[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]

HEARING TO REVIEW THE STATE OF THE FARM ECONOMY

=======================================================================

HEARING

BEFORE THE

COMMITTEE ON AGRICULTURE
HOUSE OF REPRESENTATIVES

ONE HUNDRED TWELFTH CONGRESS

FIRST SESSION

__________

FEBRUARY 17, 2011

__________

Serial No. 112-4

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COMMITTEE ON AGRICULTURE

FRANK D. LUCAS, Oklahoma, Chairman

BOB GOODLATTE, Virginia, COLLIN C. PETERSON, Minnesota,
Vice Chairman Ranking Minority Member
TIMOTHY V. JOHNSON, Illinois TIM HOLDEN, Pennsylvania
STEVE KING, Iowa MIKE McINTYRE, North Carolina
RANDY NEUGEBAUER, Texas LEONARD L. BOSWELL, Iowa
K. MICHAEL CONAWAY, Texas JOE BACA, California
JEFF FORTENBERRY, Nebraska DENNIS A. CARDOZA, California
JEAN SCHMIDT, Ohio DAVID SCOTT, Georgia
GLENN THOMPSON, Pennsylvania HENRY CUELLAR, Texas
THOMAS J. ROONEY, Florida JIM COSTA, California
MARLIN A. STUTZMAN, Indiana TIMOTHY J. WALZ, Minnesota
BOB GIBBS, Ohio KURT SCHRADER, Oregon
AUSTIN SCOTT, Georgia LARRY KISSELL, North Carolina
STEPHEN LEE FINCHER, Tennessee WILLIAM L. OWENS, New York
SCOTT R. TIPTON, Colorado CHELLIE PINGREE, Maine
STEVE SOUTHERLAND II, Florida JOE COURTNEY, Connecticut
ERIC A. ``RICK'' CRAWFORD, Arkansas PETER WELCH, Vermont
MARTHA ROBY, Alabama MARCIA L. FUDGE, Ohio
TIM HUELSKAMP, Kansas GREGORIO KILILI CAMACHO SABLAN,
SCOTT DesJARLAIS, Tennessee Northern Mariana Islands
RENEE L. ELLMERS, North Carolina TERRI A. SEWELL, Alabama
CHRISTOPHER P. GIBSON, New York JAMES P. McGOVERN, Massachusetts
RANDY HULTGREN, Illinois
VICKY HARTZLER, Missouri
ROBERT T. SCHILLING, Illinois
REID J. RIBBLE, Wisconsin

______

Professional Staff

Nicole Scott, Staff Director

Kevin J. Kramp, Chief Counsel

Tamara Hinton, Communications Director

Robert L. Larew, Minority Staff Director

(ii)

C O N T E N T S

----------
Page
Lucas, Hon. Frank D., a Representative in Congress from Oklahoma,
opening statement.............................................. 1
Prepared statement........................................... 3
Peterson, Hon. Collin C., a Representative in Congress from
Minnesota, opening statement................................... 4

Witness

Vilsack, Hon. Thomas J., Secretary, U.S. Department of
Agriculture, Washington, D.C................................... 5
Prepared statement........................................... 7
Submitted questions.......................................... 51

HEARING TO REVIEW THE STATE OF THE FARM ECONOMY

----------

THURSDAY, FEBRUARY 17, 2011

House of Representatives,
Committee on Agriculture,
Washington, D.C.
The Committee met, pursuant to call, at 11:30 a.m., in Room
1300, Longworth House Office Building, Hon. Frank D. Lucas
[Chairman of the Committee] presiding.
Members present: Representatives Lucas, Johnson, King,
Neugebauer, Conaway, Schmidt, Thompson, Gibbs, Austin Scott of
Georgia, Fincher, Southerland, Crawford, Roby, Huelskamp,
DesJarlais, Ellmers, Gibson, Hultgren, Hartzler, Schilling,
Ribble, Peterson, Holden, McIntyre, Boswell, Baca, Cuellar,
Costa, Schrader, Kissell, Owens, Pingree, Courtney, and
McGovern.
Staff present: Mike Dunlap, John Goldberg, John Konya, Josh
Maxwell, Nicole Scott, Debbie Smith, Pelham Straughn, Richard
G. Thomson, Nona Darrell, Nathan Fretz, Liz Friedlander, Craig
Jagger, Keith Jones, Mary Knigge, Scott Kushmider, Clark
Ogilvie, Lisa Shelton, Anne Simmons, and Jamie W. Mitchell.

OPENING STATEMENT OF HON. FRANK D. LUCAS, A REPRESENTATIVE IN
CONGRESS FROM OKLAHOMA

The Chairman. The Committee on Agriculture hearing to
review the state of the farm economy will come to order.
This morning's hearing focuses on the state of the farm
economy. With all of the bad news out there today, it is nice
to have something good to report. The state of the U.S. farm
economy is strong. Our nation's producers are generally
experiencing good prices and solid production. The USDA is
forecasting record-high income and exports.
Importantly, despite the higher farm gate prices, last
year's rate of inflation for food costs that consumers pay at
the grocery store, was the lowest on record since 1962. And it
is expected to track with the same average rate of inflation
this year. Yet despite the good news, those of us who have been
around agriculture know all too well that things can change
quickly.
The agricultural economy is highly cyclical, and it changes
like the weather in western Oklahoma: sharp, fast, and without
notice. This reality helps explain why the mood in farm country
today is both upbeat and apprehensive. After all, increasing
production costs, lost equity, and fast-rising farm debt may be
manageable for producers with strong prices and production, but
they spell big trouble for those without.
These facts, along with experience, offer a cautionary note
to everyone who might be tempted to cite current economic
conditions on the farm as the predicate for setting long-term
farm policies.
Some outside this room might even ask, why should anyone
other than those directly involved in agriculture care about
the state of the farm economy. I offer three reasons. First, as
the Federal Reserve points out, thanks to production
agriculture, rural America is leading the U.S. economic
recovery, just as it did through the last recession.
Second, food security remains important to national
security. In fact, NPR made this point in a recent story
entitled, Rising Food Prices Can Topple Governments, Too.
Third, there will be nine billion people on this planet by
the year 2050. We will need to double production, using less
water and land in order to feed all of them. These facts are a
wake-up call to everyone who believes that agriculture no
longer matters to our economy. But there is another eye-opener.
Some of you may have seen the black bumper stickers with a
blue line across them, with that thin blue line representing
our police force. Well, today, there are just 210,000 Americans
out there who are responsible for 80 percent of U.S.
agricultural production. These Americans support our economy,
help keep us secure, and in those 210,000 people lies the
answer to the question of how we are going to feed nine billion
people come the year 2050. In short, these American men and
women form a very thin line that we better hold.
So the question becomes: Are our Federal policies that we
are pursuing today going to hold or break this line?
Unfortunately, on a range of issues, new policies coming out of
Washington are threatening to punch a hole clear through it. We
know that the EPA has opened up at least ten assaults on
agriculture, including the strange objectives of eliminating
dust on farms and treating milk on farms as if it were oil. But
to put it plainly, EPA is gambling with our economy and wasting
taxpayer dollars while they are at it.
Irrational environmental policy is also jeopardizing our
energy production capacity that, even without the regulation of
greenhouse gases, is fast approaching a crisis. And by imposing
margin requirements on end-users under last year's financial
regulatory reform, Washington has actually managed to add fuel
to the fire.
I also feel a very subtle push from the Department that
seems to take for granted these 210,000 Americans who are
producing 80 percent of our food. There seems to be a
prioritization on a small subset of producers in order to
satisfy certain constituencies.
I think all of the Members of this Committee support
marketing opportunities such as organic production, farmers
markets, and local production, but organic production and these
other seeming priorities of the Department will not feed the
nine billion souls that will soon inhibit this planet.
I do believe the Secretary has agriculture's best interests
at heart, and I want to work with him to be an advocate for
farmers and ranchers both inside the Administration and here in
Congress.
The bottom line is Washington is being met with a critical
choice that will have major consequences down the road: We can
promote the one piece of good news out there today, or we can
pour cold water on it.
Fortunately, promoting American agriculture is simple.
Washington can, first of all, support fiscally responsible
policies that help level the international playing field;
second, we can support risk management tools so that producers
don't go without something as basic as insurance; third,
support policies that create a pro-growth, business-friendly
environment that promotes U.S. competitiveness. And, of course,
finally, the fourth, Washington can just simply get out of the
way. I believe for most of us in this room, the choice is
clear.
I look forward to hearing the testimony of Secretary
Vilsack and the views of my colleagues on the state of the farm
economy and on the direction of Federal farm policies that
could make or break it.
Now before I turn to yield to my good friend, Mr. Peterson,
I would simply express a particular appreciation for the
Secretary's patience today. We started with a series of 15
votes this morning as we work our way through this open process
on the continuing resolution to fund the rest of the
government. I would serve notice to my colleagues here that the
Secretary has to appear this afternoon before the Senate
Agriculture Committee. He has a very hard deadline of being
gone by or before 2 p.m., so we want to be respectful of his
time.
[The prepared statement of Mr. Lucas follows:]

Prepared Statement of Hon. Frank D. Lucas, a Representative in Congress
from Oklahoma

This morning's hearing focuses on the state of the farm economy.
With all the bad news out there today, it is nice to have something
good to report: the state of the U.S. farm economy is strong. Our
nation's producers are generally experiencing good prices and solid
production. USDA is forecasting record high income and exports.
Importantly, despite the higher farm gate prices, last year's rate
of inflation for food costs that consumers pay at the grocery store was
the lowest on record since 1962, and it is expected to track with the
average rate of inflation this year.
Yet, despite the good news, those of us who have been around
agriculture know all too well that things can turn quickly.
The agriculture economy is highly cyclical and it changes like the
weather in western Oklahoma: fast, sharp, and without notice. This
reality helps explain why the mood in farm country today is both upbeat
and apprehensive. After all, increasing production costs, lost equity,
and fast rising farm debt may be manageable for producers with strong
prices and production--but they spell big trouble for those without.
These facts, along with experience, offer a cautionary note to
anyone who might be tempted to cite current economic conditions on the
farm as the predicate for setting long term farm policies.
Some outside this room may even ask: why should anyone other than
those directly involved in agriculture care about the state of the farm
economy?
I offer three reasons:
First, as the Federal Reserve puts it, thanks to production
agriculture, ``rural America is leading the U.S. economic recovery,''
just as it did through the last recession.
Second, food security remains important to national security. In
fact, NPR made this point in a recent story entitled, ``Rising Food
Prices Can Topple Governments, Too''.
And, third, there will be nine billion people on this planet by the
year 2050 and we will need to double production, using less water and
land, in order to feed them all.
These facts are a wake-up call to anyone who believes that
agriculture no longer matters to our economy. But there is another eye-
opener.
Some of you may have seen the black bumper stickers with a thin
blue line across them, with that thin blue line representing our police
force. Well, today, there are just 210,000 Americans out there who are
responsible for 80% of U.S. agricultural production.
These Americans support our economy, help keep us secure, and in
these 210,000 people lies the answer to the question of how we are
going to feed nine billion people come the year 2050. In short, these
American men and women form a very thin line that we had better hold.
So, the question becomes, are the Federal policies that we are
pursuing today going to hold or break this line? Unfortunately, on a
range of issues, new policies coming out of Washington are threatening
to punch a hole clear through it.
We know that EPA has opened up at least ten assaults on
agriculture, including the strange objectives of eliminating dust on
farms and treating milk on farms as if it was oil. To put it plainly,
EPA is gambling with our economy and wasting taxpayer dollars while
it's at it.
Irrational environmental policy is also jeopardizing our energy
production capacity that, even without the regulation of greenhouse
gases, is fast approaching a crisis. And, by imposing margin
requirements on end-users under last year's financial regulatory
reform, Washington has actually managed to add fuel to the fire.
I also feel a very subtle push from the Department that seems to
take for granted these 210,000 Americans that are producing 80% of our
food. There seems to be a prioritization on a small subsection of
producers in order to satisfy certain constituencies. I think all of
the Members of this Committee support marketing opportunities such as
organic production, farmers markets, and local production but organic
production and these other seeming priorities of the Department will
NOT FEED the NINE billion souls that will inhabit the planet.
I do believe the Secretary has agriculture's best interests at
heart and I want to work with him to be an advocate for farmers and
ranchers both inside the Administration and here in Congress.
The bottom line is Washington is being met with a critical choice
that will have major consequences down the road: we can promote the one
piece of good news out there today or we can pour cold water on it.
Fortunately, promoting American agriculture is simple. Washington
can: (1) support fiscally responsible policies that help level the
international playing field; (2) support risk management tools so
producers don't go without something as basic as insurance; (3) support
policies that create a pro-growth, business-friendly environment that
promotes U.S. competitiveness; and, finally, (4) Washington should just
get out of the way.
I believe for most of us in this room, the choice is clear.
I look forward to hearing the testimony of Secretary Vilsack and
the views of my colleagues on the state of the farm economy and on the
direction of Federal policies that could make or break it.
And now I yield to my good friend, Mr. Peterson, for any remarks he
may have.

The Chairman. With that, I turn to my colleague, Mr.
Peterson, the Ranking Member, for his opening statement.

OPENING STATEMENT OF HON. COLLIN C. PETERSON, A REPRESENTATIVE
IN CONGRESS FROM MINNESOTA

Mr. Peterson. Welcome, Secretary Vilsack, back to the
Committee. I associate myself with the remarks of the Chairman.
I will try to keep my remarks brief so we can get this done.
The farm economy is in pretty good shape. Our farmers and
ranchers have been having a good time due in large part to
their own efforts; but I also believe that the strong farm bill
that we passed in 2008 deserves some of the credit for having
stability in the farm economy. Actually, the farm economy is
probably the only part of the economy that is actually solid,
and has been solid primarily through these last years here
where we have been having trouble.
We have had problems in dairy. It is not quite as bad now,
but there are problems there. And there are people who are
still not recovered, and we hopefully will be able to address
that this year. It seems like they are coming together around a
new policy. I agree with the Chairman when he says that part of
what we have to do is just kind of get out of the way.
Those of us on our side are also concerned about all of
these regulations and rules that are being promoted by other
agencies that are not in our jurisdiction. Some of them are,
frankly, pretty ridiculous, and some of my farmers are getting
pretty fed up with it.
We look forward to working with our colleagues on the other
side of the aisle to see what we can do. Unfortunately, a lot
of it is not in our jurisdiction. I wish it was, so we could
straighten it out.
We are looking forward to working with the Majority to make
sure that we continue to have a strong safety net, a strong
farm bill to undergird agriculture. Today's hearing is a good
place to start. We have a lot of new Members. This will help
their education process.
I remember when I started on the Committee many years ago,
I was way down in the front and I didn't think I would ever see
the top row. Some of you new guys are already on the top row so
you are already ahead of the game. We have a lot of work to do,
a lot of good Members, and I look forward to working with the
Chairman and the other Members to make sure that we do the
right thing for agriculture.
I yield back.
The Chairman. I thank the gentleman for his opening
statement.
The Chairman. We now turn to our panelist, the Honorable
Tom Vilsack, Secretary, United States Department of
Agriculture, Washington, D.C.
Please begin when you are ready, sir.

STATEMENT OF HON. THOMAS J. VILSACK, SECRETARY, U.S. DEPARTMENT
OF AGRICULTURE, WASHINGTON, D.C.

Secretary Vilsack. Thank you, Mr. Chairman, and Members of
the Committee. Thank you as well for the opportunity and
invitation to discuss recent developments in 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. And 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. In the short
time I have this morning, I would like to touch on a few of the
broader 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 in both 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 a record high in this fiscal year, up
nearly $18 billion from Fiscal Year 2010, with the agricultural
trade balance forecasted to be a record $41 billion.
While we are pleased with these record numbers, we remain
focused on continuing to open and improve markets for our
producers. We know that every $1 billion in agricultural
exports helps to support 8,000 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 5 years.
The other big trend in exports is the increased importance
of the Chinese market. The trade numbers just published show
that for calendar year 2010, China was our number one export
market, edging out Canada, and accounting for a little over 15
percent of exports.
Cash receipts and cash production expenses for producers
are forecast to reach record levels in 2011; $341 billion and
$274 billion respectively. 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 more from 2009. After
adjusting for inflation, this year and last year should be 2 of
the highest income years producers have seen since 1976. So
these are good times for American agriculture.
But while all of agriculture experienced a robust recovery
in 2010 and forecasted for 2011, expenses are also increasing,
especially prices of farm origin inputs like livestock and
feed, the price of energy, and operating costs.
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 income from the farm.
We need to be aware of this reality, and ensure that our work
to expand domestic markets, in particular, helps them succeed.
And as we discuss the safety net, we should make sure that we
are 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.
Consistent with recent trends, increases in debt are forecast
to be offset by large increases in farm asset values. What is
astonishing is that in 2 years the farm economy has essentially
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 them make a strong and quick
rebound from the 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 a lower demand
for farm loans than in previous years. At the same time,
capital spending was up, probably being financed with cash or
non-bank credit. We hope to see this trend continue, especially
as a 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 values rose by an estimated three percent
in 2010 to a record $1.8 trillion. We expect this trend to
continue. While this benefits existing landowners, high 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 generation of
farmers and 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 farm.
To conclude, as we enter 2011, the U.S. farm economy is
coming off unprecedented increases in U.S. agricultural
exports, farm cash receipts, farm income, and asset values for
the past few years. American agriculture is helping lead the
recovery from the worst economic collapse since the Great
Depression, and prospects for the coming year are generally
bright.
More normal weather and production increases worldwide
should lead to improved supply-demand balance in key markets
such as wheat, corn, and soybeans. With biofuel demand expected
to continue growing, although at a slower pace in the future, a
big challenge will be responding to that demand by developing
new feedstocks, producing on more acres, and producing more per
acre while protecting the environment.
I have the utmost confidence, as I am sure the Committee
Members do as well, that our farmers and ranchers and
producers, along with assistance from USDA, will be able to
meet these challenges.
Mr. Chairman, that completes my statement. I would be happy
to answer questions.
[The prepared statement of Secretary Vilsack follows:]

Prepared Statement of Hon. Thomas J. Vilsack, Secretary, U.S.
Department of Agriculture, Washington, D.C.

Mr. Chairman, Members of the Committee, thank you for the
invitation to discuss recent developments in 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. I will describe the
prospects and recent developments in output and input markets and the
challenges and opportunities they present for U.S. agriculture.

Agricultural Export Developments
Despite modest domestic economic growth, economic growth,
especially in less developed countries, and the reduced value of the
dollar are likely to support global commodity demand, keeping pressure
on global supplies and prices for a wide range of agricultural
products.
U.S. agricultural exports setting records. Supported by foreign
economic growth particularly in developing countries and crop
production shortfalls around the world, U.S. agricultural exports are
expected to be record high this fiscal year. USDA's forecast for U.S.
agricultural exports for FY 2011 is a record high $126.5 billion, up
from $108.7 billion in FY 2010, and the previous record of $114.9
billion in FY 2008. Imports, too, continue to grow and are expected to
reach $85.5 billion this fiscal year compared with $79 billion last
year. Nearly half of imports are horticultural products and another
fifth are sugar and tropical products such as cocoa, coffee and rubber.
This year, the agricultural trade balance is forecast to be a record
$41 billion, up from $29.7 billion last year.
Soybean and wheat exports are forecast to be up in volume and value
because of less foreign competition due to adverse weather conditions
in other countries. Corn exports are forecast up in value due to lower
U.S. production and weather concerns in South America, while higher
cotton export volume and value reflects tightening global stocks and
strong Chinese demand. Livestock exports are forecast to rise as the
volume and value of beef, pork and poultry exports increase.
Horticultural exports are being helped by the decline in the value of
the dollar.
Canada is our number one agricultural export market, accounting for
14 percent of expected exports this year. China has moved up to number
two, also with a 14 percent share. Mexico is now number three with an
expected 13 percent share followed by Japan at number four with a ten
percent share and the European Union at number five with a seven
percent share.

Farm Income and Retail Food Price Developments
U.S. farm income consistently strong. Cash receipts for producers
are forecast at a record $341 billion in 2011, up $28 billion from 2010
and $57 billion from 2009. Cash production expenses are forecast to be
a record $274 billion in 2011, up $20 billion from 2010 and $25 billion
from 2009. With receipts rising faster than expenses, 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, 5 of the highest income years since 1976 have
occurred during 2004-2011 (2004, 2005, 2008, 2010, and 2011).
Cash receipts for both crops and livestock are forecast to reach
new record highs in 2011. Crop cash receipts are forecast to reach $195
billion in 2011, exceeding the previous record set in 2008 by $18
billion. Cash receipts for corn, soybeans, cotton, and fruits and nuts
are all expected to rise to all-time highs. Cash receipts for wheat
will likely be up in 2011 but remain below the record level set in
2008.
Cash receipts from all livestock species are forecast to reach $146
billion in 2011, exceeding the previous record by $4 billion. Receipts
for cattle, hogs and poultry are all expected to set record highs.
Dairy receipts are forecast to increase in 2011, but remain below 2007
and 2008 levels. Government payments to producers in 2011 are expected
to total $10.6 billion, down $1.6 billion from 2010. In 2011, producers
are forecast to receive $4.7 billion in direct payments, $3 billion in
conservation payments, $1.9 billion in disaster payments, and $0.8
billion in tobacco transition program payments. With major crop prices
forecast to be near or above previous record high levels in 2011,
countercyclical payments and marketing loan benefits are projected to
be only $20 million in the coming year.
The $20 billion increase in cash production expenses since 2010 is
mainly due to a $4 billion increase in farm origin inputs (livestock,
feed), $6 billion more in energy-based input costs (fuel, fertilizer,
electricity, and pesticides), and $6 billion more in other operating
expenses. The year-over-year increase in feed expenses is projected to
slightly exceed the increase in livestock cash receipts. If this
occurs, livestock and dairy producers could be under added financial
pressure in 2011.
The balance sheet of U.S. agriculture is expected to strengthen
again in 2011. Consistent with recent trends, increases in debt are
forecast to be offset by larger increases in farm asset values. As a
result, the farm sector's debt-to-asset ratio should drop further below
last year's 11.3 percent in 2011.
Retail food price inflation to remain modest. In 2010, the Consumer
Price Index (CPI) for all food increased by 0.8 percent, the lowest
annual food inflation rate since 1962. The CPI for food-at-home
(grocery store) prices increased 0.3 percent, while food-away-from-home
(restaurant) prices increased by 1.3 percent. Higher commodity and
energy prices are expected to lead to a stronger increase in retail
food prices in 2011. For 2011, the CPI for food is currently forecast
to increase by two to three percent. During the previous spike in
commodity and energy prices in 2007 and 2008, the CPI for food rose by
an average of 4.7 percent over the 2 years. The Economic Research
Service will update its forecast for the CPI for food for 2011 later
this month.

Developments in Farm Output Markets
Major crops: global supplies tight. For the 2010/11 marketing year,
global demand is forecast to exceed global production causing global
stocks of grains and oilseeds as a percent of use to fall and crop
prices to rise. Global wheat production is forecast to decline by 5.5
percent in 2010/11, due primarily to adverse weather and reduced output
in Russia, Kazakhstan and Ukraine. For corn, increasing global use and
lower production in the United States is forecast to lead to a 15.6
percent decline in global ending stocks. And, weather-reduced soybean
production in Argentina is projected to reduce global soybean stocks.
For the United States, strong export demand for crops has supported
above average farm income in recent years. Market fundamentals continue
to look strong as growth in demand, limited carryover and weather
concerns have contributed to rising prices for most major crops. U.S.
carryover of corn, wheat, soybeans and cotton could all decline in
2010/11 as total use is forecast to exceed production.
Higher crop prices will likely lead to increased area seeded to
major crops in the U.S. this spring and increased crop production this
fall. Assuming normal rainfall over the spring and summer, production
of major crops will likely be up in 2011, leading to some rebuilding of
carryover and reduced pressure on crop prices.
Corn carryover tight in 2010/11. Under nearly ideal planting
conditions this past spring, corn producers planted 88.2 million acres,
up from 86.4 million in 2009 and the second largest area planted to
corn in more than 60 years. Despite the higher acreage, corn production
dropped by five percent from last year to 12.4 billion bushels. Total
corn use is forecast to reach a record 13.5 billion bushels in 2010/11,
reflecting the expanding ethanol industry and continued strong global
demand for corn. Stocks of corn at the end of 2010/11 marketing year
are forecast to decline by 60 percent to 675 million bushels, resulting
in the lowest stock-to-use ratio since 1995/96. The farm price of corn
is forecast to average a record $5.05-$5.75 per bushel during 2010/11,
compared with $3.55 per bushel in 2009/10 and the previous record of
$4.20 in 2007/08.
Corn acreage likely up in 2011. Corn planted area for 2011 is
expected to increase as prices and returns have improved considerably
in recent months. December 2011 futures prices for corn are currently
more than $2 per bushel above the peak of December 2010 futures last
February. Current cash prices are more than $3 per bushel above
February 2010 levels. Given the current outlook for the 2010-crop corn
and competing crop prices, corn planted area next spring could increase
three to five percent from 2010. Higher plantings combined with a
return to trend yields could lead to a record corn crop in 2011 and
higher carryover stocks in 2011/12.
Ethanol growth expected to slow. U.S. ethanol production capacity
is now estimated at 14 billion gallons. Production capacity is expected
to increase modestly over the coming 18-24 months. New construction
could add 560 million gallons of additional ethanol production
capacity, bringing total capacity to about 14.6 billion gallons.
Most ethanol production in the United States currently uses corn as
the feedstock. In 2010/11, 4.95 billion bushels of corn are expected to
be used to produce ethanol, with ethanol use accounting for 37 percent
of total use and 40 percent of corn production. In comparison, 4.57
billion bushels of corn were converted into ethanol in 2009/10
accounting for 35 percent of total use and 35 percent of corn
production. In contrast to the increase in ethanol use of 382 million
bushels between 2009/10 and 2010/11, corn ending stocks are projected
to fall by over 1 billion bushels between the 2 crop years. These
figures indicate that declining corn production is the primary factor
contributing to the drop in corn carryover this year and the primary
factor contributing to the recent increase in corn prices. Furthermore,
each bushel of ethanol produced from corn yields byproducts, such as
distiller dried grains, which substitute for corn and other feed
ingredients in livestock rations.
The profitability of producing ethanol from corn depends on the
price of corn, the price of gasoline and the cost of converting corn
into ethanol. The returns from producing ethanol from corn increase as
the price of gasoline increases providing an incentive to expand
ethanol production capacity and to use additional corn for ethanol
production. If petroleum and gasoline prices move higher over the next
several months, this will increase the demand for ethanol leading to
additional corn being used for ethanol production.
Soybean production down slightly in 2010/11. Soybean planted area
remained essentially unchanged in 2010 but the average yield per acre
fell slightly, causing soybean production to fall to 3.33 billion
bushels, down one percent from last year's record production but still
the second largest crop on record. U.S. soybean exports are expected to
increase about six percent from last year's record to 1.6 billion
bushels, reflecting lower production and reduced competition from South
America and increasing U.S. exports to China. Meanwhile, soybean crush
is forecast to decline by 5.5 percent as increasing availability of
distiller dried grains and stable livestock production lower the demand
for soybean meal. With lower production and little change in total use,
carryover levels are forecast to decline seven percent from last year.
The farm price of soybeans is forecast to average a record $11.20-
$12.20 per bushel for the 2010/11 marketing year, compared with $9.59
last year and the previous record high of $10.10 in 2007/08.
Soybean area forecast to increase slightly in 2011. U.S. soybean
planted area is forecast to increase slightly in 2011. Current futures
imply a soybean to corn price ratio of 2.2, slightly favoring corn over
soybeans. However, rotational practices favor soybeans and strong
soybean prices could encourage farmers to plant soybeans on cropland
previously planted to rice, sorghum, barley and oats.
Returns to biodiesel improve. Fifteen percent of 2010/11 soybean
oil production is expected to be used to produce about 380 million
gallons of biodiesel. Soybean oil is the feedstock for about 50 percent
of domestically produced biodiesel. The amount of soybean oil used in
biodiesel production fell by 17 percent in 2009/10 to 1.7 billion
pounds, but is expected to increase to 2.9 billion pounds in 2010/11.
Wheat acreage down, prices up in 2010/11. For 2010/11, wheat
acreage continued its long term decline falling by nearly 6 million
acres to 53.6 million, the lowest since 1970. U.S. wheat production is
estimated at 2.2 billion bushels, essentially unchanged from the
previous year as lower harvested acreage was offset by improved yields
per acre. In 2010/11, favorable weather pushed the average yield per
harvested acre to a new record high of 46.4 bushels per acre, up 1.5
bushels from the previous record.
Total wheat supplies for 2010/11 are estimated at 3.3 billion
bushels, up from 3.0 billion bushels in 2009/10, with higher beginning
stocks accounting for all of the increase. Higher forecast exports,
reflecting lower production in competitor countries, could increase
total use from 2.0 billion bushels in 2009/10 to 2.5 billion in 2010/
11, causing U.S. ending stocks to decline 16 percent to 0.8 billion
bushels. The average farm price of wheat is forecast to average $5.60-
$5.80 per bushel in 2010/11, compared with $4.87 per bushel for the
2009/10 crop and the record high of $6.78 in 2008/09.
Wheat area to expand in 2011/12. Winter wheat seeded area this past
fall totaled 41.0 million acres, up from 37.3 million acres the
previous year. Despite the recovery in area, wheat production could be
down in 2011 as yield per acre drops off from last year's record high.
Current winter wheat conditions on the Central and Southern Plains are
not as favorable compared with this time a year ago, because of the
lack of soil moisture. A much higher percentage of the winter wheat
crops in Kansas, Oklahoma and Texas are currently rated poor to very
poor than 1 year ago.
Cotton area and production up as prices increase. In 2010/11,
cotton producers responded to improved returns by increasing planted
area by 20 percent. The area planted to cotton, 10.97 million acres,
was the highest in 4 years. Cotton area increased across each region of
the Cotton Belt in 2010. Higher plantings, reduced abandonment and
improved yields are projected to increase cotton production to 18.3
million bales in 2010/11, up 50 percent from the previous year and the
highest in 3 years.
U.S. cotton use for the 2010/11 season is forecast at 19.35 million
bales, 25 percent above last season. U.S. mill use is forecast to
increase slightly while U.S. exports are forecast to increase by nearly
\1/3\. With larger U.S. exportable supplies available this season and
foreign import demand rising, U.S. cotton exports are forecast to
increase to their second highest level on record. U.S. ending stocks
are forecast to drop to 1.9 million bales in 2010/11, the lowest since
1924/25. Reflecting the low level of stocks, cotton prices have
remained relatively high through the early months of the current
season. The 2010/11 farm price is forecast to average 79--84 cents per
pound, up from last season's price of 62.9 cents and the previous
record high of 76.5 cents in 1995/96.
More cotton area in 2011/12. Rising cotton prices will likely
attract additional acreage back to cotton production in the United
States, despite improved returns for corn and soybeans. Cotton planted
area in the United States could increase as much as 10-15 percent in
2011. Improved returns could lead producers to plant cotton on cropland
previously planted to sorghum, rice and other crops as well as
producing cotton on cropland previously left unplanted due to low
returns.
Rice production up, prices moderate. For 2010/11, rice planted area
increased to 3.64 million acres, up from 3.14 million acres the
previous year, and the second highest on record. Total rice production
is up about 11 percent from last year to a record 243 million cwt.
Total use is forecast to increase by five percent in 2010/11,
reflecting improvements in both domestic use and export prospects.
However, the strong increase in production is expected to lead to a
sharp increase in ending stocks, despite higher total use. U.S. ending
stocks are projected at 52.8 million cwt. for 2010/11, up 44 percent
from last year. The farm price of rice is forecast to average $12.15-
$12.65 per cwt. in 2010/11, down from $14.40 per cwt. last season.
Sugar market remains tight. World and U.S. sugar prices have
remained high, as potentially tight global supplies continue to weigh
on the market. In mid-December, Florida's sugarcane producing region
experienced a severe freeze. According to processor reports, this
freeze resulted in widespread damage to existing sugarcane crops
awaiting harvest and recently planted sugarcane meant for harvest next
year. Nearly all of Australia's sugarcane production is in the
Northeast. That region received very heavy rainfall in November and
December damaging that country's sugarcane crop.
U.S. sugar production for 2010/11 is currently estimated at 8.01
million short tons, up from last year's crop of 7.97 million tons. With
import quotas for sugar set at the minimum amount to which the United
States is committed under the WTO for 2010/11, U.S. sugar imports are
forecast to fall to 3.25 million tons, down from 3.32 million tons last
season. U.S. sugar ending stocks are projected to decline about ten
percent to 1.35 million tons resulting in a stock-to-use ratio of 11.8
percent, down from 13.3 percent last year.
Specialty crop sales stabilize. In 2011, specialty crops will
continue to provide a significant source of cash revenues for U.S.
producers. Cash receipts for fruits, nuts, vegetables and melons in
2011 are forecast at $41 billion, unchanged from 2010. Higher cash
receipts for fruits and nuts are expected to be more than offset by
lower receipts for vegetables and melons.
Livestock & livestock products: U.S. production and prices stable.
Total U.S. production of meat and poultry is forecast to remain stable
in calendar year 2011, with slight growth forecast in supplies of pork
and poultry but reduced supplies of beef. Stable production, increased
exports and some recovery in domestic demand should help maintain
livestock prices near last year's historic highs.
For livestock and poultry producers, increasing feed costs will be
an important component of producer production decisions in the upcoming
year. In January, the price-feed cost ratios for cattle, broilers, hogs
and milk, as reported by NASS, were all well below year ago levels.
While livestock prices are expected to remain strong and further
improvement in milk prices is likely in the months ahead, higher feed
costs could lead to below average margins for livestock and dairy
producers in 2011.
Cattle prices forecast record high. Commercial cow slaughter
maintained a high pace during all of 2010. Cow slaughter was the
largest in well over a decade, even though the U.S. cow herd on January
1, 2010 was the smallest since 1951. While cattle marketings for the
last half of 2011 are expected to be lower year-over-year, net
placements in feedlots during 2010 will likely maintain beef supplies
during the first half of 2011 near previous year levels. For all of
2011, beef production is currently forecast to decrease 1.5 percent,
following a 1.4 percent increase in 2010. Steer prices are expected to
average a record $102-$109 per cwt. this year, compared with $95 per
cwt. in 2010.
Total North American cattle inventories are at their lowest levels
in decades. With smaller Canadian and Mexican inventories expected in
2011, U.S. cattle imports are forecast at 2.1 million head for the
year, down from 2.3 million in 2010.
Pork production to increase slightly. Pork production in 2011 is
estimated to increase by 0.4 percent after falling by 2.4 percent in
2010. While hog prices were up 34 percent in 2010 and are expected to
average higher in 2011, increases in feed costs are expected to temper
expansion over the next several months. The Quarterly Hogs and Pigs
report released by USDA on December 27, 2010, showed lower swine
inventories and lower farrowing intentions for the first half of 2011.
During the first-half of 2011, sow farrowings could be about 1.4
percent lower than in the same period last year.
While smaller breeding animal inventories and lower farrowing
intentions often translate into lower pig crops, continued gains in sow
productivity are expected to largely offset lower farrowing numbers in
2011. Moreover, continually improving swine genetics and enhanced
nutrition management practices are expected to continue to move average
dressed weights slightly ahead of last year's average, helping to push
pork production slightly ahead of last year's level. Hog prices are
forecast to average $58-$61 per cwt. in 2011, up from $55 in 2010 and
$41 in 2009.
Broiler production to post modest increase in 2011. The outlook for
growth in broiler meat production for the beginning of 2011 has changed
considerably over the last several weeks, due to sharp changes in both
the weekly number of broiler eggs placed in incubators and the number
of chicks being placed for growout. At the end of November, the number
of chicks being placed for growout was averaging 5.5 percent higher
than the previous year. By the first week of January, the average
number of chicks placed for growout was only 0.8 percent higher than in
the same period the previous year. This abrupt slowdown is likely the
result of sharp increases in feed prices, especially coming at a time
when wholesale prices for many broiler products have been declining.
Reflecting this slowdown, broiler production is projected to increase
by about one percent in 2011 following a four percent increase in 2010.
The price of broilers is forecast to range from 80-85 cents per pound
in 2011, compared with 83 cents in 2010 and 78 cents in 2009.
Milk prices to move higher. Milk production is estimated to
increase by 1.8 percent in 2011 to 196.1 billion pounds. While feed
costs are up considerably in recent months, a decline in cow numbers
may not occur until later this year because of the large number of
replacement heifers available. Milk per cow is forecast to increase
again this year but at less than the pace for 2010. The gain in output
per cow last year was due to good weather in addition to moderate feed
prices.
In recent weeks, both the domestic and international markets for
dairy products have tightened considerably leading to a sharp increase
in wholesale dairy product prices and futures prices for milk. Milk
output has been affected by cold weather in the U.S. and Europe and
heavy rains in New Zealand and Australia. Since early January, the
wholesale prices of cheddar cheese, butter and nonfat dry milk have
increased by 25-50 percent.
The all-milk price is forecast to average $17.70-$18.40 per cwt.
this year, compared with $16.29 in 2010 and $12.93 in 2009. While milk
prices are forecast to be higher in 2011, increasing feed costs could
continue to put financial pressure on dairy producers, especially those
producers that purchase feed at current price levels.

Developments in Farm Credit and Land Markets
Credit conditions appear to be improving. Third quarter 2010
Federal Reserve Bank surveys indicate moderately improving farm credit
conditions nationwide. Commercial banks across the country indicated
ample availability of loan funds, increased loan repayment by farm
borrowers, increased farm incomes, and fewer requests for renewals and
extensions than in 2009. Exceptions include regions dominated by
livestock, milk and poultry production which indicated slightly
worsening farm credit conditions.
Banks in all Federal Reserve Bank districts reported lower demand
for farm loans in 2010, despite historical lows for farm interest
rates. Capital spending was up, especially for larger items (100-HP
tractors and combines). The increased capital spending and reduced loan
demand suggests that these items were being financed with cash or non-
bank credit.
While farm incomes and credit conditions showed improvement in
2010, Federal Reserve Bank surveys indicate credit standards for banks
remain tight. Bankers in all regions except the Kansas City Federal
Reserve District reported increased collateral requirements on farm
loans.
Farmland costs move higher. The value of farm real estate rose by
an estimated three percent in 2010, to a record $1.8 trillion. Strong
prices for major crops and record farm income will likely cause the
value of farm real estate to move higher in 2011. Farm real estate
accounts for 84 percent of total U.S. farm assets and is the principal
source of collateral for farm loans. While a benefit for existing
landowners, 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.

Conclusion
As we enter 2011, the U.S. farm economy is coming off unprecedented
increases in U.S. agricultural exports, farm cash receipts, farm
income, and asset values the past few years. Prospects for 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 soybeans. With biofuel demand expected to
continue growing, although at a slower pace in the future, a big
challenge will be responding to that demand by producing on more acres
and producing more per acre while protecting the environment. I have
the utmost confidence that our farmers and ranchers along with the
assistance of USDA will be able to meet these challenges.
Mr. Chairman that completes my statement.

Attachment
Farm Economic Indicators
--------------------------------------------------------------------------------------------------------------------------------------------------------
Ag. Trade (Bil. $) FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11F
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total exports 56.0 62.4 62.5 68.6 82.2 114.9 96.3 108.7 126.5
Asia 21.6 24.3 22.5 24.9 29.4 43.2 37.6 45.7 54.8
Canada 9.1 9.5 10.4 11.6 13.3 16.3 15.5 16.6 18.0
Mexico 7.7 8.4 9.3 10.4 12.3 15.2 13.3 13.9 16.0
Total imports 45.7 52.7 57.7 64.0 70.1 79.3 73.4 79.0 85.5
--------------------------------------------------------------------------------------------------------------------------------------------------------
Farm Income (Bil. $) 2003 2004 2005 2006 2007 2008 2009 2010F 2011F
--------------------------------------------------------------------------------------------------------------------------------------------------------
Cash receipts 216.0 237.9 240.9 240.6 288.5 318.3 283.4 312.3 340.7
Gov't payments 16.5 13.0 24.4 15.8 11.9 12.2 12.3 12.2 10.6
Gross cash income 246.8 266.5 279.7 273.2 318.0 352.0 317.6 345.6 372.5
Cash expenses 174.7 182.9 193.1 204.8 240.3 261.6 248.5 254.2 273.9
Net cash income 72.1 83.7 86.7 68.4 77.7 90.4 69.1 91.3 98.6
--------------------------------------------------------------------------------------------------------------------------------------------------------

Commodity Prices 1 Unit 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11F
--------------------------------------------------------------------------------------------------------------------------------------------------------
Wheat $/bu 3.40 3.40 3.42 4.26 6.48 6.78 4.87 5.60-5.80
Corn $/bu 2.42 2.06 2.00 3.04 4.20 4.06 3.55 5.05-5.75
Soybeans $/bu 7.34 5.74 5.66 6.43 10.10 9.97 9.59 11.20-12.20
Rice $/cwt 8.08 7.33 7.65 9.96 12.80 16.80 14.40 12.15-12.65
Cotton (Upland) cents/lb 61.8 41.6 47.7 46.5 59.3 47.8 62.9 79.0-84.0
--------------------------------------------------------------------------------------------------------------------------------------------------------
2004 2005 2006 2007 2008 2009 2010 2011F
--------------------------------------------------------------------------------------------------------------------------------------------------------
Hogs $/cwt 52.51 50.05 47.26 47.09 47.84 41.24 55.06 58-61
Steers $/cwt 84.75 87.28 85.41 91.82 92.27 83.25 95.38 102-109
Broilers cents/lb 74.1 70.8 64.4 76.4 79.7 77.6 82.9 80-85
Milk $/cwt 16.13 15.19 12.96 19.21 18.45 12.93 16.30 17.70-18.40
Gasoline $/gallon 1.85 2.27 2.58 2.81 3.26 2.35 2.78 3.15
Diesel $/gallon 1.81 2.40 2.70 2.88 3.80 2.46 2.99 3.43
Natural gas (wlhd) $/K cu. ft. 5.45 7.26 6.39 6.26 7.98 3.72 4.14 3.97
--------------------------------------------------------------------------------------------------------------------------------------------------------
1 Agricultural commodity price forecasts are from USDA, World Agricultural Supply and Demand Estimates report, February 9, 2011. Energy prices are from
Energy Information Administration, Short Term Energy Outlook, February 8, 2011.
F=forecast.

The Chairman. Thank you, Mr. Secretary.
Mr. Secretary, you rightly point out that the farm economy
continues to remain strong. I am concerned about stability.
Over the last 62 years, which is a little longer than both your
and my personal frame of reference, the nominal monthly,
average price for wheat in my home State of Oklahoma, has
reached a historic high on 21 occasions; 21 months out of 62
years. In all but one of those instances, the price dropped
back below that high within the following year. And the one
exception was December of 1950 when it took 18 months to fall
back below that high. Are you concerned about the price
stability in the commodities?
Secretary Vilsack. Mr. Chairman, I think you always should
be concerned about stability for the reasons that you have
articulated in your question. Having said that, one of the
things that is driving the current increases in prices is the
growing global demand. And that in part is as a result of
improving global economic conditions and the development of
middle classes in a number of developing nations.
So the combination of that, combined with our efforts and
others, to try to increase agricultural productivity, not just
in the United States but globally, to meet the demands that you
again rightly indicated in terms of an increasing world
population, the combination of those two things should help us
encourage greater stability in the market.
The Chairman. Mr. Secretary, I will admit that I am a
little concerned about the effect that weather patterns in
Russia and China and not enough moisture, and too much moisture
in Australia, are having on the attitudes of the markets and
current prices.
My question is to follow up on basically what you have
said: So you believe we have reached a new plateau based on
this demand change?
Secretary Vilsack. Well, one thing that I know that is
certain about agriculture, Mr. Chairman, is that there is a
great deal of uncertainty. I think you always have to be wary.
Another reason for my confidence generally is that I think
there are extraordinary productivity gains that will continue
to be developed from improved production processes and improved
science. So while we have serious challenges, the challenge
that I am most concerned about isn't so much price stability as
it is who is actually going to be on the farm to produce the
crops that are necessary.
You mentioned the small number of farmers; and in our
lifetime, we have gone from 15 percent of our population being
on the farm to now less than one percent. So that is a deep
concern that I have in terms of who is actually going to be
able to do the work.
The Chairman. Secretary, let's visit for a moment about the
Administration's budget proposal for agriculture in justifying
the lower AGI threshold and their proposal for reducing direct
payments. There was a quote in, I believe it was Reuters News
Service, referencing an Administration official who said direct
payments, ``distort production and drive up the value of
farmland.''
Do you agree with that statement, Mr. Secretary?
Secretary Vilsack. The proposal we made, Mr. Chairman, is
one, that we have consistently made and we have discussed
before, and that is the view that the safety net needs to be
directed to the people who are in need of it most. What we are
proposing impacts roughly two percent of farmers, roughly
30,000 of the 2.1 million producers in this country. It is
really designed in response to the economic reality we face.
When the farm bill was passed in 2008, the economy was in a
much different place than it is today, and we all recognize
that we have a responsibility to focus on deficits, and
everyone is going to have to share in that responsibility.
The Chairman. As the Committee crafts a 5 year farm bill
policy which has to take into consideration not just the good
times at this point in time, but where we may be 5 years down
the road, and we have to factor in our international trade
obligations under the WTO, I guess I come back just one more
moment to this direct payment question. Do you believe that the
direct payments actually distort production decisions in the
way that they are crafted to be independent of the production
process right now?
Secretary Vilsack. Well, given the size of the direct
payments, I am not sure that I would necessarily suggest that
it is market-distorting. I am not quite sure who made that
comment. It didn't come from me, and I don't believe it came
from USDA. I think there are some very small programs within
the farm bill that involve storage, that one could potentially
argue have some capacity to alter market decisions, but I don't
believe that applies necessarily to direct payments.
The Chairman. I can't necessarily speak for all of the
regions of the country, but in my home area, wheat country, on
a $1,500 piece of land, the direct payment is something like
$15, one percent. We have debated whether that is relevant or
not. It seems like one percent----
Secretary Vilsack. Mr. Chairman----
The Chairman. Please.
Secretary Vilsack. I thought this whole discussion was
succinctly stated at a Farm Bureau meeting I attended in
Atlanta. I think what we have to decide, and I mean ``we''
collectively, what we have to decide is whether or not we want
a safety net process that provides a small amount of payments
over each year, regardless of whether it is a great year, bad
year, or middle year, or whether we really want to take a look
at some other concept that would provide for much greater help
when you absolutely need it.
And I think there is an ongoing conversation about
appropriate risk management tools, and I look forward to
working with the Committee as you all craft a farm bill to try
to hone in on that particular question. I think it is an
important one.
The Chairman. You are entirely right, Mr. Secretary. And as
we craft those policy decisions, we have to craft decisions
that will enable us to win fights in the WTO court. I may not
have voted to join the GATT in 1995, but we are a part of it
and we will have to live with it.
I now turn to the Ranking Member for any questions he may
have.
Mr. Peterson. Thank you, Mr. Chairman.
Mr. Secretary, I think I read yesterday or the day before
some kind of report out of your Dairy Industry Advisory
Committee. Are they done with their report or was that--I don't
know where I read it, but there was a discussion about some
consensus. Where is that process and when are they going to do
a final report?
Secretary Vilsack. Representative, we anticipate a report
the first week of March. They have finished their meetings, and
they are in the process of finalizing the draft of the report.
While the reality is that this committee and this council
represented virtually every interest in dairy, and as you well
know, those interests are quite varied, there was a great deal
of agreement. I wouldn't say there was unanimous consensus with
the committee and council, but there was a good deal of
agreement.
I think this is a real opportunity for us this year to work
with those who have been working on a variety of different
ideas in dairy so that we can perhaps, in this part of
agriculture, create far greater price stability and far less
volatility than we have seen. We have lost roughly 45 percent
of our dairy producers in just the last 10 years, and part of
it is the peaks and valleys are steeper, they come quicker, and
it is much more difficult for people to rebound.
Mr. Peterson. I assume this group has been following the
National Milk Producers Federation's Foundation for the Future
discussion, and that is part of their focus as they have gone
through this?
Secretary Vilsack. There has been an awareness of what
National Milk Producers Federation has put together, the four-
point plan that you are well aware of, and the discussions that
took place in the council certainly tracked along the lines of
what National Milk Producers Federation was looking at. Again,
I am not going to suggest there was complete unanimity
concerning what National Milk Producers Federation has
proposed. But there is a basis, a strong foundation, and a
consensus among dairy generally that this is the time to do
something. Despite the fact that we are seeing rebounding
prices, I think everyone knows that we can't afford this
continued volatility.
Mr. Peterson. I assume that group has come to the
conclusion that most people who have looked at this think, and
that is the current system is not working. It is just
inadequate to address the problems. I feel like we really can't
afford to wait for the farm bill to address this, if it is
possible. I am concerned about what could happen in the
interim.
What is your feeling on that? Do you think we should be
moving sooner rather than later if we can get a consensus?
Secretary Vilsack. We are certainly willing to work with
whatever the wishes of the Committee are. I would answer it
this way. Given the tremendous drop that occurred in a
relatively short period of time since 2008, I think it behooves
us to really look at a solution as quickly as possible so that
we have the best chance of stabilizing and broadening the price
band. Especially since there appears to be energy and focus in
the industry on this, I don't think you would necessarily want
to lose that focus and that energy if it gets wrapped up into a
much broader conversation involving the farm bill generally.
Mr. Peterson. You announced a new CRP sign-up, I believe,
in Pheasants Forever; right?
Secretary Vilsack. I did.
Mr. Peterson. That is going to take place when?
Secretary Vilsack. I think it is next month.
Mr. Peterson. By the way, I have handed out to some of you,
but this is the 25th anniversary of CRP, which I would argue is
the most successful conservation program we have ever had, and
I have pens here if anybody wants one.
In the last sign-up do you have any tracking information--
and my general sense is what is coming out is land that is
probably more suitable to be farmed and what is going in is
maybe stuff that shouldn't be farmed. That seems to be what is
going on. Do you have a way to track what came out last year,
if that all went back into production? Is there a deal now at
the Department where you are able to determine that?
Secretary Vilsack. I am not sure that we can pin it down to
the specific acre, but your observation is accurate, which is
that a lot of the land that was put into the program a number
of years ago perhaps is better suited for crop production. And
what is going into the program, because of the nature of the
program and the nature of the scoring system, is
environmentally sensitive and land that actually probably ought
not to be farmed. And our expectation/anticipation is that we
will be very close to the cap that was established of 32
million acres.
I have been told we don't actually track specific
production, so I am not sure that we can answer the specific
question of what goes in and what goes out. But I can assure
you that we are focused on land that is environmentally
sensitive and not likely to be particularly productive--or as
productive.
Mr. Peterson. Thank you, Mr. Secretary, and Mr. Chairman.
The Chairman. The chair now recognizes the gentleman from
Illinois, Mr. Johnson, for 5 minutes.
Mr. Johnson. Thank you, Mr. Chairman. And thank you for
your initiative in convening this hearing. And thank you, Mr.
Secretary, for your attendance here.
By the way, the Ranking Member has indicated to me, in
light of the fact that we haven't gotten a COLA increase for
the last 2 years, that these are on sale through the Peterson
office for, what, $5 for ten. I am only kidding. They are nice
pens, and a wonderful tribute to a great program.
Let me say that some of my comments I am going to actually
reserve. I realize you are not Lisa Jackson nor her surrogate.
I think I speak for Members of this Committee, and I certainly
speak for the people of the 15th District of Illinois when I
would advocate very strongly that you, Mr. Secretary, as part
of the Administration, convey to Ms. Jackson, the
Administrator, that her actions as EPA director are causing
literal havoc within the agricultural community and we need to
get that raging bull by the horns before it destroys American
agriculture. That is simply a preface, and I realize you are
not responsible for her actions, but you are part of an
Administration that shares a President. My hope is that you can
play a role as our advocate in that regard.
Let me say, I think you pointed out to begin with, an
extraordinarily important point, and that is while we are
seeing an increase in prices and that times are good, that
doesn't mean in 6 months or 9 months or 2 years that we might
not see the converse. And I am particularly concerned with some
of the proposals in the President's budget that might not
reflect that we are locking permanent changes into the budget
that might not anticipate those times that inevitably come
within the ag community.
Would you agree we always face a degree of instability, and
before permanent changes are made, those should reflect the
likelihood or lack of likelihood of that volatility?
Secretary Vilsack. Representative, agriculture is subject
to change. There are a lot of factors that go into whether or
not it is a good year or not.
But at the same time, we have to be flexible enough in the
21st century to be able to respond to circumstances more
quickly than perhaps we have in the past.
Mr. Johnson. I guess my narrow question is: Do you think
that the President's proposal with respect to direct payments,
crop insurance, conservation cuts, and restoring SNAP money in
the President's budget proposal reflects that volatility; or do
you not?
Secretary Vilsack. I believe it does. The direct payment--
--
Mr. Johnson. I only have 2 minutes. I just wanted a yes or
no. I don't agree with you. I don't think it does reflect that.
But I asked you the question, and you gave the answer.
Let me focus on trade for a moment. We have three pending
trade agreements: one, Korea signed in June of 2007; one with
Panama in June of 2007; and one with Colombia in November of
2006. This is from your own Department, Mr. Vilsack.
The belief is that failure to ratify the Korea Free Trade
Agreement would put our exporters at a tremendous competitive
disadvantage, specifically with the EU, with respect to
livestock and otherwise; that failure to execute the Panama
agreement would erode from 51 percent to only a fraction of
that given our competition from Costa Rica, Chili, El Salvador
and other countries that have those agreements. And last, the
Colombia Free Trade Agreement which Speaker Pelosi refused to
bring before the Chamber, the U.S. has already paid a huge
price for that. Our agricultural imports fell from 44 percent
in 2007 to 27 percent in 2009.
My question is: Are you willing to advocate on behalf of
these three agreements, first, with the Administration to get
them to get the paperwork to us; and then second, with the
House and the Senate to see ratification of those three
agreements?
Secretary Vilsack. I look forward to making a strong effort
in the Korea Free Trade Agreement which I hope will be before
this body very soon.
There are still a few details that have to be worked out on
Colombia and Panama; and when they are, I will be more than
happy to be supportive of them because of the positive impacts
those agreements will have on agriculture.
Mr. Johnson. My question is: Will you commit to a specific
time frame by which the Administration will have those to the
Congress and also lobbying on their behalf?
Secretary Vilsack. Well, I am happy to advocate on behalf
of the agreements; but I don't know that it is necessarily my
call to commit the Administration to a specific time frame.
Mr. Johnson. But you would agree that ratification of these
three agreements which have been pending for up to 5 years are
critically important to American agriculture as we try to meet
the objective of meeting a double demand in the world food
consumption by 2050.
Secretary Vilsack. I think trade agreements, both bilateral
and multilateral, are extremely important, as well as breaking
down barriers. That is one of the reasons why we are seeing a
record export year. We are focused on that, and we will
continue to be focused on that.
Mr. Johnson. Well, I am taking that, and I assume other
Members of this Committee are talking that to be--and we
appreciate your commitment to advocate on behalf of these
agreements, to lobby on their behalf, and make sure that they
are ratified.
The Chairman. The gentleman's time has expired.
I turn to the gentleman from Pennsylvania, Mr. Holden, for
5 minutes.
Mr. Holden. Thank you, Mr. Chairman.
Mr. Secretary, as you know, in the last farm bill, we
established a conservation program for the producers in the
Chesapeake Bay watershed. And I want to commend you and Chief
White and the Department for the way you have implemented that
program. You have done a great, outstanding job. But despite
this record-setting investment, we are facing an Executive
Order from the President that will put further regulations and
rules on our producers. And in the last Congress, Mr. Goodlatte
and I tried to work on legislation that would give USDA a
larger say in implementing this Executive Order, and we
continue to work on legislation in this Congress. We are just
not ready to introduce it yet.
But my question is: In the interim, lacking guidance from
the Congress, have you and your Department had ongoing
conversations with the EPA about how they intend to implement
the Executive Order in the watershed?
Secretary Vilsack. We have, Representative, and a couple of
things. We are working closely with the EPA, as we did with the
Department of the Interior, to see whether or not there is some
process by which we can use the resources available to USDA to
encourage conservation in exchange for producers embracing
those conservation practices. They would receive some degree of
regulatory certainty from the EPA and other agencies.
I think this an exciting new opportunity for us. We have
done this in the sage grouse issue out in the West, and we are
looking at ways to figure out ways to build on that success.
Mr. Holden. I am glad to hear it. I think we need to get
you some legislation, though, to give you some greater
authority, and we intend to work on that in the very near
future.
Actually, Mr. Secretary, last year we passed the mandatory
electronic price reporting for dairy. How is that process
going?
Secretary Vilsack. Well, Congressman, you passed it, but
you didn't provide any resources for it. So what we have done
is we have attempted to figure out is there a way in which we
can provide some degree of reporting. There are two functions
here. There is the reporting function and then there is the
auditing function. We think we will be able to do something
this year on just basic information being provided on a weekly
basis. I think what you really want ultimately is numbers that
you are very confident in, and that requires the auditing
function. That is a much more expensive operation. If we
receive the resources, we would be happy to follow through.
Mr. Holden. How much money are we talking about for full
implementation?
Secretary Vilsack. I think the projection was $2.5 million.
That is my memory. I could be wrong, but it is somewhere in
that neighborhood.
Mr. Holden. Thank you. I yield back the balance of my time.
The Chairman. The chair now recognizes the gentleman from
Pennsylvania, Mr. Thompson, for 5 minutes.
Mr. Thompson. Thank you, Mr. Chairman, Ranking Member. And,
Mr. Secretary, it is always good to see you.
My first question has to do with forestry and just seeking
to see what numbers are out there. My frame of reference,
obviously, is the Allegheny National Forest. I was curious on a
national level if what my experience has been in the ANF
parallels forestry, our national forests across the country in
terms of timber production. The plan in the Allegheny National
Forest, the management plan calls for harvesting up to 90
million board feet. That is a pretty high number, a good
number. Traditionally, we have been struggling with about 20
million, although this year the forest is up to 40 million
board feet. Just about 40. It is a step in the right direction.
We have a long ways to go to get up to good, full, healthy
practices where we can harvest in a sustainable way, which is
obviously good for the forest as well. In your opinion, do we
have data to show, do other forests have similar experiences?
Secretary Vilsack. I think it is fair to say that over
time, the amount of board feet has been reduced. But we are in
the process of putting together a new forest planning rule
which we think is designed to balance appropriately all of the
multiple uses that forests are now engaged in. There are the
energy issues, the mineral extraction issues, the forest timber
issue, the recreation, and the energy issue is one that I think
holds a tremendous amount of opportunity to create new economic
opportunity in rural communities.
The forest plan rule was just released for comment. We are
engaged in the most transparent process ever in an effort to
try to gauge as much support for this concept as possible. It
is a whole landscape approach where we are tying what we do
with the forest, with what we do on private working lands. And
we are also sort of changing the focus on this. We really want
our forests to be resilient.
As you probably know, in some parts of the country there
are serious problems with bark beetle infestations and things
of that nature. I think you are going to see a balanced
approach and recognizing the enormous economic opportunities as
well as recreational opportunities that our forests present.
Mr. Thompson. Recognizing its multiple uses, although
frankly when I look at the charters with the ANF, it really is
about providing sustainable resources for the country, and so
timber, oil, natural gas, and minerals. I know that bumping to
that 40 million board feet, a small part of that was the
clearing of timber for oil and natural gas drilling. Our forest
was oil-filmed before it was ever a forest years ago, so that
has helped get those numbers up.
One of the things that I was surprised to find out, and
this is something that I would like to follow up more on at
another time, is that those timber sales, which are usually bid
at market price--if a timber sale is specific to oil or natural
gas, those pad sites, 5 to 10 acres if it is a horizontal well,
and less than that obviously if it is vertical well, the Forest
Service puts a 17 percent premium on. It is like a 17 percent
tax on top of the market price, which I have to believe
obviously suppresses the market for that timber, those who are
bidding on it. One of the things I would like to find out, what
is the rationale behind that, a 17 percent premium on top of
the market bid?
Secretary Vilsack. If you will give me an opportunity to
ask that question myself, I will be glad to get you the answer.
Mr. Thompson. That would be great. If you follow up with
me, I would appreciate it.
I want to thank you in my remaining time regarding the
ruling with the Roundup Ready' alfalfa. I was
pleased to see that. I think that has really provided some
certainty at a proper time for our farmers as they are ordering
their seed for this year. That Roundup Ready'
alfalfa, I don't think that it is a USDA figure, but a third
party has shown that it is going to help increase profitability
by about $100 an acre. When it comes to dairy farming, anything
that we can do on that side of the column is a good thing.
Are there other things that USDA is looking at in terms of
helping to prevent the situation, to keep feed costs down?
Secretary Vilsack. Well, it is obviously in part a result
of market forces and the demand, strong demand for all of our
feed. There is not a tremendous amount we can do to focus on
the cost side. We can create opportunities to either increase
markets so the prices remain strong through exports and
domestic use, or we can provide opportunities through our
credit process. We are focused on increasing research and
development in both livestock production and protection, so we
expand significantly our opportunities to profit. And we are
also working, as you probably know, on some of the impacts of
ethanol production and the feed by-products that are produced
as a result of that process and how they might be able to
assist us in sort of stretching our feed dollar more
effectively. But on that side of the equation, it is a little
bit more difficult than it is on the demand side.
Mr. Thompson. Thank you very much, Mr. Chairman.
The Chairman. The gentleman's time has expired.
I now turn to the gentleman from North Carolina, Mr.
Kissell, for his 5 minutes.
Mr. Kissell. Thank you, Mr. Chairman, and thank you, Mr.
Secretary, for being here.
Mr. Secretary, I believe it was in December you announced
in the GIPSA rule that you were going to have a cost-benefit
analysis done. I am wondering what the timeline on that
analysis might be. And also, once it is done, are you going to
allow a time for public comment before the rule is imposed?
Secretary Vilsack. Well, we extended the time for comment
prior to that decision, and we received a substantial number of
comments which are in the process of being categorized and
reviewed. Those comments are going to help significantly inform
what Joe Glauber and his team will do in terms of the analysis.
You know, I would like to give you a specific time frame; but
at the end of the day, my instructions to Joe and his team was
to do it right and to take the time necessary to do it right
and as complete as possible. We believe we have a pretty good
idea of the concerns that people have raised from the comments,
and we are obviously anxious to get this process completed as
appropriately and as quickly as possible.
Mr. Kissell. Thank you, sir. I yield back my time.
The Chairman. The gentleman yields back his time.
I now recognize the gentleman from Ohio, Mr. Gibbs, for 5
minutes.
Mr. Gibbs. Thank you, Mr. Chairman, and thank you, Mr.
Secretary, for coming in.
I appreciate your remarks. Since I have been farming and
involved in agriculture and agricultural policy in the mid-
1970s, we always said farmers were going to get their income
from the market. In recent years, as least on the grain side,
that is happening. We are not getting it from LDPs and stuff
like we did in years past, as you are aware.
I think when we craft the next farm bill, I think there
will be a lot of discussion about the safety net programs, and
what falls into there is the Crop Insurance Program and base
payments. So I just wanted to reflect now on that a little bit.
When you talk about the sectors and regions and sectors
that are having some challenges--livestock, dairy and poultry--
I recently talked this week with one of my large hog producers
in Ohio, and he is really concerned about the cost of feed and
the ethanol relationship.
Can you expand a little, because you haven't really
mentioned it, I have always been supportive of the ethanol
industry and all that, but his comments were when you have the
subsidy and the mandate of a certain amount, a certain percent
of ethanol and all that, and the relationship, and now you see
the usage of corn maybe exceeding the feed usage on a national
basis, what would be the impact if some of the policy on
ethanol, government policy, changes to the market and its
effects?
Secretary Vilsack. Well, I think we got a slight indication
of what would happen if you prematurely withdraw the support
for a maturing industry when we allowed the biodiesel tax
credit to lapse prematurely. It resulted in 50 percent of the
production being cut and 12,000 jobs being lost.
So what I have been saying is that I think there is an
opportunity for us to discuss how those incentives are best
used to produce a very stable and secure market for renewable
fuel; the reason for it being that we know that when we reach
the 36 billion gallon threshold that the Congress has set, we
are going to have a million additional jobs, up to a million
additional jobs in rural America, which are very much needed,
and $100 billion of capital investment. So to me it is an
opportunity for us to not only stabilize markets but also to
make sure that we create jobs.
I think two things: Number one, I think there needs to be
some discussion about how we might be able to make the supply
of ethanol more convenient, which is why there is a discussion
about blender pumps and the ability to potentially incent the
blender pumps as opposed to the way we are incenting the
industry today.
I think there is a discussion that could took place in
terms of the number of flexible fuel vehicles that are actually
produced by our automakers and how we might be able to
encourage more automobiles that can use higher blends of
ethanol.
Finally, it is very important for us to expand
significantly the feedstocks that are used to produce ethanol
so that we are not as reliant on a single feedstock as we are
today. That is the reason we announced recently three
biorefineries, primarily in the South, taking a look at woody
biomass and some other waste products. That is why we have 68
feasibility studies under our REAP program to take a look at
everything from algae to crop residue to ways in which we can
accelerate the cellulosic ethanol opportunities.
Mr. Gibbs. I appreciate that, and look forward to working
with you. In Ohio, we have a project that we have been working
on through Ohio State University, a crop that produces natural
rubber. And what is really exciting about that, when they
extract the latex out of the roots, it is a stream ready to
ferment for ethanol. So that is some of those other issues. I
don't know if you are aware of that.
Secretary Vilsack. I have actually seen and spent time with
the Ohio State folks, and have actually seen the production
process that they have. That is the kind of thing that I think
is exciting because there are multiple uses that can generate
from those kinds of production processes.
Mr. Gibbs. I yield back my time.
The Chairman. I now recognize the gentlelady from Maine for
5 minutes.
Ms. Pingree. Thank you very much, Mr. Chairman.
Mr. Secretary, thank you for being here today. I appreciate
your testimony and your work on behalf of all of our farmers. I
might have a slightly different perspective than a lot of
Members on the Committee, but I was actually disappointed by
the decision to fully regulate Roundup Ready'
alfalfa without any conditions. I think I have a lot of
colleagues and certainly a lot of constituents who have
concerns about the continued deregulation of genetically
engineered crops and the long-term consequences for the organic
and non-GE conventional sectors, maintenance and expansion of
lucrative export opportunities and consumer choice. I also
think the issue of liability for organic and non-GE farmers
remains unresolved.
I was initially encouraged by your steps to address
measures for much-needed contamination prevention practices and
oversight. And given the significant economic impacts of
continued deregulation for the organic and non-GE sectors, do
you have steps you plan to take to address contamination in the
farmer's fields and liability needs? I know this is a
complicated issue, but I appreciate your comment.
Secretary Vilsack. I appreciate the question. I just simply
point out that at USDA we think we are doing something right,
but on alfalfa we are likely to get sued for the decision we
made. And on sugarbeets, we are likely to get sued on the other
side for the decision we made. So we must be doing something
right.
But specifically to your question, the conversation that we
facilitated was an extraordinarily important one, and it was
worth the difficulties that it created from a sense of the germ
plasma concerns that were expressed, and the ability that we
always would have access to nonconventional alfalfa seed. And
we tried to address that specific concern outside of the rule
by creating another opportunity within USDA in terms of its
Germplasma Protection Program to use a more isolated site in
Idaho to be able to guarantee that we would always have a
supply of non-GE seed.
Second, there is some interesting research being done in
corn on cross-pollination, and whether or not you can create
something within corn that would allow it to defend itself from
a foreign gene or pollen that would be contrary to what you
wanted to do. The question is: Is there a way in which that
research could inform a similar type of opportunity within
alfalfa? We are reconstituting two advisory groups, one on
germplasms, one on just basic general discussion of
biotechnology to go more deeply into these discussions.
Our view at USDA is it is not either/or, as some would like
to suggest. It really is about how can we have as diverse an
agriculture as possible so everyone can do what they feel and
they decide is best for their operation. The more the merrier
because it creates domestic markets. And both types create
opportunities from an export perspective. And it is the type of
thing that will generate more farmers and more opportunities
within agriculture.
So we are trying to have that tough conversation. It is
difficult to have it in the context of constant litigation, but
that is where we find ourselves today. As I say, no matter what
we do, there is always somebody that is dissatisfied with it.
What we are trying to do is say rather than constantly
litigating, maybe we can have a conversation and figure out
ways in which we can at least find where the common ground
exists. I think we did a lot of that in alfalfa. I know a lot
of folks are not happy, but we certainly did more than we would
have done had the conversation not taken place.
Ms. Pingree. I do appreciate your pursuing the conversation
and looking for ways to resolve some of this. I am not sure
that the suggestions you are working on now are going to be
enough, but I look forward to being in the continuing dialogue
with you.
I have one last quick question. If I don't have time to get
your entire answer, I will ask it later.
I see the Administration's budget for the National Organic
Program includes an increase of $3 million to strength
enforcement capacity to protect the integrity of the USDA
organic seal. I am just interested in knowing what the
additional dollars will be used for; particularly in regard to
foreign products, how they will be used?
Secretary Vilsack. In the foreign area, we are most focused
right now on negotiating equivalency agreements. We reached one
with Canada last year, and we are in intense conversations with
the EU right now. And our view is if we can develop a common
understanding and a common agreement about what constitutes
equivalence, it will be a way to protect the brand. I mean, at
the end of the day, the value added to organic is basically
that you can guarantee that it is indeed organic. And this
resource is primarily designed to make sure that folks who are
alleging that they are producing organic are actually living up
to the standards that have been set by the industry.
Ms. Pingree. Thank you very much.
The Chairman. The gentlewoman's time has expired.
The chair now recognizes the gentleman from Tennessee, Mr.
Fincher.
Mr. Fincher. Thank you, Mr. Chairman.
As a seven-generation farmer, the phrase ``Some days you're
the windshield, some days you're the bug,'' that kind of goes
with the farming industry.
I think what we need to make sure that we do is we have a
slow, steady approach. The consumer is who benefits or who is
hurt by whatever happens here. Not only are commodity prices in
a great place for the ag industry all over this country, but
rising input costs, fertilizer costs, fuel prices, seed prices,
land, rent, as far as the inflation of the prices, all factor
into the decisions that are going to be made over the next
couple of years with the new farm bill.
As a farmer, as an active farmer, the amount of regulations
that we are dealing with from EPA and other agencies are really
becoming an issue. I think I hear you today saying that you are
standing with the ag community to make sure, and again I think
who is hurt here is the consumer in the end, because we don't
want to ever get to the place where there are no farmers left
and we go to the grocery store and there are only a few loaves
of bread or a few cartons of eggs or a few gallons of milk
because we have regulated our farmers out of business.
We can compete with the rest of the world as good as
anyone. But the free market, it really works well when we let
it do its job. No doubt we can agree that there is a certain
amount of oversight and regulation that we comply with. But
again, Washington bureaucrats printing or making a computer
program, and then trying to implement that program on the farm,
sometimes doesn't always pan out.
So your commitment to us today, again, Mr. Chairman and his
commonsense approach and his remarks, and the Ranking Member as
well, as we move forward, maybe in a deregulation process to
make sure we can, as farmers and as this Committee, do our part
to making sure that the ag community does prosper and stays
intact a for long term, for our future generations. Nobody
wants to see it anymore than I do for my children.
But again, thank you for your service. The regulations are
a big, big problem for us.
Thank you.
Secretary Vilsack. Representative, I wonder if I can just
respond to your comments in this way. One of the first things I
did was to establish a good relationship with Administrator
Jackson and encourage her to actually take time to visit farm
country, which she has done. We also encouraged her to engage
in regular conversations with commodity and livestock groups,
which she has done. We continually work with her ag
representative, Larry Ellsworth, in an effort to try to make
sure that there is a complete understanding of the impact that
certain proposed regulations or thoughts might have on
production agriculture in particular.
You know, I think there has been a willingness to listen,
and there have been adjustments made as a result of that. And
we are going to continue to do that. There is no question
farmers, in my view, are the ones who are most concerned about
stewardship, because at the end of the day they live or die
based on the capacity of the soil to produce, and they are very
interested in making sure that we have clean and healthy water
for a multitude of reasons.
So there is a good relationship. We are going to continue
to work and do our job to make sure that there is an
understanding of the impact of the regulations.
Mr. Fincher. Thank you, Mr. Secretary. The high prices of
commodities now, they probably won't always stay this high. So
a safety net as we move forward is critical to ensuring that
our farmers stay profitable in the long term.
Thank you, Mr. Chairman. I yield back.
The Chairman. The chair now recognizes the gentleman from
Massachusetts, Mr. McGovern, for 5 minutes.
Mr. McGovern. Thank you, Mr. Chairman. Mr. Secretary,
welcome, and thank you for being here.
Let me begin by saying that hunger and nutrition are the
main reasons why I sought to get a seat on the Agriculture
Committee because this Committee, not only domestically but
internationally, is key to providing a safety net for those who
are falling through the cracks. And internationally, it is a
national security issue.
And I appreciate the Department's support for the McGovern-
Dole school feeding program, and I appreciate your leadership
here domestically. I appreciate the President's commitment to
end childhood hunger by 2015. I want to see him do that. I
appreciate your commitment to making sure that the food stamp
or the SNAP program is adequate to meet the needs of those who
are experiencing difficult times during this difficult economy.
During the 110th and 111th Congresses, we saw the greatest
improvements in investments in SNAP in generations. Yet much of
that funding was used to offset the FMAP bill and the child--
the Nutrition Reauthorization bill, and I am pleased that the
Administration has included the restoration of some of these
cuts in their 2012 budget request. And you know there are some
who complain that a huge portion of agriculture's budget goes
to food and nutrition issues. I think that is a good thing from
my perspective.
But I also remind people that as the economy gets better,
and people are more secure than the obligation to provide a
helping hand, whether it is SNAP or other programs decreases.
So the answer to that is to get the economy moving again.
I also--you heard people in the context they will tell you
about entitlement reform saying that well, we need to take a
hard look at the SNAP program. It is my understanding, and I
appreciate your comment when I am finished, that GAO did a
recent study not too long ago that this is one of the most
efficiently-run programs in the Federal Government, that if
there is an error rated sometimes it is mostly that we don't
provide enough, not that we provide too much.
The other thing I want to say is that I recognize that the
battle to end hunger in this country and to meet your goal of
ending childhood hunger in the United States by 2015 does not
solely rest with USDA, there are other departments and other
agencies that have a role in this. I urge the President, along
with Congresswoman Jo Ann Emerson, that one of the things that
might be useful to develop a holistic plan so that we get this
right because we are investing an awful lot of money in these
programs. There was a White House Conference on Food and
Nutrition, one domestically and one internationally this way so
that everybody who has a role in this can actually figure out
what their assignment is. Make sure there is interagency and
interdepartmental communication, which I am sure there were
some, but to come up with the plan so we all know what to do,
and it makes it easier here in Congress then to advocate,
because it is not just the Agriculture Committee, there are
other committees involved. I mean children and nutrition falls
under the Education and Labor Committee. But I don't see us
kind of working in a coordinated way to actually come up with a
plan. And so I would appreciate your comments on the SNAP
program but also on maybe the prospects of trying to get some
people together with the White House on a summit that would
bring everybody together.
Secretary Vilsack. Representative, I appreciate your
passion on this issue, and let me see if I can respond as
quickly as I can in the time remaining. Number one, the reason
why I think the Recovery Act included a commitment to the SNAP
program was not just because there were going to be more people
in need of that assistance, but because it was indeed perhaps
the most effective stimulus in terms of immediate impact on the
economy. Ninety-seven percent of SNAP benefits are spent within
30 days.
And when people can produce and when people can purchase
more at the grocery store, it obviously means that more has to
be packed, and processed, and shipped, and transported and
produced and so forth, those are all jobs. Every dollar spent
in SNAP generates about $1.80 to $1.90 in economic activity, so
it is a stimulus effect, number one
Number two, there is a misunderstanding of who actually
receives SNAP benefits. There are a lot of senior citizens who
receive it and there are obviously a lot of children. Only ten
percent of the SNAP recipients are cash welfare recipients so
it is roughly the working poor, the folks who are struggling
are helped out with this program.
The error rate for the last several years, we have had an
error rate that is less than six percent. Last year it was very
close to 3\1/2\ percent, which, given the amount of increase
that has taken place in the program, another eight million
people added to the program, the fact that we went down in the
error rate does suggest and support your notion that we are
doing a good job, but we can always do a better job and we are
focused on that.
In terms of the issue of a summit, I will say that there is
very good coordination on the international side with Feed the
Future Initiative, the State Department, USAID and USDA are
working very collaboratively. And I think that represents a
good model for us perhaps on the domestic side. I am certainly
happy to talk to folks about your idea. Anything that can allow
us to do a better job in a more coordinated, integrated
fashion, I am all for it.
The Chairman. The gentleman's time has expired. And before
we turn to the next individual, I would point out I share Mr.
McGovern's observations and points, and with projected 75
percent of all the farm bill spending in this 5 year cycle to
go to it, we are trying.
I now recognize the gentleman from Georgia, Mr. Scott for 5
minutes.
Mr. Austin Scott of Georgia. Thank you, Mr. Chairman. And
Mr. Secretary, thank you for being with us today. And I would
point out you have been a governor before and were reelected as
governor, so you did some things right I would think, in your
state.
Secretary Vilsack. Representative King might disagree.
Mr. Austin Scott of Georgia. You hit on a point with our
economy, I want to come back to. Stable markets create jobs. Is
that a fair statement, that the more stable the markets are the
more job creation we can count on in this country?
Secretary Vilsack. I would say that the more stable the
markets are, the easier it is for people to be able to plan and
therefore the more stable the job market is.
Mr. Austin Scott of Georgia. So you would an agree then
that regulatory uncertainty is bad for the economy?
Secretary Vilsack. I am not--well, I don't want to be
argumentative. Obviously if there is confusion about
regulation, that is not a good thing.
Mr. Austin Scott of Georgia. I guess I go back to what you
said when, I think it was Mr. Holden that asked the question,
and you essentially indicated that the American farmer was
going have to barter with the EPA for regulatory certainty.
And----
Secretary Vilsack. Well, I don't think that is--that is not
what I intended. Let me give it another shot and perhaps maybe
I need to do a better job explaining this. I think what is of
concern to a lot of farmers is when they are asked to embrace
conservation programs, which they are happy to do and they want
to do. And then the rules change after they have basically
taken certain steps, that it makes it difficult for them. And
so what we are trying to do is give them a degree of certainty
that when you take these steps, you won't have to worry about
the rules changing, and we think that is a good thing.
Mr. Austin Scott of Georgia. And that also changes the
value of the assets that they own. I mean, the bottom line is
when the government changes the rules after the decision has
been made, the individual should be allowed to go back and make
a different decision based on the new rules, but the EPA
doesn't work that way.
Let me tell you what the EPA did about a week ago in Tifton
as far as working with them. They walked into a family man's
business, a little business in Tifton, Georgia, they asked him
to show them their lead-based paint disclosure forms and he
could not do it. And their idea of negotiating with him is that
they moved him from $30,000 per house and $150,000 fine to
$10,000 per house and a $50,000 fine. That is how the EPA
operates in today's day and time.
So I say that to come back to this point, are you, as the
Secretary and the head of USDA, willing to go to bat for the
United States farmer, who I would remind you, you can't end
hunger without the United States farmer. And without the United
States farmer, every SNAP dollar doesn't go as far for the SNAP
recipient. So are you, as the head of USDA, willing to go to
bat on behalf of the United States farmer with the EPA?
Secretary Vilsack. I think we are doing that, Congressman.
I think we are doing it in terms of the relationship I have
with the EPA Administrator, the advice and the counsel we
provide, the letters we write on certain proposed regulations,
the input that we have encouraged from livestock, a lot of
groups to the EPA. This notion of regulatory certainty, which I
think has enormous opportunities to give folks reassurance that
as they take certain steps, they are not going to have to worry
about the situation that you just outlined that occurred in
your district.
Mr. Austin Scott of Georgia. They are scared, Mr.
Secretary. The bottom line is the American citizen is scared to
death right now of the EPA, whether they are farming or any
other industry. And I appreciate your statement that you are
going to go to bat on behalf of the farmer and that you have
been. I would ask you to use a bigger bat.
The Chairman. The gentleman yields back the balance of his
time. The chair now turns to the gentleman from Iowa for 5
minutes.
Mr. Boswell. Thank you, Mr. Chairman. And good to see you,
Mr. Secretary, and welcome to our Committee again. Just a
little bit of dialogue, Mr. Chairman, you made a comment about
the nine billion people, the population. And that just reminds
me of some of the other conversation. There is a lot out--
started out a lot of head bumping on organic and traditional,
and I submit to you, again, to all of us that there is room for
both, there is, and there still are going to be hungry people.
I think these things can be worked out. And I would hope
that we keep working in that direction because they can be. And
I don't think they are really in competition. As you know, Mr.
Secretary, in our state, we have had a lot of discussion about
the crop insurance and we are a big user as you well know. I am
still having some concerns coming from our agents and I would
remind you being that some of our colleagues, the Chairman
included hands on, there are three things that I say we have to
have in the community to be a farmer, and that is you have to
have a farmer store, whether it is a co-op or whatever it is.
You have to have a bank to work with you, and you have to have
a good insurance agent these days with the high capitalization
of trying to put in a crop or whatever do you in agriculture.
So the agents are still concerned, and I would trust that you
are probably still involved with that and hope you are.
One thing that has kind of bothered me, and going back to
some of our history and background, we have both been
concerned, I think about, is advocates for arbitration and
fairness in business contracts. And I am a little bit troubled
about this covenant not to sue. I wonder if you would shed any
light on why that covenant really should be there?
Secretary Vilsack. Well, we made an effort to try to
negotiate with the industry at the instruction of Congress to
renegotiate every 5 years the Standard Reinsurance Agreement.
And in order to stabilize the reinsurance agreement, in order
to provider greater integrity within the program, and in order
to provide a better deal for taxpayers, we negotiated a series
of initiatives designed to save money, to make sure that the
crop insurance program was stabilized in terms of its ability
to provide coverage and it was solvent. I think the good news
is that as a result of our efforts, we have actually sold
14,000 more policies as a result of the expansion that took
place with rangeland and grasslands areas. And we have also
instituted a good producer refund and rebate program as a
result of steps taken to improve the product.
I think you have to look at this thing on balance and it
was a negotiated process. And that was one of the things that
the industry was interested in having. And as a result of the
magnitude of the deal we struck, it was included.
Mr. Boswell. So you think the covenant not to sue is still
necessary to be there?
Secretary Vilsack. Well, I haven't had a chance to talk to
Administrator Murphy about that specific issue recently. But,
on balance, we are pleased that there are more policies being
sold, that we did effect a savings, and we were able to put
together the refund. So the things we were focused on happening
are, in fact, happening.
Mr. Boswell. I am not questioning that and I appreciate
that, but I just wanted to lay that out there as a concern. And
this Committee, Mr. Chairman, I have become an advocate for, I
guess the best way to put it is just fairness in business
contracts, so that producer out there can have his say and not
be forced out when necessary, but I won't go back and rehash
all that.
So maybe we can talk about that some more, Mr. Secretary. I
think I will just leave it there and thank you for your hard
work.
The Chairman. The gentleman yields back his time. The
Chairman recognizes the gentleman from Arkansas, Mr. Crawford,
for 5 minutes.
Mr. Crawford. Thank you, Mr. Chairman. Mr. Secretary, thank
you for being here. I would echo the comments of the gentleman
from Georgia in that I hear every day, day in and day out from
farmers in my district, the single biggest threat that they
face is the threat of the EPA that looms over them. And so,
again, thank you for your commitment there. And I can't ask you
to comment or speak for the EPA so I won't ask you to. But I
will ask you to speak on behalf of the USDA and help us really
understand what the relationship is on a day-to-day basis
between the USDA and the EPA. And specifically, is there a
protocol or liaison on a daily basis between USDA and the EPA?
Secretary Vilsack. I don't want to say on a daily basis. I
would say this, EPA Administrator Jackson has appointed an ag
liaison, and I know that that liaison is over in our office
very frequently. I would say almost on a weekly basis. I know
there is conversation between that liaison and individuals,
under secretaries and folks within various mission areas of
USDA. And I also know that the ag liaison speaks very
frequently with Robert Bonnie and Sarah Bittleman, who are in
my office, directly in my office on a variety of issues
involving EPA's decision-making process. I also know that we
are writing letters, constantly in meetings in which we are
addressing concerns, raising questions, asking for
clarification and making suggests about appropriate
modifications to what might be considered. I think there is, to
my knowledge, there is a very robust effort between USDA and
EPA to make sure they have all the information they need to
make the right set of decisions.
Mr. Crawford. Is the EPA, to your knowledge, are they
implementing policy that may adversely affect farmers with or
without your input or input from your agency? Or as I said
before, do you get a fair opportunity to present data on behalf
of farmers?
Secretary Vilsack. To my knowledge we have gotten a very
good opportunity, and I know a number of circumstances where we
have made a difference in terms of the approach EPA has taken,
whether it is definitions, whether it is the scope of
particular regulations; it is one of the reasons why I
encouraged the Administrator to take some time to visit and
actually get on the farm and see what is going on in various
operations. It is why I encouraged the ongoing conversation
that she has with commodity groups and livestock groups.
Mr. Crawford. I appreciate that, Mr. Secretary. I yield
back.
The Chairman. The gentleman yields back the balance of his
time. I now turn to the gentleman from Connecticut for 5
minutes.
Mr. Courtney. Thank you, Mr. Chairman. Mr. Secretary, the
last time I saw you I was on the Education and Labor Committee
and we were working on the Child Nutrition Act, which I am
pleased, in the lame duck session, we finally got done.
Congratulations to you and your staff which was a lot of hard
work. The House bill was still better than the final bill, but
I won't ask you to comment on that.
We are now at the point where implementing regulations that
are in place and I think there is probably almost universal
noise out there in terms of boards of education that are trying
to anticipate what the new rules are going to be for food
service providers, in terms of their qualifications. I mean,
obviously, one of the goals of this bill was to try and
increase new nutritional standards and food. I mean, some of
the finest chefs in the world could probably use some educating
in terms of what is healthy food so we obviously need to make
that effort out there.
But on the other hand, I don't have to tell you, local
school budgets are still unbelievably stressed right now. So
there is again worry that this is going to be a high cost to
school boards. I just wondered if you could sort of comment on
where the regulations are and whether or not you will be
working with local and state government to try and make this
workable for everyone?
Secretary Vilsack. This is a document that I asked be
prepared for me personally, which is an implementation plan for
the Healthy, Hungry-Free Kids Act of 2010. It basically is a
color-coded--things are progressing, things are not
progressing, or things are potentially delayed so that I am on
the point in terms of the major provisions of that proposal.
From what I can tell, everything that we promised that
would be done up to this point is and has been done on a timely
basis. There has been an effort to reach out and to work with
the School Nutrition Association and others in a very
collaborative way. We will continue that. And there is also an
effort--at the same time you mention chefs, there is also an
effort to actually encourage chefs to move into the schools, to
work with school personnel.
There are creative ways to stretch the dollar. We actually
have a recipe contest now that will end very soon and we are
going to put together a cookbook of recipes that can be used.
Fruits and vegetables, and whole grains and low fat dairy on
the reimbursement level so that folks learn how to be a little
bit more creative than in the past. So to my knowledge, things
are on track, and there is a collaborative and transparent
process.
Mr. Courtney. You know, I would actually encourage you to
share that with Members and their offices because, again, I
think that would be just a helpful thing for all of us to be
able to let their constituents know that this isn't some
distant bureaucracy that is going to impose things, that there
really is a process and that things are, again, being
implemented in a balanced way.
Secretary Vilsack. I will only say that there are some
programs in which you have established statutory requirements
in terms of when it becomes implemented, so some things may not
happen in 2011 because you dictated they happen in 2012.
Mr. Courtney. Thank you. And just in a brief moment here,
again, the conversation earlier about stable markets and
regulation, I actually think in some areas, having some
regulation will help stabilize markets. For dairy farmers in
Connecticut that are getting killed with high energy costs, the
lack of regulation in terms of the speculation on energy
markets is a huge destabilizing factor, either oil delivery
guys get wiped out because they didn't hedge enough for swings
in prices. And for the CFTC to get rules out there that limit
the number of positions that some of these speculators can take
on products like oil. Frankly, it would be of great benefit to
farmers and small businesses who are, again, paying prices that
are completely disconnected from real supply and demand forces.
We had a hearing on this last week, and I would just say,
again, it is hard to answer the question about input costs
which I know you have been asked here today, but clearly
getting the CFTC Dodd-Frank rules implemented will have the
effect of stabilizing a lot of these input costs in helping
people plan, which the swings in prices that are taking place
right now make almost impossible. I would just leave it at that
and I yield back, Mr. Chairman.
The Chairman. The gentleman yields back the balance of his
time. The chair turns to the gentleman from Tennessee for 5
minutes.
Mr. DesJarlais. Thank you, Mr. Chairman. Mr. Secretary, I
really appreciate your time today. Recently I had the privilege
of participating in the Tennessee Cattlemen's Association's
annual meeting. And although they had many concerns, one that
seemed in the front of their minds was the collapse of Eastern
Livestock Company, that, as you know, left hundreds of
livestock producers in dozens of states without payments,
totaling the excess of $130 million. More importantly, it has
shaken the confidence in the market and rattled livestock
producers across the country.
Last year the Administration created and implemented the
Poultry Loss Contract Grant Assistance Program to provide $60
million in assistance to poultry growers whose poultry growing
arrangements were terminated because of bankruptcy. What steps
are you taking to help producers impacted by the failure of the
Eastern Livestock Company? And how do you help restore their
confidence moving forward?
Secretary Vilsack. Well, one of the things that has to take
place, the difference between the poultry circumstance and the
cattle circumstance that you have alluded to, is that we are
really not quite finished with that process in terms of exactly
how it is all going to shake out. Obviously, there are
bankruptcy proceedings, there may very well be additional steps
being taken to recover assets from individuals. And until we
have a clear understanding of precisely what the extent of
losses might be, it is difficult that we could develop a
specific proposal.
Having said that, there is always the opportunity depending
upon the market to utilize some of the powers under section 32
if we find that there is a deep concern about farmers' capacity
to have their purchasing power compromised by virtue of this.
That is one thing we can do. We can obviously take a look at
our farm loan programs to try to help folks get through a
difficult time.
For non-producers who might be struggling because of what
took place, we also have Business and Industry Loan programs,
we also could work with the SBA to provide some assistance. And
we are obviously collecting data and information concerning
bond claims. We know that at this point, there is roughly
almost $37 million of claims that have been filed.
Mr. DesJarlais. Thank you, Mr. Secretary. Mr. Chairman, I
yield back.
The Chairman. The gentleman yields back the balance of his
time. The chair now turns to the gentleman from Oregon for 5
minutes.
Mr. Schrader. Mr. Secretary, I want to start by thanking
you for coming to Oregon last year and talking with a lot of my
growers, a lot of my timber people and a bunch of my nursery
men that had some very serious issues.
I appreciate the accommodation in some of the APHIS rules
on the whole pre-notification issue for Phytophthora ramorum.
I still remain a little concerned and so do my growers. I
think there was conversation at that meeting and within APHIS
about trying to get out of the bureaucratic regulatory
framework of pre-notification that puts a big burden on our
growers and go to maybe some sort of system-wide approach that
made more sense.
I still remain a little concerned that my folks on the West
Coast, particularly in the counties that are targeted, many of
which are in my district, that they are actually really doing
the right thing. They have a very rigorous standard that they
are looking at. With all due respect to my colleagues from
around the country, I think if they had the same rigorous
standards that my folks do, they would find they also are a
reservoir for this particular issue.
So I am concerned, I am hoping that this won't be used to
impede the trade of our crops, if you will. I think just
naturally in the marketing of crops, it automatically is going
to do that to a certain extent, so I am curious what steps the
agency and what steps the Department is taking to make sure
there is still free trade, if you will, with regard to the
crops that we are concerned with, the Phytophthora. And whether
or not the Department is still moving hopefully in an
expeditious manner and in what time frame to get away from the
pre-notification rule to something that makes a little more
sense on a system-wide basis.
Secretary Vilsack. Well, Congressman, I wish I could give
you greater certainty on an area that I know is very important
to your district and to the producers in your district because
I heard them loudly and clearly. One of the things we did do
was to provide more time so that they could make adjustments in
the process. The problem is it is just doggone difficult to
detect. And oftentimes, it can be present for a long period of
time before the symptoms manifest themselves, which can
potentially compromise other plants and other nurseries, that
is the problem. And we are trying to restrict this to areas
that have been quarantined in certain regulated counties in
three states. And we are trying to do this in a way that
doesn't necessarily significantly inhibit trade. I know that
you have a different view on this, but until we have a better
sense about this, until we have better diagnostic tools, I
don't anticipate that we are going to see a significant change
in the way we are approaching this in the foreseeable future.
I would be happy to have our APHIS folks visit with you,
again, to reassure you that they are doing everything they
possibly can and in as reasonable a fashion and way as
possible, not to compromise or jeopardize your producers. But,
I don't want to mislead you into thinking there is a quick fix
here, because I don't believe there is.
Mr. Schrader. Well, I appreciate your honesty and the
testimony here. Actually, I will take you up on your offer to
at least meet with the APHIS folks on this, get some of my
growers in. And ask that the same degree of testing be done
with the same rigor across this country. If my folks are doing
the type of testing that hopefully will help end this pest, at
least in our neck of the woods, I want to make sure it is not,
referring to your comments on it being a latent type of
organism, causing it in some of the other areas too. So I would
look for some assurances we are going to be treated with an
equal hand.
Secretary Vilsack. We will have Cindy Smith and her team
visit with you.
Mr. Schrader. Thank you, Mr. Secretary.
Second question, if I may, is regarding the Forest Service,
following up on the good Representative from Pennsylvania's
comments earlier. I am concerned about the situation in our
forests in this country. Everyone talks about sustainable
yields, and of course, that is in the eye of the beholder these
days. But, it is unquestionable that our forests are burning up
at an accelerated rate and our rural communities are unemployed
right now. And that begs for a thoughtful solution with the
Forest Service getting actively engaged.
We also have severe budget deficits, so most every agency,
particularly the last few days, is enjoying some degree of
budgetary relief, shall we say, of some of their dollars and
struggling to make ends meet.
We had talked at one point when you were out visiting, and
I talked about this with Secretary Salazar at another meeting
on county payments about having some of these sales or some of
the work to clear out the biomass and forests help pay for the
management of those sales, so that it would not be adding to
increased economic burden on the part of the Department. Have
you investigated that? Is there any reason why you would not
want to investigate that?
Secretary Vilsack. We are always willing to take a look at
ways in which we can do our job better. I have one thing that
we have suggested in the budget process is to take a number of
smaller programs and provide the Department with greater
flexibility to do a better job of managing our forests, which
may lead to better and more extended opportunities. We are
trying to make sure that folks understand by giving us that
flexibility, doesn't mean we are not going to focus on all of
the needs of these small programs, but we get constrained by
them and therefore can't use the forests for the best and most
appropriate use given a particular set of circumstances.
I would also say that, again, to allude back to the forest
planning rule, I think that the forest planning rule that we
put in place and that we are suggesting we put in place begins
to do a better job of explaining the multiple uses that forests
can create and the economic opportunities that can arise from
those multiple uses.
And we need to have assurances that we are taking full
advantage of those uses, because they are just as
extraordinary. The President yesterday, with the Great American
Outdoors announcement, pointed out that there is a huge
economic opportunity here if we do it right.
The Chairman. The gentleman's time has expired.
Mr. Schrader. Thank you.
The Chairman. The chair would serve note to my colleagues
for the following recognition that the custom of the Committee
is that all Members present at the dropping of the gavel,
recognized by the clerks, are called upon in order of
seniority. And then from that moment on, after the hearing
starts, you are called in the order with which you attend the
hearing. Noting that, I would note for my colleagues next up
will be Mr. Ribble, and then Mr. Costa, then Mr. Schilling,
then Mr. King, then Mr. Southerland, Mr. Gibson and Ms.
Hartzler. And with that, I turn now to the gentleman from
Wisconsin for his 5 minutes.
Mr. Ribble. Thank you, Mr. Chairman. And thank you,
Secretary Vilsack. I have very much enjoyed the conversation
this morning. And it was good to get your report because so
much in your report was positive. And I want to talk a little
bit about some of the good things that are going on, but I do I
feel in light of some of the comments that were made today that
you should also hear from northeast Wisconsin. There are very
few things that are consistent across agriculture. When you
talk to dairy farmers their issues are different than corn
growers, and their issues are different than the guys producing
cranberries or the timber folks. But I will tell you, Mr.
Secretary, that there has been one consistent thing, and
everywhere I went in the last year I have asked these members
of agriculture, job producers in northeast Wisconsin, what is
the number one threat?
I expected to hear that the number one threat could have
been energy costs, because they were rising feed prices or land
rents. I felt they could have said stability of milk pricing.
In other things, trade agreements that haven't happened. The
number one threat that virtually every single person has told
me is the United States Government and a runaway EPA.
And please, to the degree that you have any power at all,
Wisconsin's farmers are pleading with you, as their
representative in the Obama Administration, for help, it is the
number one threat. I wish you would take that back to them.
Going on to a more pleasant topic, that is, the 2,000 dairy
farmers in my district, we have a robust dairy industry in
northeast Wisconsin, as you are aware, having lived so close to
us. As you know the 2009 milk prices plummeted. What is it that
we can do as Members of this Committee and Members of Congress,
to help stabilize that and improve that for Wisconsin dairy
industry and the United States dairy industry? How do we get
around this whole deal of milk pricing and reducing some of the
risk?
Secretary Vilsack. I think we are going to give you a set
of recommendations here very, very soon from the Dairy Council.
As you probably know, representatives including representatives
from Wisconsin dairy have been meeting for the last year and a
half as a result of what occurred in 2009. And they are going
to come up with a set of recommendations; National Milk
Producers Federation has come up with a set of recommendations.
I know Representative Costa has some ideas and thoughts on
this.
I guess the first thing I would suggest is that this is an
opportunity this year to have a very extensive and appropriate
conversation that we really can't afford to wait any longer to
provide greater stability, a broader price band, more distance
between the peaks and valleys so that we can ensure that we
keep our producers in business.
You will look at issues involving supply and risk
management, you will look at the Federal Marketing Order, you
will look at a series of other aspects that make up this very
complex system. It is really, really difficult to understand,
but having said that, I think there are ways. I think there is
a growing consensus within dairy that there needs to be
attention.
In the past, what you have had is each separate region
basically saying we have the solution. And I think there is now
a recognition that maybe it is not one part of the country that
has the solution, it really does require all the dairymen and
women to come together.
Mr. Ribble. And I will speak on behalf of those farmers in
my district, and from this Member of Congress, we are anxious
to have that conversation. It is time to try to reduce the
peaks and valleys and to protect our dairy farmers. I grew up
milking 42 cows, and that farm is no longer there. And I am so
proud of what our dairies are doing today in terms of
production, conservation, energy production. It is a stunning
act of leadership that I am seeing every single day when I meet
with our dairymen.
Secretary Vilsack. Well, that is an interesting point you
mentioned about energy. One of the things we try to do at USDA
is to develop a partnership with our dairy producers with
anaerobic digesters. We have helped to fund close to 50 of
those digester programs. And we met with a number of
representatives from the Dairy Council and others about how we
can continue to promote that kind of partnership.
Mr. Ribble. Thank you for that. And Mr. Chairman, I yield
back.
The Chairman. The gentleman yields back the remainder of
his time. The chair now recognizes the gentleman from
California for 5 minutes.
Mr. Costa. Thank you very much, Mr. Chairman, for this
important timely hearing. It is always good to have the
Secretary of Agriculture before the Committee. Mr. Ribble, I
did not know until now that you and I both share a common bond.
I suspect other Members of the Committee as well grew up on a
dairy farm. And if we didn't have this job, we could probably
get a job milking cows, vaccinating, dehorning and pulling
calves, some redeemable skills.
On the timeline in the statement, Mr. Secretary, that you
just made with regards to the dairy industry and the peaks and
the valleys, and I think there is a common concern here because
we have seen, certainly the worst times that I have ever
witnessed in three generations of a dairy family from
California. I mean, I heard my parents talk about the tough
times early on before I was around, but I have never witnessed
it this bad over a continuing period of time.
Do you have timelines? You clearly said your commission, my
legislation, National Milk Producers Federation, I think there
is consensus, but I would like to be able for us to tell the
dairymen in the United States that we are going try to come
together with the response in the next 6 months that tries to
do the things that you articulated that I think we all feel
similarly about.
Secretary Vilsack. Representative, we are happy to work
with the Chairman in this Committee and the Senate side to do
whatever is necessary. We are happy to roll up our sleeves and
begin the work now.
Mr. Costa. I think we need milestones. I mean, if we don't
have them in place, things just kind of roll along. Your
Commission's been in place now for over a year. Do they have a
concluding report to you----
Secretary Vilsack. It is coming out the first week of
March.
Mr. Costa. Okay, seems to me that is a milestone. So I know
the Chairman and the Ranking Member have expressed concerns as
many of us have. It just seems to me that we ought to try to,
after this hearing, see if there is the will. And if we think
we have a consensus approach to make the changes for the
industry we ought to set some timelines.
Secretary Vilsack. I don't know that it is my place to set
the timelines. I am happy to work with you on the timelines.
Mr. Costa. No. I am not asking you to set it for the
Committee, I am asking for us to sit down together in terms of
talking about that if there is a consensus then we ought to try
to--otherwise, the alternative is, it seems to me, that we are
just going to lay off until the reauthorization of the 2012
Farm Bill. And if that is the consensus, then so be it, but I
have dairymen and dairywomen asking me what is happening? Are
you guys going to act on this, your bill, National Milk
Producers Federation, what is USDA doing? I mean, we ought to
tell them we are going to do something, or we are not going to
do anything until the reauthorization of the 2012 Farm Bill.
Secretary Vilsack. I think the risk that you run in to not
doing something this year is that the momentum that has been
built as a result of the concerns of 2009 which extended into
2010. I think you run the risk of potentially losing that
momentum. And I think there is a real desire to get something
done.
Mr. Costa. I know under the able leadership of our
Chairman, we will sit down and talk and maybe see if there is
something we can come together with.
Let me move on here because time--I know GIPSA was visited
earlier in the questions, and, but is not clear to me again on
what your time frame is there as well.
Secretary Vilsack. I want to make sure that the analysis
that you all have requested and that is necessary get done
properly. We are in the process of categorizing 60,000+
comments, 30,000 of which I believe were unique. Those have to
be analyzed, read and analyzed and sort of characterized. And
then that will, in turn, inform Joe and his team what needs to
be done. You know, obviously we want to get this done as soon
as possible, but we want to get it done right.
Mr. Costa. I understand. And I will single out the
correspondence that I had. But there has been some constituent
inquiries to the USDA that has not received a response, from
some of the associations out West. And I would like to make
sure that that is on your radar screen and you respond. I will
bring that to your attention at a separate time.
Finally, under the foreign agriculture efforts, I am on the
Subcommittee and we are meeting with some of the our
counterparts on market access programs and foreign market
development programs in terms of our exports. Again, this
relates to the 2012 Farm Bill, but how well do you think they
have worked?
Secretary Vilsack. Well, we have a record year in exports
and we recently did a study that every dollar that has been
invested from USDA, in our view, has generated $35 of activity.
So I would say that is pretty good return for the investment.
The President has proposed an increase in this area of the
budget, notwithstanding the difficult fiscal times we face,
because it is capable of generating more activity and more
investment.
Mr. Costa. You expect the South Korea Free Trade Agreement
to further boost exports?
Secretary Vilsack. Well, absolutely. Sixty percent of our
ag trade with Korea will have tariffs reduced immediately.
Mr. Costa. All right. My time has expired. Thank you very
much, Mr. Chairman.
The Chairman. The chair would extend the gentleman's time
by 1 minute. And would the gentleman yield for kind of a
question, or comment?
Mr. Costa. Yes.
The Chairman. The gentleman brings up the issue of GIPSA,
and we were all part of the effort of 115 Members of Congress
back in October when we wrote asking for an economic analysis
of the proposed GIPSA rule. Those few rules, the gentleman will
agree, will have more impact on livestock agriculture than this
GIPSA rule. Thinking about that letter and the discussions
among the various Members, I turned to the Secretary and I
asked about the economic impact analysis that will be done is
critically important. One of the things we ask for and that you
set the motion in the process, is it possible or could we have
an assurance that that economic impact analysis can be
subjected--that cost-benefit analysis, I should say, can be
subjected to independent peer review and perhaps a notice in
the comment process? Because there are very few things we will
do that are more important than the GIPSA rule.
Secretary Vilsack. Mr. Chairman I will--I want to take an
opportunity to visit with my team about that request,
especially as it relates to a peer review. We do want to get
this done. And we have received thousands of comments. And we
have received a lot of direction in terms of what ought to be
included or not included in the analysis. It is fairly
extensive what has been proposed. And I have a lot of faith and
confidence in Joe Glauber to be able to do this properly.
The Chairman. You are absolutely right, Mr. Secretary, and
getting it right is the most important thing. You demonstrated
the willingness to add extra time to analyze the process over
the course of recent months. You obviously care and I
appreciate that fully, but the ability to have an independent
peer review, and to have notice and comment time on that cost-
benefit analysis seems to me, and I would yield to the
gentleman from California, seems to be a very important part of
getting this right.
Mr. Costa. Mr. Chairman, I couldn't agree with you more.
And I appreciate the time to further extend the comments on
this for the new Members of the Agriculture Committee who
haven't been a part of our effort in the last Congress. We
spent a great deal of time in a bipartisan effort to ensure
that we got this right. And I concur with the Chairman, we
appreciate the fact that the Secretary extended the time
period. But the peer review is going to be critical because
this is an issue that clearly not only affects the livestock
industry throughout the United States, but it has implications
in a ripple effect on our ability to export U.S. beef products
abroad.
We have seen Japan and we have seen other countries use
what I would refer to as justifications that I don't think hold
merit to prevent export, importation of American beef to their
countries. We had a similar situation in South Korea that we
had to deal with.
So getting this right, and getting it right in a way that
has the consensus of this Committee, as well as those in the
industry is going to be critical to the long-term well-being of
the U.S. livestock industry. And I am sure you will continue,
Mr. Secretary, to find a consensus among the Members of this
Committee on that point.
The Chairman. And we will put our request in writing, Mr.
Secretary. The gentleman's time has expired. The chair now
turns to the gentleman from Illinois for his 5 minutes, Mr.
Schilling.
Mr. Schilling. Hello, Mr. Secretary. Good to see you again.
Unlike many in the room, I never worked a farm, but I can make
a mean pizza. What I would like to talk a little bit about, and
it is kind of an echo here, is the EPA. I gave you the scenario
that we have dealt with here in the 17th District of Illinois,
we are number 48 out of 50 in job creation across the United
States.
I have a family-run business that the EPA came in and these
folks have 35 people employed, they have been open for 33
years, never had anyone die, no major accidents and they ended
up getting penalized by the EPA hundreds of thousands of
dollars. They are in the process right now--they spent over
$50,000 fighting this thing. I think that I am just going to
reiterate that we have got to get those folks under control and
that was just kind of a statement, not a question.
The other thing that I would like to talk about is for 8
years I did what I called estate planning. One of the things
that was very difficult is the family farmer who literally work
their finger to the bone. What would happen is I would have to
come out and sell them what we call the last to die policy in
the event that the last owner died, then they would be able to
pass the farm down to the kids. And I always had a problem with
that. I struggle with it because I have yet to ever figure out
how the government can spend the money better than the children
of the farmer or the small business.
As you know, I know President Obama had come out last year,
and I think it was 35 percent is what they had--I have some
notes--yes, 35 percent in lame duck and then they just came out
and they increased it to 45 percent with the cap at $3\1/2\
million. Where do you stand on the death tax, as I call it,
because that is basically what it is, it is a double tax to the
farmer. Where do you stand on that?
Secretary Vilsack. I think there are a couple of things. I
think, certainly, what was done in the tax relief bill that was
passed last December certainly is extraordinarily helpful. I
have been told, I have not actually studied this myself, but I
have been told that roughly 95 percent of farmers and ranchers
would be covered by that. You constantly have to be looking at
that because of land prices fluctuating.
There are also a number of other steps within the estate
tax laws that basically mitigate the impact and effect of the
estate tax to the point where you may not have to pay it, or if
you are required to pay it because you have a very large
estate, you have a significant amount of time to do it. There
are also valuation mechanisms that can reduce the overall
value. It may not necessarily be what the market is on that
particular day. It may be that alternative use valuations can
be used. I think there are a lot of ways in which you can
address the issue of the estate tax, but certainly what was
done in December was helpful.
Mr. Schilling. With that I yield back the balance of my
time.
The Chairman. The gentleman yields back the balance of his
time. I now recognize the gentleman from Iowa, Mr. King, for 5
minutes.
Mr. King. Thank you, Mr. Chairman. And I thank the
Secretary for his testimony. I would like to start this out
with the type of governor you had been. I applauded you for
assigning the increase in the speed limit on our interstates up
to 70. It saved me untold hours of productivity that I can use
for other endeavors. And I appreciate that.
I would take us back, however, to something, I think, is a
disagreement, and we have had this discussion in my office with
regard to the Pigford issue. And in that discussion, I related
to you that then-Chairman of this Committee, Collin Peterson,
whom I wish were here at this moment. He and I had a discussion
of a disagreement where I had pointed out that a placeholder in
the 2008 Farm Bill would result in $1.3 billion additional
money going into the Pigford claims, which I have been very
clear on my judgment that many of them are fraudulent. And we
had that disagreement.
The Chairman of this Committee established his opinion to
me very clearly that he said that the language in the 2008 Farm
Bill was a hard cap, $100 million and that would resolve all of
the Pigford claims and put an end to it. I went back after our
discussion when he told me that I had voted to authorize you to
negotiate with the farmers to open up and resolve Pigford II.
As I read the language which I have asked be handed to you, and
it is section 14-012. I see the $100 million there, I see the
language there and it reads to me that it is to shall be made
exclusively from funds made available, and that it shall be the
complete debt relief to resolve all the issues before Pigford.
Now often I am the non-lawyer in the room, but I have some
lawyers around me that read this that concur with me on that.
And I think, Mr. Secretary, it probably would be better not to
ask you to render a legal judgment on the language here on
short notice, but I would ask you if you would respond to that
inquiry in writing and have you had some time to evaluate the
language here unless you are prepared today?
Secretary Vilsack. I just want to make sure I understand
the question.
Mr. King. Okay. The question is, do you agree with the
Ranking Member of this Committee, Collin Peterson, then-
Chairman, that the $100 million that is in the 2008 Farm Bill
as to put an end--to take care of all outstanding, unresolved
Pigford claims? And if so, then where did you and Attorney
General Eric Holder get the authority to negotiate with John
Boyd to open up this $1.25 billion claim which was attached to
the Cobell settlement, and passed by the 112th Congress? That
is one of my questions.
Secretary Vilsack. Let me just see if I can respond and
would be happy to amplify on it as well in writing. The reality
is--the view was that this amount was not sufficient and
adequate to actually provide the relief that folks needed,
given the number of potential claims that were not yet fully
resolved, that this wasn't sufficient.
Mr. King. And so even though the statute, as I read it,
says that $100 million shall be all of the money spent to
resolve all the cases. And it shall be construed so as to
effectuate its remedial purpose of giving a full determination
on all the merits for each Pigford claim previously denied that
determination.
Secretary Vilsack. Well, the problem is it doesn't actually
give a full determination because there wasn't sufficient
resources in this. Plus again, with due respect to the drafting
of this, it wasn't clear whether any of this money could be
used to actually process the claims, which is to say putting
the information together. And when I came into the office, I
was advised that there was probably insufficient resources to
both satisfy the claims and also pay the administrative
expenses associated with it.
Mr. King. And then so you and Attorney General Holder, I
presume, with direction from the White House, opened the
negotiation with John Boyd, the President of the Black Farmers
Association. And came to a number which I believe was $1.15
billion, which was the number that was in the CR that passed in
the 111th Congress that we are operating under now, and that is
the authority.
And I am curious to a second question into that as I watch
my clock tick, is there now a consent decree or is there any
kind of legal document that binds any of the parties involved
in Pigford II?
Secretary Vilsack. First of all, we didn't negotiate with
Mr. Boyd. There really wasn't a negotiation with Mr. Boyd.
Second, the court is in the process of reviewing this and will
essentially--because class action will essentially have to
bless this, we anticipate that will take place relatively soon.
Mr. King. And so your authority to reach this conclusion
that you recommended to the Congress that we appropriate the
$115--$1.15 billion, what was the source of that authority?
Secretary Vilsack. The authority was that it was not a
sufficient amount to resolve the class action that was pending.
Mr. King. If we have an authorization statute here that
caps it at $100 million to resolve all of it and--it doesn't
seem to me that there is any authority beyond that $100 million
the way I read the section.
The Chairman. The Secretary can respond.
Secretary Vilsack. Congressmen, you all obviously can
change your mind at any point in time, and I think it is only
fair to say that Congress does, from time to time, change its
mind about things. And I think that is essentially what you
did. It was not sufficient to resolve the case, that is the
problem. And this was a relatively arbitrary number that was
not necessarily tied directly to a number of claims and the
amount it would take to settle the case.
Mr. King. I ask unanimous consent for an additional minute.
The Chairman. Seeing no objection. One additional minute.
Mr. King. Thank you, Mr. Chairman. I have a news report in
front of me regarding Pearlie Reed, USDA Assistant Secretary
for Administration, individual that does work on your team.
Secretary Vilsack. Yes.
Mr. King. And it is reported that he was in Brinkley,
Arkansas in late January where he told a crowd that Pigford I
is under review and that those trying to defraud the government
in Pigford II will go to the penitentiary. I like that last
part of this phrase. Is Pigford I under review? And is there an
IG investigation to look at Pigford I?
Secretary Vilsack. I am not sure what Pearlie is referring
to there, Congressman. If you give me an opportunity to visit
with him about what he meant. I am not aware of that, but that
doesn't mean that it is not happening.
Mr. King. And are you an aware that there is an
investigation of Pigford I under review?
Secretary Vilsack. I am not aware of that. It could very
well be. Oftentimes, the Inspector General doesn't let us know
of all the investigations underway.
The Chairman. The gentleman's time has expired.
Mr. King. Thank you, Mr. Secretary. Thank you, Mr.
Chairman.
The Chairman. The chair now recognizes the gentleman from
New York, Mr. Owens, for 5 minutes.
Mr. Owens. Thank you, Mr. Chairman. Mr. Vilsack, thank you
for coming today. You reported that we have seen a rather
significant rise in exports of a wide variety of products,
which is clearly a good thing for us. Is there a point in time
where the level of exports would create an increase in prices
within the United States as the result of the export, or do we
have excess capacity which will allow us to continue to export
at these levels?
Secretary Vilsack. I recently saw a study and I have not
had a chance to determine whether it is appropriate or
scientifically valid. It suggested there is still a lot of
untapped potential in terms of our capacity to produce
agricultural products in this country. That there are probably
some lands that could be, for example, double-cropped that are
not being double-cropped and could be done in an
environmentally appropriate way. So if that report is correct,
I think there are still opportunities for us to meet the
domestic needs as well as a growing export market.
Mr. Owens. And would that also be true in terms of
returning lands that previously might have been dairy farms
into crop production in order to meet that demand?
Secretary Vilsack. Each individual operator is obviously
going to try to make the decision that is best for their
operation. And we have lost relatively almost half of our dairy
producers, so it wouldn't surprise me if that is happening.
Mr. Owens. Is that something that the Department would
encourage?
Secretary Vilsack. I wouldn't say we are encouraging it,
actually what we are trying to do is try to figure out if there
is a way in which we can stabilize the dairy industry so that
we don't continue to lose producers.
Mr. Owens. And I understand and certainly that is of great
importance, particularly in my district as in many others, but
those farms that have gone out of the dairy business, is there
some type of a plan that the Department has which would
encourage them to move into crop production, solely for the
purpose of export that would allow them to be profitable?
Secretary Vilsack. I wouldn't say there is a specific plan,
but there are a number of programs that could be available to
operators that would encourage them to do that, in terms of
loan grant programs that we have.
Mr. Owens. Is there someone that can I contact in the
Department that could assist my office in gathering that
information?
Secretary Vilsack. We would be happy to reach out to you,
our Office of Congressional Relations will do that very soon.
Mr. Owens. Thank you very much. I yield back.
The Chairman. The gentleman yields back the balance of his
time. The chair turns to the gentleman from Florida Mr.
Southerland.
Mr. Southerland. Thank you, Mr. Chairman. Mr. Secretary,
thank you for being with us today. I have a question regarding
citrus greening. Being from Florida, the citrus industry is
very critical to our state. Citrus greening is one of the most
devastating diseases affecting any commercial crop as
recognized by the National Academy of Sciences. In addition,
citrus ranks nearly first in the nation in crop value among
fruit and vegetable specialty crops according to the USDA's
National Agricultural Statistics Service.
Timely research on citrus greening and its vector, the
Asian citrus psyllid, is absolutely essential to ensuring the
future of citrus production in this country. I am curious if
you would go into a little explanation as far as what the
Department is doing with the SCRI initiative and just to help
give me an understanding, if you don't mind, of what tools you
are utilizing that you have at your disposal to address this?
Secretary Vilsack. Well, first of all, a recognition that
this is a serious problem and it impacts certainly two areas of
the country, both in terms of where you are from as well as
concerns we have in the Arizona, California area. Additional
research opportunities have been directed to try to assist in
developing a process by which this could be abated. There are
obviously--quarantine is probably not the right word, but there
is a way in which we are identifying where this is and we are
attempting to work with folks in these areas where we have seen
this to try to contain it as best we can. I don't know that we
have all the answers in terms of how to eradicate it, but I
think it is primarily putting additional resources behind
containment and research to try to figure out how to get rid of
this.
Mr. Southerland. I think some of the things that I know,
the citrus crops are $12.2 billion in the U.S. economy. And a
lot of people don't realize that this disease has never been
cured in any other country in the world. It is critical. This
is a dire challenge we have. I am just interested periodically
in hearing when you testified as to be able to kind of give us
an overview.
Secretary Vilsack. I will have our Congressional Relations
Office provide you with additional specific information on
precisely what we are doing. I met with the citrus growers, and
we are very aware of this concern.
Mr. Southerland. It is incredible, too, when you realize
that the citrus growers have self-funded almost $40 million of
research, and I think they need to be applauded. This is not an
industry that is waiting for government to fly in and save the
day. So I think they recognize how critical it is. I want to
make sure, as representing many in my state, but as you
mentioned, this deals with several regions of our country, that
the Department is doing everything within its ability,
utilizing the tools and the staff and the budget, to make sure
that this is a priority. It is widely unknown to our nation at
large, but we love orange juice and we love oranges and what
they mean to us.
I have to mention, it is a comment in regard to something I
know that you are getting tired of hearing. And you know where
I am going. When you hear that statement, you know the
precursor of how damaging the reach of the EPA is. It would be
unfair of me, having met with so many of the farmers in north
Florida, and I am in District 2 of Florida, so I represent the
largest Congressional district in Florida. A lot of people
don't realize, we have almost 70 dairy farmers just in Florida.
A lot of people don't realize that about Florida. We have 250
specialty crops in Florida. It is amazing, the fear that they
are hearing about the EPA and the overreach, especially with
the nutrient requirements that the EPA is pushing down on the
State of Florida.
I will tell you, we are talking about destroying perhaps
14,500 jobs in Florida in just what it would cost our local
government in Florida; $21 billion, it is estimated, in new
water treatment facilities. This has to be a tremendous
concern. I am concerned that the Administration, which you are
a part of, every time it hears that you have to come and
testify--and thank you for coming--that you hear the concern of
every district because the EPA imposes an incredible threat to
jobs in this economy recovering.
Thank you.
The Chairman. The gentleman's time has expired.
The chair now recognizes the gentleman from New York, Mr.
Gibson, for 5 minutes.
Mr. Gibson. Thank you, Mr. Chairman. Mr. Secretary, thank
you for being here today. I appreciate it.
I represent upstate New York. I have ten counties, 137
towns. Agriculture is key to our area. I have a panel that
advises me. They represent all across the ten counties. What I
thought I would do is take the opportunity to share with you
the results of a meeting we recently had.
First of all, you are held in high regard. You have made
two trips to my district in the last 6 months, and it is very
much appreciated. You conduct yourself in a very professional
way, you clearly advocate for farmers, and I want to express my
appreciation.
My number one concern, although really there are two. The
first has actually been hit by leadership and Mr. Costa as
well, and it has to do with what we are going to do, going
forward, on price discovery and stability for the dairy market.
Our farmers, in a perfect world, they would want to have more
free market forces. They have been listening very carefully for
the last 18 to 24 months about what National Milk Producers
Federation has been talking about. The biggest issue our
farmers have, because we are primarily almost entirely family
farms, is the stability. The wild oscillation in prices is very
Darwinian on our farmers.
What I was impressed with, inasmuch as there is such an
incredible group with a diversity of opinion, that they care
very deeply about one another and are ready to pull together.
So to the extent that we can bring a more rapid conclusion to
that effort, that would be tremendously appreciated.
Along with it, and I really don't want to beat a dead horse
here, but the EPA comes up all of the time. Our farmers up
there, they are tremendous environmentalists. They believe
deeply in conservation, but they are exasperated by what they
view as an overreach. I know that is not your domain, but I
wanted to share that with you. The spilled milk thing is an
example. It looks like that is going to come out okay. I had a
meeting yesterday with EPA, but for farmers who can be
skeptical, it added more fuel to the fire in terms of why don't
they come out with that exemption. So to the extent that you
can advocate for them as well, I think that that would be
helpful.
The other piece of this, the Chesapeake watershed also has
our farmers concerned. In New York State, they are looking at
potentially going down to countywide standards. There have been
some estimates in terms of what that cost implementation would
be, but it is concerning. I know that the budget came forward
and I think there is $17 million in there now to address this,
but we think we are going to be on the end of that pipeline and
our farmers are very concerned of the impact that this
potential regulation is going to do to their profitability.
There is some concern about the implementation of Dodd-
Frank for our farmers, using instruments to hedge against risk.
I know it was not the intent of Congress to use that bill to
really adversely impact farmers, but of course farmers pull
together in co-ops, and there is concern about how that is
going to impact them going forward.
Finally, this has been a particularly tough winter in
upstate New York, and of course we love the four seasons and
that is why we live there. But the heavy snow and the ice has
impacted as of last count, yesterday, we had 42 farmers who had
roofs collapse attendant to the snow and ice. Your Department
has been helpful, and we thank you for that. But anything that
you can do to help the Administration to declare that a
disaster area, that would be greatly appreciated. At this
point, I will pause for your response.
Secretary Vilsack. The disaster debt declarations, Governor
Cuomo would have to request it, and we would try to turn those
around relatively quickly. Once we do, it does create
opportunities that, absent such a declaration. I would
encourage you to encourage the Governor to do it on a timely
basis. We have had, unfortunately, circumstances when the
Governors have let the time period go by, and there isn't any
authority I have to waive that time period. It is important to
do it in a timely basis.
On the Chesapeake Bay, one of the things that we are doing,
USDA is attempting to quantify the degree to which producers
are embracing conservation and stewardship in a way to try to
allay concerns or fears that folks may have that farmers aren't
sensitive to the environment. We did one recently in the
Chesapeake Bay and we did one in the upper Mississippi River
Basin, and it does reflect, as I indicated earlier, that
farmers are indeed focused on conservation. The more we can be
specific about that, I think the easier it is to make that
case.
The Chairman. The gentleman's time has expired.
The chair now turns to the Subcommittee Chairman from
Texas, Mr. Conaway, for 5 minutes.
Mr. Conaway. Thank you, Mr. Chairman.
Mr. Secretary, thank you for being here. Last year your
Department authorized or started an ad hoc disaster relief
program that went to certain states, certain producers. Some
crops were in and some crops were out, even though the producer
was on the same farm, same disaster. I hope in your answer you
will be able to look us in the eye and unequivocally state that
politics and who might vote for whom absolutely had nothing to
do with the way that the money was distributed.
That leads me to the question of can you give us an
accounting of where the money went and who got it so we can see
a regional distribution of those moneys.
And my final question is: With previous ad hoc disaster
payments, the producers had been required to sign up for crop
insurance the next year as a condition to get into the program.
So you waived that or just didn't put that in this time. Can
you walk us through the criteria used for picking winners and
losers in that program?
Secretary Vilsack. I will make an effort to do that. There
was an effort to try to respond to the fact that when we put
together the SURE program and other disaster programs, the idea
in the 2008 Farm Bill was that we would sort of move away from
what had been the case in previous disasters where you had ad
hoc disaster relief.
When we put SURE together, it didn't really do as good a
job for some producers as others. Cotton and rice producers did
not fare very well under SURE, and there were circumstances
where there was a substantial amount of moisture that impacted
and affected those crops. And in doing so, we tried to
designate it based on where that condition, the oversupply of
water, if you will, created difficulties. That allowed us to
identify roughly a thousand counties where farmers could
potentially request this assistance.
We can give you an indication of where the farmers who
signed up for this, where they come from. There were two other
components. One was a poultry component which was very
specifically designated and designed to try to provide
assistance to poultry producers who were treated very unfairly,
unfortunately, as a result of the bankruptcy of Pilgrim's Pride
and other poultry processing facilities. And then there was an
issue involving aquaculture that had some very difficult times
with high feed costs.
So those were the sort of three groups of people that were
attempted to be assisted.
We got $20 million out to the aquaculture farmers. That is
primarily in the South. We have gotten money out, roughly $60
million, to the poultry producers. That was a handful of
states. And then the balance, about $170 million as of today,
but it may very well be closer to $200 million, a little over
$200 million when it is all said and done, to producers, where
there were significant rainfalls, involving cotton, rice. And
because of the nature of the counties, soybeans were also
included.
If any of those individuals are in fact going to receive
SURE payments as a result of SURE basically taking care of
their crop, then there will be a deduction from their SURE
payment for anything that they received under this particular
program. So it sort of addresses the issue of soybeans.
Mr. Conaway. Well, is this an indication that the SURE
program has failed? And also, look us in the eye and tell us
that your new team used political reason--there was absolutely,
unequivocally, no political considerations given to how you
came up with the winners and losers under this plan?
Secretary Vilsack. From my perspective--I am answering your
question, sir. From my perspective, we did the best job we
could to handle the difficulties that farmers who were not
treated fairly or as well as other farmers were under the SURE
program. I think it is important.
I wouldn't say the SURE program failed because it certainly
was beneficial to a lot of producers, and it certainly is the
right direction. Can it be improved? I think that is part of
the discussion that will hopefully take place in the 2012 Farm
Bill. Are there ways of improving that kind of approach,
because I think there is some merit to the approach.
Mr. Conaway. And the answer to my question that I have
asked twice?
Secretary Vilsack. I thought I answered it, sir.
Mr. Conaway. Can you look us in the eye and unequivocally
state that political considerations bore no--had nothing
whatsoever to do with picking winners and losers under this
plan?
Secretary Vilsack. From my perspective, what we did at
USDA, that is correct. I honestly can't speak for anyone else
in this process. I can just tell you what we did and why we did
it.
Mr. Conaway. Didn't you do it all? Was this a program that
was done in the White House? Where did this get done, if not in
your shop?
Secretary Vilsack. It was done in our shop, and I am
speaking for our shop. Basically what we did was we took a look
at where SURE----
Mr. Conaway. So when we get the map--and I assume you will
give us the map of where the money went, and overlay that
against political maps--there won't be any correlation there
that looks weird by region?
Secretary Vilsack. I don't think so. It has to do with
where there was a significant amount of rainfall that made it
difficult for plants either to be planted or to be harvested.
And specifically, the crops that were negatively impacted were
rice and cotton. So you are going to see states in the South--
Mississippi, Arkansas, Alabama--that were obviously impacted
and affected by this. You will see some counties in Illinois
that were impacted by this.
Mr. Conaway. Let me ask you on the record, you didn't
consider anything from a political standpoint in the way you
orchestrated this program?
Secretary Vilsack. No, sir. I asked our staff to put
together a program that would respond to the concerns that were
being expressed to us by farmers and producers who felt that
they were not being treated fairly because SURE didn't address
their particular crop.
The Chairman. The gentleman's time has expired.
The chair now turns to the gentlelady from Missouri for 5
minutes.
Mrs. Hartzler. Thank you, Mr. Chairman.
I would concur with a lot of my other colleagues here. Of
course EPA is a huge concern. But I wanted to focus on GIPSA,
and I know it has been discussed before. But in Missouri, there
was a law passed a few years ago, a Missouri livestock
marketing law, that went into effect that had basically some of
the same impact of this proposed rule. It ended up being
rescinded in a special session of the legislature just a few
months after it was implemented because of its very onerous
impact on the livestock industry.
Swine, they say that based on what happened in Missouri
with the dropped prices, the impact, that it cost roughly $2.7
million in a 5 month period. If you were to extrapolate that
across the United States, if this rule were to be implemented,
U.S. swine producers would see about a $279 million a year
impact; cattle, $728 million a year. All together, the hog and
fed cattle producers would be over a billion dollars.
So I was wondering, first of all, are you familiar with
what happened in Missouri as it relates to this proposed rule?
Secretary Vilsack. I am not specifically familiar with what
you are talking about.
Mrs. Hartzler. Okay. What impact does your Department
believe it will have on the livestock industry dollar-wise if
this should go into effect?
Secretary Vilsack. That is the reason we are doing an
economic analysis. That has not yet been done. We wanted to get
all of the comments and all the suggestions and concerns on the
part of folks before we conducted an economic analyses. And we
are taking all of that into consideration in formulating that
analysis.
I would say there was an overarching concern, and there may
be multiple reasons and explanations for this, but we have lost
roughly a third of our cattle producers in my lifetime, and 90
percent of our hog producers. We felt that there is a need to
ask questions.
When we did the anti-competition hearings around the
country, we had a lot of people converse about the need for a
packers and stockyards review and greater enforcement of
packers and stockyards. So there was a good-faith effort to try
to respond to the concerns that we have heard about the
fairness or the lack of fairness in certain markets.
We put a rule together, obviously, which generated an awful
lot of controversy and concern. A lot of people opined about
it. We have taken all of that information into account, and we
are going to try to put the best rule possible together.
Mrs. Hartzler. This is a question as a new person here. So
if it comes back that everybody's opinion is that it is going
to be detrimental, will you withdraw the rule? Do you have that
option, or are you going to move forward regardless?
Secretary Vilsack. Obviously, if it comes back and there is
no benefit to the rule at all, obviously there is a problem
with the way that we have structured the rule. And we would
obviously have to rethink the position.
I will tell you that I would like to think that there will
be consensus on some aspects of agriculture. But what I find in
this job is that there is almost never consensus. There are
always at least two sides, and oftentimes multiple sides,
depending on where you are from and how small, medium-sized or
large your operation is, and what you are producing.
And the challenge is to try to make sure that we have a
fair market. That is what we are trying to do, is just
establish a fair market. I think we can have a consensus on
that, but how you get to a fair market, there is a lot of
difference of opinion on that. There is no question about that.
Mrs. Hartzler. Well, I just hope you will take into account
what happened in Missouri to us and why the legislature had to
rescind it. And hopefully you won't do anything to negatively
impact the livestock industry.
Thank you, Mr. Chairman.
The Chairman. The gentlelady yields back the balance of her
time.
That concludes this round of question. This is the point
where I would customarily, before I adjourn, turn to my Ranking
Member and ask for closing comments. Instead, I will offer my
own comments.
Thank you, Mr. Secretary, for coming here and for
demonstrating your patience with the schedule we are working
on, on the floor. I note that whether it is rules or
regulations, policy, there are a variety of things that this
very diverse Committee has a lot of questions about, and you
serve a pivotal role for rural American production ag. Thank
you.
With that, under the rules of the Committee, the record of
today's hearing will remain open for 10 calendar days to
receive additional material and supplemental written responses
from the witness to any question posed by a Member of the
Committee.
This hearing of the Committee on Agriculture is adjourned.
[Whereupon, at 1:50 p.m., the Committee was adjourned.]
[Material submitted for inclusion in the record follows:]

Submitted Questions
Response from Hon. Thomas J. Vilsack, Secretary, U.S. Department of
Agriculture *
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* There was no response from the witness by the time this hearing
went to press.
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Question Submitted by Hon. Timothy V. Johnson, a Representative in
Congress from Illinois
Question. Last October, you announced a biofuels infrastructure
plan that included assistance through Rural Development to install
10,000 blender pumps and storage systems over the next five years.
Given the cost of blender pumps this could be a very expensive
commitment. Would you further discuss this infrastructure plan and how
these projects would be funded? Do you envision using grants, loans, or
loan guarantees? If your intent is to target urban areas where blender
pumps are not currently deployed, does this mean you intend to utilize
scarce rural development funds in urban areas, and which Rural
Development program would be utilized for the deployment of blender
pumps?
Question Submitted by Hon. Reid J. Ribble, a Representative in Congress
from Wisconsin
Question. Mr. Secretary, I was encouraged to hear the
Administration announce steps last month to begin to resolve one of the
largest trade disputes we have that has hampered our agricultural
exports, particularly of cheeses, to Mexico, a major market. Exports
help our farm economy to thrive and it has been disconcerting to see
Mexico impose retaliatory tariffs on cheeses and other agricultural
products due to our noncompliance with NAFTA. American agriculture
constantly faces this very same dilemma, as our trading partners often
try to evade their agreements with us, so it is critical that we ``walk
our talk'' by abiding by our own commitments. Given the impact this
dispute has had on one of our largest agricultural markets, can you
tell me where efforts stand to settle this matter as swiftly as
possible, and what USDA is doing to continue to impress upon the other
agencies involved that a resolution is urgent?
Questions Submitted by Hon. Collin C. Peterson, a Representative in
Congress from Minnesota
Question 1. What steps is USDA/FNS taking to build on the Education
and Administrative Reporting System (EARS) that will evaluate the
outcomes and impacts of successful programs, over and above the simple
process measurements?
Question 2. In implementing SNAP Nutrition Education provisions,
what steps is USDA/FNS taking to allow states and communities to
propose and implement demonstration projects prior to FY 2013, using
existing SNAP Ed resources included in Section 241 of the Healthy
Hunger Free Kids Act of 2010. How might such demonstration projects be
helpful to states in national planning and preparation during the
transition period?
Question 3. Healthy Incentive Pilot--please provide an update of
the status and scope of work, including how EBT coding, the timeline,
potential for establishing baseline data for participants.
Question 4. Fresh Fruit and Vegetable Snack Program--what will be
the allotments for the upcoming school year? Is there unspent money
from last year? What percentage of those schools funded are high-need
schools?
Question 5. Fresh Fruit and Vegetable Snack Evaluation--what is the
status of this report? Are there results that can be shared?
Question Submitted by Hon. William L. Owens, a Representative in
Congress from New York
Question. Last year I was joined by many colleagues from the
upstate NY delegation, as well as many from the Dairy Farmer Caucus, in
expressing to the Administration my grave concerns about the prospect
of expanding U.S.-New Zealand dairy trade through the TPP and the
billions of dollars in losses that could impose on the U.S. dairy
economy. I know the state of the U.S. dairy economy has been an issue
of particular interest to you, as it is to me. What is USDA doing to
help ensure the Administration is fully aware of the negative impact
that expanding U.S.-New Zealand dairy trade could have on our dairy
sector?