U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 

For sale by the Superintendent of Documents, U.S. Government Printing Office

Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800

Fax: (202) 512–2250 Mail: Stop SSOP, Washington, DC 20402–0001

85–327 PDF 2003

S. HRG. 107–879

THE ADMINISTRATION PERSPECTIVE WITH

REGARD TO THE NEW FEDERAL FARM BILL

HEARING

BEFORE THE

COMMITTEE ON AGRICULTURE,

NUTRITION, AND FORESTRY

UNITED STATES SENATE

ONE HUNDRED SEVENTH CONGRESS

FIRST SESSION

SEPTEMBER 26, 2001

Printed for the use of the

Committee on Agriculture, Nutrition, and Forestry

(

Available via the World Wide Web: http://www.agriculture.senate.gov

COMMITTEE ON AGRICULTURE, NUTRITION, AND FORESTRY

TOM HARKIN, Iowa, Chairman

PATRICK J. LEAHY, Vermont

KENT CONRAD, North Dakota

THOMAS A. DASCHLE, South Dakota

MAX BAUCUS, Montana

BLANCHE L. LINCOLN, Arkansas

ZELL MILLER, Georgia

DEBBIE A. STABENOW, Michigan

BEN NELSON, Nebraska

MARK DAYTON, Minnesota

PAUL DAVID WELLSTONE, Minnesota

RICHARD G. LUGAR, Indiana

JESSE HELMS, North Carolina

THAD COCHRAN, Mississippi

MITCH MCCONNELL, Kentucky

PAT ROBERTS, Kansas

PETER G. FITZGERALD, Illinois

CRAIG THOMAS, Wyoming

WAYNE ALLARD, Colorado

TIM HUTCHINSON, Arkansas

MICHEAL D. CRAPO, Idaho

MARK HALVERSON, Staff Director/Chief Counsel

DAVID L. JOHNSON, Chief Counsel for the Minority

ROBERT E. STURM, Chief Clerk

KEITH LUSE, Staff Director for the Minority

(II)

(III)

C O N T E N T S

Page

HEARING(S):

The Administration Perspective with Regard to the New Federal Farm Bill .... 01

Wednesday, September 26, 2001

STATEMENTS PRESENTED BY SENATORS

Harkin, Hon. Tom, a U.S. Senator from Iowa, Chairman, Committee on

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

Lugar, Hon. Richard G., a U.S. Senator from Indiana, Ranking Member,

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

Baucus, Hon. Max, a U.S. Senator from Montana ................................................ 14

Conrad, Hon. Kent, a U.S. Senator from North Dakota ...................................... 06

Crapo, Hon. Mike, a U.S. Senator from Idaho ...................................................... 16

Dayton, Hon. Mark, a U.S. Senator from Minnesota ........................................... 18

Hutchinson, Hon. Tim, a U.S. Senator from Arkansas ........................................ 09

Leahy, Hon. Patrick, a U.S. Senator from Vermont ............................................. 05

Lincoln, Hon. Blanche, a U.S. Senator from Arkansas ........................................ 19

Miller, Hon. Zell, a U.S. Senator from Georgia ..................................................... 11

Nelson, Hon. E. Benjamin, a U.S. Senator from Nebraska .................................. 08

Thomas, Hon. Craig, a U.S. Senator from Wyoming ............................................ 21

Wellstone, Hon. Paul, a U.S. Senator from Minnesota ........................................ 12

WITNESSES

Veneman, Hon. Ann M., Secretary, United States Department of Agriculture,

Washington, DC, accompanied by J.B. Penn, Under Secretary, Farm and

Foreign Agriculture Service, United States Department of Agriculture ......... 22

APPENDIX

PREPARED STATEMENTS:

Harkin, Hon. Tom ............................................................................................ 62

Lugar, Hon. Richard ......................................................................................... 64

Conrad, Hon. Kent, (chart submitted) ............................................................ 66

Helms, Hon. Jesse ............................................................................................ 87

Roberts, Hon. Pat ............................................................................................. 89

Veneman, Hon. Ann M. .................................................................................... 67

DOCUMENT(S) SUBMITTED FOR THE RECORD:

Cochran, Hon. Thad ......................................................................................... 96

Stabenow, Hon. Debbie .................................................................................... 98

QUESTIONS AND ANSWERS:

Questions submitted for the record (no answers provided) .......................... 104

(1)

THE ADMINISTRATION PERSPECTIVE WITH

REGARD TO THE NEW FEDERAL FARM BILL

WEDNESDAY, SEPTEMBER 26, 2001

U.S. SENATE, COMMITTEE ON AGRICULTURE, NUTRITION, AND FORESTRY, Washington, DC.

The committee met, pursuant to notice, at 9:03 a.m., in room

SD–106, Dirksen Senate Office Building, Hon. Tom Harkin, [Chairman of the Committee], presiding.

Present or Submitting a Statement: Senators Harkin, Leahy,

Conrad, Baucus, Lincoln, Miller, Nelson (of Nebraska), Dayton,

Wellstone, Lugar, Helms, Roberts, Fitzgerald, Thomas, Hutchinson,

and Crapo.

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

IOWA, CHAIRMAN, COMMITTEE ON AGRICULTURE,

NUTRITION, AND FORESTRY

The CHAIRMAN. The U.S. Senate Committee on Agriculture, Nutrition, and Forestry will come to order.

This morning, we are having a hearing on the administration’s

views on food and agricultural policy, and this morning I am

pleased to welcome Secretary Veneman, accompanied by Under

Secretary Penn and Dr. Keith Collins, to our committee for this

hearing.

We look forward to this morning’s testimony and discussion of

the report the administration released last week, and I have to tell

you in my 27 years now on the House and Senate Agriculture Committees I have read a lot of reports. We used to have the annual

book that came out on agriculture. Of all of them, this is perhaps

the most comprehensive and forward-looking that I have seen in all

these years.

I recommend it highly to any member of the committee who has

not read it. I read it on the train going up to New York last week

and back, and perused it a little bit last night. I recommend it

highly. It is a great report, and I commend you for that, Madam

Secretary.

Just yesterday, the distinguished ranking member, Senator

Lugar, and I issued a set of joint policy objectives for the Farm bill.

So I believe the stage is set for a good hearing and an airing of

views.

Farm families and rural communities across America have not

shared in our Nation’s prosperity. We need new directions in Federal agriculture, food and rural policies. I welcome this report, Secretary Veneman, because it clearly indicates a willingness to examVerDate 11-MAY-2000 14:47 Apr 09, 2003 Jkt 085327 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 85327.TXT SAG1 PsN: SAG1
2

ine critical issues in rural America and in our food and agriculture

system, and to explore new ideas and policy proposals. To be sure,

there are details to be filled in, and I look forward to working with

you and your team on these specific policies.

In your written testimony, which I went over last evening, I was

pleased to read your part in there when you talked about a comprehensive review of ag policy is urgently needed. I couldn’t agree

more.

Farm income protection is, of course, a fundamental part of the

Farm bill. We need a better system to provide adequate income

protection without requiring annual emergency legislation. However, protecting agricultural producers against income losses is not

enough by itself. The Farm bill must also help farmers and rural

communities create and realize opportunities for the future.

If the legislation fails to lay a foundation for new opportunities,

rural America will be no better off 5 or 10 years from now. Farmers

will be just as dependent on Government checks and rural communities will still be falling behind.

The new Farm bill should help farmers earn better returns and

a larger share of the consumer dollar in the market. Value-added

processing ventures, new biotechnology products, innovative marketing channels, and increased exports all can help. If independent

farms are to survive, though, we must ensure that agricultural

markets are open, competitive and fair.

America’s farmers, ranchers and landowners have a strong stewardship ethic, but margins are tight and they too often lack the financial resources to conserve natural resources as they want to do.

The new Farm bill should extend and strengthen USDA’s current

conservation programs, and it should create a new system of incentive payments for maintaining or adopting new conservation practices on land that is in production. The bipartisan legislation that

I have offered will, I hope, improve producers’ incomes and help

them conserve soil, water and wildlife.

We have barely scratched the surface of the potential for producing farm-based renewable energy and raw materials, including ethanol, biodiesel, biomass, and even wind power. Anything we can

make from a barrel of oil we can produce from farm commodities.

I am proposing a special title to promote renewable energy in the

Farm bill. It has never been done, but the time is right. Quite

frankly, I believe this area could represent the largest potential

market for income growth for farmers and ranchers, along with

products made from agricultural crops, such as soy-based building

materials and things like that.

We also need to strengthen the foundation and infrastructure of

our Nation’s food and agricultural sector. That includes support for

research, protecting the safety and security of our food supply, safeguarding plant and animal health. We must meet our responsibility

to help fight hunger and malnutrition at home and in developing

countries, especially among children.

We will not have truly healthy rural communities unless both

farms and small towns do well. Rural America is too often at a disadvantage when it comes to basics like enough good water, electric

power, telecommunications, loans for businesses, and equity capital

for investment. A critical part of the Farm bill, I believe, is helping

3

to revitalize rural economies, generate more good jobs and improve

the quality of life in rural communities.

Last, let me just say, Madam Secretary, that the events of 2

weeks and a day ago also compel us to examine the Farm bill in

the light of the safety of our food and animal and plant-based food

products in this country, to take a strong examination of our whole

system, from producer to the store, to make sure that our people

have the utmost and the highest confidence in the safety of our

food in this country.

To that end, I will examine with you any advice or suggestions

you might have for changes that need to be made, but I also believe

that this is going to have to be something that we are going to have

to focus on in this Farm bill. I welcome any suggestions and advice

that you might have for us along this pathway. Again, I welcome

you to the committee and I look forward to your testimony.

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

appendix on page 62.]

With that, I would recognize my distinguished ranking member,

Senator Lugar.

STATEMENT OF HON. RICHARD G. LUGAR, A U.S. SENATOR

FROM INDIANA, RANKING MEMBER, COMMITTEE ON

AGRICULTURE, NUTRITION, AND FORESTRY

Senator LUGAR. Thank you very much, Mr. Chairman.

I congratulate you on ‘‘Food and Agriculture Policy’’ and I am

going to quote from this extensively. For those who want to know

where we are heading, page 46, Chapter III, is an area that is very

significant as we consider farm legislation.

The publication of the United States Department of Agriculture

book on Food and Agriculture Policy is a signal event. I congratulate Secretary Ann Veneman for this timely intervention into preparation for the next Farm bill, and I join Chairman Harkin in welcoming her and her colleagues to the committee today.

Chapter III of the new USDA book merits special attention. The

chapter begins by pointing out, and I quote, ‘‘the farm sector is diverse beyond the imagination of those who farmed the New Deal

legislation. On average, farm family incomes no longer lag, but

rather surpass those of other U.S. households. Most farms are run

by people whose principal occupation is not farming...domestic demand alone is no longer sufficient to absorb what American farmers can produce.’’ These are all direct quotes.

On the next page Chapter III continues, and I quote, ‘‘Many of

the program approaches since the 1930’s proved not to work well

or not at all, produced unexpected and unwanted consequences, became far costlier than expected, and have been continually modified over time in a long succession of farm laws. Some major, and

still highly relevant, lessons learned include,’’ first, and I quote,

‘‘History has shown that supporting prices is self-defeating.’’

That is a remarkable statement on the face of it. ‘‘History has

shown that supporting prices is self-defeating. Government attempts to hold prices above those determined by commercial markets have simply made matters worse time after time. Artificially

higher prices encouraged even more unneeded output from the

most efficient producers at the same time they discouraged utilizaVerDate 11-MAY-2000 14:47 Apr 09, 2003 Jkt 085327 PO 00000 Frm 00007 Fmt 6633 Sfmt 6633 85327.TXT SAG1 PsN: SAG1
4

tion pushing surpluses higher and prices lower.’’ This is all a direct

quotation from page 47. ‘‘Supply controls proved unworkable too...the remaining land was

farmed more intensively, and supply was rarely cut enough to

boost prices to politically satisfactory levels. The programs were

costly to taxpayers and consumers and the unused resources were

a drag on overall economic performance...limiting our acreage was

a signal to our competitors in other countries to expand theirs, and

we lost market share that is always difficult to recapture...’’ Continuing the quotation, ‘‘Stockholding and reserve plans distort markets enormously...because such stock eventually must be

returned to the market, they limit the recovery of prices in the future. Moreover, time after time, stocks have proven costly to maintain, distorted normal marketing patterns, ceded advantage to competitors, and proved tempting targets for political tampering...’’ I continue the quotes: ‘‘Program benefits invariably prove to be

disparate, providing unintended (and unwanted) consequences. The

rapidly changing farm sector structure produced a wide array of

farm sizes and efficiencies. Many farms were low cost and the programs were of enormous benefit, enabling them to expand their operations. Others did not receive enough benefits to remain viable

and thus were absorbed along the way.’’ The book credits the FAIR Act of 1996 with removing much of

the decades-old program structure, providing unparalleled farm decisionmaking and becoming the least distorting of markets and resource use. USDA states that the FAIR Act’s ‘‘direct payments to

share some unintended effects with price support programs, namely the artificial inflation of farmland prices. The effect has been exacerbated by the size of payments in recent years, some $28 billion

in the last 4 years above the amount provided in the 1996 law.’’ The book goes on to point out that only 40 percent—40 percent— of farms receive these payments because they are largely directed

to specific commodities. In fact, 47 percent of the payments—47

percent—went to large commercial farms which contributed nearly

half of the commodity production and had household incomes of

$135,000. A color chart illustrates this on the next page.

Another interesting discussion surrounds the fact that 42 percent

of farmers rented land in 1999, and commodity payments capitalized in higher land values often led to higher rents.

Secretary Veneman, the farm legislative process is in motion,

and the book of principles makes an important contribution, but I

ask you and your associates to do more. Please begin to comment

specifically on the wisdom of farm bill ideas which are now being

formulated or debated in the House and the Senate. Please enlist

the assistance of OMB to identify how much money is now available in a war economy with dire predictions that prospective surpluses are vanishing or gone. The need for that timely intervention

by the Bush administration and USDA is apparent. I look forward

to your testimony.

Thank you, Mr. Chairman.

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

appendix on page 64.]

The CHAIRMAN. Thank you, Senator Lugar.

I will now turn to, in order of appearance, Senator Conrad.

5

Senator CONRAD. I would be happy to yield to Senator Leahy.

The CHAIRMAN. Senator Leahy.

STATEMENT OF HON. PATRICK J. LEAHY, A U.S. SENATOR

FROM VERMONT

Senator LEAHY. Mr. Chairman, I appreciate the courtesy very

much. This is an extremely important hearing.

Secretary Veneman, I have had a chance to go through your report. It is excellent, which is nothing less than what we have

grown to expect from you in both administration and previously

when you were here.

Also, incidentally, I want to thank you for the briefing you gave

yesterday to a number up here on the question of agriculture’s role

in anti-terrorist activities. Looking around this committee, I know

we have some who are on the Judiciary Committee here. We were

over with Attorney General Ashcroft, or I would have been there.

Actually, we were here in this room with Attorney General

Ashcroft, or I would have been there, but I have been briefed about

what you raised.

Your report highlights some of the inequities of the current Farm

bill which is directed toward specific commodity producers. The

benefits reach only about 40 percent of our farms. There are concerns a lot of us have raised over the years about large benefits

going to a small number of very large producers, and you refer to

that in here.

It implies that farmers throughout the Northeast and Mid-Atlantic States receive relatively few benefits in the current Farm bill.

In fact, throughout the Northeast and Mid-Atlantic, we produce

about 7 percent of this Nation’s agricultural products. Most people

don’t realize it is that large, but we receive about 1 percent of Federal farm programs under the current laws. We produce 7 percent

and get about 1 percent of the benefits.

I am very pleased that the report highlights the value of promoting conservation. That actually benefits farmers, but it benefits everybody else in the country, and I hope this will mean that we are

going to have adequate funding for voluntary agricultural conservation programs on private lands. Every one of our 50 States has a

backlog now and an overwhelming need.

Your emphasis on nutrition and food assistance is so important,

and on the need for more WIC funding. The WIC program is one

of the finest social programs, health programs, nutritional programs, whatever you want to call it, this country has ever had. We

are the wealthiest, most powerful Nation on Earth. We spend hundreds of millions, and probably even billions of dollars storing excess food. Yet, we have to understand there are a lot of poor pregnant women who get adequate nutrition during their pregnancy

and adequate nutrition for them and the child after the child is

born.

With this really tiny investment, the child is going to be able to

learn better, he is going to grow better. The health of both the

mother and the child are going to be better. It is a win-win situation for the taxpayers, for society, and for the mother and the child.

We have had rising unemployment, so national participation has

risen substantially. We have to look at that because we can’t have

6

hundreds of thousands of eligible women and children go unserved

next year. WIC has always gotten strong bipartisan support up

here, and I hope, Madam Secretary, we can work together on that.

I am concerned, as I have stated before, about the increasing concentration among agricultural processors, especially Suiza Foods in

my area. A recent University of Connecticut study showed that

much of the increase in consumer milk prices in New England is

attributable to concentration at the processor or store level.

Last, to go back to the terrorism thing, don’t hesitate to tell us

what USDA needs. We have had several meetings of the joint bipartisan leadership, and at one of those meetings it was raised the

fact that we are talking about Justice and the military and everybody else has an interest in terrorism. The point was raised, what

about agriculture? Everybody stopped for a moment and realized,

of course, there are some very real needs there. Don’t hesitate to

raise it. You are going to find strong bipartisan support here.

Again, and I will yield with this, Mr. Chairman, with thanks to

both Senator Conrad and to you, I for one am very, very pleased

that the Secretary is where she is.

Thank you.

The CHAIRMAN. Thank you, Senator Leahy.

The order of appearance I have is Senator Conrad, Senator Nelson, Senator Hutchinson, Senator Miller, Senator Baucus, Senator

Thomas. We will go in that order, then.

Senator WELLSTONE. Tom, you have order of appearance. Is that

order of when we came in?

The CHAIRMAN. Yes.

Senator WELLSTONE. You didn’t see me come in, then.

[Laughter.]

Senator WELLSTONE. I will talk to you if you want to do it that

way.

The CHAIRMAN. Senator Conrad.

STATEMENT OF HON. KENT CONRAD, A U.S. SENATOR FROM

NORTH DAKOTA

Senator CONRAD. Thank you, Mr. Chairman.

Thank you, Madam Secretary, for being here and for putting together this basic document that reviews farm policy. As I went

through the book, there are a couple of things that aren’t there

that are important to understand about what our farmers are currently facing, and let me just share those with you and with the

committee.

As I look at what is happening in a State like mine, one of the

most agricultural in the Nation, and I see the cost of everything

that farmers buy going up, and in some cases up dramatically, especially those that are energy-related, and look at the prices that

farmers receive and see those prices almost on a straight line down

in real terms since the passage of the last Farm bill, it is no wonder that there is such an air of hopelessness in farm country.

In the time I have served North Dakota, I have never seen just

a sense of hopelessness out there. I just had a group of farmers

come on a fly in to Washington, and in the meeting that we had

one leader after another said, what do we say to our young people,

7

what do we say that gives them any hope, because we ourselves

have lost hope.

I had a leader of one of the major farm organizations in my

State, one of the most efficient, productive farmers—won every

farm award—sit next to me on a plane several months ago. He

said, Senator, I don’t want this broadly known, but I tell you if I

don’t have a good year this year, I am done. I can tell you people

in my State would be absolutely shocked if they knew the identity

of that person. This is as good a farm operator as you will find, I

would speculate, anywhere in the country.

We are in a circumstance in which our major competitors, the

Europeans, have a totally different approach to farm policy. They

have made a judgment they want people out across the land. They

don’t want everybody to go to town, and they have put their money

on the line to support a policy like that. It is expensive, it is very

expensive, but it creates a circumstance in which there is an

unlevel playing field for our producers.

This is the most recent data from the OECD comparing support

for U.S. farmers by our Government to what European farmers receive from their governments. This is per-acre support, the 1996-

to–1999 average. The blue bar there is the United States; that is an average of $38 an acre. The European support level is $313 an

acre. Anybody could make it on $313 an acre of support, but you

can see the extraordinary disadvantage our farmers face.

Some would say, well, we want a free market. There is no free

market in world agriculture. Every one of these governments support their producers, and they do it for a reason. The Europeans

have been hungry twice and they don’t intend to be hungry again,

and they are willing to put the money out to make certain that

happens. In addition, they have made a determination that they

want people out across the land and they are spending to make it

happen.

Let me just go to the next chart, and I am going to go through

this quickly. It is not just in terms of support for individual producers, but in terms of export assistance for the most recent year that

we have full figures, 1998, this pie chart shows world agricultural

export support. The Europeans are the blue part of the pie. 83.5

percent of all world agricultural export subsidy is accounted for by

the Europeans. Our share is that little red sliver, less than 3 percent. They are out-gunning us here 30 to 1.

It is no wonder, to me, that we are in severe difficulty as we

move to write a new farm bill. In essence, we have abandoned our

producers in a fundamental way, in comparison to what our major

competitors are doing.

Finally, I would leave this chart with my colleagues for their consideration. This shows the percentage of farm income contributed

by Government payments by State, and we just selected States at

random, the States that are represented by members on this committee. I guess that is a random way of picking them.

We didn’t put Vermont on there, Pat.

It is very revealing here: Wisconsin, 174 percent of net farm income is Government payments; Montana, North Dakota, Kansas,

Illinois, Michigan, all more than 100 percent; Indiana more than

100 percent; Nebraska, right on the line, 99 percent, and on down

8

to South Dakota, at 56 percent. Nationwide, 40 percent of net farm

income is coming from Government payments, but in these States

it is far more dramatic.

When we write new farm policy, we have to be not only cognizant

of what you have provided in this really excellent book, and I applaud you for it, but we have also got to be aware of what is going

on with respect to our major competitors. If we want to negotiate

a more level playing field, the only way I have seen anybody be

successful in negotiation is that they have leverage, and this next

Farm bill has to be seen in that context.

It has to be a plan that gives leverage to our negotiators to negotiate a more level playing field. It won’t happen without leverage,

and right now we have none. I believe this Farm bill has to be one

that puts us in a position to negotiate successfully a more level

playing field.

With that, I thank the chairman and I thank my colleagues.

[The prepared chart submitted by Senator Conrad can be found

in the appendix on page 66.]

The CHAIRMAN. Thank you, Senator Conrad.

Again, I will go down the list: Senator Nelson, Senator Hutchinson, Senator Miller, Senator Wellstone, Senator Baucus, Senator

Thomas, Senator Crapo, Senator Dayton. I have the clock set for

5 minutes, but I haven’t enforced it really hard.

Now, we will go to Senator Nelson.

STATEMENT OF HON. E. BENJAMIN NELSON, A U.S. SENATOR

FROM NEBRASKA

Senator NELSON. Thank you, Mr. Chairman, and thank you for

convening this hearing.

I am happy to welcome back to the Senate Ag Committee you,

Madam Secretary, and your colleagues. You have already heard

from several of the members, so I will try to keep my comments

brief.

The Food and Agriculture Policy report which you issued was

timely and full of useful information, and I certainly don’t agree

with all the conclusions, but they provide fodder, as you might

imagine, for discussion of farm policy. That they are a useful tool

in providing us with ideas and certainly insight into the priorities

of your administration.

I want to commend you, in particular, though, for the food safety

and rural communities discussion because that is an important

part of farm policy, although we don’t often think of it as being

part of agriculture policy, but it certainly is. In fact, most Americans have no idea that food safety is part of the USDA’s mission.

As a matter of fact, there are some folks who would like to have

it elsewhere, and some are very happy where it is.

We all know how critical food safety and safe food is, and the

perception that our food is safe. They are a part of the economic

well-being that agriculture can enjoy. If consumers here and

abroad question the safety of the food supply, it is disastrous for

our entire agricultural sector. The level of subsidy in Europe is already disastrous to international trade as it relates to American

agriculture. If you add any question about food safety, you only

9

make matters that much worse, and I was pleased to see the prominence that you gave it, as well.

Rural communities in a State like Nebraska or many of the

States that are represented in this committee are a very important

part of the fabric of life in a State. I have said that in Nebraska,

if we end up with only Omaha and Lincoln, it won’t be Nebraska

anymore, if we lose the rural areas. That is why it is so extremely

important to work.

There are a couple of things that I am concerned about, and that

is how we hang on to family based agriculture and the effects of

concentration in agriculture. Those are two issues that I hear most

about from Nebraskans, and I didn’t see any reference to that in

the report, that agricultural production is comprised in Nebraska

of 55,000 farm families, or that these families, in addition to growing more than enough food for everyone in the country, are responsible for preserving and enhancing the environment and supporting

their communities.

I didn’t see any indication, and this is probably an oversight, that

the administration supports family farming. I would hope that we

could think about this not simply in pure economic terms, but in

terms of social policy, as well as policy that is aimed at rural

States.

What I would like to do is have you think about this: In terms

of what happened 2 weeks ago, can the USDA be a vital voice in

the administration for the removal of sanctions that involve food in

the war that we are about to engage in with certain countries that

have joined together with us for common purposes where there already may be sanctions, certainly food sanctions?

The trade barriers are a matter of great concern, and I guess I

would like to know if the U.S. Department of Agriculture is going

to work with our trade Ambassador to equalize the impact of trade

barriers against agriculture. When we talk about free markets in

agriculture and it relates to these areas of significant support, it

translates into U.S. agriculture unilaterally disarming. We have to

think about it in terms of reducing the barriers in other parts of

the land.

Then with regard to farmer-owned reserves, I agree with you as

to the economic impact, but if we are going to move to food and fuel

as part of an agricultural policy, then the farmer-owned reserve

may be an energy reserve as much as it is a food reserve, if we are

going to be focusing on biofuels.

A lot of things for you to consider. I don’t expect you to respond

to all of those, but I hope that you will focus on those as you move

forward. Thank you very much. I appreciate you being here.

The CHAIRMAN. Thank you, Senator Nelson.

Senator Hutchinson.

STATEMENT OF HON. TIM HUTCHINSON, A U.S. SENATOR

FROM ARKANSAS

Senator HUTCHINSON. Thank you, Mr. Chairman, and thank you,

Madam Secretary, for your appearance here today. I also want to

join my colleagues in thanking you for the excellent briefing yesterday on what the Department is doing and where we stand on the

10

possibility of agri-terrorism. I appreciated that very much. It was

very, very helpful.

I also just want to weigh in, as I have in the past, Mr. Chairman,

with what the House has done and what the Secretary has done,

that it is important, it is urgent that our committee move ahead

expeditiously in the writing of the Farm bill and that that be done

as deliberatively, but as quickly as possible because as we look at

a Nation that is in an economic slowdown, if not recession, if you

look at farm country, it is a recession or a depression in many

parts.

Madam Secretary, you have come to Arkansas before. I want to

invite you back. The Mississippi Delta country of Arkansas is in depression today and it is an agriculturally based economy. I am glad

Senator Conrad provided the chart. He passed it out. I couldn’t see

where Arkansas was on there, but I see it now. We are right down

there with South Dakota, way over to the right.

Because I may not have an opportunity to ask all my questions,

I want to raise two issues that dramatically impact my State right

now. One is the catfish farming issue, in which we have a very serious problem with imports of Vietnamese basa which are coming

in. If it were any other product, it would be called dumping on the

American market. It has gone dramatically up to about a quarter

of the market now coming in from Vietnam, a different kind of fish

that is being sold in American restaurants and being sold on the

American market as if it were American farm-grown catfish.

Part of this is a labeling issue and we are working with the FDA.

I understand that that is a separate issue, but I have been told

that as many as 25 percent of producers could be forced into bankruptcy by next year if something isn’t done to assist them.

Catfish farming has been one of the bright spots in the last decade in the Delta because it provides some diversification and some

hope. Yet, these are the farmers today that, because of these dramatic increases in imports, are facing bankruptcy.

Back in 1992, there was a purchase program through the Agricultural Marketing Service for domestic farm-raised catfish for distribution in Federal feeding programs. It was in some ways a comparable situation and there was, in 1992, action taken to provide

some relief on that, and I would like you to consider that.

Another issue that I would raise is an issue that our rice farmers

are facing, and the failure, I believe, of the Department in meeting

its rice food aid programming commitments. I have written you

concerning that. I have also written the President about that.

We have our largest rice harvest in years, but the plan to purchase 261,400 metric tons of rice for food programs—we are falling

woefully short of that this year. We are at about 161,000, 62 percent of the planned tonnage, as we come to the end of the fiscal

year, which exacerbates this situation of having a very plentiful

harvest at a time that the Department has not met the commitments that it had made in the food program. At the appropriate

time, I would like you to respond to that.

I do thank you for the report and its recommendations regarding

a farm bill and I hope that we can address, as we talk about this

war on terrorism—and that is a very real war, but we also simultaneously, and related to it, face a war in our economy and trying

11

to stimulate this economy. Certainly, a big part of that is what is

happening in agriculture today. I look forward to working with you

as we write a new farm bill and as we address these very pressing

issues with our farmers.

Thank you, Mr. Chairman.

The CHAIRMAN. Thank you, Senator Hutchinson.

Senator Miller.

STATEMENT OF HON. ZELL MILLER, A U.S. SENATOR FROM

GEORGIA

Senator MILLER. Thank you, Mr. Chairman.

Madam Secretary, I thank you for testifying before this committee, and also for the briefing yesterday. I also want to add a thank

you again for speaking at the Southeastern Agriculture Symposium

in Athens, Georgia, in August. Largely because of your presence,

the Symposium was a great success, and that the lessons learned

there will help us as we develop a new farm bill.

You and the entire administration are working diligently to get

this Nation back on its feet. We all appreciate that hard work. As

our Nation rebuilds and regroups, the security of our Nation has

become the priority of all Americans, as well it should, and increased support for agriculture should be considered a very important part of this plan.

We all know that an army travels on its stomach and you must

feed an army to fight a war. We have heard all those things, and

we all know that America’s family farmers produce the safest and

most efficient food supply found in this world. I see no better argument for the continued support for our Nation’s farmers.

Madam Secretary, the agriculture crisis we have faced over the

past 3 years remains. Even with the continued assistance Congress

has provided in the past, the farmers of my State continue to struggle more and more every year. I have heard from many of my constituents in recent months and they foresee, after their crops are

sold and equipment is put up for the winter, that this year will

turn out to be even worse.

Farmers across this country are exhausting the resources that

they have worked for years to build, and without a new farm policy

that allocates additional assistance, the family farms in my State

will disappear.

Our first priority of farm policy should be to provide an adequate

safety net for our farmers when natural or economic disasters

strike. Over the past 3 years, our farmers have experienced both

crises. This sector provides a stable food supply and the economic

engine for many rural communities.

A lesson we can learn from history is that when our economy begins to waver, our agriculture industry often provides the backbone

of support that carries us through difficult times, and I hope that

this administration will take this objective into serious consideration.

In the policy statement which you issued last week, a strong emphasis was made on increased need for conservation support. The

farmers of my State have utilized current conservation programs

well, but they have a continued need for improvement in programs

such as CRP and EQIP.

12

I agree with you that more can be done in regard to conservation,

and I look forward to working with the administration and with

this committee to create conservation policies that adapt to farming

operations in States such as Georgia.

I mentioned earlier that our farmers produce the safest and most

efficient food supply to be found in the world. It is a food supply

that every American should have access to. As a former Governor,

I understand the importance of school and elderly nutrition programs, and agree with you that improvements in these programs

should be pursued. There are many other aspects such as rural development, trade expansion, research and energy needs that we

must improve upon as we consider a new farm bill.

I look forward to working with you and this committee to craft

a new agriculture policy that secures the economies of rural America and places our Nation’s family farmers on a positive road into

the 21st century.

Thank you, Madam Secretary.

The CHAIRMAN. Thank you, Senator Miller.

Senator Wellstone.

STATEMENT OF HON. PAUL WELLSTONE, A U.S. SENATOR

FROM MINNESOTA

Senator WELLSTONE. Thank you, Mr. Chairman. I know that we

want to move forward, so I am going to move fairly quickly here.

Thank you for being here, Madam Secretary.

I want to first of all say to the Senator from Georgia that I quite

agree with his remarks, and I especially think that food security

certainly can be connected to national security. We always talk

about oil, but I can’t think of a more precious commodity than food,

and we need to view agriculture within that framework.

The second thing I want to say is that Senator Dayton and I had

hearings back home, and I am sure many colleagues did as well;

huge turnouts. This was in August and people were there. It was

mainly, Madam Secretary, because they really do have their backs

to the wall and they desperately want to see a change in farm policy. People more than anything else are focused on the price crisis

and they want to get a decent price. I mean, they want to be able

to get a decent price so they can support their families. It is that

simple.

My passion is for the family farm part of agriculture and I really

think that we need to see really significant changes from the farm

policy that we have had, especially when it comes to making sure

that family farmers get a decent price.

I am really interested in something I wish the House had done.

There is a lot of consensus in the countryside, and among a good

many of us on both sides of the aisle—and you allude to this; I

mean, your criticism of some of the subsidy in inverse relationship

to need is right on the mark.

We have to put more competition back into the food industry. I

mean my battle cry is to put free enterprise back in the free enterprise system. I have been kidding my colleagues on the other side

that I am becoming the conservative on the committee.

In particular, we need to have a section of whatever final farm

bill that is passed that deals with concentration; we absolutely do.

13

There is a direct connection here between the whole issue of whether there is competition and whether family farmers are going to

have a shot at getting a decent price. I mean, if you are at an auction and there are two buyers, you don’t get a very good price.

I can’t see moving forward, Mr. Chairman, without really focusing on the problem of concentration. I will tell you, you will find

farmers and people who live in rural America on all sides of the

political equation who agree with that. I would really like to see

that focus.

We talk a lot about rural economic development in relation to agriculture and value-added products. I just want one more time to

say, especially given the situation we now find ourselves in on September 11 and afterwards, that on the energy front and on the energy independence front, an awful lot of people in rural America

feel like they have part of the answer, and part of it is biomass

electricity and clean fuels and biodiesel and ethanol and wind. I

want to just say that that can very much be a part of our future

and I don’t think can be disassociated from a farm bill.

Finally, I want to say to you, Mr. Chairman, your work—and I

know the Secretary has focused on this as well and I was very

pleased to see it. Above and beyond some of the really good programs like CRP, with the full backing of Pheasants Forever and

Ducks Unlimited, all of which has been win-win, this notion of environmental credits is extremely important. We ought not to give

up on that. It is the right thing to do. It brings more support from

people who don’t live in rural communities for a good farm bill. It

is something the administration can take the lead on. Senator Harkin has taken the lead on it and I just want to express my strong

support for this as well.

Then, finally, I want to ask you to do something that is gutsy because we don’t focus on this as much as a committee. Senator

Leahy started on it when he talked about WIC. WIC is important

and WIC has bipartisan support, but with all due respect, we are

in hard economic times. We need for the USDA to be an advocate

for the food stamp program.

Let’s just get real about it. You talk about citizen children. What

the Secretary is talking about, colleagues, are all the children of

legal immigrants, since we cutoff their benefits, who are not receiving any help. That is wrong.

I ask for the Food and Nutrition Service to do a study. They

came back and they told us that over 50 percent of the people are

not receiving it. We have seen like a 30-percent decline, Mr. Chairman, in food stamp participation, and the reason has not to do with

people no longer need it or are no longer eligible. We don’t have

outreach out in our counties anymore. We are not telling the working poor that they are eligible.

Colleagues, this is the major nutrition safety net for children in

our country. This is an extremely important program for working

poor people. Working poor people are getting killed in these hard

economic times.

You are in a position, Madam Secretary, to take the lead. This

committee is in the position to take the lead, and I want to argue

that in whatever economic stimulus package we have, and we will

have to have one, we have to face up to the fact that all kinds of

14

people who are eligible aren’t receiving it. All kinds of children are

no longer getting the help that they need.

Frankly, it is an economic stimulus. It is an economic stimulus

because people right away purchase, and then when they have

some help to help them purchase food they have some other money

they can spend in other ways in the economy. Don’t, Senators on

both sides of the aisle, leave food nutrition programs and the food

stamp program over here. We need your strong leadership.

We have to be honest about some of the cuts we made in that

program that we shouldn’t have made. We have to be honest about

people who are eligible who are not receiving it, and we have to

make sure that we fully support this extremely important safety

net program, lifeline support program for working poor people and

for children in our country. We are not doing it now. Now is the

time to do it.

The CHAIRMAN. Thank you, Senator Wellstone. I would just add

as a postscript, I know in my State and several other States, as the

food stamp participation has gone down, the demand on food banks

has gone up, an interesting juxtaposition.

Senator WELLSTONE. A dramatic increase.

The CHAIRMAN. Senator Baucus.

STATEMENT OF HON. MAX BAUCUS, A U.S. SENATOR FROM

MONTANA

Senator BAUCUS. I thank the Chairman. I appreciate him holding

this hearing.

Thank you, Madam Secretary, for attending today. You have a

problem. With all the testimony I have heard thus far, a lot of, not

complaints, but deep, deep concerns about what is going on in the

country. I don’t envy your position, and I know you take these comments in the spirit that they are meant, namely this is a huge

problem in large parts of our country.

I really have two points I want to make. One is with respect to

the commodities I am a bit familiar with, that is those in Montana.

Off the top I will tell you, if you don’t already know, Montana percapita income is at the bottom of the barrel. In 1946, Montana

ranked 10th in per-capita income. Ten years ago, we were 38th.

Today, we are 49th in wage per-capita income, and in total per-capita income we are about 47th. We are down at the bottom. It is because of the changing nature of the economy, globalization. There

are a lot of factors, but it is a fact.

Our largest industry is agriculture. That is our largest industry,

and if our per-capita income is going down so much, clearly agriculture income is also going down dramatically.

I know you are from California and those are the crops that you

are most familiar with. I have to tell you, when it comes to wheat,

when it comes to barley and some livestock, that is not California

at all. There is no comparison, none whatsoever. We so much rely

upon a decent income from wheat or from barley, basically. We

have some specialty crops, but it is basically wheat and barley and

cattle and sheep, which is declining, as you know, and hogs.

Over the years, let me just tell you what I have learned and

what the problems really come down to and what the solutions are

in this. You have been Secretary now about a year. You have done

15

a great job, but I just want you to hear from me, somebody who

has been on this committee many years, representing my State for

many years, what I have seen for many years.

I associate myself with the remarks of the Senator from North

Dakota, Senator Conrad. He is right on target. A lot of this is unfair foreign competition, and it is the dramatic subsidies that other

countries have, particularly export subsidies that are trade-distorting, and they are particularly European compared with other countries. We know a bit about the Canadian Wheat Board. That, too,

is trade-distorting, but the European subsidies are just over the

top.

He said, and it is true, that based upon deep, bitter experience

in working out trade agreements with other countries on various

items, we are not going to get very far with the Europeans until

we have leverage. No country, in my deep experience, altruistically,

out of the goodness of its heart, will lower a trade barrier. They

just don’t. Why should they? They don’t unless they are persuaded

to. You need leverage.

Senator Conrad has some ideas about what that leverage should

be. They are good ideas, but if you truly want to do something for

producers, you are going to have to find the leverage and your associates are going to have to find the leverage so that in the next

year or two or three we get meaningful reduction in trade-distorting overseas subsidies. You are going to have to find it. We will

work with you to try to find it, but we are going to have to have

it if we are going to be successful.

As you know, in the meantime our smaller towns are dying on

the vine, losing population, in eastern Montana, western South Dakota. I can only speak for our part of the country, but I am sure

that is true in other rural parts of the country as well.

The second major problem here—I mentioned trade—the second

is concentration of economic power. Producers are left the dregs. It

is those further up the food chain, all the way up to the grocery

stores, et cetera—that is where the money is. We all know that.

As Senator Wellstone and others on this committee have said

today, more and more and more people in agriculture know that is

part of the problem. I hear it everywhere. A few years ago, you

would just hear it from a few. Now, you hear it just constantly.

Farmers know that one of the reasons their profits are getting

squeezed is because there is too much concentration of economic

power higher up which takes their money away from them and fills

the pockets of those higher up. They know that, and there is a near

revolution brewing because so many people know that to be the

case. I strongly urge you to get on it right now, not give it lip service.

We have known for years what the problems are, and for years,

to be honest, we really haven’t done a lot about it. It cuts across

all administrations. It is not Republican or Democrat; it is all administrations. If you address those two concerns, that would go a

long way.

Third, the passage of a farm bill that truly has a safety net so

that those farmers who are working hard and doing a reasonably

good job just don’t fall between the cracks. We are not trying to

16

save all farmers; we are just saying those who are working hard

and doing a pretty good job who fall between the cracks.

Mr. Chairman, just one more quick point. Thank you.

You have a harder charge right now, too, because of the crisis

that is going on. You have to work harder to get the attention of

OMB and the administration to do these things, a lot harder. That

is why at the top I said you have a tough job. We want to help you.

One very important, but very small second point. I have to mention this, Mr. Chairman, because it is very, very important.

When I was back home not too long ago, I was at Fort Peck Indian Reservation and have had diabetes hearings across the State.

As you know, diabetes incidence in our country has gone up significantly in all States across the Nation.

On Fort Peck Indian Reservation, kids there are on the reservation working for the newspaper went on strike; they boycotted because of the school lunch program, because of the content of the

food in the school lunch program, which encourages diabetes. It

doesn’t minimize it or prevent it, but encourages it. They have been

trying like the dickens to try to do anything to raise the profile of

USDA’s failure thus far to address the composition of the food in

the school lunch program. I would just urge you very strongly to

take a big step to help reduce diabetes in this country by addressing the quality of food in the school lunch program.

The CHAIRMAN. Thank you, Senator Baucus.

Senator Crapo.

STATEMENT OF HON. MIKE CRAPO, A U.S. SENATOR FROM

IDAHO

Senator CRAPO. Thank you very much, Mr. Chairman. I, too, will

try to be brief in my remarks. I see the need for that.

I want to again thank the Secretary for coming up here today,

and just say that I believe you have already heard from those who

have spoken today some of the critical concerns. The events of the

last couple of weeks have highlighted the critical importance of our

focus on food safety and food security. We appreciated your briefing

yesterday.

I just want to highlight a few points that frankly I was extremely

pleased to see well covered in your statement and in the excellent

materials that you have provided to us. I agree with and with Senator Conrad on the focus that you have made on international

trade. As has already been said by Senator Baucus, the fact is that

one of the most significant problems we face in American agriculture today is the unfair trade, the trade barriers, the tariffs, the

subsidies, and so forth, that we face in international competition in

the most important, expanding area of markets for our farmers. I

appreciate your focus on that.

I believe many of us from the ag sector, as we have dealt with

trade relationships, including trade agreements like NAFTA, and

so forth, over the last few years, are very interested in seeing how

the administration will respond to the challenge that we are faced

with from the unfair trade circumstances that we see in the world,

particularly focused on agriculture.

As you know, there is a WTO ag caucus, bipartisan, House and

Senate, here in the Congress that is very much focused on assuring

17

that we work closely with the administration on trade issues. We

want to work closely with you. I frankly believe that the issue of

trade promotion authority is closely tied to how those who focus on

ag issues feel the administration is doing with regard to protecting

our interests in international trade.

Second, I was very pleased to see your focus on the need for a

safety net for our farmers and the recognition that you gave to the

fact that price supports and supply controls are not the way that

we should seek to pursue a safety net policy. I look forward to

working with you in putting together that basic safety net.

As you probably know, I too am one of those who is working very

closely on conservation issues, and I was pleased to see your comments last week on that as well. It is very critical that we recognize that as we craft a farm bill and we look at our national food

and fiber policies that we also recognize that, in my opinion, the

Farm bill has been probably one of the most significant pro-environmental pieces of legislation. Our national farm policy is probably one of the most significant environmental pieces of legislation

that we deal with in this Congress. We need to recognize that that

is one of the important aspects of and objectives of our work now

on the farm bill.

Again, just to quickly wrap up here, I also appreciated your focus

on what you called ag infrastructure. It is critical that we recognize

the role of stabilizing and strengthening the agriculture infrastructure in this Nation, and I am talking there about things such as

research, information, inspection, monitoring, testing, promotion of

our products, those things that help protect our farmers against

emerging threats and help to promote their products in the world

climate.

Last, I just want to thank you also for your strong focus on rural

communities. I have found it very interesting to see your analysis

of the source of farm income and the diversity of farm income in

our rural communities. I believe that one of the focuses that we

must have in this committee is on how we can help develop a national food and fiber policy that will best address the growing need

of strengthening our rural communities.

It seems to me that in America right now, in a very real sense,

we are seeing two different economies emerge. If you will, I would

call it the urban economy which seems to be a lot more stable and

stronger, notwithstanding some of the recent events, and on a more

stable course than the rural economy that we see. It is almost like

two different economies in the United States. We have to recognize

that what we do here in this committee and what we do as we

work with you on farm policy can be critically important to those

rural communities.

Again, I thank you for coming here today, and I look forward to

working with you on these and other issues and I look forward to

your testimony.

The CHAIRMAN. Thank you, Senator Crapo, for being succinct.

You came in under the 5-minutes. I appreciate that very much.

Senator CRAPO. I hope I get some points for that along the way.

The CHAIRMAN. You will get a lot of points for that.

Senator Dayton.

18

STATEMENT OF HON. MARK DAYTON, A U.S. SENATOR FROM

MINNESOTA

Senator DAYTON. Thank you, Mr. Chairman, and I want to thank

you, along with Senator Wellstone, Mr. Chairman, for giving us the

opportunity to hold field hearings of this committee in Minnesota.

As Senator Wellstone said, they were extremely well-attended. We

had over 200 at one and about 150 at another, and the input was

very, very valuable. Thank you for that.

Madam Secretary and the members of your administration, I

want to thank you for being here as well. Much has already been

said that I am not going to repeat it if I can help myself, but Senator Conrad’s chart here, it seems to me, really captures the essence of the challenge that we face in moving our farm economy

forward. It is also, to my mind, a very effective measure of the success or lack thereof in our future agriculture policy.

It seems to me that if we can get net farm income up or keep

it at the present level and bring the percent of that which is provided by Government payments down, that, to me—and if you

agree or disagree, I would be interested in your comments—ought

to be a very good index of whether or not our programs are successful, and the need for market prices to reach levels where farmers

can make profits in the marketplace rather than depend on Government subsidies.

I hope we can have the kind of candid dialog in this hearing and

hereafter that I believe is called for, because we give lip service to

that, but I don’t know that that is really the conviction held by everyone in your administration, nor is it held by everyone in the agriculture industry. Clearly, there are some people whose economic

interest benefits from having lower prices. Some farm producers,

livestock producers and dairy producers benefit from lower grain

prices.

Certainly, farther up the processing and distribution lines, as

others have said, starting with a lower price base for raw commodities is going to mean greater margins for profit. Some believe that

we have to keep our market prices lower in order to increase our

competitiveness with export sales.

We can’t gloss over our difference here and get to the really bottom line of American agriculture. Are we going to make it profitable in the marketplace? Is that a goal of farm policy? If it is not,

for whatever reason, let’s admit that it is not, and therefore that

we need some form of Government subsidies or we need to go

through a wrenching out in the industry or in the whole sector of

some producers.

It seems to me the inability to come to terms, to hard grips with

that is something we have been able to gloss over because we have

$20 billion now going into prop up the economy, resulting in this

kind of distortion. If we take this money out, as we try to avoid

doing and may have to do just because of the cost, what are the

effects going to be? Are we going to ameliorate those effects or are

we simply going to say to farmers, as Freedom to Farm intended

6 years ago, you are on your own out there and if you can’t make

it with the fluctuating market prices, then you are simply going to

go out of business? That, to me, is the question we all try to avoid.

19

That is the elephant in the closet or whatever that we are going

to have to let out and face up to.

The Farmers Union just recently produced figures on what they

estimated the cost of production was for a bushel of corn, soybeans

and some of the other basic commodities. I would be interested,

and you probably can’t respond today, Madam Secretary, whether

in your estimation those numbers are accurate, reasonably so, generalized across the country, or not.

If they are accurate and they are far above the market prices of

those commodities today, then I would be interested to know

whether, in your view and the administration’s view, those are appropriate target prices we are setting as a clear public objective to

get the market prices of these commodities above that cost of production point so farmers can make a profit in the marketplace or

whether, in the balance, that is not our policy, that is not our objective, in which case then we could talk about alternatives we posit.

If we don’t get to the crux of that issue as a driving factor in creating this farm bill, Mr. Chairman, then we don’t know what our

goal is and we are not going to be in a position to know whether

or not we have accomplished it.

Finally, I just want to say, Mr. Chairman, I commend you for

your focus on conservation. Your new initiatives in that area, in addition to the CRP and the wildlife reserve and some of the other

programs, really heralds a new day where we can try to encourage

farmers to adopt more conserving practices, while at the same time

still producing our Nation’s foodstuffs.

I thank you, Mr. Chairman.

The CHAIRMAN. Thank you very much, Senator Dayton.

Senator Lincoln.

STATEMENT OF HON. BLANCHE LINCOLN, A U.S. SENATOR

FROM ARKANSAS

Senator LINCOLN. Mr. Chairman, thank you. Thank you for holding this hearing today. I also want to thank our Secretary, Secretary Veneman, as well as Dr. Collins and Dr. Penn, for appearing

before us today.

The work of America’s farmers continues, and so does the work

of this committee toward a better and more effective agriculture

policy in this Nation. The Secretary’s appearance and the presentation of the administration’s views on agriculture today show us

that despite the very, very serious matters that they are dealing

with and that we are all dealing with, they have not forgotten the

needs of rural America, and we appreciate that.

We have all heard suggestions over the past several days that

development of a new farm bill should be delayed until next year,

or put off. Concerns about the Federal budget are even greater now

than they were in August, and I feel very confident that Senator

Conrad has mentioned some of that already. If not, he will later.

Yet, while we focus our attention on our national defense and the

fight against terrorism, we must also keep an eye on the daily

needs of our citizens in this country. In many cases, as it is in the

case of agriculture policy, these daily needs actually relate in a

very direct way to our Nation’s basic ability to respond in times of

crisis.

20

The soundness of our Nation’s economy relies in large part on

the health of rural America, and as we all know, our rural economy

is in serious trouble. This makes our work toward a new farm bill

that much more urgent, in my opinion. Many in Congress are talking about an economic stimulus package. For Arkansas, a boost to

the farm sector would be one of the most effective forms of economic stimulus we could see. This is true, of course, for many parts

of rural America, certainly for each of the States that is represented here on the Agriculture Committee.

Over the past several months, the Agriculture Committee has debated the different forms of support that the next Farm bill should

include. Sometimes, the debate has taken somewhat of a divisive

tone. I know that in some of the recent articles we saw this summer I, for one, was very disappointed to see how some people have

chosen to really sensationalize some of the programs that are

there.

To the extent that they included some of us who are farmers in

those articles, it was concerning to me, especially, again, the way

that it was sensationalized. I find myself as one of nine grandchildren of a grandfather who left a trust, and yet I was categorized as one of the big farmers on the committee, very inaccurately. I found that I was responsible for the entire farm, as opposed to just the one small part that is my part, being one of nine

grandchildren, which is only about a quarter of the entire farm.

It is very important for us to be realistic and to be honest about

what we are talking about and being able to produce the safest and

most abundant and affordable food supply in the world. My family

is engaged in farm programs because, after all, they are farmers.

It is important for us in this Nation to be able to provide the kind

of safety net that agricultural producers need to be competitive in

a world marketplace.

I raise this issue to point out how some people wish to carry out

the Farm bill debate. Rather than bringing the different segments

of the agricultural community together to find a comprehensive solution that can work for all parts of our very diverse rural economy, some people seem to think that the best approach is to drive

a wedge between the members of the farm coalition. That is devastating.

I use the word ‘‘coalition’’ for a reason. All of us in this room are

part of this farm coalition. We are all from farm States that depend

very heavily on the strength of the farm economy. We all farm very

different crops, in very different manners, but we don’t have the

time to waste on divisive approaches to the Farm bill debate. Our

farmers need a farm bill, and they need it very, very soon.

I am pleased that my colleague from Arkansas has already mentioned some of the things that we hope to be focusing on, as well:

the unbelievable problems that we are seeing in our catfish industry, where they are facing the misleading labeling of the Vietnamese basa fish, and certainly the needs of our rice farmers for greater shipments of rice in the food aid program.

When I visited with farmers throughout Arkansas during August, I found farmers who had been in business since the 1940’s

and they were getting the same price for their rice that they got

in the 1940’s. They cannot survive that way. They have a good

21

crop. There are ways that we can be helpful to them, and I hope

that we can use those food aid programs to do just that.

The House has almost finished their debate and is close to putting a bill on the House floor for consideration, and the time is

really drawing near when the Senate needs to do the same.

Again, I applaud the Senator for the charts that are provided.

They are always excellent and I always use them.

I hope that we will recognize that we are at a critical juncture

of whether or not we make the choices on behalf of the American

people, of whether or not we want to provide the kind of safety net

that is going to allow us the kind of domestic production in agriculture that we need not only in good times, but also in times of

crisis.

I hope that we will all come together in this committee, as well

as in the farm community, to ensure that what we come up with

is something that will allow us to be able to do that, and that is

to keep our farmers active, to keep them competitive in an international marketplace, and provide them the tools, conservation and

otherwise, that they need in order to do the best job that they can

and continue to produce for us the safest and most abundant and

affordable food supply, as they have over the years.

I thank you, Madam Secretary, for coming today to help us get

a strong start to a very strong farm bill here in the U.S. Senate.

I hope that we can work with you in this process to provide something on behalf of production agriculture.

Thank you.

The CHAIRMAN. Thank you, Senator Lincoln.

Senator Thomas, I apologize. I thought you had gone.

STATEMENT OF HON. CRAIG THOMAS, A U.S. SENATOR FROM

WYOMING

Senator THOMAS. Not at all. I did leave for a minute, but I

thought maybe the Secretary would get a chance pretty soon.

Thank you for being with us and for meeting with us last week.

I appreciate.

There have been a lot of changes in agriculture, no question

about it. The focus has been on the program crops. You point out

that now only 30 percent of the farms are really in there; 20 percent of the value comes from program crops. We need to be broader. We need to talk about conservation. My friend from Arkansas

talks about catfish and rice. In Wyoming, we would have to talk

about something else, probably sheep and sugar. It is a broad

thing. Concentration is very important, and fair trade, and those

are the things I hope we can, in addition, talk about.

Thank you for being here, and I hope you get a chance to talk.

The CHAIRMAN. You get the prize for being the shortest of all. It

wasn’t even 30 seconds, hardly. Thank you.

Madam Secretary, you have been very kind and very patient. As

I was just saying to Senator Lugar, it is important for Senators to

be able to have at least 5 minutes to speak about their own particular interest and about their States.

I noticed you taking notes, and I was taking some, too, Madam

Secretary, because we have a lot of expertise here. We have a lot

of people around this dais who have been involved in agriculture

22

for a long time. We all represent different sectors of the Nation, different types of crops, different kinds of production. It is important

to hear these Senators. I appreciate your patience and your attention to the comments that they have made, and I know you will

take them to heart.

Again, we welcome you here and please proceed with your testimony.

STATEMENT OF HON. ANN M. VENEMAN, SECRETARY, UNITED

STATES DEPARTMENT OF AGRICULTURE, WASHINGTON, DC;

ACCOMPANIED BY J.B. PENN, UNDER SECRETARY, FARM AND

FOREIGN AGRICULTURE SERVICE, UNITED STATES

DEPARTMENT OF AGRICULTURE

Secretary VENEMAN. Thank you very much, Mr. Chairman. I am

pleased to be here this morning with the committee, and I appreciate the attendance of so many of the committee here today.

I want to thank you, Mr. Chairman, and Senator Lugar as well,

and all the members for this invitation to discuss our views on the

future of food and agriculture policy. I want to make this short

statement and then I will be pleased to respond to your questions,

and would ask that our longer statement be included for the

record.

The CHAIRMAN. Without objection.

Secretary VENEMAN. The past 2 weeks have been very difficult

and an extremely sad time for all Americans. The acts of terror

were cowardly acts on innocent human lives and will certainly have

a long-lasting impact on every one of us.

Americans are strong and unyielding in our defense of freedom,

our culture, our way of life, and our people. While our hearts go

out to the victims and their families and we mourn those who lost

their lives, we salute the courage of those who saved lives and admire the countless volunteers, firefighters and police who have

been working around the clock in the search and rescue efforts.

In the wake of this tragedy, our Nation is stronger and more unified than ever. As the President said last week in his address to

Congress, we will not tire, we will not falter, and we will not fail.

At USDA, we have been assisting, where possible. Five of our

Forest Service incident management teams have supported the

search and rescue operations. These teams are providing equipment, supplies, tents and food to thousands of workers and volunteers. In addition, our Food and Nutrition Service is working with

impacted communities to assure food assistance is available to

those in need. Other USDA staff are helping in various ways, and

I want to assure you that all of our personnel continue to operate

our programs. We are back to business, not as usual. We are being

extra vigilant in all that we do. As the President said, all of this

was brought on us in a single day and night fell on a different

world.

I would like to begin my remarks by commending the committee

for starting a wide-ranging discussion on the future of our food and

agriculture system. Likewise, as has been mentioned here today,

the House has been moving on a farm bill as well.

Since the beginning of the year, the occurrence of several major

events has convinced me of the urgency of a comprehensive review

23

of all of today’s agriculture, all of the policies, all of the programs,

and other supporting public infrastructure.

The foot and mouth disease outbreak in the United Kingdom and

on the European continent was a major threat to our livestock sector. Fortunately, we have maintained our 72-year record of keeping

the U.S. foot and mouth disease-free. As a result, this year we have

significantly increased our resources, our personnel, our dog teams,

our inspections to protect U.S. agriculture.

Also, the spread of BSE in Europe and the recent find in Japan

has enormous implications for beef and feed markets. Our policies

to regulate feeding practices and actively test for BSE have protected our consumers and ranchers and farmers. We continue to review these programs and the science to ensure that strong firewalls

are in place.

The emergence of ag biotechnology and its widespread adoption

in this country is posing new challenges throughout the food system and the global trading complex. Ag biotech holds tremendous

promise, as illustrated by the StarLink incident. However, it is important that we continue to assure a coordinated and rigorous

science-based approach to this emerging technology.

Our food system continues to stand the test of these events and

they serve to reemphasize just how valuable our public infrastructure of specialists, institutions and facilities are to our farmers and

ranchers and to the ag economy as a whole. Our policies, regulations and supporting institutions must keep pace with new technology, the shifting business environment, and our industry structure. These and other reasons led us to decide to take a longer view

of the needs of the entire food and ag system.

Throughout my career, I have participated in many strategic

planning exercises and policy analysis, which is why our first step

in preparing for the future policy discussion has been to develop a

profile of the industry today, where it is heading, and to identify

the major drivers of change.

Last week, as has been mentioned today, we released a report

entitled ‘‘Food and Agriculture Policy: Taking Stock for the New

Century,’’ and most of you have seen the report. This review and

the suggested principles hopefully will guide the tenure of our administration as it serves as the basis for strategic planning, for decisionmaking within USDA, for our budget proposals, and for our

input into the Farm bill process.

We did not attempt to prepare detailed proposals for the Farm

bill. We decided that we could best contribute to the deliberations

by taking this approach rather than developing detailed proposals.

There is an abundance of highly creative thinking that can develop

alternative approaches to the various issues that would be consistent with the principles we have put forward. We look forward to

working with the Congress as specific proposals are discussed.

Now, I want to briefly outline the report. In our report, we begin

by noting that fast-paced changes are occurring and how these

have fundamentally reshaped the market environment for our farm

sector. We then examine a wide range of critical issues that impact

our food and agriculture system.

We recognize the rapidly changing food and agriculture system.

We put forward an understanding that trade expansion is critical

24

to the future of agriculture. We examine farm sector structure in

today’s global environment. We recognize that more than ever, enhanced infrastructure is necessary to protect the very core of agriculture and the products that our farmers and ranchers produce.

We recognize the different role that the conservation and environment are playing in today’s production agriculture. We talk

about how to strengthen rural communities and how to ensure

strong nutrition and food assistance programs. Finally, we talk

about the importance of integrated programs as we move the Department into a 21st century workplace for delivering the services

to the customer base that we serve.

Let me briefly touch on some of the key findings of our stock-taking exercise on the evolving food and agriculture system before

turning to our principles.

Today, American farmers operate in a global, technologically advanced, rapidly diversifying, highly competitive business environment that is driven by increasingly sophisticated consumers. We

have shifted from the commodity-based, surplus-oriented production focus of the last century to one now defined by products, services, markets and consumers.

Increasingly, our consumers insist on defining what is produced,

how it is produced, how the production takes place and with what

effects. American consumers are only part of the contemporary picture, though. As I have said before, more than 96 percent of the

world’s population lives outside the United States. Exports already

account for some 25 percent of total farm sales and represent the

largest potential growth market for the future.

Access to these markets requires overcoming barriers created not

only by high tariffs, but also by different cultures, languages, and

preferences for food in a diverse, technologically driven farm sector

that faces the new realities of consumer-driven agriculture at home

and abroad.

Today, about 150,000 American farmers produce most of our food

and fiber. These commercial operations make up just one segment

of U.S. agriculture. USDA counts another 2 million-plus farmers

who meet the criterion of a farmer; that is, at least $1,000 of agriculture products sales annually, many of whom have other occupations but who enjoy rural lifestyles.

A vast diversity of businesses and households emerges out of this

multitude—niche farms, hobby farms, hunting preserves, dude

ranches, you-pick operations, farms that sell directly to consumers

through farmers’ markets, bed-and-breakfasts, and many more.

Our report analyzes the current realities of our market and our

farm structure in more detail, and also identifies the small number

of very powerful forces that are propelling the fast-paced changes

occurring in every single component of the food system.

Let me be very clear. We must help our farmers expand into new

markets if we are going to succeed in the ever-changing environment. Otherwise, they will be left behind. We need tools like trade

promotion authority to open new markets and reduce tariffs.

Globalization has increased competitive pressure from closer integration of business all around the world. Better, faster, more reliable communications and transportation systems facilitate business’ abilities to produce, source and sell in the locations that give

25

them the best advantage, even if it means operating in multiple locations around the world.

A broad range of new technologies—precision agriculture, e-commerce, biotechnology, and food system technologies such as new

packaging materials—continue to expand our markets by creating

completely new demands for ag products. These are powerful forces

and they will continue to drive our food and agriculture system.

Another change that has been constant in the evolution of the U.S.

farm and food sector is rapidly evolving consumer demands driven

by globalization and new technology will increase the pace of

change in the new century.

Mr. Chairman, how we approach these issues will set the course

for American agriculture of the future, and I would like to discuss

our central principles.

Trade policy leads off the critical importance of global markets.

Trade policy must focus on gaining access to foreign markets

through tariff reduction and the elimination of trade-distorting subsidies, and be supported by domestic policy that meets our existing

international obligations and provides ample latitude to pursue

ambitious goals for trade negotiations.

Domestic farm policy must not inadvertently reduce competitiveness at the same time that trade policy seeks expanded export

market opportunities for our farmers. Farm policy and programs

must be tailored to reflect wide differences among farms with respect to production costs, marketing approaches, management capabilities and household goals.

Farm policy, including providing a safety net, must promote

more sustainable prosperity for farmers through market orientation without engendering long-term dependence on Government

support. This does not rule out helping farmers and ranchers when

unexpected events beyond their control occur and cause output or

income to plummet.

The infrastructure that supports market growth and efficiency,

which includes everything from border inspection services to research endeavors, must be renewed and reoriented to fit today’s realities, with input and cooperation from every link in the food

chain.

Conservation policy must both sustain environmental gains, but

also accommodate new and emerging environmental concerns. The

need for sources of renewable energy and the potential for reducing

greenhouse gas emissions are emerging environmental issues. In

addition, reducing nutrient runoff from livestock production, addressing conflicts over scarce water supplies, and protecting open

space have gained momentum as issues to be addressed.

Conservation policies should adapt to emerging environmental

and community needs, and incorporate the latest science. Conservation policies should be market-oriented in order to ensure the

maximum environmental benefits for each dollar spent. This requires a portfolio of instruments, including land retirement, but

also stewardship incentives on working farmland.

Now that the economies of seven out of eight rural counties are

dominated by non-farm activities, commodity-based policies do not

address the complexities of rural life and rural business. Rural

America is diverse, and tailored policies must create conditions

26

that will attract private investment, encourage education of the

rural labor force, and promote non-farm uses of the natural resource base, including through development of renewable energy

sources and carbon sequestration to reduce greenhouse gas emissions.

Commitment to ensuring the access of all Americans to a healthy

and nutritious food supply must continue, with particular attention

to improvements in delivery of food assistance to low-income families who still face food insecurity.

Recognition of emerging diet quality issues is of paramount importance, and it was mentioned this morning, as the Nation’s concern shifts from under-consumption and under-nutrition to provision of the proper varieties and quantities of foods and nutrients

to promote health and well-being.

Public sector management, and that of the U.S. Department of

Agriculture in particular, must overcome the tendency of traditional agency hierarchies that inhibit the coordination and collaboration necessary for effective delivery of food and farm programs

and citizens’ access to public services.

There are, no doubt, many policy options and program designs

consistent with these principles for the new century. Selection of

the best among them will require continued attention to the realities of the farm and food sector, and a dedication to fair and effective operation of the Federal Government.

Mr. Chairman, as we enter a new century, this is the most opportune time for leaders in agriculture to take the long view, to

step back and determine as best we can the future requirements

of this industry, and to put in place the plans and investments that

will be necessary to enable our food system to serve us well in the

decades ahead as it has in the past.

I appreciate the opportunity to discuss our vision and to share

our guiding principles that we have developed. We look forward to

working with you in the future and I will be pleased to answer

your questions.

[The prepared statement of Secretary Veneman can be found in

the appendix on page 67.]

The CHAIRMAN. Madam Secretary, thank you very much for your

statement, and your prepared statement will be made part of the

record in its entirety.

We will just have 5-minute rounds for some questions, and again

we will go in order of appearance, as we did before, except that I

would try to go from one side to the other in the question period.

Madam Secretary, I am sure it comes as no surprise to you that

I want to focus a little bit on conservation in my opening question.

I am really pleased at your statement about focus on a new stewardship on working lands. Certainly, the land set-asides that we

have had in the past, the CRP and WRP and others, have indeed

provided a lot of benefits to a lot of areas. We have new industries

in my home State that are taking advantage of that in terms of

hunting, wild fowl production, wildlife habitat, things like that. It

has been very beneficial.

However, I do agree with you that we need to have a new focus

on how to support farmers and ranchers in conservation practices,

and how to be good stewards on the working land. In this way, I

27

see that we can indeed support our farmers and ranchers, to give

them income support that they need in a way that is non-trade-distorting, gives a benefit not only to them, but also to all of society,

and preserves our valuable resources for future generations.

Now, in your report, you mentioned the importance of creating

programs that are non-trade-distorting. This is reflected throughout your entire policy report. You support the conservation incentive program for working lands.

However, in describing a potential approach for implementing

the program, you talked about using a bidding system. I am talking

about now page 86, on which you talk about designing a marketbased stewardship program. This report indicates that bidding

would lead to rates reflecting costs of implementing practices, and

that is referred to as a WTO requirement for green box.

Well, I am not certain. As I read the Uruguay Round, the cost

limitation is not a requirement for green box treatment for direct

payments of the type not contemplated at the time of negotiation

or ones that provide decoupled income support, even if they are

connected to conservation. Therefore, the cost limitation mentioned

in this report for green box treatment is not the only way a conservation incentive program may qualify as WTO green box.

In other words, what I am saying is a bidding system may be one

way, and that is correct that it would be WTO-compliant. If you

look at the language of the Uruguay Round, there may be other

ways of doing that. It could be a contractual system, for example,

rather than just a bidding system.

Is that consistent with your interpretation?

Secretary VENEMAN. Yes, It is. Obviously, it is very complicated

as you begin to look at a variety of these things. What we tried to

do on this page that you referred to in looking at a market-based

stewardship program is give some idea of just one concept that

might be piloted as a part of a new program that would really look

at costs and benefits, and give some value to a new environmental

concept.

It is certainly one of the tools that we discuss in the tool box of

possible environmental programs, many of which we already are

using. You are correct. There are different ways to look at green

box consistency, and while this is correct, there are also other ways

to look at green box consistency as well.

The CHAIRMAN. I am glad to hear that, and I look forward to

working with you on ways to do that.

I just have one more question. They didn’t run the clock, but I

just have one more question before I move on.

It would be helpful to me and other members of the committee

to know what the administration’s position would be on some of the

following existing conservation programs: the EQIP program which

has been very successful and which I also think needs expanding.

There has been some talk about moving that from the Natural Resources Conservation Service to the Farm Service Agency.

I am wondering if you have developed a position on that yet; if

so, if you could tell us whether you would approve of that type of

a move or whether you are still examining it? Have you developed

a position on that as of this time?

28

Secretary VENEMAN. Well, the EQIP program has proven to be

one of the very effective tools that we have in that conservation

tool box of existing programs. I frankly haven’t had any discussion

of moving the program. I guess some have, but we certainly haven’t

taken any kind of position in our book or in any other way on that

issue.

The CHAIRMAN. You don’t have a position right now on where

that should be located?

Secretary VENEMAN. No. I mean, it has been operated in NRCS

and it has a lot of components of technical components, and that

is certainly where one of their core competencies is.

The CHAIRMAN. I appreciate that. Just one last thing: limiting

USDA technical services, as you just mentioned, primarily to producers who participate in Federal land retirement or cost-share

programs. If we did that, if we just limited these technical services

to producers who participate in Federal land retirement or costshare programs, according to the National Association of Conservation Districts, it could cause up to 90 percent of the Nation’s ag

producers to lose most or all of the conservation technical assistance they currently receive.

Again, I am just wondering if you have a position on that and

whether or not we should limit it or should we keep it broad, as

it is today?

Secretary VENEMAN. I am not familiar with anything that would

indicate that we have wanted to limit technical assistance.

The CHAIRMAN. I appreciate that.

Secretary VENEMAN. That as we move forward and we talk about

the environmental issues that farmers are facing today, it is a

broader range of issues—water quality and quantity, issues of livestock waste.

That one of the things that is recognized throughout agriculture

and agriculture groups, as well as in many environmental groups,

is there are a lot of issues where we do need both technical assistance and programs to help address some of these issues and help

farmers be successful; as you say, have programs that allow farmers to be successful as farmers, not just taking land out of production.

The CHAIRMAN. I appreciate that. It ought to be broadly based,

too, and I appreciate hearing that.

Senator Lugar.

Senator LUGAR. Thank you very much, Mr. Chairman.

Secretary Veneman, I am informed that on Monday House Agriculture Committee staff members briefed commodity groups in this

city on their continuing assumption that $73.5 billion above baseline would be available for programs supporting the Farm bill over

the next 10 years of time. The plan they suggested was they

thought that the House would act immediately, maybe next week,

leaving to us the reality work of taking a look at what money, in

fact, is here.

Now, the assumption of $73.5 billion over 10 years sees agri- culture in America in perpetual crisis for a decade. It sees $7 billion, on average, every year over and above all that we are doing

now. It suggests surpluses in those 10 years, or at least in some

of them, I presume, from which this money might come, or it will

29

come from Social Security, Medicare, education programs, or other

offsets.

It is time really, Madam Secretary, for the administration to give

a pretty clear idea of what the money situation is if there is to be

a debate next week in which an assumption is being made that

$73.5 billion is about to go for agricultural subsidies, or at least

$45 billion according to estimates, at least, from House authorities.

Second, I would just say, Madam Secretary, that the suggestion

is being made that it is appropriate to discuss this next week, even

in the face of debates we are having about the internal security of

the country; specifically, powers for the FBI to detain suspects, for

example, large civil rights issues; questions everyday of moneys

that may be required additional to the $40 billion that we appropriated for the war and for the rebuilding of New York City and

the Pentagon, in addition to the moneys we appropriated last week

simply to keep our airlines going, without any idea whether that

will be adequate, given the very sharp decline.

The sense of reality about this, Madam Secretary, is this country

has enormous economic problems that have not been fathomed one

iota in terms of the estimates coming from anybody thus far. Now,

let us say theoretically that it turns out the administration says

not to worry, that there is $73 billion clearly there, $7 billion for

agricultural emergencies. Then it seems to me it would be very useful to take a look at the chairman’s idea of how should these be

distributed.

Your report says the distribution now means that moneys go to

large commercial farms. It means they grow and small farms decline. Yet, around this table today we have heard about the plight

of the small family farm. Of course, it is difficult. The programs we

now have almost guarantee it will be difficult. They guarantee concentration of ownership, not of farmers, but everybody else, for that

matter. They guarantee distortion of markets that you have illustrated to a fare thee well.

Therefore, to proceed down the trail with more of this, on top of

more, seems to me inadvisable. The Department needs to speak up,

or someone in the administration needs to do so promptly if there

is to be any consistency with the report that you have.

Now, if we are to distribute money, perhaps it should be through

conservation payments. They might go to small farmers, as well as

to large ones. It may be that the risk management we adopted last

year in crop insurance has some viability with regard to all types

of people in farming, not just the 40 percent who now get the commodity payments. Sixty percent do not, so all of the rest of the

rhetoric is useless with regard to a majority of farmers, however

you define them.

These are serious problems, Madam Secretary. We are all kidding ourselves if we do not see that at least a schedule seems to

be on track to debate a farm bill, inconceivable as this might be,

on the House floor next week in the middle of a war. We had better

wise up.

Finally, this idea that somehow an army marches on its stomach,

that food security means that this is vital—let’s come off of it. The

fact is 90 percent of our conservation payments now go to retire

land. We have gone to desperate means to curtail supplies in this

30

country. To imply somehow we need a farm bill in order to feed our

troops and to feed our Nation is ridiculous, and I hear that subject

being raised again and again.

The facts of life are we have it coming out of our ears. As you

have pointed out, if we can’t trade it, if we can’t export it, we are

going to have low prices perpetually, given these policies, while we

lament low prices.

Madam Secretary, I am sorry to go into an oration, but nevertheless you can tell I feel strongly about these things, and you should

too. This is why I hope you will testify promptly on each of these

issues.

I thank you.

Secretary VENEMAN. Thank you, Senator. Let me first go back to

the purpose of the book really was to bring a larger and broader

debate about farm policy, about the fact that it is not a single sector.

Somebody brought up, what is the definition of a family farmer?

Well, one of the reasons that we talked about the differences in the

farm sector in this book is to really show that there isn’t a single

kind of farmer in today’s environment. There are people of all sizes,

at all parts of the spectrum, and most of them are family farmers,

but families structured differently. Part of this is looking at the

huge diversity of farms that we have.

You talked about conservation payments being a way to reach

more of the farmers. As you know, one of the things this report

points out is that only 30 percent of the land is owned by about

150,000 people that are producing about 70 percent of the production. Conservation programs do reach probably a broader range of

people that are in the agriculture sector.

I agree with you that risk management tools are important, as

well, whether it is crop insurance types of programs, or we haven’t

talked today about things like the farm accounts, the risk management accounts, where we would use the Tax Code as well to give

farmers some assurance of being able to get through the difficult

times. That also has to be part of the Farm bill debate.

As far as the timing is concerned, I understand very well your

concerns because, again, as this report points out, there is a very

diverse farm sector that is changing. The food and fiber sector is

changing all the time because of technology and globalization and

a variety of other factors.

People who say that agriculture isn’t high-tech are wrong. I

mean, this is a high-tech industry that is being driven by new

forces, like other sectors of the economy, and it is going to take

time to take a deliberative approach as to how we really should address all of the factors that impact our food and fiber sector and

our farm sector today.

I might add that this Farm bill does not expire until just over

a year from now. The budget at this time is uncertain. I can’t

speak to you about the budget. I have been talking with Mr. Daniels. It is important to work out at this point. I can’t talk to you

about where the budget is going to go with regard to anything because of the uncertainty of what has happened in the last 2 weeks.

I might add that I commend the Congress, both the Senate and

the House, for acting quickly before the August recess to give farmVerDate 11-MAY-2000 14:47 Apr 09, 2003 Jkt 085327 PO 00000 Frm 00034 Fmt 6633 Sfmt 6633 85327.TXT SAG1 PsN: SAG1
31

ers some needed help. We have been able to get that help out to

farmers, most of it already before the end of the fiscal year, and

so we have had some assistance this year.

Again, the purpose of what we have tried to do here is, like you

would in a strategic plan, to frame the debate around what does

the farm sector today look like and what are the factors that are

driving it. We hope that we have been helpful in doing that.

I would also commend both you and Senator Harkin for the principles that you put forward yesterday. Those are quite consistent

with the principles that the administration has put forward, and

we certainly look forward to working with you to advance programs

that would be consistent with the principles that we have all put

forward.

The CHAIRMAN. Senator Conrad.

Senator CONRAD. Mr. Chairman, thank you, and thank you

again, Madam Secretary. Let me come at this a different way because Senator Lugar feels strongly on one side and I feel just as

strongly on the other side. This economy is in trouble. It is not just

the broader economy; the farm economy is in desperate trouble.

I am going to a meeting in 10 minutes with the leaders of the

House and Senate Budget and Finance Committees for a review of

our current financial position. One of the questions that is going to

be asked at that meeting is what is the administration’s position

with respect to the money that is in the budget to write a new farm

bill.

As Senator Lugar correctly described, there is $73.5 billion that

is in the budget resolution to help write a new farm bill. The administration in its mid-session review said that that money would

have to be offset, that that money would have to be made available

by cuts in other places in the budget.

The question I would ask you is what is the administration’s position? Can the money that is in the budget to write a new farm

bill be used or not? This goes beyond an academic question. In 10

minutes, the leaders of the House and the Senate Budget and Finance Committees are going to be grappling with that question,

among others, as we attempt to determine our current financial circumstance.

Let me just say that I just held a hearing in my State and one

of the major farm group leaders, when I asked him if this money

were not available what does it mean, said, Senator, if this money

is not available to help write a new farm bill, there will be a race

to the auctioneer, a race to the auctioneer. I know that is true. I

don’t think that serves any economic purpose at all.

I heard in your response to Senator Lugar that you are not prepared to answer the question. When will you be prepared to answer?

Secretary VENEMAN. Well, again, the budget situation is an uncertain one, as we all know, and I certainly appreciate the position

that you are in and the Members of Congress are in. Again, this

is an issue that you will be working with OMB on.

No one could have predicted what was going to happen 2 weeks

ago. No one can prepare for that from the standpoint of many parts

of our lives, but at this point I can’t speak for the administration

32

on what is going to happen on particular aspects of the budget, and

would ask that you work with OMB in that regard.

I know that there are farmers in this country who are struggling.

At the same time, it is important to point out that this year it is

projected that net cash farm income will be at an all-time high, at

a total of $61 billion. Farm real estate values have increased 21

percent since 1996.

It is important when we talk about the farm sector that we recognize that some of the economic considerations have changed; that

some of the prices, particularly on livestock, have been getting better.

Senator CONRAD. My time is rapidly leaving and I have to go to

this other meeting. I would just say to you I hope the message from

this administration is things aren’t fine in farm country because

that just defies the reality that I see everyday as I go around my

State.

I mean, if the farm community in my State were to hear the

message that everything is fine and getting better, they would go

through the roof, Republicans, Democrats, independents, because

that is not the reality of their lives. I have never seen in my life

of public service a sense of hopelessness as deep as what I see in

farm country.

Let me go back to the fundamental question. You are the Secretary of Agriculture. If you can’t tell us whether or not the administration supports the use of the money that is in the budget to

write a new farm bill, I don’t know where we get that answer. I

would say to you I hope you go back and talk to the White House

and talk to whoever else needs to be talked to and deliver us an

answer quickly. We have to know as we construct a budget plan

for this country what the administration’s position is.

It is a lot of money, $73.5 billion. It is in the budget. Does the

administration support the use of the money that is in the budget

to write a new farm bill or not? It is a simple question. We need

an answer.

Secretary VENEMAN. I understand, Senator. I do want to just say

that I understand, and I don’t mean to imply in any way that rural

communities don’t need assistance. As we state in our principles

book, it is important to recognize that rural communities need assistance not just in terms of farm programs, but to strengthen

rural communities, whether it is education or it is water systems

or electrical systems or Internet access and broadband.

That we need to be looking at the way we support rural America

as a holistic approach, as I have said many times during this debate, and that we in no way mean to undermine—as you were

somehow saying that we don’t understand the plight of people living in rural America and our farmers. We think it is very important.

As I have been out in farm country all around the country—I

have been not to North Dakota, but I have been to South Dakota.

I have been to Iowa, I have been to Nebraska, I have been to Indiana, I have been to Arkansas. I have been to a lot of places and

when we talk to farmers about the need to strengthen rural communities, the need for more research, the need to make sure our

infrastructure is strong with good pest and disease and food safety

33

and research programs to support that, there is so much support

for making sure that we have good systems in place so that they

can do the business that they do. That is, again, why we talk about

more than just the farm program part that you are talking about.

We need to really support the whole sector in a holistic way.

Senator CONRAD. I would just say to you that all of that is true.

It is also true that the money is a central issue. You can’t do any

of these good things without money. You can’t have leverage for

trade negotiations, in my judgment, without money. The money is

in the budget and the question is does the administration support

the use of the money that is in the budget or not. That is the critical question.

Madam Secretary, thank you very much for your appearance

today and I look forward to the answer to that question.

The CHAIRMAN. Thank you, Senator Conrad.

Senator Thomas.

Senator THOMAS. Thank you.

Let me followup a little bit, Madam Secretary. It is my understanding that this year basically through disaster payments and

the last several years we will have spent more on agriculture than

the $7 billion that he is talking about. In order to then accomplish

what you have in mind, and I share your view, how would you

change that?

The money has been going out in disaster payments. How would

you change that basis, assuming we have $7 billion to spend? I

know that is a broad question, but generally how would you change

that, rather than disaster payments?

Secretary VENEMAN. Well, again, I agree with you that it has

been a difficult kind of means by which to give assistance to farmers to do it on an ad hoc disaster basis. We all agree that that is

a difficult way to respond every year, year after year.

That is, again, why what we tried to put forward was a broad

look at agriculture, one that would not only have an economic safety net for farmers that is market-oriented, one that is strong in

terms of trade policy and opening up new markets, because that is

where the markets of the future really are; a strong infrastructure,

as I have talked about, supporting pest and disease and food safety

programs; programs that enhance our research abilities; conservation and environment programs, additional ways to support farmers in that regard; and rural development programs that are really

responsive to the needs of today’s rural communities. As we look

at, again, the whole approach to the farm policy in the future, it

is important to look at all aspects of it.

Senator THOMAS. My new conservative Senator from Minnesota

indicated that there were fewer people in the food stamp program.

Is that a fact, or do you know offhand?

Secretary VENEMAN. I believe that is true. Let me just make a

few comments about the feeding programs because it is important.

In the food stamp program, we have a new Under Secretary, Eric

Bost, who ran the food stamp program in Texas and has very

strong feelings about what will make the food stamp program more

effective and he is working on ideas now to increase the effectiveness of our food stamp program, in particular, and our delivery systems in that regard. We are working hard to try to determine how

34

we can consistently improve delivery systems and make sure that

our programs are available for those in need.

Also, as I pointed out earlier, when you have times of disaster

as we do right now, we have ways that we can accelerate the delivery of our feeding programs, and we are in the process of doing

that right now to victims and families and people who are unemployed who are now in need. Our feeding programs are extremely

important in that regard. That is an important component of what

we are talking about here as well.

Senator THOMAS. Of course, if the numbers have gone down because people are less needy, that is great, if that is the case.

One of the things obviously that we are looking for is trade

strengthening and fair trade. We met yesterday with the Trade

Representative on sugar, as a matter of fact, but I guess my point

is when you are negotiating trade agreements, what is the role of

the Department of Agriculture?

Secretary VENEMAN. Well, we have had a strong partnership role

with USTR, and Ambassador Zelleck and I worked together in the

previous administration and we have a strong working relationship

now. He and I at the beginning of this month went together to

Punta del Este, Uruguay, to attend the Cairns Group meeting, the

meeting of agricultural trade-exporting countries who are very interested in beginning a new round and getting significant reform.

We have traditionally in the U.S. had positions that are quite

similar to those of the Cairns Group, things like eliminating export

subsidies that have been talked about here today, and, additionally, reducing trade-distorting domestic support. That as we go forward, we are planning a very active role in trade and we will continue to work very closely with the USTR to advance the issue of

agriculture.

I might add that the President feels very strongly about agriculture and trade. He never talks about trade without talking

about agriculture, nor does he talk about agriculture very often

without taking about trade. I can tell you that in my working with

Ambassador Zelleck, he clearly understands the importance of

trade and agriculture, and how important trade will be to agriculture in the future.

Senator THOMAS. My time has expired, but it just seems like we

still have a lot of trade barriers, and with the kind of leverage that

it would seem we would have, with the deficit we have on exports,

people coming to this place, that we would have a little more muscle in terms of like, for instance, the tariffs on beef in Japan. We

don’t seem to be able to move those things, and yet we all tend to

agree that if we are going to have more production and continue

to have agriculture do as well, we have to have some new markets.

Yet, we seem to continue to allow those impediments to continue.

I know it is a tough one, but—— Secretary VENEMAN. Well, let me just make a comment on that.

When you talk about tariffs on beef in Japan, clearly the Japan

beef market was improved substantially when we got the beef and

citrus agreement, it was back in 1986 or somewhere in the mid1980’s.

The fact of the matter is you are right. Agriculture tariffs worldwide average about 62 percent. In this country, they are about 12

35

percent, and that is why it is so important to get additional trade

agreements so that we can reduce those tariffs, so that we can get

greater access to those markets abroad.

Japan is our No. 1 export market for food and we certainly appreciate their business. Again, there are certain areas—rice is

one—where we would like to get additional access because there is

a market there.

Senator THOMAS. One of the frustrations, as you know, is we

keep hearing we need more agreements, and yet we get agreements

and we don’t see any real, substantive change in terms of agricultural obstacles.

Secretary VENEMAN. Well, one of the things that is important to

understand about trade agreements—I mean, you like at NAFTA.

Our exports to Mexico have doubled since we implemented NAFTA

in 1994. Our agricultural exports to Mexico have doubled. Canada

and Mexico are now our No. 2 and three ag markets.

There are those who talk about the difficulty of entering into new

trade agreements. The fact of the matter is countries all over the

world are moving forward with trade agreements. There are over

130 bilateral and regional trade agreements in the world today and

we party to only two of those.

What does that mean? It means that when other countries negotiate a trade agreement and give that country preferential access

through lower tariffs, we lose market share. We have seen that already as Canada has negotiated an agreement with Chile and has

taken away some of our markets for wheat and potatoes, as just

two examples, and other products as well because they now have

lower tariffs going into Chile than we do. We have talked for 10

years about negotiating a free trade agreement with Chile.

One of the important things to recognize today about trade is

that if we are not a player at the table, we will be left behind, and

that is one of the reasons this administration and the President

have felt so strong about getting trade promotion authority passed

as quickly as possible.

Senator THOMAS. We have to be sure we implement those—for

instance, molasses, stuffed molasses, things like that—and take

away a little of the enthusiasm about it, as does the Mexican letter

on sugar.

Thank you.

Secretary VENEMAN. I understand that, and we are working very

hard on some of the trade irritants as well.

The CHAIRMAN. Thank you, Senator Thomas.

Senator Nelson.

Senator NELSON. Thank you, Mr. Chairman.

It might not seem like it, but this is still a friendly audience,

Madam Secretary. We want to work with you and your staff to deal

with many of these issues—in fact, all of the issues that have been

raised. The fact that so many feel so very strongly at the dais here

is a good indication of how significant the problems are and how

important it is that we work together to find solutions.

I would like to continue in this area of trade. That while there

is a lot of interest in NAFTA, it was misspelled. We didn’t have the

second ‘‘f’’ in it, where it is fair. We focus here on free trade, and

it should have had a second ‘‘f’’ in it for ‘‘fair.’’

36

Quite frankly, there is concern about whether it is stuffed molasses and you have to go to court. Fortunately, the court of appeals

has now ruled in conjunction with the Canadian agreement. Honestly, when you look at the barriers that are out there and the unfair trade practices of our trading partners, you get very concerned.

As a matter of fact, on page 40 of the book you indicate that our

producers and the industries they support can see the value of U.S.

agricultural exports grow 19 percent if we had the removal and the

elimination of the barriers.

What I would like to ask is what can we do specifically. It is important that you join together with Ambassador Zelleck. That is an

excellent opportunity and I hope that you will continue to do it and

raise the level of consciousness of the importance of agriculture as

part of trade policy. I am pleased that the President speaks in the

same sentence about agriculture as well as other trade areas.

What I would like to hear is what are our specific plans, and

‘‘specific’’ is important here, to deal with the trade distortions

caused by the barriers in the world. Either our trade partners in

other parts of the world bring their barriers down or we have to

bring our support up. You can’t have this continuing unlevel playing field working against our producers and have trade be any part

of the answer. The more we trade, the worse it gets in the sense

that we can’t send products to Europe because of the barriers. Yet,

products from Europe seem to find their way into our markets very

easily.

I am not against trade. I have taken 12 trade missions in my

prior professional life as a Governor, so I believe very strongly in

trade. Somehow it just doesn’t work out for agriculture, and it is

because of the barriers. What we need to do and what I would like

to hear from you is find out what the specific proposals are to either bring those barriers down, raise our support levels up to be

competitive, or some combination, because it isn’t going to work if

we are only talking about it.

Secretary VENEMAN. Probably the best way to remove barriers is

through trade negotiations. Some of the biggest barriers that we

have, of course, are high tariffs.

Senator NELSON. You see, that didn’t even work with the Canadians in conjunction with sugar because they found a way to make

into molasses to get it down here and get around the barrier.

Secretary VENEMAN. I understand, but we do have dispute settlement mechanisms. We have been able to take that one to court. I

mean, there are trade irritants, but one of the important things

about the WTO system is that it gives us a way to address some

of these issues. We have dispute settlement mechanisms within the

North American Free Trade Agreement. That it is——

Senator NELSON. It takes time, and I understand. I don’t mean

to cut you off, but I am wondering if there isn’t a way—and I have

spoken to Ambassador Zelleck about this, and that is to have the

equivalent of a referee that can make more immediate decisions

that then get appealed so that you can start the process, because

my sugar beet farmers are delighted with the result in the court

of appeals, but in the meantime they have suffered losses because

of the adverse trade practice of our trading partner.

37

Secretary VENEMAN. I understand the frustration. We all are

very frustrated by some of these trade irritants that take some

time to resolve and are difficult to resolve. The fact of the matter

is the system does work. I agree with you, it does take a tremendous amount of time.

I know when you are talking about barriers, you are talking

about some of the trade irritants.

Senator NELSON. Tariffs; well, irritants and tariffs, yes. Tariffs

are irritating, too.

Secretary VENEMAN. Obviously, some of the biggest issues we

have to face are high tariffs. Again, as I said in response to the previous question, 62 percent average food and ag tariffs around the

world; we have twelve.

Our proposal for agriculture in the WTO right now really would

talk about bringing those tariffs around the world down to more

equivalent levels. We have to get those tariffs down so we can get

greater access to markets. Again, I am very concerned that if we

don’t enter into a new WTO round and try to do this globally that

we will continue to see free trade agreements negotiated all around

us—Europe has almost 20 ongoing right now—and that those countries will enter into free trade agreements, getting preferential tariff access, and we will be left behind.

That needs to be a big concern to our farmers and ranchers who

depend so much on the export market. We export about 25 percent

of what we produce and our exports continue to go up. They are

about 53.5 this year; they are projected to be $57 billion next year.

Obviously, the global market is extremely important. We produce

much in excess of what we can eat in this country. We can’t consume much more, so we have to open up markets and continue to

give our farmers the opportunity to trade abroad.

We are clearly on the same page and I understand your frustration with getting some of these irritants resolved more quickly.

Certainly, we are working closely with USTR to do everything we

can to assist in that.

Senator NELSON. I hope the sugar farmers are able to recover

some of their damages because of these irritants and trade barriers

that are used against us.

Thank you.

The CHAIRMAN. Thank you, Senator Nelson.

Senator Crapo.

Senator CRAPO. Thank you very much, Mr. Chairman.

Madam Secretary, I am going to begin by asking you a very highly Idaho-specific question which I don’t even expect you to know

the answer to, but I just can’t resist this opportunity because you

will be able to go get me the answer and it is very critical that we

get an answer to this.

As you may know, Idaho is facing a drought right now, and one

of the very significant impacts of that is that we have had a very

significant reduction of the grazing and haying opportunities. The

Department of Agriculture has given permission for the CRP lands

to be utilized for grazing and haying.

We have recently, as a delegation, requested that this emergency

grazing permission be continued until December 31, 2001, and

have not yet received an answer. We need an answer fast, so if you

38

have an answer right now, I would love to hear it. If not, I would

like to ask you if you could get us an answer as quickly as possible.

Secretary VENEMAN. Senator, I have been told that as of this

morning we have approved that for an additional 30 days.

Senator CRAPO. That is great news, but that doesn’t get us to December 31. I will take that news back and continue to work with

you to see if we can’t get this expanded to the end of the year, and

I do significantly appreciate that.

Let me now with the rest of my time just continue. There are a

lot of questions I would love to ask you, but since we have been

talking trade in the last couple of rounds I would like to give you

my perspective on it because it is very similar to that which you

have been hearing.

You yourself have pointed out today a couple of times the disparity in just tariffs. Senator Conrad pointed out the disparity in subsidies. Just using the tariff example—62-percent average tariff on

our products and a 12-percent average tariff that we charge on

products coming into our Nation—it is an incredible disparity.

As I indicated to you before, there is a WTO ag caucus or coalition here in the Congress between Republicans and Democrats and

House Members and Senators, and I have been to enough of those

meetings to tell you that there is a pretty strong consensus among

that group that we have to reach parity on these kinds of issues.

Let me just, as I discuss that, move on to Seattle. I was at Seattle for the WTO round that was attempted to be started there.

A lot of people said they thought that what happened in Seattle

was a disaster. Of course, a lot of the rioting and those kinds of

things were unfortunate, and it was unfortunate that we weren’t

able to get a good start to a new round of WTO talks there.

I actually left Seattle pleased in one sense, thinking it was the

first time that I had seen the United States say no to a bad deal.

I thought that it was finally time for the United States to tell the

rest of the nations that we would no longer agree to a trade agreement that continued these disparities.

In my opinion, for years the United States trade negotiating policy has been that agriculture was basically a trading chip. There

seems to be give-and-take in many other areas. In terms of the negotiations, there is give-and take, and we seem to take in manufacturing and in information technology and other industries, but use

as what we would give our ag policy. Other nations that seem to

be more focused on their ag interests would want to take in the ag

areas and give in information technology and manufacturing and

the like.

I don’t know if that is exactly what happened, but the ultimate

outcome was—you mentioned there are over 100 trade agreements

and the U.S. is party to only two. The agreements that we are a

party to basically put into place this, and that is one of the reasons

you are seeing resistance here to trade promotion authority and

further trade agreements.

It is not that there is a disagreement with your point that we

need to be at the table in this global environment. We do need to

be at the table. The point that a lot of us are very concerned with

is that we need to be at the table with tough negotiators who are

not going to trade away agriculture again.

39

One of the things that a lot of us are looking at—and hopefully

you won’t take any of this here as a personal attack because we

are talking about a history of trade negotiating under many different administrations, and we are hoping to see this administration do what The last administration began to show us it was ready

to do, and that is stand tough and negotiate strongly for agriculture.

I have said a lot of times no deal is better than another bad deal.

We can all agree that we want a good deal, and we can debate over

whether what we have had in the past are good deals or bad deals.

The reality is that today we still have trade agreements in place

that allow other nations to have their high tariffs and their high

subsidies, and cement the United States into its low tariffs and low

subsidies which continue to disadvantage our producers.

I just wanted to give you my perspective on that and to tell you

that from what I have seen so far it appears that the administration, both in terms of the Department of Agriculture and our U.S.

Trade Representative, do understand this and have committed that

agriculture will be our highest priority in this next round of WTO

negotiations.

I would just like to ask you if you would comment on that.

Secretary VENEMAN. Certainly. I applaud the WTO caucus and

the fact that it has been working on the trade issues because it is

important that we have an understanding in the Congress of how

important trade is to our economy and to agriculture in particular.

I have had the opportunity to visit with the WTO caucus.

In talking about Seattle, one of the things that we are prepared

to do and preparing for at this point in time is the launching of

a new round post the Seattle failure. We think it is very important

to launch a new round, not to have another failure, that we need

to advance WTO discussions so that we can reach further tradeopening opportunities for our farmers and ranchers based upon

what was agreed to in the Uruguay Round.

It is significant what we were able to accomplish in the Uruguay

Round because agriculture has been really left out of trade agreements previously. We were able to get some global disciplines on

export subsidies. We were for the first time able to get some global

disciplines on internal supports.

Now, there are still big disparities, particularly between the U.S.

and the EU and the U.S. and Japan. The proposal that the U.S.

has put forward for this proposed round is one that would try to

bring the support of other countries down more, because rather

than tie it to a historical base period, it would tie it to the value

of production, so that it would bring down the support of other

countries more quickly than our own support. We think that is an

important difference, but it does buildupon what was agreed to in

the Uruguay Round. Obviously, the more you put support into a

green box, it doesn’t count against your caps, and so forth, and that

is another important issue to remember as we debate new farm

programs and new farm bills.

The other thing is that we got significant changes in the tariffs,

in that all of the quotas, and so forth, were turned into their tariff

equivalents with a process called tariffication. There was marketopening of a certain access, and then the beginning of bringing

40

those tariffs down. We don’t have those bans to deal with anymore

and those are tariffs from which we can now negotiate, which is

another important accomplishment.

Finally, the thing that we accomplished that is so significant in

the Uruguay Round is the sanitary and phytosanitary agreement

that gave us the ability to really have a dispute settlement mechanism for things like some of the trade disputes that we so often

have, whether it is the beef hormone dispute or it is a variety of

other things.

It basically requires that any kind of regulation be based on

sound science, and we have taken several of those cases; we have

been involved in several in the WTO and we have won most of

them. It is important that the Uruguay Round achieved rules requiring science-based approaches to these issues and giving us a

dispute settlement mechanism with which to deal with them.

The CHAIRMAN. Thank you very much. You see, Senator Crapo,

it paid to stay around this long.

Senator CRAPO. That is right. That was great. I got 30 days, at

least.

The CHAIRMAN. That is right.

Senator Dayton.

Senator DAYTON. Thank you, Mr. Chairman.

Madam Secretary, if I could refer to a couple of pages of your

statement here, on page 11 of your testimony today you say, ‘‘History has shown that supporting prices is self-defeating. Government attempts to hold prices above those determined by commercial markets have made matters worse time after time.’’ Then on

page 11 you go on to say, ‘‘Supply controls proved costly to taxpayers and consumers, and the unused resources were a drag on

overall economic performance.’’

Then going on to page 12 you state, ‘‘The Federal Agricultural

Improvement and Reform Act of 1996 proved to be historic by removing most of the decades-old program structure, provided unparalleled farmer decisionmaking flexibility through decoupled payment benefits, and set a new example throughout the world for

providing domestic farm sector support. While that approach still

is arguably the least market and resource use-distorting approach

available, its decoupled payments do share some unintended effects

with price support programs, namely the artificial inflation of farmland prices. The effect clearly has been exacerbated by the size of

supplemental payments in recent years, some $28 billion in the last

4 years above the amount provided in the 1996 law.’’

If I take those sections, then, and boil them down, it seems that

you are against price supports, against supply controls, and against

the size of the supplemental payments. If we remove all three of

those props, we are back to essentially the original Freedom to

Farm concept, which leaves us with market prices well below the

cost of production, as traditionally defined—and again I would repeat my request to know what those numbers are in your calculation—with the premise, then, that increased exports are a solution

to these low prices. They, in turn, require in the construct that I

am aware of also fairly low domestic market prices in order that

our commodities be competitive on the worldwide market.

41

I guess I don’t see the way out of this box under your proposal

for most American farmers, and I wonder if you can show me

where the way out is, or the way to prices that you believe are appropriate, and are those prices domestically ones where most

American farmers can make a profit and not need the subsidies.

Secretary VENEMAN. Well, first of all, I would just like to say

that the testimony is based upon what was in the principles book.

We are not against anything. We are just trying to point out some

of the economic consequences of some of the programs, and we

want to make sure that some of the benefits of various programs

are recognized as well. We are really trying to give an all-encompassing look at the sector.

Now, having said that, certainly when we talk about things like

supply controls, those have made us less competitive. We clearly

live in a global economy. We need to be part of that global economy

because we are very efficient producers. If you have supply controls, you tend to be less competitive and you only give away the

production and market share to other places.

Senator DAYTON. We removed price controls under Freedom to

Farm and the farmers generally liked that. Then we have a greater

level of production because there aren’t price controls. Under the

basic law of supply and demand the prices go down, and then we

either revert, as we did under FAIR, to these additional payments

to keep farmers afloat or we pull them back and the farmers collapse.

Again, where does that leave us?

Secretary VENEMAN. Those are some of the difficult issues, and

obviously we have not made a proposal for an economic safety net

for farmers. We have said that there are a variety of ways to do

that, but whatever way it is done, it should be done in a way that

is market-oriented that does not impact our trade agreements.

Senator DAYTON. What does that mean in the real world? What

does that mean?

Secretary VENEMAN. Well, again, I don’t have a proposal for you

today. There are a number of proposals that have floated in various

years, and again I don’t have that kind of proposal. I talked to

some extent about some of the tax proposals that may be available.

We have talked about farm accounts giving people the ability to

have that kind of means by which to control their income in ways

that will give them the ability to have some kind of safety net that

they set aside for themselves. I mean, that is one kind of example.

Let me go back for a minute to the cost of production issue because the cost of production is a very difficult one in today’s environment. When you look at the different sizes of farms, the different kinds of operations, the different technologies that are used

today, it is very difficult to put a single cost of production on a specific commodity because of the differences in the way that farmers

across the spectrum farm.

When we talk about cost of production, we can talk about average costs of production, and so forth, but the variables are really

quite great. I mean, you look at the productive capacity on an acre

of land in one State and compare it for the same commodity in another State or another area and it can be double.

Senator DAYTON. A fair point, a fair point.

42

Secretary VENEMAN. It is very difficult to talk about cost of production per unit in today’s environment.

Senator DAYTON. A fair point, so let me rephrase it because I see

Dr. Penn nodding his head in agreement with what you are saying.

Secretary VENEMAN. Oh, good.

Mr. PENN. I always agree.

Senator DAYTON. We have an honest difference of opinion.

Secretary VENEMAN. I always like it when my economists agree

with me.

Senator DAYTON. Right. You can be reassured; he was nodding

his head, and sincerely so.

Maybe you could respond today or I could ask in writing in the

next couple of days, but what do you believe the appropriate market prices are for basic agricultural commodities—corn, wheat, soybeans, sugar, milk, hogs, beef cattle?

If we are trying to construct an economy that balances out farm

income on the one hand and competitiveness on the other, that balances out export viability versus imports, what prices or what

range of prices for these commodities do you believe, does USDA

believe, are the right ones?

If we know where we want to go or what we want to try to accomplish, then it seems to me we can try to devise policies that can

get us there. If we disagree on that, as Senator Lugar and Senator

Conrad do, then we can have that debate. Right now, we all throw

out these homilies about this, that and the other. Meanwhile, we

have a total decoupling or disconnect between our rhetoric and

what is happening out there in the real world.

Secretary VENEMAN. Well, I don’t have prices for you.

Senator DAYTON. No. I am asking USDA to formulate them.

Secretary VENEMAN. We have talked about the importance of the

marketplace and the market deciding the prices, and that is important. The other thing that you have to recognize in today’s

environment—— Senator DAYTON. Madam Secretary, my time is up. I want an answer to my question. I want an answer from USDA. This is what

everybody tiptoes around. My family was in the retail business and

they knew what prices they had to have in various areas—shoes,

socks, the like—if they were going to stay in business, and then

how to achieve those prices versus the volume. That is the basic

law of economics—supply and demand.

We are so far removed from that as a result of the 1996 trade

bill and all these additional payments which we agree we can’t sustain. We have to get back to figuring out what our objective is for

prices in the marketplace and then whether we are going to make

up the difference or whether we are going to tell farmers this is

what you are going to get, and if you can’t achieve the efficiencies

with that price to stay in business, then you are going to have to

go out of business.

Farmers out there really want somebody to talk the truth to

them because the realities are talking the truth to them and all

they get from us is either a bail-out or avoidance of the problem.

I am sorry I have to leave, but I would repeat the request. What

are your target prices? What, on balance, do you think the right

prices are that we should be striving to achieve, balancing all these

43

forces? If we don’t know that, it seems to me we can talk about this

stuff for the next 7 years and we will all try to avoid the responsibility for what is going to occur out there anyway.

Thank you. Sorry, I have to leave. I have a press call.

The CHAIRMAN. Thank you, Senator Dayton.

We have a vote on final passage of the military construction bill

right now. Senator Lugar just went to vote and then when he

comes back, he will chair the hearing and then I will come back,

because we do want to take up the nominees. We have a couple of

nominees that I know the Secretary wants to get through and we

want to get through, also. We will continue the hearing process.

Senator Lincoln.

Senator LINCOLN. Thank you, Mr. Chairman.

Madam Secretary, just a few points that have already been

made. You have said on several occasions that the net farm income

is at an all-time high. I would just also point out that the net costs

are at an all-time high, as well, the input costs of what it takes

to farm, especially for those of us in a region of the country where

you have pretty capital-intensive crops.

When you look at the energy situation and you look at chemical

application and you look at all the other things that we are faced

with in our region, those input costs are also at an all-time high.

That is critical to remember, and I hope that you will as you move

forward in those thoughts because I have heard you make that

statement. I have taken it to heart, but I just want to make sure

that we look at the other part of that equation.

To Senator Lugar, with all due respect, in terms of the corporate

farming, it is so important for us to remember that if we eliminate

the farm program, we are going to have nothing but corporate

farms. We have family farms who have now in many ways tried to

compete. They have tried to keep their head above water, and yet

they just end up renting their land to a larger neighbor who is incorporated who can be more effective in their costs and mitigating

their costs out. That is very important for us all to remember.

I appreciate also the points that you have made about the importance of open markets globally. They are essential. Exports are a

crucial source of income for our farmers in Arkansas and across the

Nation, and I certainly believe that any comprehensive approach

Congress takes to farm policy must identify the opening of foreign

markets as a very high priority. We did that in Freedom to Farm.

Unfortunately, we haven’t seen the markets materialize as we

need.

I am also concerned, however, that policymakers sometimes focus

so narrowly on the importance of foreign markets that they lose

sight of the need for sound domestic farm policy. Our farmers truly

do need a foundation of support that is bedrock strong. Otherwise,

the unfair trading practices of our competitors become all the more

effective against us. Senator Conrad has very eloquently explained

many times how the relatively low level of support found in U.S.

farm policy leaves our farmers extremely vulnerable to our overseas competitors who typically enjoy a much higher level of support, and we have seen that.

As a member of the Senate Finance Committee, I have already

stated my general support for trade promotion authority. You have

44

brought it up a couple of times today. However, a strategy based

on opening foreign markets and lowering trade barriers worldwide

is a very slow and long-term approach. It is a very necessary approach, without a doubt, but it cannot be done in a vacuum.

We have to really first ensure that our farmers have that bedrock support of a sound farm bill, with a reliable safety net, before

we can expect a trade strategy to be very successful. We cannot

strip our farmers of the support that they need from a strong farm

bill and then simply wait for our trading partners to reply in kind.

That, again, Senator Conrad has made that point over and over.

That would be catastrophically counterproductive.

Somewhat of where we went with Freedom to Farm was waiting

and anticipating to see those markets materialize, and there is a

great deal of fear about such a catastrophic event happening. I

know when I was home in Arkansas, many of my agricultural producers approached me about trade promotion authority with a

great deal of doubt at this point, having been supportive prior to

that—doubt about the success of current trade agreements and how

they appear to have kept many of our farmers out of the market.

Even those that one would ordinarily expect to be supportive of an

expansive trade policy, it has kept them somewhat from offering

their support on TPA.

I guess really one question would be, as the administration has

asked our farmers to support the trade expansion of TPA, what assurances does USDA give our farmers that you will actively be

seeking and actively supporting passage of a strong farm bill with

an adequate safety net for them?

Secretary VENEMAN. Thank you. You made a statement that we

were talking about eliminating farm programs. We are not talking

about eliminating farm programs. We are talking about really

being broader in our approach to looking at what helps both farmers and rural communities, and that is an important distinction

that I didn’t want to let go.

We are talking about a variety of things that help farmers and

rural communities, whether it is rural development programs and

looking at how they can be better structured to serve the rural

communities that we have today, looking at conservation-type programs and the assistance that farmers are asking for in terms of

having assistance to be the best stewards of the land that they possibly can be, because we know there are so many new challenges

today.

These programs actually reach a broader number of farmers than

do some of the current commodity programs, and part of what we

are trying to do is say let’s take a broader look here and not be

only focused on just farm programs. I don’t want it to look like we

are trying to get rid of something. We are trying to be broader in

the approach.

I would also note that as you look at what we did in our principles book, we pointed out the very strong diversity in farms that

we have today. One of the things that are seeing is more and more

farms and farmers that are producing to niche markets, that are

producing to new kinds of marketing arrangements where they are

forming cooperatives or other business arrangements to sell specific

kinds of products, value-added products, value-added processing.

45

We see a lot more of this happening, and we have used a lot of

our programs to assist in that regard and we need to look at what

works and what can be used to enhance the value that the farmer

gets out of the consumer dollar, whether it is in new and alternative uses for agricultural products. All of our programs need to

be, again, broad-based as we look at this.

I appreciate your support, in concept, for the trade promotion authority. When you ask how do we get farmers to understand the

importance of trade promotion authority, one of the main arguments is, first of all, trade promotion authority does nothing more

than allow the country to enter into new trade agreements. The

trade agreements aren’t yet negotiated, but if we are not a player

at the table, how do we get the kinds of advances that we need—

the reductions in tariffs, the market openings—that will allow our

farmers to have better access?

That is one of the strongest arguments in terms of talking to

your farmers back home about why we need this authority and why

we need to be at the table, in addition to the arguments that I

talked about earlier about being left behind and losing out market

share, as other countries have negotiated free trade agreements

and gotten the benefit of lower tariffs.

There are some very strong arguments to be made to our farmers

and ranchers about why trade agreements and trade openings are

so important to their future, and we can all play a very active role

in helping people in the countryside understand that.

Senator LINCOLN. Well, I don’t disagree. You are exactly right

that we have to be at the table, but in the mind’s eye of the producers that are out there, particularly some of those in my State have

somewhat of a lack of confidence in who is going to be standing up

for them in those agreements.

When we look at the problems we are having with trade in poultry down in South Africa, when we look at the softwood lumber

problems that we have had out of Arkansas from Canada, when we

see the catfish issue which has been tremendous for us—we sat

and watched while our neighbors in Louisiana lost their entire

market for crawfish in less than 3 years to China. We are seeing

the same thing happen to us in the catfish industry, and yet we

can’t get the immediacy of the administration to work with us on

this issue. I mean, we are losing catfish aquaculture farms hand

over fist.

The problem is not one of convincing people that we need someone at the table, but more importantly that we are going to have

not only the bedrock support in farm policy, but also we are going

to stand up for agriculture at those tables when we get there. I just

think that that is really critical.

I would just say in terms of the broad sense of those programs,

they are important, without a doubt, the cooperatives and the other

ways that we can diversify, but they do take time and they take

a great deal of technical assistance. I hope that we don’t just put

all of our eggs in one basket, but look at how we can really work

through that.

The last thing I would just like to touch on is the low prices that

are hurting virtually every commodity.

46

The CHAIRMAN. Senator, I might just say we have only got 2

minutes left in the vote.

Senator LINCOLN. All right.

Rice, just so I can put that on the top of your list, is unfortunately no exception, without a doubt. We know that there were

seven Senators, along with myself, who wrote a letter to the President about the increased food aid program. We have yet to get a

response.

I know that General Powell has mentioned other ways that we

can work through the disasters and the diplomacy. Food aid might

be one of those. I certainly would like to encourage a response to

our letter and to that issue of increased food aid.

Thank you, Madam Secretary.

The CHAIRMAN. Thank you.

Secretary Veneman, Senator Lugar and Senator Fitzgerald were

coming right back. They had some followup questions, as do I. We

will just take a short recess here and when they return, we will

resume our hearing.

[Recess.]

Senator LUGAR.

[presiding.] Chairman Harkin has asked me to call the hearing

to order. He will be back shortly from voting on the floor.

I want to mention that Senator Roberts was unavoidably detained for a national security briefing, and I ask unanimous consent that his statement be placed in the record.

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

appendix on page 89.]

Senator LUGAR. Likewise, Senator Helms, who was unavoidably

detained, has asked that his statement be made a part of the

record and, without objection, that will occur.

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

appendix on page 87.]

Senator LUGAR. Madam Secretary, let me just continue with the

questioning as we wait for other members to return, and we thank

you for your patience and your longevity in this process.

Mention has been made during the hearing about farm income.

You have indicated that it may be that we will have a record farm

income of $61 billion this year, and you have heard a challenge to

that from one member who said, well, don’t be saying that in farm

country because people are angry.

The two situations are not necessarily contradictory. There are

many persons in various States and various counties who are having very difficult times, but at the same time it is important in

some perspective that the payments that we authorized in the Senate and the House during August that were paid to farmers in my

State, and likewise the crop insurance that we have—for example,

on my farm we are able to insure 80 percent of the average income

for the last 5 years. That is quite a bit of safety net.

Now, all farmers may not have availed themselves of that, or of

the 70 percent or various other levels, but that is available, and so

are futures markets. That requires a certain degree of sophistication and education, but this is one way that farmers make money.

The problem, as you have pointed out, is that 170,000, more or

less, farms are commercial farms. They are making money, to the

47

extent that agriculture gets a return at all. Maybe 2 million others

are involved in other sorts of difficulty.

Now, it has been suggested this morning particularly by Senator

Conrad, as he has in other of our hearings, that the EU is a formidable situation, and it is and the subsidies are enormous. But

I would question whether our response ought to be to raise our

subsidies by $50 or $60 billion a year to match that. Your testimony is that the subsidies that we are doing now may be distorting.

Now, the facts of life are that the EU is attempting to expand.

The end of the $50 billion for France and Germany comes with the

answer of ‘‘Poland,’’ and as Poland accesses to the EU the whole

picture changes dramatically. I visited with the German agricultural minister just last month and he pointed out that in his country and in France, the entire situation alters simply because there

has to be a flow of money. Others who are newly accessed to the

EU are deeply worried about that, too—Spain, Portugal and others.

That is going to happen because of the realities of Europe.

What we need to do, as you have pointed out, is to try to get

tariffication, to try to get the end of non-tariff barriers. The

phytosanitary issues are very, very important, particularly biotechnology, and these are of great meaning to farmers in terms of

getting demand up and getting exports and sales.

Finally, I would just comment again that Americans as a whole

need to have an interest in this Farm bill. We have been discussing

it today from the standpoint of production agriculture, the 2 million

farms, but the fact is that we will have a broad base for our bill

if we do some things to protect the soil and water of this country

in perpetuity.

As farmers, we are stewards for a short period of time, but it is

fundamental that we have clean water around our farms and it is

fundamental that we upgrade our top soil. These are things for

which the public is prepared to spend some money in terms of the

interests of all of us.

Likewise, the nutrition programs. The work that Senator Harkin’s staff and my staff have been doing together is going to enhance those very substantially, whether it be WIC, food stamps, or

eligibility of Americans who are in need. That is of great interest

to millions of Americans who are outside of production agriculture.

It is tremendously interesting the credit ideas we have for young

farmers because they have been hurt by our current policies. If

rents go up, it is tougher for them to rent land or to get into the

game at all, and so as a result we have to do something for the

entry level if we want to be competitive, if we are not simply blowing smoke about competition in America with young people who

want to do this.

These are areas of the Farm bill that we have really not gotten

into today. We are talking about the money. Is $73.5 billion out

there? Now, the answer is, no, it is not, and it probably was never

there. If you parse carefully President Bush’s State of the Union

message, he said there is $5 trillion in surplus. About $1 trillion

is out there for contingencies; among the contingencies: Medicare

reform, prescription drugs for the elderly, Social Security reform.

48

And, oh, by the way, if agriculture needs some more money, that

is probably where you have to look for it. Right now, there is not $5 billion in surpluses. The last estimate in August was $3 billion, and my guess is even as we speak that

is melting away. The $1 billion is gone. If we are going to do Social

Security or Medicare, it is going to be at the expense of something

else, unless this country gets real prosperous in a hurry and, as opposed to having zero GNP, gets to 3 or 4 again, which we all pray

will occur.

Now, for us to be debating $73.5 billion next week in this context

is irresponsible, in my judgment. Having said that about three different ways, I say it again because somehow it isn’t getting

through. There are people that are still having meetings in Washington and a suggestion by a spokesperson for one group who shall

remain nameless that said as soon as the House passes that bill,

we will be over on the Senate like a ton of bricks.

Well, welcome to the party, because we are not going to be moved

by a sudden urge of persons who suddenly catch religion on a bill

that, in my judgment, has a lot of work still to do simply to pick

up the pieces and to work out the fiscal responsibility of it.

Madam Secretary, I thank you again for your indulgence in allowing me to make these remarks in my time.

I look forward to recognize now Senator Fitzgerald, of Illinois.

Senator FITZGERALD. Well, thank you, Senator Lugar.

Welcome, Madam Secretary. Your report is very good that you

put together. It would have been even more helpful if you could

have proposed how we solve this big conundrum and draft a farm

policy that really works and doesn’t cause distortions.

I want to ask a couple of things. I am sure you have seen all the

media reports about large Fortune 500 corporations or NBA stars

who have been receiving farm subsidies from Joe Taxpayer. I wondered if there is anything we might be able to do in the Farm bill

to address that situation.

Secretary VENEMAN. Well, that obviously what we do at USDA

is carry out the law, as it is currently on the books, and that is

what we have done. People who own land obviously get some of the

benefits of the programs if they have some of the base acres, as

laid out in the law.

That one of the things that some of those articles also indicate

is a point that we make in that book, and that is that today there

is not just this uniform farmer in the countryside, that there is a

wide diversity in the types of farms, and that probably farm policy

can’t be really looked at as a one-size-fits-all solution.

One of the reasons in our book that we talk about a broader base

of programs and we talk about a more holistic approach, that we

recognize the importance of rural development programs, of conservation programs, of pest, disease, food safety and research programs, and what we call infrastructure, is all of these things help

farmers in rural America. They probably help to some extent a

broader base because many farmers and much of the production is

ineligible for the subsidy programs that we spent a lot of time talking about today, only about 20 percent.

It is important as we move forward to really again look at this

more holistic approach that we are talking about, and that cerVerDate 11-MAY-2000 14:47 Apr 09, 2003 Jkt 085327 PO 00000 Frm 00052 Fmt 6633 Sfmt 6633 85327.TXT SAG1 PsN: SAG1
49

tainly the principles that the chairman and Senator Lugar put out

yesterday also recognize that there is a broader approach to be

looked at in terms of the discussion of how we move ahead in farm

policy.

Senator FITZGERALD. Your report points out the conundrum that

we have that some farmers at the lower end who are inefficient

and very small, we can probably never pay them enough to help

them earn a good income. If we are paying the same support across

the board, then if we were trying to help the inefficient, small

farmer earn a good living, we would be over-compensating the real

large, efficient producers so that they would be stimulated to overproduce even more.

Do you think we should consider moving toward a bifurcated program in some way? Some could actually read your report as suggesting we shouldn’t be making eligible the small, inefficient producers. I don’t think that is what you intend, but some could read

the report that way. Do you think we should bifurcate our treatment?

Secretary VENEMAN. Again, when you talk about bifurcating, it

talks about just farm programs, and what we are trying to do in

our report, and what the chairman and Senator Lugar’s principles

talk about is the diversity of the farm sector today and the diversity of programs that help various parts of that diverse farm sector.

Support programs that help program commodities is one aspect.

Certainly, trade is something that helps everyone. Pest and disease

prevention and research programs and food safety programs help

the whole spectrum of the food chain. Rural development programs

help rural communities which support our agriculture, and yet our

rural communities also support many of our farmers.

There are really only about 150,000 farmers that get the bulk of

their income, or maybe 175,000 or so that get the bulk of their income from farming. Much of the farm household income today is

supported from other off-farm jobs in rural communities. The

strength of rural communities is extremely important.

That it is also important to look at the number of programs that

we have that help farmers get more value out of the marketplace.

Those are important programs, value-added types of things and opportunities that we have through some of our rural development

programs, for example, where we assist farmers.

We have certainly utilized a lot of those programs for ethanol

production, which I know is an interest of yours. Again, that points

to the importance of looking for new and alternative uses for agriculture. The important role that agriculture can play, for example,

in being a renewable source of energy is an important part of the

conversation that we need to have, whether it is ethanol or biodiesel or biomass for energy production, or wind power that we can

use in conjunction with ag lands. All of these are issues that we

need to discuss in a broader debate about policy today.

Senator FITZGERALD. We are really on a treadmill on our overall

farm policy because what farmers would like most, I suppose, is

just good prices for their crops. All of our programs, no doubt, keep

us producing a lot and then over-production further depresses the

prices, and if we could find some way off that treadmill, we would

be a whole lot better off.

50

I wanted to turn to another subject. Your report states that, ‘‘Our

domestic and export policy must support our existing international

obligations.’’ With regard to U.S. sugar policy, can you explain our

commitments under NAFTA and what effect this might have on

our high-fructose corn sweetener dispute that we are now having

with Mexico?

Secretary VENEMAN. Well, I believe the high-fructose corn syrup

dispute is in the process of dispute settlement at this point. There

is a long history of this whole sugar issue. Obviously, during

NAFTA, one of the things that was decided was that they would

try to have greater access for sugar.

There is a dispute about what is allowable in terms of coming in

from Mexico. That is still being debated, the validity of a side letter, and so forth, and then there is the issue of corn sweetener

going into Mexico. All of these are very contentious. Ambassador

Zelleck, as well as people from our staff, have been working very

hard to try to sort out some of the issues pertaining to sugar.

We had a discussion earlier on about the stuffed molasses. That

comes into the equation of the North American sugar market and

what is going on with that as well, but it is very complicated at

this point. We are in the process of trying to negotiate some agreements with regard to all of this, but at this point it still is not resolved.

Senator FITZGERALD. Does the administration have a position on

the overall sugar program?

Secretary VENEMAN. Well, no, we haven’t taken a specific position, although we have set forward principles that talk about market orientation of programs. The sugar program, is one that needs

to be examined primarily because we have taken sugar over the

last—well, last year, before I was here, we actually took sugar into

inventory. We had to do set-asides on sugar. I would certainly say

that that is a program that needs to be examined and one that

needs to be made more workable so that we don’t run into those

difficulties.

Senator FITZGERALD. How about dairy? Forgive me if someone

has asked this question. Does the administration favor or oppose

the dairy compact, which I guess is going to be an issue still that

we will have to confront this year? We have had that battle before

you were Secretary and we may be having that battle for many

years to come, but do you have a position on that? Do you support

the continuance? I am opposed to dairy compacts, but I would be

interested to find out the administration position.

Secretary VENEMAN. The administration has not taken a position

on dairy compacts. I mean, obviously, again we have principles laid

out that talk about market orientation, and I would simply say

that dairy compacts ought to be examined in that light.

I will say again, and I said it the last time I appeared before this

committee at my confirmation hearing when we talked more about

dairy policy—as I said at that time, and I continue to believe, dairy

is one of the most difficult issues that we have to deal with in agriculture. It is very regional. We produce dairy in almost every State.

Virtually everybody has a different idea about how we ought to

deal with dairy and dairy policy. I have said many times that I

would love to see the processing industry come together with the

51

producers and come up with a dairy policy that everybody can

agree to. Now, whether or not that will ever happen is yet to be

seen. I haven’t seen a lot of movement in that regard. Again, dairy

is a very difficult issue, but I can only say that we would like to

look at all of our farm programs, be they the commodity programs

or dairy or sugar, and move in a more market-oriented direction.

Senator FITZGERALD. I would encourage you to take a firm position on that. President Bush came out against the dairy compacts

explicitly in 1999 when he was campaigning in Vermont, and this

is going to be one issue where we would be best served by the administration taking a firm stance.

The Senate is very closely divided historically on this issue and

your weighing in would be appropriate because I do think that with

the precedent we have with the New England Dairy Compact, either our whole country is going to go toward these compacts or we

are going to go away from these interstate compacts.

With that, I want to thank you for being here. Just one final

question on a real practical matter. Maybe two years ago I and

Congressman LaHood, from Peoria, Illinois, passed a bill called the

Freedom to E-File bill which would require the USDA to develop

a system for farmers to access and file their USDA paperwork over

the Internet.

I was just wondering if you might be able to update the committee on your implementation of the legislation, and I am hoping you

will be able to meet the June 2002 deadline for implementation. In

our research we found that farmers were highly computer-literate

and many farmers would love to have the opportunity to file their

paperwork over the Internet, and in the long run it could really

save both the farmers and the Government some money.

Secretary VENEMAN. Senator, I appreciate you asking me that

question because it gives me the opportunity to talk about the last

chapter of our principles book which I haven’t had the opportunity

to talk about today, and that is a chapter that really says we want

to be able to integrate our programs and make sure they are efficiently administered, and that would be part of it.

Obviously, one of the things that we can do is better get our data

bases into a computerized environment that is connected. We have

an initiative for a common computing environment that would put

our NRCS programs, our Farm Service Agency and our Risk Management Agency programs together in common data bases. We

think that is extremely important, and part of that is to bring the

whole concept of e-filing and allowing our customers to do business

with us over the Internet, as so many businesses are doing today.

In addition, we have a project ongoing to look at how we integrate our maps for the agencies as well. We have maps in the

Farm Service Agency, we have NRCS maps, we have RMA maps

of farms, and those should be consistent and integrated so that

they can be accessed easily by both farmers for making farm decisions, as well as for program administrators. We feel very strongly

about program administration and how we can take steps to make

programs more effectively administered in our Department.

Senator FITZGERALD. Thank you.

The CHAIRMAN. Thank you, Senator Fitzgerald. I might just say

that the whole issue of the compact really is not even in our jurisVerDate 11-MAY-2000 14:47 Apr 09, 2003 Jkt 085327 PO 00000 Frm 00055 Fmt 6633 Sfmt 6633 85327.TXT SAG1 PsN: SAG1
52

diction. That comes under the Judiciary Committee, so it is not

really ours to deal with. It is up to the Judiciary Committee. No

committee has ever dealt with it. It just came on the Senate floor

several years ago.

Senator FITZGERALD. It is normally a rider on an appropriations

bill, isn’t it?

The CHAIRMAN. Yes.

Senator FITZGERALD. Yes.

The CHAIRMAN. t has never been dealt with on the committee

level, but this is not the proper jurisdiction for the compact itself.

As you know, the Northeast Compact expires at the end of this

month. Again, it is not our jurisdiction to do one thing or another

about it. That is the Judiciary Committee. If they want to do something, they will have to do something about it.

Now, overall dairy policy as it relates to the Farm bill, yes, then

we can set up certain structures. If we want, and we can deal with

various kinds of structures in the Farm bill. As the Secretary said,

this is so diverse, I don’t know. I mean, dairy policy is going to be

something to grapple with, I can tell you that.

Madam Secretary, you have been very kind and very patient. I

just have two rather specific types of questions in closing and then

we want to get on to the nominees.

As a clarification on conservation, I want to ask this question

specifically to get a clarification to make sure that I clearly understand this. Pertaining to the question I asked earlier about green

box, a conservation incentive payment program where the payment

is not directly based on costs may qualify as green box under the

WTO.

Do you agree with that?

Secretary VENEMAN. Yes.

The CHAIRMAN. I appreciate that. I just wanted to get that clear.

Secretary VENEMAN. I know that you are looking at some specific

programs, and we stand ready to work to look at any of these programs with you and try to determine how they would fit with our

WTO commitments or any other program that is designed. We appreciate the fact that the committee is looking at where these programs would fit within our existing trade obligations because we

do feel that that is an important part of this discussion.

The CHAIRMAN. As we are looking at it, at least in terms of what

I have been promoting anyway in terms of conservation and working lands, it may not be directly associated with the exact costs. It

may have some other things in there that for which we may want

to give incentives. For example, and I just wanted to clarify that

that still may qualify as green box. I appreciate that.

Second, there have been various questions asked about the

House bill. If the House does indeed take up its bill next week, we

need to know the Administration’s position. If you are not prepared

to state that today, will you, representing the Administration, be

prepared to state the Administration’s position on the House bill

prior to the House consideration of the bill?

Secretary VENEMAN. Senator, my understanding is that if the

House bill is taken up, there will be the standard statement of administration policy, or SAP, as it is normally referred to, which is

normally issued by OMB.

53

The CHAIRMAN. That will be prior to the House taking up the

bill?

Secretary VENEMAN. My understanding is that that would be the

case.

The CHAIRMAN. I appreciate that.

Last, just a little bit of soapbox if I might, and I know Senator

Wellstone wants to ask one last question. On the trade promotion

authority, I have in the past supported all of the so-called fast

tracks and things like that, but quite frankly I am having some

reservations in terms of this.

As I have looked into what is called fast track, or now trade promotion authority, I just want to comment on something you might

have said, that we need this to have a seat at the table in negotiations. It is my understanding of the laws that are now existing that

any Administration under the constitutional framework of our Government has the power to negotiate any treaty with any country.

They do not need our prior approval. They don’t need us to give

them any kind of authority.

This Administration can go and negotiate any treaty that they

want, trade or otherwise. The only constitutional mandate is that

the Senate advises and consents. That means that any treaty

struck by any administration must come to the Senate for its approval. That means that we, representing our constituents and the

country, then can take a look at it and can voice and perhaps even

vote the concerns of our constituents.

Fast track, or trade promotion authority, is the Senate saying we

are giving up that constitutional prerogative of ours; we are giving

that up. We are saying to the Administration you can negotiate,

but then when it comes here we cannot change it, we cannot

amend it. All we can do is vote up or down on it, so we have given

up the advisement part of the advise and consent. We can consent

or not consent, but we can’t advise. We do have a seat at the table,

we do have a seat at the table, and the administration can proceed

on that basis.

However, I am beginning to think that as we continue down this

road, that we as a Senate need to ensure that we keep that ‘‘advise’’ part of the ‘‘advise and consent,’’ and that we be partners in

these kinds of negotiations.

I would just repeat again, regarding trade, what Senator Roberts

said, and he said it here at a committee hearing back in July or

June when he made the statement that maybe we have listened to

the siren song of trade long enough.

As I have watched this over the years it has always been an accepted fact or accepted belief that if we cut down our production,

other countries will promote their production; they will increase

their production. That is true.

It is also true that if we increase our production, they increase

their production. I have the data going back 20-some years to show

that no matter what we do, Brazil is going to produce more, China

is going to produce more, and Argentina is going to produce more.

It makes no difference, and there is plenty of data to show that.

Countries are going to do what they think is in their own best interest, regardless of what we do.

54

Last year, When I was in China traveling around agricultural

areas, seeing mile after mile after mile of corn and beans and sorghum—I remember when Freedom to Farm was passed China was

going to be one of our big markets for our grain. Last year, China

exported corn. They not only fed a billion people, and they are pretty well fed, but they exported corn. They may have exported oilseeds and some soybeans, too. I am not certain about that.

Then I look at the land over there and there is all this land and

here are these farmers out there farming it. Guess what their input

costs are? Almost nothing. The land is all owned by the government. They don’t have to buy land. A lot of the machinery is owned

by the government, a lot of the marketing is done by the government, and they just work the land.

I don’t like that system at all, but you have to face reality. That

is what it is, and to put my corn farmer in Iowa who has to buy

land, pay interest rates, pay high prices for equipment, and the

input costs that Senator Lincoln talked about—to compete against

that kind of a system, you are asking my farmer to compete

against the Chinese government. It can’t happen.

Trade, yes, I am all for trade. We have to promote trade and do

as much as we can on trade, and we ought to be getting into more

value-added trade, not just the bulk commodities. We have to be

thinking about what can we do to get into that value-added market. That is where we are good. We are good at that and we can

do it better than anybody else in the world in terms of taking commodities and making them into something very valuable, something desirable. Whether it is how we cut it, chop it, dice it, or how

we package and process it, we can do it better than anyone else.

Those are the kinds of markets we ought to be looking at abroad,

not just the bulk commodities.

I would also say that as we look ahead, biotechnology is coming

and I have been very supportive of it. What that means is that in

a lot of these areas of the world which we thought would be our

markets in the future because they can’t grow anything, they are

now going to be able to grow more of their grains, feed and food

grains, on arid lands. Biotechnology is doing it; it is going to increase their production. I don’t know that they are going to be that

big of a market for us. They will be in terms of some of the biotechnology, but in terms of bulk commodities I am not so certain.

Again, where do I come back? I come back where we do agree,

and that is we have to have a broader look at how we are going

to support farmers in rural America. Much broader than what we

have done in the past. That is where we agree. There may be some

little things on which we may disagree, but in that contextual

framework we do agree.

Two other things. Again, because of our system, we have to think

about how are we going to enable younger farmers, younger people,

to get into agriculture in this country. The average age of farmers

now—I don’t know—it is 50-something; at least out in my area it

is. That is probably true nationwide.

It is almost impossible for a young person to get into agriculture,

unless you inherit it. There is no other way, or you just work for

someone. To own land, to actually invest in it, buildup equity over

55

a lifetime and have your own land and your own farm, is just literally impossible to do unless you inherit it.

There has got to be some way that we can structure this for

young people who are smart, who have been to our ag schools—

they know how to produce, they know how to be good conservationists—to be able to buy land and buildup their equity over the

years. That is one of the most perplexing things that we have facing us right now, how we break that down and how we provide for

that kind of support for young and beginning farmers?

Last, the question I keep asking all the time, and it kind of gets

back to what you said in your book here, in your report last week:

should we as a Nation continue to support every bushel, bale and

pound that is produced in this country? If we should, I want to

know the arguments for it.

Should we continue to support every bushel, bale and pound produced? If so, give me the arguments. I would like to see them. If

not, then perhaps we need a different approach as to how we are

going to support agriculture.

That is my soapbox and if you have some response—I know Senator Wellstone had a question, but if you have a response, we

would be glad to hear it.

Secretary VENEMAN. Well, you said a lot, so I will try to be brief.

Let me start with the whole issue of trade promotion authority and

why it is important, and particularly about the advise and consent.

First of all, this is a trade agreement and they have been treated

a little bit differently than treaties, because treaties are only approved by the Senate and trade agreements are approved by both

Houses.

Trade promotion authority, or traditionally fast track, what it

has done is given the negotiators—we talk about trade negotiating

authority. It is actually giving the negotiators the ability to negotiate agreements and bring them back and be, as you say, voted on

up or down.

Now, a couple of things in that regard. One is that it is anticipated with trade promotion authority that this would done with a

tremendous amount of advice from the Congress. We have traditionally had a lot of advice from the Congress in negotiating trade

agreements. I know that this administration feels very strongly

about the importance of getting advice from Congress as we go forward with negotiating trade agreements. I know that Ambassador

Zelleck feels strongly in that regard, too, and that in granting trade

promotion authority we would expect to work very closely with the

Congress as we proceeded with negotiations.

What it does is it gives us the ability to have credibility with our

trading partners that if we negotiate something, it is going to stick.

It is either going to go away completely or it is going to stick, and

that is the critical issue, is the ability to have the credibility with

our trading partners.

I talked a little bit earlier about the fact that I went to Uruguay

earlier this month and went to the Cairns Group. I mean, we meet

with people from other countries all the time about trade issues

and they are all asking, are you going to get trade promotion authority? They are looking at that as something that will give us the

56

ability to take a leadership role in the negotiations, which we

should.

I would certainly pledge to you on behalf of the administration

that any trade agreements that we work on will be done with a lot

of consultation with the Congress, both the House and the Senate.

Let me talk for a minute about the value-added trade issue because I couldn’t agree with you more, but it is happening. There

is a chart on page 40 of our book that shows, since 1990, how the

share of value-added trade has increased. About 60 percent of our

trade now is in high-value—meats, processed products, fruits and

vegetables. That is the trend, and it continues.

When you export pork from Iowa, you are also getting benefit,

though, from the bulk because you are exporting pork and corn or

soybeans. It is important that we recognize that when we export

high-value, we not only get the benefit of that export, but we get

benefit to agriculture for what is going into that higher-value product. I just wanted to point out that that is a trend. I agree with

you on that, but that is extremely important that we focus on the

higher-value products, not forgetting our bulk, of course.

On China, just a word. That it is important to understand China

is a big customer, particularly for oilseeds this year. We have seen

tremendous increases in their oilseed imports, and we have negotiated a very good agriculture access agreement as part of the

China WTO accession—I mean we, the U.S. Government; it was

done before we were here. One of the next steps was taken last

week in terms of getting China into the WTO, and hopefully that

will happen soon because we have a good access agreement for

many agricultural commodities for China and the WTO.

Just one word about younger people in agriculture. I agree with

you that it is difficult today for some younger people to get into agriculture in terms of farming and owning land. One of the interesting things that I find when I talk to deans of agriculture schools

if how many young people are now going into agriculture.

It is fascinating because one of the things they cite is the hightech nature of agriculture, the biotechnology, the new products, the

nutrition aspect, the intersection of those, and the fact that agriculture is offering so much promise now for young people in terms

of a career and there is a lot of excitement about food and agriculture as a career.

Maybe it is hard, as you say, to get money to get land, but there

are so many exciting career opportunities that people are finding

in the food and agriculture system today that is something we

ought to recognize, that young people are coming back to the ag

schools in new and different ways, ways to integrate technology

and business into the function of the production and the food system. That is important as well.

Finally, that I just want to say that another piece of all of that

and getting young people involved as well is the importance of

things like research we have talked about today, and the whole infrastructure issue and the importance of how that supports all of

our food system here, whether it is pest and disease prevention,

food safety, and all the research that supports that.

As we go forward, I do hope we can continue to talk about this

broader approach and how all of these things will help, and do help

57

agriculture, and need to be updated and integrated into the system

we have today.

The CHAIRMAN. Thank you, Madam Secretary. I know Senator

Wellstone had one last question.

Senator WELLSTONE. Thank you, Mr. Chairman, and I understand that Senator Lugar asked the question earlier about what

kind of money we have to work with, so I won’t go over that

ground.

My apologies. I mentioned to Senator Harkin earlier that at the

same time the HELP Committee had a hearing on September 11

and some of the post-traumatic stress syndrome needs and support

of children in the mental health area, which is an area I work in.

I apologize that I had to step out.

I will just do this very briefly because you have been here a long

time. There is a quote from your report that captures my imagination and goes back to my earlier comments about competition:

‘‘While the structural change in agriculture clearly is advantageous

for some, it also prompts concerns about competition, market access and the use of market power by some participants, to the disadvantage of others. Moreover, reduced competition could limit society’s gain from structural change by stifling innovation or tilting

the market results in favor of those that have the greatest market

power.’’

This is on page 21 of the report. It is an excellent summary, and

as any number of us have said, we really think that in the countryside there is quite a bit of unity about the need to deal with the

problem of concentration. This is the part of the Farm bill that I

certainly want to work on, so I wanted to ask you kind of how the

administration is going to respond to the problem of concentration,

reduced competition, the market power of large agribusinesses, and

what your priorities are going to be in this area.

Secretary VENEMAN. Well, one of the things that we talk about

in this book is, again, the issue of getting bigger is happening in

certain parts of the whole food system, whether it is some of the

farms that are getting bigger or more concentration in terms of the

processing or even the retailing side, as was mentioned earlier in

the hearing.

Let me just say that we have Packers and Stockyards that is

very involved in concentration issues, as well as we work closely

with the Justice Department to see whether or not there are competitive issues with regard to mergers and acquisitions and that

kind of thing. The Department plays a very active role in that regard.

At the same time, we need to recognize that there are programs

that give farmers some choices. We talk a lot about the importance

of giving farmers opportunities in the value-added area, whether it

is the ability to come together in a cooperative structure or other

business with the help of some of the programs that we have.

We have seen a lot of success in this area. We have the Dakota

Past Growers up in North Dakota that has become the third largest pasta producer. There is a beef cooperative in 30-something

States that has been very active. We have seen a number of business entities be formed to really give the producers the opportunity

58

to get value out of the food system in ways that they feel helpless

to do otherwise.

That we develop new products through biotechnology, giving producers the opportunity to find value products that they can produce

and get more value, all of these are opportunities, that give people

the ability to take a road other than maybe the larger players, and

that is one of the things that we can help and a assist in doing.

Senator WELLSTONE. To be honest about it, when you mention

Packers and Stockyards, I don’t really think that family farmers in

Minnesota or around the country believe that they have gotten

much help from Packers and Stockyards or that much help from

the Justice Department.

I understand the kind of niches, but what I want to know is

whether or not you are willing to take this on. We have all these

mergers and acquisitions on both the input side and the output

side. I mean you have oligopolies, at best. I could recite the figures,

but you know them. The farm-retail spread grows wider and wider,

and what I am saying is I don’t think there is a future for family

farmers unless there is some real competition.

Do you all have some plans to put some competition back into

the food industry? Do you have some plans to challenge some of

these acquisitions and mergers in terms of their impact not just on

consumers, but on our independent producers? To say that we are

active right now, to be honest I just think that that right now in

the countryside has no credibility at all because people don’t believe that.

Secretary VENEMAN. Well, again, one of the things we need to

promote is more value-added opportunities for farmers. We have

programs that do that. We may want to look at additional opportunities to develop things that will allow farmers to participate in

those kinds of arrangements and get more value out of the food

system.

Senator WELLSTONE. Will you challenge some of these acquisitions and mergers that lead to more and more concentration? Are

you willing to look at their impact on producers and have Packers

and Stockyards be more active?

Secretary VENEMAN. Again, the Packers and Stockyards Administration has been active. We have been active with the Justice Department over the years, or at least the Department has. Again, it

is a question of evidence. I mean, these are very legalistic kinds of

investigations, and certainly we have cooperated in the investigations in trying to produce evidence in the various investigations

into these mergers.

Again, it falls within what the law requires today and we work

very closely with Justice. I believe Justice has an ag person over

there. In addition, we have had people at the Justice Department,

making sure that they understand the structure of the agriculture

industry, to make sure that the proper things are taken into account, and we will continue to do that.

Senator WELLSTONE. I will finish on this. Madam Secretary, I

would love to later on—I don’t want to take any more time—talk

to you about the food stamp program. I touched on that in my

opening comments, and you could play such a positive role.

59

You talked about we are operating within this framework. Are

there some changes in law that we need to make that would enable

you to do a better job?

By the way, I am being scrupulously bipartisan here. I don’t

think we have done much in past administrations on this question,

because the mergers and acquisitions go on with a vengeance. If

there are changes that we need to make that could give you more

authority to do the job you need to do to give our independent producers a chance to compete, that is really my question.

Secretary VENEMAN. Well, again, we have not put forward specific proposals in our book. We will certainly look at that issue to

determine whether or not we need additional authority, and if people here have ideas for authorities that might be granted, we would

be happy to analyze them and work with you.

Senator WELLSTONE. Thank you. Thank you, Mr. Chairman.

The CHAIRMAN. Thank you, Senator Wellstone.

Well, Madam Secretary, you have been very kind and generous

with your time and your expertise today. We do appreciate it.

Again, I congratulate you on a fine publication on the policy book

that you put out last week. We look forward to working with you

as we develop our legislation here and we will wait to see what the

House has to do, I guess.

Secretary VENEMAN. Thank you, Mr. Chairman, and I just want

to also thank you for your timely consideration of our nominees,

whom I now know you will take up two of them.

The CHAIRMAN. We are going to bring up two more right now.

Senator Lugar and I have agreed that we have asked to discharge

the committee. We are going to try to bring them up under unanimous consent this afternoon and get them through before we go

home today.

Secretary VENEMAN. Thank you very much. We really appreciate

that. We are counting on these people to start work soon.

The CHAIRMAN. Exactly. Well, thank you, Madam Secretary.

Secretary VENEMAN. Thank you.

The CHAIRMAN. Thank you, Dr. Penn, Dr. Collins.

[Whereupon, at 12:45 p.m., the committee was adjourned.]

(61)

A P P E N D I X

SEPTEMBER 26, 2001

62

63

64

65

66

67

68

69

70

71

72

73

74

75

76

77

78

79

80

81

82

83

84

85

86

87

88

89

90

91

92

93

(95)

DOCUMENTS SUBMITTED FOR THE RECORD

SEPTEMBER 26, 2001

96

97

98

99

100

101

102

(103)

QUESTIONS AND ANSWERS

SEPTEMBER 26, 2001

104

105

106

107

Æ