP contribution of $29.5 billion in 2010. 


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These jobs are already competing with offshore imports, and the last thing Congress 

should do is incentivize the diversion of a primary raw material used to make these 

products so domestic manufacturing becomes cost-prohibitive. The same applies to 

other wood-based consumer products like cabinets, flooring and doors, and also to 

landscaping, nursery and greenhouse production. None of these industries can remain viable without free-market access to our most essential feedstock. 

One of the energy programs in the 2008 Farm Bill that we wanted to highlight 

today is the Biomass Crop Assistance Program (BCAP). We agree that the BCAP 

program, when established, was well intentioned and had a laudable goal of reducing our nation’s reliance upon foreign and non-renewable energy sources. As you 

know, its goal was to tap into our domestic agricultural and engineering resources 

and infrastructure and develop new reliable, renewable domestic energy. 

The funding for the program was intended to help incentivize farmers, ranchers, 

and forest landowners to participate in this new marketplace by developing and 

growing new ‘‘energy crops’’ or sending waste products to biomass conversion facilities where they would then be used for bioenergy. 

Shortly after passage of the 2008 Farm Bill, a number of longstanding existing 

industries were negatively impacted by one major flaw within the BCAP program. 

The matching payment portion of the BCAP program began creating a diversion of 

wood by-products, such as bark, sawdust, shavings and woodchips, away from established markets and uses in the wood fiber industry and towards bioenergy facilities. 

Manufactured products such as composite wood panels used in wood-based furniture, cabinets, doors, flooring, architectural moulding and millwork and other commercial uses of fiber such as landscape mulch and commercial growing media rely 

exclusively upon these wood by-products as their only available raw material. As 

BCAP was rolled out, these materials were diverted away from traditional and long 

established markets to government subsidized bioenergy facilities. 

After considerable consultation and tens of thousands of written comments from 

the public, USDA established a rule to prevent this specific market distortion by 

emphasizing that the purpose of the program was to incentivize ‘‘. . . cultivation of 

new biomass for new markets rather than divert biomass from existing markets.’’ 

Additionally, the biomass material that could be considered to be eligible for subsidy 

must be collected or harvested directly from the land before delivery to a biomass 

conversion facility. We would encourage the members of the House Agriculture Committee to retain the spirit of preventing market distortion as they move forward in 

the 2012 Farm Bill process and consider the future of BCAP and other energy programs in the farm bill and other energy related legislation. 

A prudent, cost-effective expansion of America’s energy options is a laudable goal, 

particularly if it leads to reduced dependence on imported fossil fuels. To this end, 

the Wood Fiber Coalition supports Congressional efforts to promote the development 

of new, renewable energy sources. However, as the experience with the USDA Farm 

Service Administration’s hastily launched Biomass Crop Assistance Program 

(BCAP) has shown, industries that rely on existing markets for wood fiber supplies 

may suffer irreparable harm if good judgment is not exercised in the development 

of comprehensive Federal energy policies. 

For many decades, our industries have used forest and wood mill by-products, including bark, chips, sawdust, shavings and trim, in the production of valuable biobased consumer products. Renewable, carbon-neutral wood by-products are primary 

components in the production of:

• Composite wood panels

• Wood-based furniture, cabinets, doors and flooring

• Wood-based architectural moulding and millwork

• Growing media for the production of trees and landscape plants

• Landscape mulch and other landscape materials

• Commercial growing media

Wood fiber incorporated into building materials now used to make furniture, cabinets, doors, flooring, and many other consumer products, as well as to support the 

landscaping and nursery industries, must not be subject to an option to become a 

subsidized commodity to the detriment of these vital industries. Few of our member 

companies have alternative raw materials to which they can turn, and most, without access to economically competitive, regionally available sources of wood fiber 

and wood fiber products, will be left with no alternative but to leave the United 

States and take their jobs offshore, or close down altogether. 

To prevent this from happening, Federal policy should explicitly recognize that 

forest and wood mill by-products are essential feedstocks supplied through an established, competitive and sustainable free market. 

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Federal policy should focus its biomass programs entirely on the use of 

unmerchantable materials and agricultural waste, as well as, of course, those that 

are developed with the sole purpose of creating energy, such as switch grass or energy cane. This approach will expand the wood fiber basket and create new domestic 

jobs while also helping achieve alternative energy goals. 

The current statute defines ‘‘renewable biomass’’ in relevant part as ‘‘. . . any organic matter that is available on a renewable and recurring basis . . .’’ Although 

there is an exclusion in the statute for materials from public lands that are used 

in higher valued products, the exclusion is not explicit regarding such materials 

from private lands. Byproducts such as bark, sawdust, shavings and woodchips 

could thus be considered to be eligible for subsidies in programs promoting bioenergy. 

In all Federal legislation, Congress should embrace a definition of renewable biomass, for both public and private lands that excludes materials 

that could be used for higher-value products, including, but not limited to, 

composite wood panels, lumber, finished or other manufactured wood 

products, mulch, nursery media, paper and packaging. Only biomass materials collected or harvested directly from the land should be federally 

incentivized. In doing so, Congress would recognize that forest and wood mill byproducts are essential feedstocks for existing industries supplied through an established, competitive and sustainable free market. A definitional exclusion of biomass 

for goods already used in higher valued products would eliminate the incentive to 

divert basic raw materials away from existing industries. 

We would urge the Members of the Agriculture Committee to support an amendment to the definition of ‘‘Renewable Biomass’’ that excludes bio-based materials 

from public and private land that are used for higher value products. This change 

is critical for our industries because many legislative initiatives now and in the future will look to the definition of ‘‘renewable biomass’’ found in the farm bill as a 

template for other energy proposals. The correction should be made now. 

Finally, Congress should make a concerted effort to establish a unified, consistent 

definition of renewable biomass. There are at least 14 Federal definitions of renewable biomass for renewable energy programs, most of which classify the raw materials used to manufacture our products as waste materials. Ideally there should be 

just one. 

Thank you for the opportunity to submit comments and please do not hesitate to 

contact David Beaudreau at [Redacted] or [Redacted] if you have any comments 

or questions. The Wood Fiber Coalition looks forward to continuing to support the 

work of the Congress on this important matter. 

Sincerely, 

Respectfully,

THOMAS A. JULIA, THOMAS REARDON, 

President, Executive Director, 

Composite Panel Association; The Business and Institutional Furniture Manufacturer’s Association;

ANDY COUNTS, ROBERT LAGASSE, 

Chief Executive Officer, Executive Director, 

American Home Furnishings Alliance; Mulch & Soil Council;

ROBERT J. DOLIBOIS, PETER J. MORAN, 

Executive Vice President, Chief Executive Officer, 

American Nursery & Landscape Association; Society of American Florists. 

Æ