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S. HRG. 112–275 

AGRICULTURE: GROWING AMERICA’S ECONOMY 

HEARING 

BEFORE THE

COMMITTEE ON AGRICULTURE, 

NUTRITION AND FORESTRY 

UNITED STATES SENATE 

ONE HUNDRED TWELFTH CONGRESS 

FIRST SESSION 

FEBRUARY 17, 2011 

Printed for the use of the 

Committee on Agriculture, Nutrition and Forestry 

( 

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

COMMITTEE ON AGRICULTURE, NUTRITION AND FORESTRY 

DEBBIE STABENOW, Michigan, Chairwoman 

PATRICK J. LEAHY, Vermont 

TOM HARKIN, Iowa 

KENT CONRAD, North Dakota 

MAX BAUCUS, Montana 

E. BENJAMIN NELSON, Nebraska 

SHERROD BROWN, Ohio 

ROBERT P. CASEY, Jr., Pennsylvania 

AMY KLOBUCHAR, Minnesota 

MICHAEL BENNET, Colorado 

KIRSTEN GILLIBRAND, New York 

PAT ROBERTS, Kansas 

RICHARD G. LUGAR, Indiana 

THAD COCHRAN, Mississippi 

MITCH MCCONNELL, Kentucky 

SAXBY CHAMBLISS, Georgia 

MIKE JOHANNS, Nebraska 

JOHN BOOZMAN, Arkansas 

CHARLES E. GRASSLEY, Iowa 

JOHN THUNE, South Dakota 

JOHN HOEVEN, North Dakota 

CHRISTOPHER J. ADAMO, Majority Staff Director 

JESSICA L. WILLIAMS, Chief Clerk 

MICHAEL J. SEYFERT, Minority Staff Director 

ANNE C. HAZLETT, Minority Chief Counsel 

(II) 

(III) 

C O N T E N T S 

Page 

HEARING(S): 

Agriculture: Growing America’s Economy ............................................................. 1 

Thursday, February 17, 2011 

STATEMENTS PRESENTED BY SENATORS 

Stabenow, Hon. Debbie, U.S. Senator from the State of Michigan, Chairwoman, Committee on Agriculture, Nutrition and Forestry ............................ 1 

Roberts, Hon. Pat, U.S. Senator from the State of Kansas .................................. 2 

Panel I 

Vilsack, Hon. Tom, Secretary, U.S. Department of Agriculture, Washington, 

DC .......................................................................................................................... 6 

Panel II 

Creagh, Keith, Director, Michigan Department of Agriculture and Rural Development, Lansing, Michigan ............................................................................ 33 

Hoenig, Thomas M., President, Federal Reserve Bank of Kansas City, Kansas 

City, Missouri ....................................................................................................... 36 

Outlaw, Joe, Ph.D., Economist, Texas A&M, College Station, Texas ................. 39 

Yoder, Fred, Farmer, former President, National Corn Growers Association, 

Plain City, Ohio .................................................................................................... 37 

APPENDIX 

PREPARED STATEMENTS: 

Baucus, Hon. Max ............................................................................................ 46 

Chambliss, Hon. Saxby .................................................................................... 51 

Casey, Hon. Robert ........................................................................................... 53 

Creagh, Keith .................................................................................................... 55 

Hoenig, Thomas M. .......................................................................................... 60 

Outlaw, Joe ....................................................................................................... 75 

Vilsack, Hon. Tom ............................................................................................ 79 

Yoder, Fred ....................................................................................................... 94 

DOCUMENT(S) SUBMITTED FOR THE RECORD: 

Hon. Pat Roberts: 

‘‘The Man Who Said No To Easy Money’’, article, Time Magazine .............. 98 

American Farm Bureau Federation, prepared statement .................................... 102 

Press release from Hon. Saxby Chambliss ............................................................ 114 

QUESTION AND ANSWER: 

Chambliss, Hon. Saxby 

Written question to Hon. Tom Vilsack ........................................................... 132 

Gillibrand, Hon. Kirsten 

Written question to Hon. Tom Vilsack ........................................................... 130 

Leahy, Hon. Patrick J. 

Written question to Hon. Tom Vilsack ........................................................... 126 

Nelson, Hon. E. Benjamin 

Written question to Hon. Tom Vilsack ........................................................... 126 

Page

IV 

Roberts, Hon. Pat 

Written question to Keith Creagh ................................................................... 120 

Written question to Joe Outlaw ...................................................................... 123 

Written question to Hon. Tom Vilsack ........................................................... 125 

Written question to Fred Yoder ...................................................................... 136 

Creagh, Keith: 

Written response to questions from Hon. Pat Roberts .................................. 120 

Outlaw, Joe: 

Written response to questions from Hon. Pat Roberts .................................. 123 

Vilsack, Hon. Tom: 

Written response to questions from Hon. Pat Roberts .................................. 125 

Written response to questions from Hon. Patrick Leahy .............................. 126 

Written response to questions from Hon. E. Ben Nelson .............................. 126 

Written response to questions from Hon. Kirsten E. Gillibrand .................. 130 

Written response to questions from Hon. Saxby Chambliss ......................... 132 

Yoder, Fred: 

Written response to questions from Hon. Pat Roberts .................................. 136 

(1) 

AGRICULTURE: GROWING AMERICA’S 

ECONOMY 

Thursday, February 17, 2011 

UNITED STATES SENATE, 

COMMITTEE ON AGRICULTURE, NUTRITION AND FORESTRY, 

Washington, DC 

The Committee met, pursuant to notice, at 2:36 p.m., Room SR– 

328A, Russell Senate Office Building, Hon. Debbie Stabenow, 

Chairwoman of the Committee, presiding. 

Present or submitting a statement: Senators Stabenow, Leahy, 

Harkin, Conrad, Baucus, Nelson, Brown, Casey, Klobuchar, Bennet, Gillibrand, Roberts, Johanns, Boozman, Grassley, Thune, and 

Hoeven. 

STATEMENT OF HON. DEBBIE STABENOW, U.S. SENATOR 

FROM THE STATE OF MICHIGAN, CHAIRWOMAN, COMMITTEE ON AGRICULTURE, NUTRITION AND FORESTRY 

Chairwoman STABENOW. Well, good afternoon. I am going to call 

the meeting to order for the Senate Agricultural, Nutrition and 

Forestry Committee. We do need to conduct some business. At the 

point at which we have a quorum, we will stop and do that. 

But I do want to indicate that it is a great honor and privilege 

for me to be here today as the new chair of this Committee and 

beginning this first hearing in the 112th Congress; and I am very 

proud to welcome our colleagues, new colleagues as well, to the 

Committee. 

We are, I think, starting in a very important place which is talking about jobs and the economy. Sixteen million jobs, that is the 

estimate of the total number of Americans who have a jobs because 

of American agriculture and that is why we are here today. That 

is a big deal for American families. 

I am very proud, as you know, to represent the State of Michigan 

where we know how to grow things and we know how to build 

things. We do that and we are very proud of it. 

Agriculture presents more than 70 billion dollars for our economy 

each year and represents one out of four jobs in Michigan. 

That is why I am very pleased and both Senator Roberts and I 

agreed that our first hearing should look at the impact of American 

agriculture on our economy, how important it is in terms of jobs 

because it is really a story that is not told enough and it is a story 

that we are going to repeat throughout this Congress. 

And as I mentioned, Senator Roberts and I agreed to this because certainly he understands the importance of agriculture in 

2 

creating jobs and I am very pleased to be working with our new 

ranking member, my friend, Senator Roberts. 

I want to thank him for being here today and representing the 

great State of Kansas where I know there are at least 300,000 jobs 

that come from agriculture. 

Senator Roberts and I both served in the House. He was a great 

champion and chairman in the House and now serving with him 

in the Senate is a real honor for me as well as serving with all of 

you. 

The Senate Agriculture Committee has always been a bipartisan 

Committee. That is one of the things, I think, that we all enjoy 

about it. We put the interests of producers and rural America in 

our Nation above politics that occurs around here and I look forward to continuing that tradition as we move forward in this Congress. 

As I mentioned, today’s hearing focuses on jobs in agriculture 

and rural communities. I would like to extend a warm welcome to 

Secretary Tom Vilsack, who will be our first witness. 

I also welcome our second panel and I want to indicate I am very 

pleased that Keith Creagh, who is our new director of the Michigan 

Department of Agriculture and Rural Development, will be testifying on the second panel. 

I suspect that many of you have read the same reports that I 

have been reading. Rarely have we seen a more positive outlook for 

the agricultural economy as a whole. This should come as no surprise to any of us. American farmers and ranchers produce the 

safest, most nutritious, and most sustainable agricultural products 

in the world. 

We know this and the rest of the world does as well. In fact, one 

of the biggest success stories in our Nation’s economy is the 

strength of our farm exports. For the second year in a row, agricultural exports have been projected to be over $100 billion. 

This year we expect to see a record high of $126 billion in exports and, in fact, agriculture is among very few industries where 

we enjoy a trade surplus. This is really welcome news for our economy. 

Here is some more good news. Our agricultural exports will support over one million jobs this year alone and these jobs are not 

just on the farm but towns and cities all across the country. 

I know that each of our members of the Committee here today 

have a similar story to tell about the importance of agriculture in 

each of your States in terms of the economy and jobs. 

As we listen to our witnesses today, let us keep those 16 million 

Americans in mind who are counting on us to continue to give 

them the opportunity to be successful. 

It is now my great pleasure to yield to the distinguished ranking 

member, Senator Roberts, for his opening remarks. 

STATEMENT OF HON. PAT ROBERTS, U.S. SENATOR FROM THE 

STATE OF KANSAS 

Senator ROBERTS. It is a true privilege and an honor to serve as 

ranking member of this Committee. Basically Senator Chambliss 

served as the top gun on our side for the last six years; and as I 

3 

quickly note, I am on page 3 instead of page 1. I better pay homage 

where homage is due. 

Thank you, Madam Chairwoman. 

[Laughter.] 

Chairwoman STABENOW. All right. It is about time. 

[Laughter.] 

Senator ROBERTS. This knelling business I do not know about 

that, but I will do my very best. 

As I said before, the high road of humility is not often bothered 

by heavy traffic in Washington but it is a very humbly experience 

and an honor and a privilege. My congratulations on taking the 

gavel of the Agriculture Committee. I am honored to be riding shotgun with you as this Committee conducts oversight of the 2008 

Farm Bill and the Dodd-Frank Act and investigates over burdensome regulations and the long-delayed trade agreements and prepares for the next Farm Bill which will happen to be my seventh. 

That is a lot of Farm Bills. 

Kansas and Michigan have much in common in regards to the 

crops we grow. We both have wheat, corn, and soybeans producers; 

and you do have something called specialty crops, big time. 

Additionally, I look forward to learning about the diversity you 

all have in production, crops like asparagus and berries. I even like 

asparagus. I understand you all have tasty wine in Michigan too. 

So when the hour is late and we have any difficulty, why, maybe 

you could break that out. 

Michigan has over 19 million acres of forest land. That is a lot 

of forest land. Kansas, I am talking about western Kansas, west of 

Highway 81, we have 19 trees. 

[Laughter.] 

Senator ROBERTS. And we call them invasive species. 

[Laughter.] 

Senator ROBERTS. Now, back to my original page. 

It is a true privilege and honor to serve as Ranking Member. 

Senator Chambliss served as the top gun on our side for the last 

six years. He is taking on yeoman work as the Ranking Member 

of the Intelligence Committee. I want to thank Saxby for his tireless leadership, especially during the 2008 Farm Bill. 

I could go down the line of former chairmen and ranking members who continue to serve this committee, Senators Lugar, Cochran, Leahy, and Harkin, and our former Secretary of Agriculture, 

Senator Johanns. 

I feel compelled also to pay homage to Mr. Conrad, who has 

played a very key role in every Farm Bill that I have been involved 

with. 

The unprecedented depth of knowledge and experience on this 

Committee this time around, I think it will serve all of agriculture 

and rural America well. 

I also welcome two new members to the committee, Senator 

Hoeven from North Dakota and Senator Boozman from Arkansas. 

The Agriculture Committee is not often the first choice for new 

members but we are fortunate to have your enthusiasm and expertise on board, and you made a wise choice. 

4 

You will find that this Committee is a bit different than others 

in that you will work just as much with members from the other 

side of the table as this side. In my 

experience with agriculture, I found that this Committee on more 

occasions than not is a fine example of bipartisanship and comity. 

Those are not just words. That is what we have to do. We must 

work together because too often agriculture programs become the 

target of criticism and attacks. We have already seen that. 

Our farmers and ranchers do produce the safest, most abundant, 

and affordable food and fiber supply in the world, all while facing 

increased input costs and tightening regulations. That quote has 

been said virtually by everybody on the Committee and by Tom 

Harkin at least 17 times, 18 times. 

As if these challenges were not enough, our producers face a 

challenge of worldwide significance. Let me remind all members 

that as the global population of the world tops nine billion, probably 9.3 billion in the next several decades, agriculture production 

most then double to meet the expected demand for food and nutrition. 

That to me is the key issue that we must face and it is a moral 

issue and it is an issue of national security and it is an issue of 

world stability and all you have to do is look at the conflagration 

going around the world today with many people suffering from 

malnutrition and starvation and I think you can get the message. 

So as Ranking Member, I am going to work to ensure that our 

producers have the tools and the necessary protection to meet this 

challenge. Why would we do anything given that imperative that 

would be harmful to the men and women whose job it is to feed 

this country in a troubled and hungry world. 

So I really think we have to bear down and really do our oversight and do our homework to make sure that does not happen. 

Today’s hearing focuses on agriculture’s contribution to our national economy. I appreciate our witnesses that are providing their 

perspective. 

Mr. Secretary, welcome back to the Committee. I understand this 

is round two for you today. I think you were over on the House 

side. I hope our friends on the other side of the Hill treated you 

well. You do not look any worse for wear. You look fine, sir. 

I also thank Mr. Hoenig from the Kansas City Federal Reserve 

for testifying on our second panel. I will have more to say about 

him later. If those of you can stay to hear Tom, I would encourage 

you to do that. If there is a story written about somebody on the 

Fed who has a profile in courage it would be Tom Hoenig. 

This afternoon we will hear many positives about the current 

state of agriculture. As everybody knows, our prices are up to historical levels. The sun is shining, well, maybe not Kansas but the 

sun is shining, usually a good thing. 

But any farmer in Kansas or Michigan or Iowa or even Vermont 

who has spent more than two weeks in the field can tell you that 

prices can change just as quickly as the weather. We on the authorizing committee must be mindful of that fact, especially as we 

move into future debates on the safety net. 

Madam Chairwoman, I thank you for calling this hearing. I look 

forward not only to hearing what our panels have to say today but 

5 

also to working with you to drive agriculture policy in the 112th 

Congress. 

I thank you, ma’am. 

Chairwoman STABENOW. Thank you very much, Senator Roberts. 

And just to follow up on one thing that you said, I think this 

really is an extraordinary Committee when I look around at the expertise on this Committee. The chairman on other Committees, 

former chairman, this really is an opportunity I think in this Congress for us to really lead and provide expertise as it relates to developing a Farm Bill that really works for all of agriculture and for 

the country. 

Senator Leahy, you wanted 30 seconds for a moment here. 

Senator LEAHY. Very briefly. Just to congratulate you, Madam 

Chairwoman, in being here. This Committee was my first choice 

when I came here 37 years ago. I have served on it during that 

time. I have been chair. I had been ranking. 

I am delighted you are here because I know how hard you 

worked to put together bipartisan coalitions. It is what is needed. 

Senator Roberts is absolutely correct when he said he is also I 

think probably the only person who served both as House chairman 

and now as Senate ranking member. He and I have worked very 

close together. 

You are absolutely right, Pat, in what you say that we work 

across party lines for the good of agriculture. So I am just delighted 

to see both of you in this leadership role. I think the Senate is fortunate. 

Senator HARKIN. Would the Senator yield just for 30 seconds? 

Chairwoman STABENOW. Senator Harkin. 

Senator HARKIN. Thank you, Madam Chair. 

I also want to congratulate you and commend you for taking his 

position but I just wanted to add one other thing and, of course, 

I always congratulate, Pat, my good friend—— 

Senator LEAHY. That Pat. 

Senator HARKIN. That Pat over there and this one here too. 

But I would not let this moment go by without pointing out that 

our new chair is the only person who has served on both her State 

House Agriculture Committee, her State Senate Agriculture Committee, the House Agriculture Committee, and 

the United States Senate Agriculture Committee, the only one 

who has ever done that. 

Congratulations. 

Chairwoman STABENOW. Thank you, Tom, very much. 

We do have a quorum now. We do have some business to conduct 

before proceeding with our witnesses. So thank you very much for 

those kind comments. 

[Whereupon, at 2:49 p.m., the Committee proceeded to Executive 

Session, and resumed at 2:50 p.m.] 

Chairwoman STABENOW. So let us move on to our two excellent 

panels today. In the interest of time, I am going to ask that members’ opening statements be submitted for the record as would be 

normal practice for the Committee and, of course, we recognize 

members in order of their appearance alternating sides. 

So welcome, Mr. Secretary, to the Committee. We want to thank 

you very much for your testimony and for your leadership. 

6 

Your written testimony will be submitted for the record, and we 

would ask that you provided us with, five minutes with your comments before opening for questions. 

STATEMENT OF THE HON. TOM VILSACK, SECRETARY, U.S. 

DEPARTMENT OF AGRICULTURE, WASHINGTON, DC 

Secretary VILSACK. Thank you, Madam Chair, and to the members of the Committee, I want to thank you for the opportunity and 

the invitation to discuss recent developments and prospects for the 

farm economy. 

As we enter 2011, the farm economy continues to remain strong 

with U.S. agricultural exports, farm cash receipts and net farm income projected at or above previous record levels. Farm household 

debt levels appear to have stabilized despite increasing land values. While prospects generally look bright, recent sharp increases 

in prices for major crops are generating a range of concerns. My 

written statement describes the prospects and recent developments 

in output and input markets and the challenges and opportunities 

they present for U.S. agriculture. 

So I am going to take the short time I have this afternoon to 

touch on a few broad trends. 

As you may know, recent data tells us that U.S. farm exports 

reached an all-time high in calendar year 2010. We saw a rise both 

in the value and volume of U.S. agricultural exports worldwide 

supported by foreign economic growth. Particularly in developing 

countries U.S. agricultural exports are again expected to be at a 

record high this fiscal year, up to $18 billion from fiscal year 2010, 

with an agricultural trade balance that is forecast to be a record 

of $41 billion. 

While we are pleased with these record numbers, we remain focused on continuing to open and to improve markets for our producers. We know that every one billion dollars in agricultural exports helps to support 8000 jobs, and we want agriculture to continue to play a leading role in the President’s national export initiative in helping to reach the goal of doubling exports over the 

next five years. 

The other big trend in exports is the increased importance of 

China and the Chinese market. The trade numbers just published 

showed that for the calendar year 2010 China was our number one 

export market, edging out Canada and accounting for 15.1 percent 

of exports. 

Cash receipts and cash production expenses for producers are 

forecast to reach record levels in 2011, $341 billion in cash receipts, 

$274 billion in production expenses. 

Importantly, receipts are rising faster than expenses so net cash 

farm income is forecast at a nominal record of $99 billion this year, 

up $7 billion from last year and nearly $30 billion from 2009. 

After adjusting for inflation, this year and last year should be 

two of the highest income years producers have had since 1976. 

These are good times for American agriculture. But while all of agriculture experienced a robust recovery in 2010 and 2011, as forecast, expenses are increasing especially prices of farm inputs like 

livestock and feed, the price of energy, and operating costs. 

7 

The livestock and dairy industries could face some financial pressure in 2011 and bear watching. At the same time, many small and 

mid-sized operations have continued to struggle to earn substantial 

on-farm income. We need to be aware of this reality and ensure 

that our work to expand domestic markets in particular helps them 

succeed. 

As we discuss the safety net, we should also make sure that 

maintaining a strong safety net for producers who need it most. On 

the whole, we are optimistic. The balance sheet of U.S. agriculture 

should continue to strengthen again in 2011; and consistent with 

recent trends, increases in debt are forecast to be offset by the larger increases in farm asset values. 

What is astonishing is that in two years the farm economy has 

rebuilt the equity lost in 2009, and in 2011 the farm sector’s debt 

to asset ratio should drop even further below last year’s 11.3 percent. 

Our Nation’s farmers and ranchers should be celebrated for this 

achievement. Their careful management of debt has played an important role in helping make them a key component of a strong and 

quick rebound from financial crisis. 

Commercial banks across the country say loans are available although standards are tight, and farmers are increasingly paying 

them back on time. Exceptions include regions dominated by livestock, milk, and poultry production. 

Last year, despite low interest rates, there was lower demand for 

farm loans than in previous years. At the same time, capital spending was up, probably financed with cash or non-bank credit. We 

hope to see this trend continue especially as result of the bipartisan tax deal reached in December which provides for 100 percent 

expensing of business investments like tractors and combines. 

Farm real estate value rose by an estimated 3 percent in 2010 to a record $1.8 trillion. We expect this trend to continue. While 

this benefits existing land owners, high farm real estate values 

make it difficult for individuals who may wish to enter farming and 

increases operating expenses for individuals who rent farmland. 

I hope that moving forward we can work to confront this issue 

and others as we look to grow the next generations of farmers, 

ranchers, and producers. This may mean a solution based on sweat 

equity or another way to provide credit to those who wish to farm 

in this country. 

But for the good of our environment, the quality of life we all 

enjoy, the relatively low cost of food and for the American economy 

as a whole, we must keep farmland as farmland and farmers on 

the farms. 

To conclude, as we enter 2011, the U.S. farm economy is coming 

off unprecedented increases in U.S. ag exports, farm cash receipts, 

farm income, and asset values the past few years. 

We are helping to lead the recovery from the worst economic collapse since the Great Depression. Prospects for the coming year 

generally look bright. More normal weather and production increases worldwide should lead to improved supply demand balance 

in key markets such as wheat, corn, and soybean. 

With biofuel demand expected to continue growing, although at 

a slower pace in the future, a big challenge will be responding to 

8 

that demand by developing new feed stocks, producing on more 

acres, and producing more per acre while protecting the environment. 

I have the utmost confidence, as I know this Committee does as 

well, that our farmers and ranchers along with the assistance of 

USDA will be able to meet those challenges. 

With that, I will be happy to answer questions. 

[The prepared statement of Secretary Vilsack can be found on 

page 79 in the appendix.] 

Chairwoman STABENOW. Well, thank you very much, Mr. Secretary. I know we all have questions. I mentioned in my opening 

statement that one out of four people in Michigan are working because of agriculture, and I am sure everybody on the Committee 

has a similar story. Even though the number of farmers are in decline, agriculture has had a tremendous impact on the overall economy. As we look down the road, can you tell the Committee where 

you expect to see continued growth? 

Secretary VILSACK. I would expect to continue to see growth, as 

I indicated, in exports. There is a strong demand. The world economy is improving. Expanding middle classes in China and India 

and other developing countries, I think suggest a good opportunity 

for us. 

I think we are also focusing on increasing our commitment to 

trade missions, to displays, to exhibits of our products, and also to 

reducing barriers. A major emphasis has got to be on reducing the 

barriers that exist to many of our products, specifically beef in 

China, Japan, Taiwan. 

One of the problems and one of the challenges will be to make 

sure that we understand and appreciate the differences between 

small, medium-size, and large-scale farming operations. 

While there was a decline in the medium- and large commercialsized operations over the last five years, there was a significant increase in the small-sized operations. 

And in order to repopulate rural America and create economic 

opportunity, it is my judgment that our Department needs to be focused on all aspects of agriculture and as diverse an agriculture as 

we possibly can have to provide as many options and opportunities 

as we can if we are to stabilize the rural economy generally. 

Chairwoman STABENOW. We have a lot of good news to talk 

about in agriculture but I do not want to just look through rosecolored glasses when we look at the future for agriculture. 

And I know that, I hear a lot from my growers about input costs, 

largely feed, fuel, fertilizer. When we are looking at their future, 

do you expect trends to continue when we are looking at potential 

implications of rising input costs for our growers and what does 

that mean in your judgment in the near-term as well as the longterm? 

Secretary VILSACK. Well, obviously there are concerns on the energy side. When oil prices go up, there is obviously an impact in 

farm country. So it is something we are concerned about, and we 

are concerned about it in terms of sector specific. 

Obviously it impacts and affects livestock operations. It can also 

impact and affect dairy. We are concerned about the strength of 

our industry. It has rebounded from a very difficult 2009, and we 

9 

are cautiously optimistic for 2011. But we know that the next 

downturn is right around the corner. 

That is one of the reasons why we are focused on addressing perhaps a more comprehensive approach to the dairy industry. They 

discussed this at length in the House hearing. We have a report 

due from our Dairy Council in the first part of March. Our hope 

is that there is a consensus being developed within the dairy industry that we can address this very quickly because otherwise I think 

we are going to be confronted with the circumstances we saw in 

2009 with peaks and valleys that occur far too often. 

Chairwoman STABENOW. If you could speak a little bit more in 

terms of the peaks and valleys or the boom and bust. I mean, some 

would argue that the current success in the farm economy is due 

slowly to strong markets and favorable exchange rates which certainly have played a role. But we do have a boom and bust. And 

do you not think we need to invest in emerging technologies and 

markets like bioenergy and bioproducts in order to make the farm 

economy more resilient? 

Could you speak about that? 

Secretary VILSACK. There is no question in my view that you 

need to diversify options and you need to maximize opportunities 

on the farm. To the extent that you can convert waste product to 

fuel and energy, that is something we should encourage. 

We have roughly 50 anaerobic digester projects ongoing with the 

Dairy Council and dairymen across the country in an effort to convert manure into power, into energy. 

We just recently announced 68 feasibility studies through the 

REAP program to take a look at alternative ways in which we 

could use new feed stocks to produce renewable energy and 

biofuels. All of that adds value, creates new economic opportunity, 

and also will help to create jobs. 

If we could reach the 36 billion gallon threshold that Congress 

has set for us in terms of renewable fuel, it would mean up to a 

million jobs in rural America and $100 billion of capital investment. 

You know, that is the type of opportunity that we need to look 

at. We need to expand broadband. We need to look at regional local 

food systems. We need to do a better job of linking economic opportunity from conservation in terms of outdoor recreation as the 

President announced yesterday. All of that has to be part of an 

overall strategy to try to rebuild the rural economy and to try to 

provide opportunities for farmers and ranchers. 

Chairwoman STABENOW. Thank you very much. 

Senator ROBERTS. 

Senator ROBERTS. Mr. Secretary, thank you again for coming and 

I am going to go where wise men never go. 

As I have said before, over the next several decades the world 

population is going to go somewhere between 9 to 9.3 billion people. 

Estimates are that we are going to need about twice as much food 

as we are currently producing. All of us have been concerned on 

this Committee regarding our ability to produce a stable feed and 

fiber supply. 

Now, here comes a curve ball. As you know, about 10 percent of the farms with revenues above $250,000 a year are responsible for 

10 

about 80 percent of the agriculture output. So as we reach the limits in terms of planted acres, it seems certain to me we are going 

to need these folks more than ever. 

The relatively small number of farmers who produce the vast 

majority of our crops, they are either going to have to grow more 

with what they have or even less. Consequently, I have always 

thought our farm policy should be agnostic in terms of size. 

I can remember the great Tim Penny/Pat Roberts debates, and 

I think you were present on the Committee at that time, Tom. Tim 

always was the champion of the small family farmer. 

I indicated one time that a small family farmer was somebody 

five foot two in Minnesota, as opposed to the large family farmer 

which I thought was somebody six foot two who played linebacker 

previously for the University of Nebraska on the western plains. 

An acre of wheat, soybeans, or corn does not produce more or less 

depending on the size of the farm, and lots of folks today like to 

pick on or at least think that would be a good target for budget 

savings. It is a paradox of enormous irony it seems to me. 

So when a natural disaster hits and impacts production either 

through low prices or yields, my question is what should our approach be farm policy-wise to these 10 percent of producers who 

are deemed too large for one reason or another? What kind of economic conditions do we need to ensure for them to be successful in 

meeting the future demand? 

Secretary VILSACK. I think we have several responsibilities to the 

large scale commercial operations, Senator. I think, first and foremost, we need to figure out ways in which we can help them be 

as productive as possible. 

That is one of reasons why our research component focuses on 

livestock production as well as protection and why we are also engaged in crop production and protection. I am not convinced that 

we have maximized the capacity of our land to produce. 

I think we need to take a look at whether or not there are places 

in the United States that could potentially be more productive than 

they have been. I do not know that necessarily there are many 

places but there are some that can double-crop effectively. That 

may not be. That is something we should look at. So research and 

development is one aspect. 

Secondly, I think we have got to be very aggressive in our efforts 

to export our supply. That is one of the reasons why our commercial operations are doing well financially. We need to continue to 

do that, and there needs to be a concerted effort to reduce barriers, 

to have free trade agreements approved, to look at multi-lateral 

trade arrangements, and I think we are focused on that. 

I think we do need a safety net. I think the question which was 

posed to me or was posed by Bob Stallman to the Farm Bureau 

convention in Atlanta was well put when he asked, do we need a 

safety net system that provides a small amount of money every 

year regardless of the quality of the year or do we need a safety 

net that provides the assistance and help when it is needed the 

most in an amount that actually will make a difference. 

I think that is a really good question, and I think it is one that 

we should be asking. I do not know that I have the answer today, 

but I think it is an appropriate question, and I think our capacity 

11 

to expand risk management options which we are doing I think is 

one way of addressing that issue. 

So I think there are a multitude of things that we have to do and 

I think we have to recognize that science is going to play a significant role in all of this, and we have to facilitate that science. 

And that gets us into when you say where no wise man wants 

to go, from a person who has tried to make the right set of decisions, and I think former Secretary Johanns knows about this as 

well. It is interesting that when you make one decision on one crop 

you get sued by one group and you make a similar set of decisions 

on another crop and you get sued by the other group. 

So we must be doing something right if we are getting sued by 

everybody. But this is a conversation I think we have to have as 

well. 

Senator ROBERTS. We have about 30 seconds left in my time. I 

know you mentioned several challenges that we face. What keeps 

you up at night? What is the biggest thing that you worry about? 

You know, we talk about the safety net. We talk about exports. We 

talk about trade agreements. We talk about price volatility, et 

cetera, et cetera. 

In your current role as Secretary of Agriculture, what keeps you 

up at night? 

Secretary VILSACK. Two things that concern me most are access 

to credit and capital in rural America and whether or not we are 

actually going to have a generation of farmers to replace those who 

are now averaging 57 years of age. Thirty percent of our farmers 

are over 65. The fastest growing segment of our farmers over 75. 

That is a problem we also need to address. 

Hopefully, the 2012 Farm Bill will build on the steps that you 

have taken before. 

Senator ROBERTS. Mr. Secretary, that is a very good answer. 

Chairwoman STABENOW. Thank you. 

Senator Nelson and then Senator Johanns. 

Senator NELSON. Thank you, Madam Chairwoman. 

Secretary Vilsack, it is good to see you again. We appreciate your 

being here. 

In both your written testimony and the economic research services recent series of reports provide a very in-depth look at the current state of U.S. and global agriculture along with what is obviously an interesting overview of the future potential and challenges 

that farmers and ranchers will face in the coming years, and you 

have been very forthright with us in your expectations. 

As we are looking at agriculture today and looking at the world, 

we are beginning to see some of the challenges as global food prices 

continue to rise. 

We have both spoken at length on the importance of research in 

meeting these challenges to agriculture. The need to feed this 

growing world population that my colleague from Kansas has so 

eloquently pointed out with more limited inputs, the health aspects 

of food production, environmental considerations, and the need to 

produce biofuels. 

Now, it seems unfortunate that the ARS and the NIFA budgets 

are basically flat, if not decreasing slightly, while we are increasing 

12 

research budgets in other agencies by as much as 16 percent for 

NSF and 18 percent for DOE. 

In view of these challenges and the steps that you have pointed 

out, what can the Department do to ensure that we continue to get 

the level of research necessary to answer the questions that are 

there as well as the questions that will continue to develop along 

the way. 

Secretary VILSACK. Senator, I think we are challenged to make 

sure that our research is focused on issues that matters. We have 

identified, I think, four or five key areas where there needs to be 

additional research. I mentioned two of them earlier. 

You have mentioned the issue of energy. That is certainly one of 

them. The issue of global food security is also another area that we 

are focusing on. 

So, number one, focusing the research dollars that we have, and 

then secondly, doing a better job of leveraging those resources. Our 

view is that if we are engaged in a competitive grant process which 

we are under the National Institute of Food and Agriculture that 

we can leverage our resources more effectively and get more bang 

for the limited dollars. 

We recognize, and I think you all do as well, we have got to get 

our fiscal house in order and you have got to make tough choices. 

While it may seem that we have made a choice that you may not 

necessarily totally agree with, the fact that we are flatlined in this 

environment does reflect, I think, to a certain extent that it is a 

priority and we will continue to search for ways to stretch those 

dollars. 

Senator NELSON. What about water resources in particular? A 

State like Nebraska is constantly challenged on having enough 

water resources spread across the State. 

Is there anything being done to try to figure out the most effective way of dealing with our limited water resources? And it is not 

limited to Nebraska. This could be true of the southeast when they 

encounter drought as well. 

Secretary VILSACK. I would say there are a couple of things. I 

mean, first of all, we are working on improved irrigation systems 

and processes by which we use scarce water resources more effectively. 

That has implications not only domestically but also internationally. We are actually doing some interesting work in Afghanistan 

in that area as well. 

Secondly, we continue to focus on how we can better manage our 

forests in both private, state, and national forests because they act 

as a natural reservoir. If we do a better job of maintaining our forests, then we may have a better opportunity to use that natural 

reservoir more effectively to control water flow. 

Then obviously we are working with farmers to develop the 

science that will actually result in us being able to grow crops in 

more adverse weather conditions and circumstances. In other 

words, using less water, less pesticides and chemicals. That is part 

of the scientific opportunities that we are engaged in terms of crop 

production and productivity. 

13 

Senator NELSON. Do you think that the research dollars that are 

in the budget are sufficient for that kind of research to continue 

aggressively? 

Secretary VILSACK. Senator, that is a difficult question to answer 

because every person’s definition of reasonable and necessary is different. I would say that we have done a good job of trying to balance all of these important competing interests. 

Senator NELSON. Finally, my time is about to run out. I want to 

commend you and your staff for the hard work of dealing with the 

Roundup ready sugar beets which you responded to that challenge. 

It would certainly embrace western Nebraska as well as eastern 

Wyoming and Colorado, and I believe North Dakota as well, and 

the Minnesota as long as I am naming a few states. 

So thank you very much for that work and please pass the message along to your staff. 

Secretary VILSACK. Thank you, sir. 

Chairwoman STABENOW. Thank you. 

Senator JOHANNS. Senator JOHANNS. Mr. Secretary, good to see you again. One observation and then a couple of questions. 

One of the frustrations for me, and I know for you and I think 

for every person who has served as ag secretary in recent years has 

been market conditions relative to U.S. beef. I just wanted to put 

on the record again today that the situation specifically with Japan 

is not yet solved. 

These folks are impossible from my vantage point. This has been 

going on now for years and years. We are still dealing with the 

standard of 20 months, and I am not blaming you because I worked 

on this too. We just do not seem to be making progress with them. 

I hope you can convince me otherwise but it just seems like we are 

just not getting anywhere. 

Offer your thoughts on that. 

Secretary VILSACK. Senator, I would certainly agree with you 

that it is a very frustrating process. When you are dealing with 

issues involving BSE and the host country Japan has a greater 

number of BSE from their own domestic livestock than we have 

ever had, it is an interesting conversation. 

Having said that, part of the challenge for us recently has been 

about the lack of consistency in people we are dealing with in 

Japan. We have had three ag administers since I have been the 

Secretary of Agriculture which has made it a little bit difficult. 

But we have been engaged in serious conversations. Jim Miller 

is here and I think he can attest to, when he was working at 

USDA, he spent a good deal of time just recently in Japan. 

You know, we are moving towards a place where I think we can 

get to yes. It is slow. It is difficult. It is somewhat complicated by 

the relationship that Japan and Korea and China and that area of 

the world have relative to beef. 

No one wants to create a situation where someone who has treated us well believe that they are getting worse of a deal or less of 

a deal that we are giving someone else. 

So it is a matter of trying to balance all of this, but I am confident that we can get there. You know, I think it is important for 

us to get the free trade agreement in Korea, get that through the 

14 

process, put that behind us, if you will. And then I think perhaps 

that offers a new momentum for beef. 

But I share with you your frustration. 

Senator JOHANNS. I mentioned it as much today to send a message to the Japanese yet again that we have not forgotten, that it 

really, really is time to step up to the plate and solve this problem. 

I would have said exactly what you said six years ago and I am 

guessing Ann Venneman would have said the same thing before 

me. It just goes on and on, I mean it is just year after year after 

year. But I appreciate your efforts, whatever we can do to support 

that, and we will keep pressing. 

Let me, if I might, focus now on another issue. I look at the 

USDA numbers and one thing, of course, that has caught 

everybody’s attention is the carryover numbers for corn which are 

historically low, virtually no carryover, barely enough, probably not 

even enough to keep the pipeline going. 

I look at drought in China and that creates a further upward 

pressure and I guess if you are on the selling end of this, this is 

a remarkable time. 

At the elevator, you are seeing corn prices around $7. But on the 

other hand, as you know, there are people on the buying end of 

that, whether it is the ethanol industry, whether it is the meat industry or whatever. 

Then the other piece that is going on this time of year, actually 

a little before this, is the competition between corn and soybeans. 

I would like to hear your thoughts about this. Where do you 

think we are headed here and, you know, what would happen if we 

have a tough weather cycle here as we go into this crop season? 

Secretary VILSACK. Well, that obviously would put, just to answer the last question first, it would obviously put more stress on 

a situation that we are keeping an eye on. 

We are projecting increased plantings of 3 to 5 percent in corn 

which may alleviate some of the concerns you have on the supply 

side. 

In the longer term, in talking with officials with seed companies, 

they are convinced, and I believe that they are accurate about this, 

that we have not yet maxed out in terms of the capacity to use 

science to increase productivity. 

I think in our lifetime, you know, a hundred bushels to the acre, 

200 bushels to the acre, we are sort of at the goal posts and now 

it is 300 bushels to the acre that is happening more routinely. 

They honestly believe that they can get to 400 bushels an acre 

in the not-too-distant future. So that is one issue. 

On the international issue, I think what we in the United States 

need to do is to continue to work with other countries to get them 

to have a greater willingness to accept the science, to understand 

there are advanced ways of producing agricultural products so that 

we take some of the pressure off globally. 

I mean, you and I together, when we were governors started the 

biotech coalition, I think we recognized that there was not the acceptance of that overseas, and we are still faced with that today. 

We need to continue to work in that area. 

Senator JOHANNS. I will just wrap up by comments, Madam 

Chair, by saying I agree with your thoughts about technology; but 

15 

one of the points that needs to be recognized is it used to take 

about 140 days, 120 days to get through the process. Now it is taking upwards of 1200 days to get through the process. So it is a solution but. 

Secretary VILSACK. If I might, Madam Chair. 

Chairwoman STABENOW. Yes, you may take a moment. 

Secretary VILSACK. A very good point, and I would say two 

things. One, we have instructed APHIS to go through a process improvement program to try to see if there is a way in which we 

could reduce the amount of time. 

Two, there are greater numbers and greater complexity of applications and petitions that are being submitted so that makes it a 

little bit more difficult. 

Three, oftentimes there are lawsuits in-between, as you well 

know, that slow the process down which is why I think it is important for us to at least engage folks in a conversation in this country 

about science to see if we can energize the middle, the rational 

middle on these issues in the way of perhaps limiting or at least 

giving courts multiple options so that they do not basically enjoin 

activity for an extended periods of time. 

Chairwoman STABENOW. Certainly, that is something that is a 

challenge for us in the Committee, and we want to work with you 

on as well as look at bringing people together. 

Senator Klobuchar and then Senator Hoeven. 

Senator KLOBUCHAR. Thank you very much, Madam Chair. Congratulations on your chairmanship as well as Senator Roberts, and 

welcome, Secretary Vilsack. 

I was teasing my friend, Senator Nelson over here, that, in fact, 

Minnesota is first in sugar beats as well as turkey production. And 

as you know, being from Iowa, we are also in the top five for corn, 

canola, soybeans, and in my personal favorite, honey. 

Secretary VILSACK. You say corn? 

Senator KLOBUCHAR. Yes, in the top five. 

Secretary VILSACK. Top five, okay. 

Senator KLOBUCHAR. I was not going to get into a fight with 

Iowa over corn. 

Secretary VILSACK. You are not going to win that one. 

Senator KLOBUCHAR. No. I know. 

So anyway, we care a lot about all the issues you have raised 

and I would say that you have identified the challenges that I 

heard around our State with the input cost, with what call the red 

tape issues, and I want to thank you. 

Senator Johanns and I co-chair by the Biotech Caucus in the 

Senate, and thank you for the work you did, not just with what 

Senator Nelson mentioned but also with the Roundup ready alfalfa 

issue, and some of the other things in moving some of these things 

along. 

But we continue to hear concerns about the EPA treating it as 

if it were considered an oil product or the discussions about regulating dust from farm driveways, and I think that we need a little 

common sense not only with the court process but with the EPA 

rules. 

16 

The third thing which you mentioned which I think is really important not just in the ag world but to our country is the export 

issue, and two things. 

One, could you talk a little bit about Cuba? I have worked with 

Colin Peterson in trying to open up some of those pockets, and secondly, of the funding for the market access program at USDA and 

why you think that is so important. 

Secretary VILSACK. First of all, on the EPA, if I might, we are 

working very hard with Administrator Jackson to develop an ongoing conversation relationship so that we have a good idea of what 

is being discussed and thought about and allow us to weigh in on 

the impact it may have on agriculture. 

Senator KLOBUCHAR. I think that would be helpful. Senator 

Lugar and I have a bill trying to get people that look at those rules 

to have an ag background. But that would be very helpful. 

Secretary VILSACK. We have ongoing conversations with her ag 

liaison, Larry Elsworth. So that is number one. 

Number two, on Cuba, interestingly, we are seeing actually a 

slight decline in ag trade with Cuba. Having said that, this obviously is an opportunity for us if we can do it consistently. With the 

value system that is important in this country and given the complexity of our relationship with Cuba, we look forward to that activity. 

On MAP, every dollar that we invest in export assistance has generated about $35 in export activity. You know, I suspected that 

if we got a 35 to 1 ratio return on investment for every dollar we 

invested in this place, it would be much easier to do your jobs than 

it is today. 

MAP is an important component. It by no means is the only component. The relationship we have with our cooperators is important. The work of the foreign ag service in terms of their relationships, all of this is important, and we have to focus on continually 

reducing barriers. 

Senator Johanns’ question is a prime example of the ongoing 

challenges we have as countries create barriers and make it very 

difficult to remove them. 

Senator KLOBUCHAR. Two questions with regard to ethanol. I was 

pleased with the EPA decision on E–15 but I wondering if there is 

anything USDA can do to help encourage state governments to ensure that gets through the regulatory process. 

Then, secondly, Senator Johnson and I are working on a bill that 

would include a new more cost-effective producer credit for biodiesel and ethanol to replace existing tax credits and I do not know 

if you are familiar with that. But I wondered if you thought that 

would be more helpful to look at it as more cost-effective than have 

the tax credits go more to the producers than just the blenders. 

Secretary VILSACK. I think it is a good discussion to have about 

how best to incent a maturing industry. We saw what happened 

when the biodiesel credit was prematurely ended and allowed to 

lapse. We lost 50 percent of our production capacity and 12,000 

jobs. 

I think that there needs to be some attention to the infrastructure on the supply side, making it easier and more convenient for 

consumers to get ethanol, and I think we need to look at ways in 

17 

which we might be able to incent our auto manufacturing companies to spend under 150 bucks to make every car a flexible fuel vehicle or to work with them to figure out what we could help them 

make that happen. 

I understand they are under a lot of challenges but that is a discussion we ought to have. If we can produce greater demand and 

we produce more convenient supply, then I think this industry will 

take off. 

At the same time, we also have to identify additional feed stocks, 

and we need to do what we are doing at USDA to accelerate research to try to figure out what works besides corn so that this is 

an industry that has its presence in all parts of the country, because if we get to 36 billion gallons it is a million jobs in rural 

America. It is a hundred billion dollars of capital investment and 

both of those are sorely needed in rural areas. 

Senator KLOBUCHAR. Thank you. I can ask a question in writing 

about the milk program. I have appreciated your help with a really 

difficult subject there. That is probably the number one concern 

that we have heard in our State, and we look forward to working 

with you on the next Farm Bill about what changes we can make 

to make that a better program. 

Secretary VILSACK. May I? 

Chairwoman STABENOW. Yes. 

Secretary VILSACK. You are talking milk? 

Senator KLOBUCHAR. Yes. 

Secretary VILSACK. We are actually going to suggest, the Daily 

Council is going to come out with its report next month, and we 

honestly think that is something you might want to consider taking 

up even before you get into the 2012 Farm Bill because there is energy and passion and somewhat of a consensus being developed 

around the entire dairy industry to sort of see if we can get better 

price stability and less volatility. 

Senator KLOBUCHAR. Thank you. 

Chairwoman STABENOW. Thank you very much. 

Senator Hoeven, before your questioning, let me just welcome 

you again to the Committee along with Senator Boozman. 

As you may have just heard with the exchange between Senator 

Klobuchar and the Secretary our competition here is not between 

Democrats and Republicans. It is what crops you produce. This is 

a significant competition on the Committee. So we are very pleased 

to have you and welcome. 

Senator HOEVEN. Thank you, Madam Chairman. I look forward 

to working with you, also to our ranking member, Senator Roberts. 

It is good to be part of this Committee and, of course, have people I have worked with for many years as a governor on two previous ag bills and certainly looked forward now to working on all 

the things that come before the Agricultural Committee and certainly the next Farm Bill. 

And you are right. It does come down to who produces what and 

how much. Along those lines, I do need to mention that North Dakota is the number one producer of 14 different major commodities 

among all 50 states, things like oats. I just jotted down a few. Oats, 

barley, spring wheat, durum, sunflowers, pulse crops which is peas, 

18 

beans, and lentils. You mentioned honey. So I will mention we are 

number one in honey. 

Senator KLOBUCHAR. But not turkey. 

Senator HOEVEN. Not turkey. 

[Laughter.] 

Senator HOEVEN. And we share a wonderful border with Minnesota where we grow many sugar beets and share many common 

interests, not to mention corn, soybeans, and many other crops. 

It is good to see you, Mr. Secretary. Thank you for your many 

visits to our State. We appreciate it. I also want to mention the last 

time you were there I think it was either that day or the next day 

that we loaded Angus and Hereford cattle on a 747 and exported 

them to Kazakhstan which just goes to some of the exciting things 

that happen in agriculture that people do not think about food, 

fuel, and fiber technologies playing a tremendous role. Our producers are obviously the best in the world. 

And, you know, good farm policy is important for rural America. 

It is important for farmers and ranchers but it benefits every single 

American and people throughout the world because we have the 

lowest cost, highest quality food supply in the history of the world 

thanks to our producers. 

So when we talk about good ag policy, it affects everyone, and 

I just want to start by getting some of your thoughts on, you know, 

as we enter writing a new Farm Bill your priority, and specifically 

if you would talk a little bit about the safety net. 

We have a counter cyclical safety net composed of three parts, 

the counter cyclical payment, direct payment, and crop insurance. 

I think it is very important for our producers. And if you would just 

touch on that little bit and your priorities as you go forward. 

Secretary VILSACK. Well, the Farm Bill is an extraordinarily 

complex document that involves really all of rural America and, 

you know, at the end of the day my goal is to try to revitalize the 

rural economy, and obviously you start with a strong agricultural 

economy, and that means continued investment in research as we 

talked about before. 

It involves the continued export assistance. It involves ways in 

which we can promote American products. You point out that we 

are blessed. A recent study shows that roughly 6 to 7 percent of 

our paycheck goes for food. That is substantially less than it is in 

other parts of the world which means that Americans have greater 

flexibility with their paycheck than the rest of the world, and they 

should thank a farmer and a rancher for the privilege. 

As far as the safety net is concerned, there is no disagreement 

that we need a safety net. I think what we have to understand is 

how different farming is and different groups of farmers. We described it in a recent ERS study of basically three groups. 

We have got residential farming which are really small operations that frankly these folks are not really farmers, you know, in 

the traditional sense. They are people who work off the farm and 

live in rural areas that have a small acreage and sell a very small 

amount, maybe less than $10,000. There are 1.3 million people in 

that category. They are important to encourage because they help 

populate rural communities. They help support rural communities. 

19 

Then there are roughly 5- to 600,000 that are in what is referred to as intermediate-sized operations, less than $250,000 in sales. 

These folks make up a good hardy group of folks, hard working 

folks. They do not make much, if anything, from their farming operation. 

In a state and in a time when we saw farm income go up 34 per- cent last year, these folks will be lucky if they average $10,000. 

So when we talk about safety nets and we talk about direct payments and we talk about programs like that, that group really 

does, in fact, seriously need assistance and help, and they need offfarm income. 

So rural development becomes extremely important for them to 

be able to keep the farm. That is really part of the safety net, an 

off-farm job for them. 

Then you have got commercial-sized operations, more than $250,000 in sales. They are doing pretty well in this better economy. They are the ones that export. They are the ones who generate most of the food and they obviously are important. 

I think the question is at what level do we, in fiscally constrained 

times, at what level do we provide assistance and when do we provided it. Do we provide small amounts over a period of each and 

every year regardless of how well the year is or do we help those 

folks out at a time when they are desperately in need. 

There is a fourth component to the safety net that we have put 

in place in the 2008 Farm Bill that needs to be worked on, and 

that is the disaster assistance. 

You have got crop insurance. You have got the payments. You 

know, you have got the counter cyclical stuff but you also have a 

disaster assistance. 

And in the past it has been ad hoc. We made an effort to try to 

systematize it with the SURE program and some of the livestock 

programs. They work well for some crops but they do not work so 

well for other crops. 

And I think one of the challenges is can we figure out how to do 

those systematic disaster programs in a way that is beneficial to 

all the crops otherwise you are going to continue to have ad hoc 

disaster which I think we are trying to move away from. 

The last thing I would say is I think that there really needs to 

be a conversation about risk management. You know, as you know, 

we have made a suggestion which is not necessarily agreed upon 

by everybody on this Committee to take a look at those direct payments and figure out if there is a way in which someone who is 

making a half a million dollars in farm income or $250,000 in nonfarm income, do they really need a payment. If so, what should 

that payment be, and is there a way in which we can use risk management more effectively and in a more cost-efficient way to provide the kind of support folks need when they really need it. 

I think these are all questions that we are going to have to work 

on together. 

Chairwoman STABENOW. Thank you very much. 

Senator BENNET. 

Senator BENNET. Madam Chair, congratulations to you and the 

ranking member. I enjoy serving on this Committee so much because of the bipartisan work that gets done here. Every time I am 

20 

here it feels like a refuge from a lot of the partisan work that goes 

on in the Senate. So I look forward to supporting both you and the 

work in front of us. 

Mr. Secretary, I want to say thank you to you for coming by my 

office earlier this week to meet with me and Senator Udall on the 

continuing problem of the bark beatle in Colorado. I will not take 

time here except to say thank you for your efforts, to remind you 

again of how important it is for us to address this issue for the 

health of our forests, the health of our watershed, not just ours in 

Colorado but in the Rocky Mountain region. 

I wanted to raise one other issue that is important to Colorado 

before I get into some other line of questioning and that is the inability of our potato producers to sell into Mexico. I wonder if you 

might give us an update about where those discussions stand. I 

know you have been trying. 

Secretary VILSACK. I traveled down into Mexico in December of 

last year and met with Secretary Mayorga to talk about a variety 

of issues, and potatoes was one of them. 

What we agreed to do was to have our teams essentially meet 

to see if there was a way in which we could, in a sense, mediate 

this 26 kilometer barrier that were trying to tear down. He expressed a willingness to do this and there have been meetings, two 

meetings have taken place since our meeting, and our hope is that 

this process results in a more favorable treatment of our potato 

growers. 

Senator BENNET. I hope you can keep us posted on that and let 

us know here what we could do to help your efforts there. Sometimes we forget the discussion on Asia of how important Mexico is 

to us. 

Secretary VILSACK. Our number three trading partner. 

Senator BENNET. Right, exactly. 

The second area I wanted to ask you about, in many ways really 

good things are happening. As you were saying, the prices are high, 

the de-levering that is going on among our producers is really substantial and a great, I think, model for the rest of us. 

And to some degree, things are better but the underlying issues 

that our rural economy faces are still what they were when we 

went into this recession in many ways. The agricultural prices do 

not necessary translate into economic growth. 

And I wonder if you could share with the Committee what you 

think the four or five most important things that USDA, the federal government can do generally to support an economy that really will mean that there is a rural economy going forward for the 

sons and daughters of people on eastern plains in Colorado, for example, who wonder very much whether there is going to be the 

same opportunity or a new opportunity for the next generation of 

farmers, the next generation of people that want to live in the 

small towns on the eastern plains. 

Secretary VILSACK. Over the course of my lifetime, populations in 

rural America as a percentage of our overall population have declined. The populations have aged. The poverty rates are higher. 

Unemployment rates historically have been higher now. 

In this most recent recovery, actually rural America is recovering 

a little more quickly than our urban and suburban friends. But 

21 

nevertheless there are still trend lines that we need to try to reverse. 

I would suggest that there are a couple of things. First of all, 

within USDA I think the things that we can do to fundamentally 

change that dynamic are to continue to expand access to broadband 

so that farmers and ranchers have access to real-time information 

and make real-time decisions. 

Small business owners can expand their markets from local and 

regional markets to global markets. Schools can do a better job of 

offering a multitude of course selections that they might not otherwise be able to afford to provide. And health care centers can link 

up with specialist that would be impossible for them to afford on 

a day-to-day basis. 

I think, secondly, we absolutely need to embrace this new energy 

future. Whether it is fuel or renewable energy, there are tremendous opportunities for economic growth in rural communities. 

Most of the renewable energy is going to be produced in rural 

America and we need to figure out how to maximize the economic 

return of that for rural residents. 

Third, I do believe it is important for us to continue to look for 

ways in which we can create domestic markets. Apart from renewable energy and fuel, I think the local regional food systems being 

connected to producers and consumers is important because you 

can develop local supply chains that are job creators. 

Entrepreneurs who can create small warehousing or cold storage 

facilities or mobile slaughter make it a little bit easier for schools, 

universities, whatever that might be located in rural areas to actually create jobs and provide alternative opportunities for producers. 

I think it is very, very important that we do a better job of maximizing outdoor recreation and using our conservation dollars in a 

way that produces more habitat, more opportunities for hunting 

and fishing and hiking. 

It is a multi-hundred billion dollar operation we are talking 

about. Those resources can go into rural America. 

Then, finally, I think we need to look at ways in which we can 

create verifiable and credible ecosystem markets in which we are 

basically paying farmers, ranchers, and landowner for certain conservation practices that are of a societal benefit, whether it is 

water issues. Senator Nelson’s comments earlier bring that to 

mind, things of that nature. We are working at USDA to try to develop those kinds of models that might work. 

Then finally, I think you have got to be concerned about credit 

and the ability to attract venture capital into rural communities so 

that you have got a sense of entrepreneurship. That is a real challenge. 

I know as a governor, we have got several former governors here. 

I suspect they dealt with these issues when they were governors. 

I certainly did, and I think we need to be very creative about how 

we get venture capital into those rural areas. 

Senator BENNET. Thank you. Thank you, Madam Chair. 

Chairwoman STABENOW. Thank you very much. 

Senator Boozman, welcome. 

Senator BOOZMAN. Thank you very much, Madam Chair, and it 

really is an honor to be with you. I was just telling my colleague 

22 

that we have an advantage in being junior members. We really get 

to know the witnesses. We can just lean over and shake their 

hands and visit with them. 

It is an honor also to have you here and to listen to your testimony. We appreciate your service. 

As you know, the ag business is tremendously important in Arkansas, and I had the opportunity to visit with many of my producers. You mentioned the different layers of producers and things. 

But I will tell you it seems to me like, regardless of who I am 

visiting with, right at the top of the list is the EPA and the potential for the regulations that are coming down. 

You mentioned the waste products, you know, trying to get rid 

of those, that offers great potential. I think with the initial Boiler 

MACT rules and things like that, much of that could not be done. 

So I guess my question, as you mentioned, I am so pleased to 

hear that you are working, you know, with your counterpart on the 

EPA to try and figure out, you know, these things as they go forward. 

But I would really like, you know, besides that what we are 

doing specifically. Are we outlining things like the farm dust rule, 

the MPDS permitting, expanding the Clean Water Act, and then 

again regulation of greenhouse gases through our boiler regulations? I guess what I would like to know is what would be the economic impact to our farmers and our producers if that kind of stuff 

was to go forward. 

I really do think that is the question of the day right now. 

Secretary VILSACK. Well, Senator, that is one of the reasons why, 

I think one of the reasons why the boiler rule was changed was because of the relationship and the input that USDA provided as that 

rule was being put together. I think there was a recognition of the 

impact. 

We are doing several things. First of all, we are absolutely encouraging the EPA administrator to spend sometime in rural 

America and she has actually gone on farms and actually seen 

what is taking place on the farm so that she has a clear understanding and a clear picture of precisely what rules or regulations 

might, in fact, how that might, in fact, involve an operation or why 

it may not be necessary given what farmers and ranchers are 

doing. 

Secondly, we are beginning to quantify in very real terms the 

conservation benefits and the environmental benefits of stewardship practices on ag land. 

We did this in the upper Mississippi River recently. We just recently completed a study in the Chesapeake Bay area in an effort 

to try to re-assure people that farmers are, in fact, adopting conservation practices and, in fact, are going to do so. 

We are also engaged in negotiations and discussions with the 

EPA about how we might create regulatory certainty. We did this 

with the sage grouse in the western part of the United States with 

the Department of the Interior and the Endangered Species Act. 

If producers are willing to do ‘‘A’’ ‘‘B’’ and ‘‘C’’ then in exchange 

for that there would be some regulatory certainty that the rules of 

the game would not be changed on them which would make their 

investments inappropriate. 

23 

There is a liaison between the Ag Department and EPA. So we 

are constantly providing input, analysis, information on what is 

being proposed or suggested in an effort to try to make sure that 

there is a clear understanding on the part of the EPA in terms of 

how this might impact farms, ranches and producers. 

So, you know, and I think the last thing I would say is that we 

have facilitated conversations between commodity groups and livestock groups and the EPA Administrator so that there is a clear 

understanding of precisely what is being proposed. 

A lot of times things kind of circulate through the process and 

they get bigger and bigger and bigger as they circulate and they 

get scarier and scarier as they circulate. 

That kind of conversation, I think, can at least make people understand what the facts are. And, you know, I think EPA is listening at least from the vantage point of the things we have been focusing on. I get the impression that they are at least open to a dialogue and conversation with us which is important. 

Senator BOOZMAN. I appreciate that and appreciate those efforts. 

Again I think some really number values as far as economic impact 

are helpful. Your opinions as being Secretary, your Department’s 

opinion as to the cost benefit, what you are actually doing, and 

then again I was the ranking member on water resources so I understand that there is a lot of stuff that is blown out of proportion 

but there is a lot of stuff that is not and so that is really—and as 

you mentioned also, the idea that you do the best management 

practices, five years later somebody comes by and says, no, you are 

doing it all wrong. Those things are not a good situation. 

Thank you, Madam Chair. 

Chairwoman STABENOW. You are welcome. Thank you very 

much. 

Senator Brown and then senator Thune. 

Senator BROWN. Thank you, Madam Chair. You look good in that 

chair. It is nice to see you. 

Chairwoman STABENOW. Thank you very much. 

Senator BROWN. Congratulations on your first hearing and I appreciate having someone who represents a State that looks a lot 

like mine in the chair, except for the corn and soybeans part but 

thank you for all that. 

Secretary Vilsack, thank you for your visionary leadership. We 

have made such a difference in these two years. 

No questions. I know that many people have asked questions 

pretty wide-ranging. I just wanted to bring to your attention which 

you know about but in a public way what happened in Wooster, 

Ohio at the agricultural research station. 

It is affiliated with Ohio State, involved doing all kinds of innovative research on animals and plants and crops. The tornado that 

hit the Wooster agricultural research and development center last 

year caused a lot of devastation as you know. 

And Deputy Secretary Merrigan was there. I appreciate her coming out and visiting and we will work with you on repairing that 

and getting it up to the standards that it was before. I have been 

there numerous times. I know that Deputy Secretary Merrigan enjoyed her visit there and contributed a lot just by her advice and 

her presence so I thank you for that. 

24 

Thank you, Madam Chairman. 

Chairwoman STABENOW. Thank you very much. 

Senator Grassley came into the room and left. He was technically 

the next person on the list but, Senator Thune, we will turn to you 

in his absence. Welcome. 

Senator THUNE. I better get in here before he walks back in. 

Chairwoman STABENOW. That is right. 

Senator THUNE. Thank you, Madam Chair, and Secretary 

Vilsack, thank you for your service and appreciate you being before 

the Committee today. And there are lots of challenges as we look 

at the next Farm Bill, and all of us are interested as we begin to 

hear testimony and anticipate what that bill might look like. 

I wanted to ask you a question about, you know in the Midwest 

we have been somewhat insulated, not entirely, but somewhat insulated from the housing boom that impacted the country but I am 

a little concerned about the potential for a land boom, a farmland 

boom, or I should say a bust in a place like our State. 

We have a lot of land that is going for prices that we have not 

seen before, probably driven somewhat by higher commodity prices, 

who knows what all else. Agriculture has been pretty profitable of 

late. 

But my question has to do with if you had land values reset either due to a drop in commodity prices or an increase in interest 

rates, how survivable is that going to be this time around? 

We saw that happen many, many years ago. My impression is at 

that time there was a lot more debt on the balance sheets of a lot 

of our producers than there is today. But what is your sense of the 

potential for that kind of a problem, a bubble, so to speak, like 

what we have seen in the housing market around the country? 

Secretary VILSACK. Senator, I appreciate that question. I think it 

is an important question because there is a lot of human toll that 

can take if it does not get handled properly. 

I think the difference between then and the eighties when we 

were in a situation where land prices were inflated and all of a 

sudden the bubble burst is, in fact, the debt load that was being 

and is being carried by producers. 

The one advantage I think we have in the circumstances is the 

debt to asset ratio is very strong right now. I mentioned that it is 

about 11.3 percent. So it is a relatively good strong solid ratio and 

we anticipate that ratio may very well decline again this year. 

So I think we are in a little better shape than we were to weather the storm. You know, the other thing I would say it is that 

USDA, I think, it is probably more engaged in terms of farm credit 

than it has been in a while across the board. 

We have seen rather significant increases in many of our lending 

programs. We are proposing some adjustments to those programs 

but again we are doing a pretty good job in terms of making sure 

our loan decisions are good decisions. 

And so I think we are in a slightly better position than we were; 

but as you well know with agriculture, things can change very, 

very rapidly which is why we have to constantly look at ways to 

improve demand, improve productivity, try to ratchet down as best 

we can about costs. 

25 

Senator THUNE. With regard to improving demand, when do you 

anticipate that the trade agreements with South Korea and Colombia and Panama will be submitted to the Congress? 

Secretary VILSACK. Well, my hope is that the Korean free trade 

agreement is submitted as soon as possible. I would anticipate that 

will be done shortly. You know, there are still a few details that 

have to be worked out, as I understand it, on Colombia and Panama. 

But my view is that once the Korean free trade agreement goes 

through the process, and hopefully it goes through rather quickly, 

that creates real momentum. 

At the same time that is occurring, the focus cannot just be on 

those trade agreements. It has to be on multi- lateral arrangements 

as well which is why the transpacific partnership is important. 

And it has to be, as Senator Johanns and I had a conversation 

earlier, has to be about breaking down barriers that have existed 

far too long in some countries in terms of beef trade and some of 

the other challenges we have. 

So it is a combination of all of those. 

Senator THUNE. From Tunisia to Egypt, a lot of what is impacting global unrest has been food prices. I am a believer that the answer to feeding a growing global population sort of involves expanding biotechnology and modern farming practices beyond our 

borders. 

And I guess my question would be what can the United States 

and our trading partners do to help address that? 

Secretary VILSACK. We have developed a different approach on 

biotechnology from an international perspective. What we have 

done is suggested that there needs to be a much more aggressive 

public diplomacy effort in terms of matching farmer to farmer, scientist to scientist, political leader to political leader, discussing this 

because, as you know, there is a lot of objections and concerns that 

are raised in some areas without a great deal of justification in my 

view. 

So that kind of dialogue has to take place. We also think that 

it is important for United States to partner with countries in regions, Africa and Asia, that have embraced biotechnology so that 

they can act as sort of the spokesperson on that continent or in 

that area, perhaps more effectively and persuasively with their 

friends and neighbors. 

We can provide support and assist, and so we are trying to identify who those might be, whether it is a Kenyan or a Phillippine 

or someone along those lines. 

And then finally we need to do a better job of focusing on the 

benefits of this science, the ability to use less water or less chemicals, less pesticide as well as the extraordinary increases in productivity. 

When you combine that with just basic improvements in agriculture that can be incorporated by many of these developing countries, their productivity can certainly be improved. 

Senator THUNE. A quick question, Madam Chair. 

I am hearing from both sides as I am sure you are on these 

GIPSA’s proposed livestock marketing rules. What is the latest 

with regard to that? Is there going to be a comment period? 

26 

I understand you are doing some additional economic analysis. 

When do you anticipate that we might be looking at that analysis 

and is that going to be forwarded on and available for inspection? 

Secretary VILSACK. Senator, we did not do the analysis prior to 

the comment period because they wanted the benefit of the comments. We wanted the benefit of information from folks. 

We received, I think, somewhere in the neighborhood of 60,000 

comments, about 30,000 of them are unique, not necessarily form 

comments. We are in the process of categorizing each of those comments in areas of the rule. 

That information will then be taken by Joe Glauber and his team 

and put together an economic analysis. I have told Joe I am not 

going to box him into a specific, arbitrary time frame. 

I want him to do the job. I want him to do it right. I want him 

to do it thoroughly, and I have the confidence he will be able to 

do that. We obviously want to get it done but we want to get it 

done without forcing it to be done in a way that is not correct. 

Chairwoman STABENOW. Thank you. I think in the interest of 

time, we will move on. 

Senator Baucus and then Senator Grassley. 

Senator BAUCUS. Thank you, Madam Chairman. Of course, my 

congratulations to you and my congratulations to the good Senator 

from Kansas in your esteemed positions. I look forward to working 

with you. 

And thank you, Mr. Secretary, for taking your time to visit with 

us today. We know how busy you are. We thank you very much. 

I would like to just say in a sidebar here which I personally appreciate working with you in lots of different measures and lots of 

different ways. You are a good public servant, good Iowan, good Ag 

Secretary. You are a good man. 

Secretary VILSACK. Thank you. 

Senator BAUCUS. I deeply appreciate working with you. 

As is the case for all members of this Committee, agriculture is 

really important to my State, as you know. It is our number one 

industry ever since I have been in public service, has been and will 

continue to be for a long time. About 50 percent of the Montana 

economy is tied to agriculture. It is very, very important. 

We have done well in Montana as have other States with our 

products and especially exporting overseas. A point I want to focus 

in on is getting more markets, opening up more markets for U.S. 

products. I am especially thinking of Asia right now. China. I think 

China is our number one export, I think. Is that true just this past 

year? 

Secretary VILSACK. Yes, that is correct, last calendar year. 

Senator BAUCUS. China is growing so quickly which is all the 

more important for us to expand even more in China. I would be 

interested in your thoughts and how we might do that, especially 

with respect to beef. 

I am a bit put out that China does not take American beef. We 

are trying to put together, trying to ratify a Korean trade agreement on autos, and frankly I will not support that agreement unless we get some access on beef. 

I talked to the President about that today. I think he understands. But I just ask that we get something that passes the smell 

27 

test that is credible so that we are also expanding American beef 

access into Korea as well as agreeing to the auto provisions. 

Otherwise, I support the Korean free trade agreement as I do so 

long as we get a meaningful increase in beef exports to Korea as 

well as supporting the Panama and Colombia free trade agreement. 

I think we have to get this done very quickly. 

Next with respect to the FTA, as I know you know, we are losing 

our market share in Colombia because we failed to pass an FTA. 

You know these figures better than we, but between 2008 and 

2010, American market share in Colombia declined from 46 percent 

to 21 percent. 

For wheat in particular, American market share fell in Colombia 

from 73 percent to 43 percent. As you well know, Canada is about 

to enter in force a free-trade agreement with Colombia. We are 

very concerned that Canada is, as a consequence, going to reap a 

terrific advantage over Montana as well as the country in Colombia. 

We have got to get that Colombia free trade agreement to pass 

so we can sell our products into Colombia. 

I understand that USDA has released a report on the benefits a 

Peru FTA has had in agriculture. My understanding is our exports 

to Peru are up 258 percent since fiscal year 2006. Again these 

trade agreements make a big difference. 

I might add in Colombia it is not just the direct commercial 

value but also the geopolitical. It is very important the United 

States is strongly present in South America. If we are not there, 

there will be big vacuums. 

We have all noticed the degree to which China is trying to develop market share and also its position in Colombia. They want 

to build a competing canal, a railroad that competes with the Panama Canal. That is Chinese capital into Colombia. It is real. I have 

talked with the Colombian ambassador about this just a few days 

ago. 

One, what can we do about China, how can we get more ag exports to China, what leverage do we have? Second, with respect to 

the FTAs, I would like to hear from you the degree to which the 

administration is going to push these FTAs and get more beef into 

Korea at the same time. 

Secretary VILSACK. Well, Senator, thank you for those questions 

and obviously thank you for your continued advocacy on behalf of 

beef producers in this country. You have been one of their strongest 

advocates, and I know you will continue to be. 

In terms of China, we are essentially five to ten offals apart from 

being able to reach some kind of agreement that would result in 

a broader access in the Chinese market. 

We had conversations in the JCCT in December in which the 

Chinese indicated a willingness to accept beef under 30 months, 

bone in and bone out. 

We had conversations about offals, that they would be willing to 

agree to. We sent a technical team, Jim Miller, who was then 

Under Secretary, spent two weeks in China with technical teams. 

And essentially what happened was that we wanted 10 to 15 offals included on the list and they were only willing to commit to 

five. The challenge for us is making sure that, as we reach these 

28 

agreements, that we do not jeopardize relationships or arrangements with other countries where the market has, in fact, been 

opened so that they perceive that they have received less of a deal 

or are not as sweet a deal as the Chinese have. 

So we are going to continue to press this, continue to work on 

it, continue to pursue it. My belief is that if the Korean free trade 

agreement, when the Korean free trade agreement gets approved, 

that will create momentum in a variety of areas. 

It will create momentum for us to go back and re-double our efforts in China and Japan in particular as it relates to beef, and it 

will allow us I think then to move to Colombia and Panama get 

those trade agreements finalized and get them to you hopefully for 

quick action. 

So I think the lynchpin of this is the Korean free trade agreement, and I think once that gets through the process, I honestly 

believe that puts us in a much better position. 

Senator BAUCUS. I did not hear much about beef. 

Secretary VILSACK. The Koreans have indicated a willingness to 

go to 30 months. They have indicated a willingness to pursue further discussions about how they might get to OIE compliance based 

on consumer demand and consumer acceptance; and that, at least 

from our perspective, gives us the capacity to make a significant 

step forward in opening the market; and then the process of full 

and complete opening of the market OIE compliant sometime in 

the future. 

Honestly, when we take a restricted position, it is all or nothing, 

it makes it extremely difficult for us to make progress. So our view 

is if we can get to 30 months, bone in/bone out, appropriate offals 

that are significant to their culture and our market and a process 

by which we can have further discussions and negotiations that 

they will result in significant increases in trade. 

Chairwoman STABENOW. Thank you. 

Senator BAUCUS. I am not asking for the question of all or nothing. I have it as open to all of American beef irrespective of age, 

irrespective of cut, bone in or boneless or whatnot. 

It does not have to be all. I am not asking for that, although 

Korea was at that point a few years ago. I am just asking for something more than currently exists, and which is not all, which is 

more than currently exists, and I cannot support the Korean trade 

agreement unless we get some progress. I am not asking for all. I 

am asking just for some progress compared to the status quo. 

Thank you, Madam Chairman. 

Chairwoman STABENOW. You are welcome. 

Senator GRASSLEY. 

Senator GRASSLEY. Welcome, and I also want to echo what Senator Baucus said of the job you are doing. 

Secretary VILSACK. Thank you. Senator, they just told me that 

new members of this Committee get to sit closest to me. You cannot be a new member of this Committee. 

Senator GRASSLEY. You know what the deal is. This is my third 

committee so I get appointed and I fill the last slot, not the first 

one. 

Senator ROBERTS. Would the Senator yield? Your glass of ethanol 

is up here. 

29 

[Laughter.] 

Senator GRASSLEY. Would you start my clock over again please? 

Chairwoman STABENOW. We will give you back 30 seconds, Senator Grassley. 

Senator GRASSLEY. I was going to ask about trade and I think 

that most of the trade issues have been touched on but part of my 

question was the extent to which you may not be the lead on trade 

issues for the Administration but you obviously play a very important role as it relates to agriculture. 

Could you tell me just a little bit about how you see your role 

in trade issues like Korea and Colombia or any trade issue? 

Secretary VILSACK. Sure. Well, first of all, it is to make sure that 

everybody in this town and everybody in the country understands 

how successful agricultural trade is relative to other aspects of the 

economy. When we talk about a $41 billion trade surplus projected for this 

year, to put this in proper perspective, just five years ago that 

trade surplus number in ag was $4 billion. So we have seen an 

eight- to ninefold increase in the surplus. 

And every billion dollars of ag trade, as I said earlier, is 8000 

jobs. So it is extremely important. It represents 10 percent of our 

total export. 

We have a very close relationship with the U.S. Trade Representative’s office. We have people right now discussing over in Geneva 

the Doha round. 

Obviously on Doha, we are anxious to try to consummate a deal 

but we have to have a deal that is fair. And in order for their deal 

to be fair, it is important for the Indias and the Chinas and the 

Brazils of the world to have far better market access to our products if they are expecting us to take a look at our support structures and systems so that we can quantify precisely what we are 

getting. 

So we have an ongoing relationship with the trade representative’s office. We are in all the meetings. We are engaged in all the 

discussions relative to ag trade. 

We have a very significant presence internationally. We have 99 

offices, and most of what is done in those 99 offices is trade related. 

They have developed relationships. We have seen a significant 

increase in the number of foreign visitors to our trade shows here 

in America. We have seen a significant increase in the number of 

exhibits that we now are promoting American branded products. 

We are proposing a continued support for market access programs and all of the other financial programs that provide assistance. So we are very aggressive in this space. We see this is as one 

of our principal responsibilities. 

Senator GRASSLEY. Let me express a frustration I have about Colombia, and you do not even have to respond to this but I would 

at least like to respond. 

And that would be going back to the 2007. Republicans are 

thrown out of the majority. Democrats come into the majority. They 

are not satisfied with the way it was negotiated so they said we 

have to sit down and renegotiate. 

And then on May 10, 2007, there is a bipartisan announcement 

between Bush and the Democrat leaders of the Congress that we 

30 

have got things worked out on Colombia and then things still are 

not done. 

That is a frustration I have. It seems like there is a little bit of 

moving of the goal posts, and I just express my view. I do not ask 

you to respond to it but at least you know how I feel about it. 

If I could go to India and I know that you and Under Secretary 

Miller and your FSA team has been working hard on resolving agricultural issues with India. 

And I know you worked hard and I am as disappointed as you 

probably are that we have not had reciprocity in return from India, 

and it is such a large and expanding economy and they are building up a middle-class very fast. 

Unfortunately, U.S. exports to India are limited both in value 

and in range of products. In 2008, India receive less than one half 

of 1 percent of the total U.S. agricultural exports and ranked 39th 

among overseas markets for us. 

And as you may know, Senator Baucus and I requested that the 

International Trade Commission conduct a 332 investigation on India’s barriers to exports. 

The findings suggest that India’s high tariffs are a significant impediment to U.S. agricultural exports and that certain Indian nontariff measures including sanitary and phytosanitary measures 

substantially limit or effectively prohibit it. 

So my question is even considering everything you have done, 

what is your Department doing in coordinating with other involved 

agencies to bring about resolution of this frustrating challenge? 

Secretary VILSACK. I traveled over there with the President and 

had extensive conversations with the ag minister and frustration, 

I do not know if that is a strong enough word, Senator. I am not 

quite sure in this context I could use the kind of language I would 

like to use about it. It is very frustrating. 

And, you know, it is complicated by the fact that there are a multitude of other areas and issues in which we are dealing with India 

that are very, very important and significant. 

I have sent a strongly worded letter to the ag minister in India 

about dairy and access to the dairy market. Obviously, they have 

certain religious concerns which we tried to address. 

We are going to continue to focus on trying to open up those markets. Doha maybe creates an opportunity for us to do that. We are 

trying to get our international partners and international friends 

who want a Doha round to be concluded to press India with the 

fact that they have got to open up their markets. 

And the reality is if they open up their markets, their consumers 

will have more choice, their consumers will have better price, their 

producers will be encouraged to be more productive and to focus on 

what they do best, and they will also will benefit. 

But it is a hard sell right now. It is a very hard sell. 

Senator GRASSLEY. The last thing I would say is kind of a, I hope 

you get plenty of opportunity to present to the EPA a lot of things 

that they are doing that is detrimental to agriculture, harmful to 

agriculture. 

And there are a lot of them I could bring up but there is enough 

of them that you can almost come to the conclusion that EPA 

stands for end of production agriculture. 

31 

Anyway, one of them is fugitive dust. I am sure you know what 

fugitive dust is, being from Mount Pleasant, Iowa, or anyplace in 

the Midwest, and they have got this rule coming up that somehow 

the farmer is supposed to keep dust within his property lines. 

And I tried to tell them only God determines when the wind 

blows and only God determines when soybeans are 13 percent 

moist and you have to combine them; and when you combine, dust 

happens. 

We just got to get through to them the common sense that you 

cannot combine beans just when the wind is not blowing, and it is 

just frustrating to me. So you do not have to comment. I just hope 

you can make it clear to them because you are from the same part 

of the country I am, and they just do not seem to get it. 

Secretary VILSACK. Can I share in the proceeds from the new 

bumper sticker that you have just created? Dust happens. 

[Laughter.] 

Chairwoman STABENOW. And I think on that note, Mr. Secretary, 

we want to thank you for coming. These are certainly issues that 

we all want to continue to tackle with you and we thank you for 

your leadership, and I would say as I began today, that 16 million 

jobs come from American agriculture and we look forward to working with you to make sure that our farmers have every opportunity 

to succeed. 

So thank you very much. 

We have a second panel. We would like to have them come up. 

I know that Senator Brown has to leave in a moment and wants 

to make an introduction first as we are bringing our second panel 

forward, and then we will proceed in introducing the other panelists. 

So we will wait until folks are seated and then get started. 

[Pause.] 

Chairwoman STABENOW. We are going to go ahead and get started. We appreciate your patience and your joining us today. I know 

coming from around the country, and I am going to let Senator 

Brown proceed first with an introduction. 

Senator BROWN. Thank you, Madam Chair, and again congratulations to you and Senator Roberts for your leadership on this 

Committee. 

I would like to introduce Fred Yoder, who is a farmer, and dust 

does not happen on Mr. Yoder’s farm when he is combining soybeans. 

But Fred is a farmer and agricultural leader and a real visionary 

thinker in my home State of Ohio on agriculture issues. He has 

worked closely Joe Schultz on my staff that staffs this Committee 

and staffs us on other issues. 

During the 2008 Farm Bill debate I so appreciate the counsel 

that you have given to Joe and to me and helped us understand 

these issues from your perspective as a real trusted advisor. 

Fred is fourth generation corn and soybean and wheat farmer in 

Plain City, Ohio. Some of you may not know it is the home of the 

famous Dear Dutchman restaurant and their homemade pies. 

Mr. Hoenig, you should try them sometime. You would like them, 

in Kansas or wherever. So I appreciate that. 

32 

But Fred has been a leader not only in Ohio but across the Nation. He served as president of the National Corn Growers and has 

volunteered thousands of hours representing farmers’ interests 

throughout the world. 

He was, I believe, the only American farmer to attend the world 

climate discussions in Copenhagen where he was a strong advocate 

in protecting and advancing the interests of U.S. agriculture. He 

reported to me personally and to Joe some of his observations from 

that. 

He continue to promote policies that support farmers that help 

address our Nation’s need for energy independence, and he is also 

a proud grandfather I would add. 

And Fred, I am so glad he is here today. I very much apologize. 

I was hoping the last one would not go this long but I have to 

leave. 

Joe will be here during his testimony and I am proud to call him 

a fellow buckeye. So, Fred, thank you for joining us. 

Chairwoman STABENOW. Thank you, Senator Brown. Those pies 

you were talking about, I hope they have Michigan cherries and 

blueberries and apples in them. Okay. Good. Good. Absolutely. 

Let me take a moment now before trying to Senator Roberts who 

I know also has an introduction but let me invite and welcome 

Keith Creagh, who was appointed by Governor Rick Snyder on January 1st to be the director of the Michigan Department of Agriculture and Rural Development, and prior to serving as director, 

Mr. Creagh was the director of industry affairs for in Neogen Corporation, a company that develops and provides food and animal 

safety solutions to the agri-food industry. And prior to Neogen, Mr. 

Creagh has held numerous positions I believe for 33 years with the 

Michigan Department of Agriculture. 

So he comes with a wealth of experience and expertise to his position, and we welcome you. 

Mr. CREAGH. Thank you, Senator. 

Chairwoman STABENOW. Senator Roberts, you have an introduction. 

Senator ROBERTS. Thank you, Madam Chairwoman. I think we 

have an excellent second panel with a lot of expertise. 

I am pleased to introduce one of our witnesses for the second 

panel, Mr. Tom Hoenig, who is the president and chief executive 

officer of the Federal Reserve Bank of Kansas City and the senior 

member of the Federal Reserve System’s Federal Open Market 

Committee. 

The Kansas City reserve bank covers the 10th Federal Reserve 

District which is comprised or includes Colorado, Kansas, Nebraska, Oklahoma, Wyoming, the northern half of New Mexico, and 

the western third of that state just to the east of Kansas. 

So I think it is fair to say that his district does encompass a 

whole lot of agriculture, including livestock, grow crops, specialty 

crops, as well as biofuels, and processing. 

Mr. Hoenig, it is an honor to have you here today. It is very good 

to see you again, sir. I have had the privilege of meeting with Mr. 

Hoenig about every six months or every year at least and just a 

couple of weeks ago on his turf. He is a native of Fort Madison, 

Iowa. He currently resides in the non-Kansas side of Kansas City. 

33 

He received his doctorate in economics from Iowa State University and joined the Federal Reserve Bank in 1973 as an economist. 

He assumed the role of president in October 1991 and also currently serves as Chairman of the Federal Reserve’s Presidents 

Committee of regulation and bank supervision and legislation, indeed a tough job. 

He is the longest-serving of the 12 current regional Federal Reserve Bank presidents and is the longest tenured member of the 

system’s Federal Open Market Committee which has authority 

over just U.S. monetary policy. 

Now, if you all have not read it, I would encourage you to thumb 

through this week’s Time magazine. It is an article entitled, The 

Man Who Said No To Easy Money, described a bit further down, 

it describes him as the heretic in the priesthood. A little strong but 

I do not know if that is quite true or not. 

Madam Chairwoman, I ask that a copy of that article be included 

in the record. We might preclude it by saying that I consider Tom 

as a profile in courage. 

Chairwoman STABENOW. Without objection. 

[The article can be found on page 98 in the appendix.] 

Senator ROBERTS. Mr. Hoenig brings a valuable perspective to today’s hearing, especially the questions posed by Senator Thune, 

and I look forward to his testimony. 

Thank you, Madam Chairwoman. 

Chairwoman STABENOW. Thank you very much. 

And last but certainly not least is Dr. Joe Outlaw. Thank you 

very much for joining us. Dr. Outlawed is a professor and an extension economist in the Department of Agriculture Economics at 

Texas A&M University. He also serves as the co-director of the agricultural and food policy center at Texas A&M. 

His extension education and applied research activities are focused on assessing the impact of farm programs, renewable energy, 

and climate change legislation on U.S. agricultural operations. 

We very much appreciate all of your being here and your testimony is a very important part of the record for our Committee. So 

I am going to ask Mr. Creagh to begin. 

Thank you very much for being here. 

STATEMENT OF KEITH CREAGH, MICHIGAN DEPARTMENT OF 

AGRICULTURE AND RURAL DEVELOPMENT, LANSING, 

MICHIGAN 

Mr. CREAGH. Thank you, Chairwoman Stabenow and Senator. I 

am certainly thankful to be here and to have the opportunity to 

present today. 

On behalf of the State of Michigan, Governor Rick Snyder, and 

all of us at the Michigan Department of Agriculture and Rural Development, I want to express our appreciation for your commitment 

and leadership on food and agriculture issues. 

We also recognize the remarkable new opportunities for rural 

America, and we look forward to a continued partnership with you 

to assure Michigan’s food and agricultural industry is strategically 

aligned to enhance our growth opportunities as we reinvent Michigan. Michigan’s agri-food industry contributes $71.3 billion annually to the state’s economy. 

34 

Production agriculture, food processing, and related businesses 

employ more than one million Michigan residents; approximately 1 

in 4 jobs. This is a robust and high tech industry that will undoubtedly serve as one of Michigan’s, and the Nation’s, foundation to our 

long term, sustainable economic recovery. 

At a time when Michigan lost 850,000 jobs, our agricultural economy experienced a decade of growth. It expanded at a rate of more 

than five times faster than the general economy, 11.9 percent 

versus 2 percent, between 2006 and 2007. 

Further, since 2007, we have seen a 27 percent increase, making 

agriculture a cornerstone in diversifying Michigan’s economic future. As a result of our diverse soils, crops, fresh water, and climate, we are well- positioned to continue this growth and expansion at all levels of production. Currently, we produce over 200 

commodities on a commercial basis; and lead the Nation in 18 of 

these. 

Under Governor Snyder’s leadership, Michigan is developing a 

comprehensive food and agriculture strategy that prioritizes food 

safety, food security, nutrition and health, energy, trade, environmental stewardship, and rural development. It is fundamental, and 

part of our core mission, to provide a safe and wholesome food 

product for the citizens of Michigan 

We will continue to work with our federal partners to seek appropriate funding and implementation of the Food Safety Modernization Act which will allow for a more vigorous and collaborative approach between federal, state and local partners. 

The risk of contaminated food products to our consumers reinforces the need for a rigorous inspection system to mitigate those 

risks. Collaborating with our federal partners will assist in identifying respective roles in the food safety continuum. 

The Michigan Department of Agriculture and Rural Development 

applauds your support and leadership of the Specialty Crop Block 

Grants. Having these resources available for cost-sharing opportunities provides much needed research, training and education that 

otherwise may not be available for food and agriculture entrepreneurs. The health and nutrition of Michigan citizens are directly 

tied to an available and wholesome food supply. 

Michigan has a dynamic food processing industry currently generating $24.9 billion annually and employing 134,000 people. However, merely sighting a food processing facility in a community does 

not necessarily address the long term economic variables. 

To ensure growth and sustainability are at the forefront of the 

equation, we must conduct a thorough and extensive review of the 

proposed facility. All of the following components are integral to 

the process and must be addressed: infrastructure, trained workforce, capability and capacity to deliver goods on a predictable 

basis, food safety checks and balances, access to available markets 

and appropriate inspections and certifications. 

Adequate infrastructure including roads, rail, waste water treatment and high speed communication must be part of any comprehensive strategy. We appreciate the opportunity to work with 

USDA Rural Development to identify broadband interface opportunities in our rural areas to ensure our citizens can compete in the 

global marketplace. 

35 

Just as rural electrification was crucial to the advancement of 

food production in the 20th Century, access to high speed internet 

is vital to the productive capacity of today’s rural communities. 

Michigan is fortunate to export almost one-third of its agricul- tural production, generating more than $1.55 billion annually, and 

employing more than 12,000 workers. We have nearly doubled our 

exports since 1997. In 2009, we directed over $753 million in exports to Canada 

alone. Michigan has worked strategically with the Food Export Association of the Midwest USA through the Market Access Program 

to provide export assistance to our small and medium-sized companies. Because of this partnership, in 2009 we jointly assisted over 

60 companies participating in nearly 150 programs or services, 

which resulted in an increase of $13.6 million in export sales. We 

look forward to continuing this partnership as we build upon our 

international successes. 

Agri-tourism is another area in Michigan where we are experi- encing growth. Farm and farmers markets, coupled with our $287 

million wine industry, generate well over a million tourists each 

year. Michigan ranks in the top four in the nation for the number 

of farmers markets, as well as the rate of growth. By spending $10 per household each week on locally grown foods, $40 million would be kept circulating in Michigan’s economy. The 

continued growth of the food and agriculture industry will require 

the integration of new science and technology, as well as the implementation of appropriate risk management tools in order to minimize the impact from food recalls, exotic and invasive species, and 

natural disasters. 

Assuring the food and agriculture industry has the necessary 

tools available from the United States Department of Agriculture, 

the Environmental Protection Agency, and the Food and Drug Administration to provide relief from these occurrences is critical. 

Continuation of programs that support these collaborative efforts 

will enhance the future economic growth of Michigan agriculture. 

Michigan farmers appreciate the technical assistance that has 

been made available to them. An example of this collaboration is 

the Conservation Technical Assistance Initiative whereby 

leveraging a 100 percent match from USDA we were able to put 

engineers and technicians on the ground to help farmers design 

and install conservation practices. These individuals will leverage 

$16 million in federal cost share dollars paid to the impacted producers for the installation of practices. The expenditure of these 

dollars not only resulted in a 40 to 1 return on investment, but also 

provided substantial protection of the Great Lakes and our Michigan environment. 

As national policy is fashioned, we must provide flexibility at the 

state and local level to support innovation and entrepreneurs who 

strive to make a difference in the economic recovery process. As we 

look to reinvent Michigan and compete on a global scale, the food 

and ag industry stands ready to assist in our long term economic 

recovery. 

We look forward to working with you and the U.S. Senate 

Committee on Agriculture, Nutrition and Forestry to make rural 

America a great place to live, work and play. 

36 

[The prepared statement of Mr. Creagh can be found on page 55 

in the appendix.] 

Chairwoman STABENOW. Thank you very much. 

Next is Thomas M. Hoenig, President, Federal Reserve Bank of 

Kansas City. 

STATEMENT OF THOMAS M. HOENIG, PRESIDENT, FEDERAL 

RESERVE BANK OF KANSAS CITY, KANSAS CITY, MISSOURI 

Mr. HOENIG. Thank you, Madam Chair. 

Agriculture remains a vital industry in the expansive region of 

the Federal Reserve Bank of Kansas City and, accordingly, our 

Bank has a long tradition of focusing significant attention on industry developments. Our observations on agriculture, in turn, 

have given us useful insight into the U.S. and global economies 

more broadly. In my remarks today, I will describe recent developments in the Nation’s farm economy and discuss some risks that 

have my attention at least and I heard discussed here earlier. 

First, agriculture, broadly defined as farm production and output 

from related industries, accounts for almost one- sixth of U.S. jobs 

and economic activity. While the farm share of economic output has 

declined as other parts of our economy have grown, increased activity in broader agricultural industries manufacturing, transportation, distribution and food retailing, for example has opened new 

job opportunities in both rural and metro communities. 

A robust agricultural sector cushioned the rural economy in our 

and other regions across the nation during the recent recession, 

and the industry’s strength in supporting further improvement in 

the rural economy remains today. 

In 2010, strong demand and tight supplies for most farm commodities contributed to a sharp rebound in farm profits, which then 

supported sales in farm equipment and other farm- based industries. Strong profits from agriculture also girded important elements of our rural financial system. Commercial banks with large 

agricultural loan portfolios posted stronger returns than their peers 

over the past three years. While more than 300 commercial banks 

failed during this period, only 22 agricultural banks throughout the 

country failed. 

Agriculture is also benefiting directly from the rebounding economic strength of China, referred to here, and other emerging market economies, where rapid income growth is driving up food demand. 

The United States remains a net exporter of agricultural products, shipping more than 40 percent of its wheat, cotton, soybeans 

and rice crops to foreign countries in 2010. United States crop and 

meat exports are expected to rise to record highs in 2011. Looking 

out a little further, economists expect global growth to exceed 4 

percent well into 2012, with the developing and emerging market 

economies remaining in the lead. Rapid income gains in the developing world promise then further increases in demand for higherprotein diets. 

Despite these prospects and the prospects of sustained farm income growth, U.S. producers must remain alert as they face challenges related to their very success and tied to recent developments 

in financial markets. Surging commodity prices and low interest 

37 

rates have translated into increasing farmland values, which have 

eclipsed their 1980s peaks. In our Bank’s fourth quarter 2010 Survey of Agricultural Credit Conditions, for example, cropland values 

in Nebraska and Kansas were up nearly 20 percent above year- ago 

levels and more than 75 percent higher than five years ago. 

This run-up in farmland values has occurred, however, amid financial markets characterized by high levels of liquidity and unusually low interest rates. History has taught us that it is nearly 

impossible to determine how much of the farmland boom may be 

an unsustainable bubble driven by financial markets and how 

much results from fundamental changes in demand and supply 

conditions. Therefore, it will surprise no one when I say we are 

watching the market closely, just as we are watching for imbalances emerging elsewhere in the economy. 

Of particular interest to me is how agriculture might adjust 

when financial markets return to more normal interest rate conditions. Rising interest rates often coincide with falling farm revenues and higher capitalization rates, a depressing combination for 

farmland values. Moreover, even if crop prices remain high but 

capitalization rates return to their historic average, farmland values could fall by as much as a third, which most certainly would 

erode the financial health of the farm sector. 

Fortunately, as others have mentioned, the industry entered this 

period with relatively strong balance sheets. Farm leverage ratios 

are at historic lows, and agricultural banks are well capitalized. In 

addition, farm operators and banks have strengthened their riskmanagement practices, using basic hedging strategies and derivative markets to manage price and balance sheet risk, which contributed to smaller increases in problem assets at agricultural 

banks than at their peers. Nevertheless, I follow the basic lesson 

that bad loans are made in good times, and I remain watchful. 

In closing, I will briefly highlight a symposium our Bank sponsored last summer, and I think the consensus was important, and 

that is a marked view, and a very healthy consensus I should say, 

that the industry’s success will lie not in its ability to follow a single path but in its ability to adapt quickly to shifting economic 

landscapes and conditions. Still, my nagging concern remains that 

current distortions in financial markets are increasing the risk that 

imbalances in asset markets will catch agriculture, and the U.S. 

economy more generally, by surprise once again. 

Thank you, Madam Chair. 

[The prepared statement of Mr. Hoenig can be found on page 60 

in the appendix.] 

Chairwoman STABENOW. Thank you very much. 

Mr. YODER. 

STATEMENT OF FRED YODER, FARMER, FORMER PRESIDENT 

NATIONAL CORN GROWERS ASSOCIATION, PLAIN CITY, OHIO 

Mr. YODER. Thank you, Chairman Stabenow and Ranking Member Roberts. It is a great pleasure for me to be here and an honor 

to be here especially to testify at your first full Committee hearing. 

I appreciate the kind introduction that Senator Brown gave me. 

I have been farming a long time and I am a fourth- generation 

farmer. I have had the privilege to testify before this Committee 

38 

several times in previous years. But today, I would like to testify 

before you just as Fred Yoder, a farmer from Ohio, rather than represent a national association and their policy positions. 

As I reflect over the years as to what agriculture has meant to 

me, I am reminded of that old commercial that used the phrase, 

‘‘you have come a long way, baby.’’ Today’s agriculture is not my 

father’s agriculture. We have come through the years of excess production, using programs to curtail carry overs by limiting acres 

planted, all the way to Freedom to Farm in 1996, which gave us 

full potential of our lands that they offered. 

However, we did not develop the demand for all of that volume, 

and soon we once again had to rely on government to help us dispose and we had to dispose of that production through deficiency 

payments and market clearing measures. But today, we have new 

technologies, and new markets, especially for corn. 

While traditionally we have always used corn for livestock feed, 

today we use roughly a third of our production for biofuels, without 

reducing the bushels for the feed and export markets. Biofuels, 

which now represent roughly 10 percent of the Nation’s transportation fuel today, has literally transformed rural America. 

In Ohio alone, it has generated over $1 billion towards Ohio’s 

economy while adding jobs and keeping small towns alive. The demand for corn, wheat, and soybeans has never been stronger and 

farmers will continue to respond by producing for all markets. Today’s agriculture is one of the few bright spots in the American 

economy. 

Demand for commodities is at an all-time high throughout the 

world. Instead of a supply-driven market, we are in a robust demand-driven one, where farmers’ primary source of income is the 

marketplace. The current Farm Bill offered a change from previous 

ones with an option called ACRE, a new tool to help manage our 

risk in conjunction with crop insurance. 

Many of you worked hard to make this new tool a reality, and 

I thank you for that, especially you, Chairwoman Stabenow and 

your great staff, and also to my own Ohio Senator Brown and his 

great staff too. All his kitchen cabinet meetings he had around the 

State of Ohio, it really showed us how the system is supposed to 

work. 

Unfortunately, when the option of ACRE was offered initially by 

the local Farm Service Agency offices, it became more complicated 

than it probably needed to be. However, as we look at how we are 

going to play out the future Farm Bill, I sure would hope and encourage us all to look to build this new roadmap including those 

risk management tools that we started with the last one. As a citizen and taxpayer, I think it is important for us to re- address 

some of our core principles before we delve into specific policy decisions for a future farm bill. 

First and foremost, I would suspect the vast majority of people 

in the United States, including those in agriculture, would agree 

that the U.S. Government should balance the federal budget by reducing federal spending, resulting in a reduction of the federal 

debt, and eliminating inefficient spending in all sectors of the U.S. 

economy. 

39 

If one accepts this initial principle, there is a much different perspective that emerges as we think about how we need to shape and 

form our discussion. I also think most would agree that the new 

Farm Bill should include a policy that allows the market to provide 

for a safe, reliable source of food, feed, fuel and fiber, but at the 

same time provide a strong safety net for those times when unforeseen revenue losses happen from events beyond our control. This 

can be done through improving such programs like ACRE in combination with improved and equitable Federal Crop Insurance for 

all regions of the country. 

Again, it would be easy for farmers to have the attitude to cut 

everyone’s budget but ours, and push for business as usual. But 

what if we could enhance the tools available in managing our risk 

in growing our crops, while continuing to grow new opportunities 

in the marketplace, and do it with savings to the overall budget? 

The opportunities I have today as a farmer are the best I have 

seen in my lifetime. Yes, a lots more volatility but a lot of reward. 

We have got to deal with these volatility issues. I hope that whatever we do we can continue to grow these opportunities for today’s 

farmers, and for my son in the future as he takes my place on the 

farm. 

Thank you for your time, and I look forward to your questions. 

[The prepared statement of Mr. Yoder can be found on page 94 

in the appendix.] 

Chairwoman STABENOW. I am sorry. We are discussing the fact 

that they just called a vote and so we definitely want to hear from 

Dr. Outlaw and ask questions. So it is a question of how we rotate 

this. Senator Roberts, if you would like to go just vote and then 

come back and then I will leave you and go do the same thing. We 

will tag team it. 

Welcome, Dr. Outlaw. We very much appreciate you being here 

today. 

STATEMENT OF JOE OUTLAW, PH.D., ECONOMIST, TEXAS A&M, 

COLLEGE STATION, TEXAS 

Mr. OUTLAW. Chairwoman Stabenow and Ranking Member Roberts, thank you for the opportunity to testify on behalf of the Agricultural and Food Policy Center at Texas A&M University on the 

outlook for U.S. agriculture based on our long history of representative farm research. 

We specialize in working at the farm level with a one- of-a-kind 

data set of information that we collect from real farmers and 

ranchers. Our Center was formed by our Dean of Agriculture at the 

request of Congressman Charlie Stenholm to provide Congress with 

objective research regarding the financial health of agriculture operations across the U.S. with a focus on unbiased analyses of the 

impacts of proposed agricultural policy changes. 

For more than 25 years we have been provided funding via Congressionally directed spending to work with the 

Agricultural Committees in the U.S. Senate and House of Representatives providing members and Committee staff objective research regarding the potential farm level affects of agricultural policy changes. 

40 

In 1983, we began collecting information from panels of four to 

six farmers or ranchers that make up what we call representative 

farms located in the primary production regions of the United 

States for most of the major agricultural commodities. 

Currently we maintain the information to describe and simulate 

98 representative crop and livestock operations in 28 states as seen 

in Figure 1. We have several panels that continue to have the original farmer members or their children that we started with back in 

1983. 

We update the data to describe each representative farm relying 

on a face-to-face meeting with the panels every two to three years. 

We partner with FAPRI at the University of Missouri who provides 

projected prices, policy variables, and input inflation rates. 

The results I am going to discuss today were developed with 

FAPRI’s January 2011 ten-year baseline projections. Under the 

baseline, 36 of the 64 representative crop farms are considered in 

good overall financial condition by 2016 with 15 in moderate condition and 13 in poor condition. Eighteen of 34 livestock operations 

are considered in good financial condition by 2016 with 11 in marginal condition and 5 in poor condition. 

While there are a number of farms in moderate or poor condition, 

this is the best overall representative farm outlook since 1995 

when it appeared that higher commodity prices were in place for 

the foreseeable future. We all know that those higher prices were 

short-lived. 

One of the most important and useful features of our work is the 

knowledge and insights we gain from the interaction we have with 

the panels of farmers and ranchers. In addition to our update visits, we maintain communication throughout the year and periodically ask them direct questions of how they are likely to respond 

to policy changes. Some of their most revealing responses were to 

questions regarding climate change, biofuels, and farm debt levels. 

In preparation for this testimony we asked them to let us know 

how they were doing and what their concerns were for the future. 

In general, most crop farmer respondents said their outlook was favorable due to the recent price improvements for most commodities. 

While there is cautious optimism regarding higher commodity 

prices the sudden downturn experienced in 1995/96 and more recently in 2008 has most of the representative farm members nervous about the future. Most responded that input prices are sticky 

meaning that they rise along with commodity prices but tend to fall 

much slower as experienced recently after the 2008 price increases. 

There is also a concern that Congress will use these current high 

prices as justification for severely reducing the safety net provided 

by the different commodity programs. Most respondents felt that 

the current price volatility created a much more difficult business 

environment than they experienced in the past. 

The dairy operators reflected the dire circumstances many dairy 

farmers find themselves in resulting from several years of accumulated losses, particularly in 2009, which may have been the worst 

year ever for milk producers. 

This same sentiment was reflected by several rice farmers but to 

a lesser degree. It is interesting to note that most cotton farmers 

have not benefitted from the recent record cotton prices as their 

41 

2010 crop was generally already priced, or sold, prior to the record 

price run-up. All livestock sectors continue to transition to a higher 

and more volatile feed cost environment. 

While our cow calf operations cite higher market prices, they also 

responded that they are having difficulties securing forage supplies 

due to drought, difficulties outbidding stocker operators for grazing 

land, and face lower expected prices due to the reality that feedlot 

profitability is being strained by high corn prices and high calf 

prices. 

Their final two areas of concern were their feeling that government regulation and specifically EPA regulation of their operations 

was driving up their costs of doing business and that there needed 

to be something done about the shortage of agricultural labor and 

specifically a more workable guest worker program. 

Madam Chairwoman, this completes my statement. 

[The prepared statement of Mr. Outlaw can be found on page 75 

in the appendix.] 

Chairwoman STABENOW. Thank you very much and thank you to 

all of you. 

Let me take a moment to ask some questions and, first, to Mr. 

Creagh, in your testimony you talk about the importance of infrastructure to economic growth and sustainability. USDA rural development administers and manages, as you know, a number of different programs, housing, business, community infrastructure, utility programs. 

From your perspective at the state level, can you share with us 

which programs are particularly important for continued growth in 

our rural communities? 

Mr. CREAGH. Well, Madam Chairwoman, as you know, it is always tough to pick a favorite child. I would say from the get-go for 

Michigan the increase in the support of the infrastructure is critical to our long-term success. 

The President was in the up in the Upper Peninsula, as you are 

well aware of, talking about broadband and some the advantages 

of bringing that to rural Michigan. If are going to compete in a 

global network and a global society, then we are going to have to 

have access to those markets through the appropriate use of 

broadband and Internet and high speed communication needs. 

But I would also have to say roads, rails, water will get your 

goods to market. That would be the first one. 

The second one is USDA rural development has been integral to 

keeping people in their houses in Michigan. We appreciate the support that USDA rural development did for Michigan. 

Chairwoman STABENOW. Thank you. I think it is interesting as 

I talk to people in Michigan about how much there is not an awareness of how rural development really does touch all of our lives, the 

quality of life in rural communities as you mentioned, I mean, 

housing as well as what we would consider traditional infrastructure or the ability to have a fire engine or a police vehicle or the 

other things that are so important to quality of life. 

Mr. CREAGH. Right. 

Chairwoman STABENOW. I am wondering also, you mentioned, 

Mr. Creagh, several areas of growth and entrepreneurship among 

our Michigan producers specifically agri-tourism, farmers markets, 

42 

wine production. As you look down the road, are there other opportunities or areas where you would see for the potential growth of 

new areas in terms of agriculture? 

Mr. CREAGH. Absolutely. This again still is a processing state. 

We harvest our crops within a short period window and winter 

comes. So there will be a significant processing capability and capacities that Michigan can take advantage of overtime. 

As I mentioned, we are number one in 18 different commodities. 

We still send cucumbers out of State to pickle. There are opportunities for increasing our dairy sector which is our number one sector. 

And of course, my favorite is cherries. As they move from cherries, it is from a baking industry to a highly nutritional fruit. We 

lead the Nation in the production of dried cherries. So there are a 

number of opportunities to tie health and nutrition and ag production together to help also alleviate some health concerns, put 

healthy food on the table and solve some long-term problems. 

Chairwoman STABENOW. Thank you. 

I would like to ask all of our witnesses. When you look at the 

importance of the rural economy to each of our States and to our 

country, I wonder if each of you or whoever would like to respond 

could talk a little bit more about the larger impact that we see in 

rural communities from increased incomes. What are producers 

using increased cash flows to invest in? How do we see that impacting the health of rural communities and the economy as a 

whole? Where do you see this adding impact for our communities? 

Mr. HOENIG. 

Mr. HOENIG. Madam Chair, in our area, of course, when we have 

seen rising incomes, we have seen very significant increases also in 

investment on equipment, for example. 

And also, as you build momentum, you also get increases in some 

of the production as was mentioned earlier and even small manufacturing moves forward. 

It has multiple effects for rural America more generally, and I 

think that is critical. Now, you see it become more regionally oriented within States where you have major kind of hubs around 

that, and that is part of the process. But you do have follow-on 

from increasing incomes generally. 

Chairwoman STABENOW. Yes. Mr. Yoder, did you wish to respond? 

Mr. YODER. Yes. I just want to add to what he said. Farmers 

have a tendency, if they have money, they are going to reinvest in 

their operation. 

In our area, there has been a tremendous reinvestment in new 

machinery as well as new technology. There are lots of GPS and 

auto-steer and all that kind of stuff that whenever there is money, 

there is going to be a time to reinvest in that. 

The other thing, too, as far as talking about biofuels, while in 

Ohio we have five ethanol plants running. That is around 300 real 

jobs but that translates into—that is direct jobs. But it probably 

translates into 30,000 indirect jobs because of the community that 

produces more of those dollars that filter through the community. 

So it is a big deal. 

Chairwoman STABENOW. We are done with our testimony. 

43 

Dr. Outlaw, if you wanted to respond to the question that I have 

asked, you are welcome to. 

Mr. OUTLAW. Okay. I would echo the same responses that the 

previous panelist said. Basically, when the farmers are doing better, they tend to reinvest and purchase machinery. 

Unfortunately, one of the secondary effects of that is that they 

probably get a little bit more leverage than they would have liked 

to have been, and because of some of the interesting things about 

tax laws and being able to write off losses, there is not a real big 

incentive to save which is unfortunate. 

But much like they said, the ag economies in areas that are important to ag see that the spillover effects into the rest of the economy are quite large. 

Senator ROBERTS. [Presiding.] The distinguished Senator from 

Michigan has gone to vote, and you have noticed that there has 

been a coup. 

[Laughter.] 

Senator ROBERTS. We will now proceed to write the wheat section of the Farm Bill. 

[Laughter.] 

Senator ROBERTS. With a little more questions about the ACRE 

program, Mr. Yoder, than perhaps we would like but it will be all 

right. 

Tom, let me ask you a question, if I might. In your testimony, 

you said something you have probably said a lot in the past few 

years, including last year, during April 7, 2010 speech in Santa Fe 

which everybody ought to have a copy of, you say that one of the 

effects of near zero short-term interest rates, coupled with surging 

commodity prices, is that operators and investors in the Midwest 

are buying up farmland, and they are, bidding up the price, and 

they are. 

And you appropriately note that we also saw this phenomenon 

in the banking run up to the banking crisis of the eighties, and we 

did, and we came through it, finally. 

Although there are several differences between now and then, 

your point about the basic lesson of bad loans being made in good 

times should be repeated time and time and time again. 

The old-timers at the coffee shop repeat it all the time. You are 

not an old-timer but at least they could repeat it. 

And then you also said something about farm debt when I visited 

with you, something like going up in the past five years 7 percent 

or have I got seven years and 5 percent. I cannot remember. 

Mr. HOENIG. I think it is the latter. 

Senator ROBERTS. Okay. But at any rate, that is a 35 percent increase. 

Mr. HOENIG. Right. 

Senator ROBERTS. Then we got talking about cash grants and we 

got talking about other things, and some of those figures really 

startled me in terms of what would happen when the bubble 

breaks, and you know the bubble will break. 

I do not know if it is a bubble or what but we are going to go 

back to semi-normalcy in regards to crop prices, it seems to me, or 

maybe we will not. I do not know. Who can tell? 

44 

What can or should we be doing policy-wise to help guard against 

a significant drop in farmland values and farm debt? 

Mr. HOENIG. Well, the farmland values are going to proceed because of the very easy borrowing conditions and the very high 

prices that are encouraging people to invest in, as I think you mentioned earlier, you know, scale becomes important to operators. 

And so your opportunity to buy additional land for scale has 

never been better in that sense, and so you have that momentum 

going forward. 

And I think one of the things that we would try and do as we 

talk to operators and also to bankers who are involved in making 

more land loans than operating loans right now is that do not be 

fooled by loan to value ratios that are moving up. 

In other words, the land value is going up because the discount 

rate is very low and, therefore, you could lend 70 percent against 

it and you are safe. 

But if those land values are going up very rapidly and the implied discount rate is very low, 3 percent, and normally it is 7 percent, that means you can have a 50 percent decline in that land 

value. 

So we are cautioning the lenders, the bankers who may be helping to facilitate the expanded acquisition of land with debt to be 

very careful about how they interpret the loan to value ratios and 

how they interpret the cash flows. For a considerable period these 

high prices will remain and then we find they do not. 

So the only thing they can do is say be prudent. Make sure your 

loan to value ratios are actually stronger than they normally would 

be because you are going to need that margin. That is really what 

you do right now. 

When interest rates rise, you will get some adjustments down because interest rates will bring those land values down, and hopefully because we watch the leverage a little more carefully, we will 

be in a better position to handle the adjustment this time through. 

Senator ROBERTS. I know you are stepping down. I know you are 

retiring. Thank you for your service. Thank you for your common 

sense. 

Gentlemen, thank you all for your testimony. We have yet another vote right after this one which necessitates that I depart as 

well and also necessitates the chairwoman from coming back for 

which she apologizes. 

So I think we have had a very good first session. I thank you 

very much for coming, for taking time out of your valuable time to 

come here and to testify. As always, everything that you say will 

be recorded for posterity and will not collect dust on some shelf. 

So with that, this meeting is adjourned. 

[Whereupon, at 4:53 p.m., the Committee was adjourned.] 

(45) 

A P P E N D I X 

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