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Class XIII Curriculum

"Understanding National Government and Its Influence on Agriculture"

 Seminar VI

 

March 10, 2007
Scribe: Kevin Long
Oklahoma City -Gettysburg

Saturday was a travel day. OALP participants arrived at the airport and checked in by 10 am to wait for our plane. The OKC departing group met up with the Tulsa departing group in Memphis and sampled the local cuisine (BBQ or Hamburgers). We arrived in Baltimore in good shape and our luggage made the trip also. While we were in the air one of our class members mother was rushed to the hospital and he had to return to Oklahoma.

We met our bus and loaded the belly down with luggage. We made it to dinner at all you can eat fish restaurant and got our monies worth. Dr. Joe was quick to point out to the chairman that some of the class members had forgotten to remove their lids. It’s hard to slip anything by Dr. Joe. After leaving the restaurant the bus was kind of quite on the way to our motel. After getting checked in our hotel, several class members found a place to talk over the days travel and solve some other world problems.

Scribe: Brenda Neufeld
March 11, 2007
Gettysburg, PA

The class met at 9:30am and traveled to the Gettysburg Battlefields Visitor Center. We spent a brief half hour viewing the museum exhibits before departing on a bus tour. Our bus tour was lead by Mr. John Fuss who has 15 years of experience leading such tours and shared with us his great knowledge of the Gettysburg battles. The battles at Gettysburg were fought in July of 1863, half way through the Civil War, and many consider these battles to be the turning point of the war. This was the bloodiest battle ever fought on American ground and as Mr. Fuss described those days to us is was overwhelming to think of not only the loss of life, but the aftermath left behind for farmers of that area. In November of 1863, President Abraham Lincoln would give his Gettysburg Address at the dedication of the cemetery for those who lost their lives in this battle. The battles at Gettysburg have been called “the high water mark of the war for the Confederates” because following these battles the tide changed for the Union army and they were on their way to victory. It was a very solemn thought to think how life could be very different today had the outcome of these battles been different.

We enjoyed a wonderful buffet lunch at General Pickett’s Buffet in Gettysburg and then loaded on the bus again.

Mid-afternoon we arrived at the Fontana Union Fellowship Church to meet our host families for the rest of the day. Although this paring off was meet with some reservation at first by some, all reports the following morning were of great experiences. We left the church parking lot with our host families and spent the evening enjoying a variety of activities they had planned for us. Many went touring around the neighborhood, several got to experience a working dairy, but all reported having great visits with their host families and learning more about agriculture in Pennsylvania.

Scribe: Douglas Ritter
March 12, 2007
Lebanon, PA- Lancaster, PA- Washington, D.C.

Lancaster County Host Families

I began my day at 4:00 a.m. to help my host family milk 170 plus Holstein Cows. After what seemed like a full day’s work, I was treated to scrambled eggs and ketchup. Eighteen families hosted one or two OALP participants. It was an educational experience for us all. My family was a family dairy operation which raised the majority of feedstuffs for their operation on 400 acres. In Oklahoma, it may take 10 to 15 acres per head.

Tour of Hershey Chocolate Factory

Stan Bucher, our tour guide, arranged a tour of the Hershey Factory. Most tourists only see the facilities in the theme park, Chocolate World, we were fortunate to receive a behind the scenes tour.

Mr. Bucher began our tour with a bus ride of Hershey, PA. Hershey was founded by Milton Hershey and evolved from a corn field to a large city. The streets are named Cocoa and Chocolate Avenue and the street lights are shaped like Hershey Kisses.

Mr. Hershey failed three times in the candy making business before he became a success making CRYSTAL A caramels. This success provided Mr. Hershey with the resources to continue working on a chocolate formula that would one day become the HERSHEY’S milk chocolate bar. In 1900, Hershey sold the caramel business for $1 million but kept his chocolate making equipment.

The ingredients to Hershey’s success are cocoa beans, sugar, and fresh whole milk.

  • Cocoa beans come from cocoa trees growing in the tropics. The beans are blended from various regions so to produce Hershey’s unique taste.

  • Sugar is both beet and cane sugar. Hershey owned fields in Cuba at one time.

  • Local dairy farms provide 700,000 quarts of milk a day to the West Hershey plant.

  • Nuts are also used in various products.

Hershey’s business is very successful and is worth over $4 billion dollars. Halloween is a $700 million dollar season. Easter is the second largest with Christmas coming in third. Hershey plans to do away with seasonal shapes to avoid the markdowns of their products the day after. With the health food craze, Hershey still remains strong with the philosophy that there is a “place” in the diet for chocolate. Two squares of chocolate have more antioxidants than other foods.

The main plant in Hershey, PA has the distinction of being the largest chocolate plant in the world. Forty million kisses are produced per day.

Mr. Hershey believed wealth should be used for the benefit of others and practiced what he preached. He used his chocolate fortune for two projects…the town of Hershey and his industrial school. The school was founded for orphans. It is now the largest non-profit school in the USA. They have a $10 billion endowment fund. Orphans upon graduation may attend any university or vocational school with all expenses paid.

Hershey’s Amusement Park

“Welcome to Hershey, the Sweetest Place on Earth!” Our tour proceeded to Chocolate World. The idea for Chocolate World was Hershey’s solution to thousands of tourists flocking to see production. Besides being an amusement park and a zoo, Chocolate World has a mini production line. Approximately 3 million people visit Chocolate World per year. Mr. Hershey loved elephants. His pet elephant was named, none other than Cocoa. Hershey wanted to connect to their visitors on an emotional level and built a 3D movie theatre costing $200K. The theatre is complete with floor vibrations, bubbles, rain, streamers and smell. At the end of the tour, we received coupons for 25% off candies and Hershey collectibles.

Lunch at Hoss’s Steak and Sea House

Stan and Sandy Butcher provided the lunch at Hoss’s.

Amish Farm Tour

Our next location was to an Amish Farm. The Amish are Anna-Baptist and try to be self-sufficient. They limit their exposure to the outside world. Their houses have no electricity and are lit with propane lamps. Their phone is outside the house.

We visited Elam and Sadie King and their 7 children. The children ages range from 14 to 3. The children were well behaved and quite adorable. The family operates a 100 acre farm, has 50 cows and 50 heifers. They do not utilize tractors but use more traditional farming methods. For example, the farming is done by the team of 8 Belgium horses. One unique implement was a cart mounted with an engine complete with hydraulics and PTO for running their baler.

The cows are kept tied in individual stalls where they are milked. They grow no-til corn and alfalfa utilizing hybrid seed. Mr. King applies Round up Weed Control with his horse and cart. We concluded our visit by giving the children toys and Oklahoma Centennial Mugs for the adults. We then departed Pennsylvania arriving at the Holiday Inn-Capitol, Washington D.C.

Scribe: Cody White
March 13, 2007
Washington, DC

Tuesday morning we met at Starbucks at 7:45am and walked together to the metro entrance @ McPherson Square. We rode the Metro to Smithsonian station and entered the USDA building through security. Kathryn Hill, USDA Office of Communications, met us and arranged our program for the morning. The class watched an introduction video before hearing from the speakers. Tammi Didlot introduced Terry Dietrich from the Oklahoma Farmers’ Union who stayed for the first presentation and later joined us for dinner.

Our first speaker was Jennifer Spurgat, Director of Government Affairs Farm Policy for the National Association of Wheat Growers. Ms. Spurgat is a lobbyist for the National Association of Wheat Growers and gave a presentation on what the Wheat Growers are lobbying for in the new Farm Bill. Essentially they would like to improve on the strengths of the 2002 farm bill, keeping the basic structure while making adjustments for wheat that would bring wheat subsidies to levels other grain crops currently enjoy.

The second speaker was Dr. Mark Keenum, Under Secretary, Farm and Foreign Agricultural Service. Dr. Keenum spoke about the new farm bill proposal and mentioned that the Secretary of Agriculture held 52 listening sessions in 48 states prior to developing the current farm bill proposal, which gives the USDA credibility. He pointed out that the national budget is at a deficit today compared to the surplus when the 2002 farm bill was written. He said that the farm economy has improved tremendously over the past 4 years with an estimated $67 billion projected net income for agriculture.

The next speaker was Dr. James Murphy, U.S. Trade Representative, and Assistant Executive Office of the President. Dr. Murphy said his small office employs 225 people of which only 3-4 has practical agricultural experience. Their two mandates are to coordinate trade development trade policy and negotiate agreements with foreign governments. He said that 16% of Oklahoma farm cash receipts are from exports compared to 25% for the national average. He said the U.S. pushes for ambitious agricultural trade policies but his office is limited by the Trade Promotion Authority (TPA) which gives congress authority to override their negotiations with a yes or no vote. TPA expires this year and we don’t know if it will be renewed.

Dr. Roger Conway, Director, Energy Policy and New Uses, spoke next. He noted that his office has gone from being “the Maytag repairman to Janet Jackson’s wardrobe designer waiting for the other button to pop!” He spoke about Ethanol as it is expected to rise to 9 billion gallons for 2008-2009. He said reasons for the increased demand include extension of the tax credit, government creation of a guaranteed market for ethanol, $80 barrel oil prices, and MTBE. He also said production cost for corn ethanol has decreased as technology improves. His forecast was that gas prices will likely stay high and ethanol will continue to be feasible to produce, eventually accounting for 10-20% of transportation fuel.

The next speaker was Mike Lesenbigler, Deputy Director of Conservation & Environment, Foreign Service Agency. Mr. Lesenbigler passed out a power point slide sheet and spoke on the Conservation Reserve Program (CRP). He discussed the general benefits of CRP and showed national maps where the primary acres of CRP land are located. He mentioned that 85% of CRP enrollees elected to renew their CRP plans when they expired, indicating that people generally like the program.

The final morning speaker was Jim Brownlee, Communications Coordinator, and USDA Office of Communications. Mr. Brownlee spoke primarily about renewable energy and the Secretary’s Farm Bill Proposal. He reiterated that the Secretary had attended 23 (of the 52) listening sessions in preparation, and mentioned that Phase II of the Farm Bill producer interaction will begin at Purdue University next month.

Scribe: Edmond Bonjour
March 13, 2007
Washington, D.C.

At the suggestion of Chairperson Galynn Beer, we formed “pods” to get to the Senate Agricultural Conference Room in the Russell Building following lunch instead of staying in a large group. By 1:30 p.m., all but one of the pods had arrived but we went ahead and started the presentations.

Dr. Stephanie Mercier, Economist with the U.S. Senate Agricultural Committee, gave a fast-paced presentation entitled, “Factors Affecting the Shape of the 2007 Farm Bill.” She stated that the scope of farm bills since the inception has expanded but that the margin of passage of the bills has been shrinking. There has been a decline of $30 billion since last year’s baseline mainly due to higher commodity prices. During the 20th Century, the U.S. population has increased 270% while the farm population has decreased 60%. Therefore the farm voting bloc in Congress has changed due to the decrease in number of farms.

The USDA has submitted a proposal which is the first substantial proposal in the past 20 years. Many farm groups favor the current policy with modest “tweaks” such as a corn revenue safety net, rebalancing target price for soybeans, and the possible renewal of the Milk Income Loss program. (Last pod arrives. Yea!) There were several possible reforms including farm income based on revenue rather than price, conservation, and renewable energy that included cellulosic material.

The time-line for the new Farm Bill would be to mark-up bills in May and June, complete the House and Senate bills by August recess, and finish the process by September 30, 2007. This may be optimistic at best.

Dr. Craig Jagger, Economist with the U.S. House of Representatives Agricultural Committee spoke next. He stated that the Federal budget has a significant effect on agricultural policy and that this is the most dismal budget he has seen. The budget comes from a bipartisan budget committee. The agricultural share of the federal budget is only $90 billion. The Food Stamp program receives two-thirds of the agricultural budget. Conservation-based programs increased $80 million after the 2002 Farm Bill. The House has limited ability to add to the funds.

During questions, Dr. Jagger stated that baseline projections from the 2002 Farm Bill fall into one of three categories: too high – program costs are low but can not use the excess money in other places, too low – the Agricultural Committee does not have to do anything, or just right – which never happens. As far as direct payments, you can only get 22.5% advanced payments now and will get 77.5% after October 1, 2007. The money is in the baseline for deferred payments which is mandatory money in the budget.

Michelle Perez, Senior Analyst with the Environmental Working Group gave a presentation entitled, “Conflict or Conversion: The 2007 Farm Bill.” The Conservation Reserve Program (CRP) was initiated in 1985 to replace set-aside programs. Over the next two decades, $30 billion was spent on this program for conservation compliance on highly erodible lands. From 1982 to 1997, erosion decreased 40%. The swamp-buster program, where you can not drain wetlands, had a 70% reduction in conversion from 1982 to 1992. During the 1990 Farm Bill, there was a proposal to exclude rich farmers from receiving payments by having cap payments but this was defeated.

In 1991-1993, the EWG examined commodity programs in a new way. They employed computer investigation techniques to find out more about commodity subsidies. They then released a Farm Subsidy Database in 1995 without names of subsidy recipients in a report called “City Slickers” which traced millions of dollars in payments to recipients in America’s biggest cities. In 1996, the names of these subsidy recipients were released due to the Freedom of Information Act. Much controversy occurred following the release of names.

Only 25% of farmers receive farm subsidies. In 1995-2004, $125 billion were spent on commodity and disaster subsidies. For FY2004, $98 million of requests in Oklahoma were not funded and 67% of farmers in the U.S. did not receive Farm Bill payments.

For the 2007 Farm Bill, the EWG states that there are new stakeholders such as Oxfam and Bread for the World. They also suggest an increase to $8 billion per year instead of $4 billion per year. EWG stresses that balance and fairness are the central themes defining the 2007 Farm Bill. They want green box programs that promote measurable gains.

During questions, Ms. Perez stated that $2.9 billion of requests were approved but not funded. As to funding sources for EWG, she stated they were from private sources. (Scribe’s editorial note: According to their web site www.ewg.org, the main supporters of EWG's farm subsidy database and advocacy for more sustainable agricultural policies are the Joyce Foundation, the McKnight Foundation, the Wallace Genetic Foundation, and the William & Flora Hewlett Foundation.) The class could have gone on for hours with more questions for Ms. Perez but time did not allow.

We then trekked over to Congressman Frank Lucas’ office as a group, not as pods for fear of losing a group again. We gently crammed into his warm office for an open discussion. Mr. Lucas stated that they are all anxiously waiting on Congresswoman Nancy Pelosi for a budget for the Farm Bill. The Military Supplement Appropriation will include money for the drought of 2005-2007. He stated that this is a very fascinating time. There is also much focus on what is happening oversees.

He then opened the discussion for questions.

  • Animal ID and Country of Origin are going to be difficult to implement but that good producers will benefit. 2.

  • What he likes about the proposed Farm Bill is that it is WTO compliant but that adjustments to the 2002 bill must be made for the cotton program and that wheat subsidies must be adjusted upward. If the budget is $10 billion less than in 2002, we can live with it, but if $20 billion less then there will be a problem, especially for the Food Stamp program. Conservation, renewable energy, and food stamps may get the priority and commodity groups may get hurt.

  • The White House is not the most effective communicator.

  • Supplemental appropriations for Iraq – supposedly will not pass unless a definite date is established for pull-out but on the other side do not micro-manage from Washington D.C.

  • He briefly touched on the Horse Slaughter bill.

  • On the manure issue, environmental people have a lot of control and really do not care about agriculture.

  • Money available for rural development will depend on the budget appropriation.

  • The biggest challenge facing rural communities is that through federal programs we must provide a positive growing economy where people can prosper on the farm or in business.

We then went back to the Russell Building to visit with Senator James Inhofe only to discover that he was in session at the Capitol. We walked over to the Capitol and met him outside the Senate chambers in the hallway where it was not very conducive for a discussion because of other tour groups and difficulty hearing. Therefore, Pat Regier graciously shared her notes with me for this session and the following is a compilation of both of our notes.

Senator Inhofe made it very clear that he is “far right.” He believes it is better to know where everyone stands instead of moving left to the middle or right to the middle. He serves on the Environment and Public Works Committee along with the Armed Services Committee. In the Senate, you are a product of your Committees. He encouraged us to pay attention to what is happening in the Environment and Public Works Committee as it affects us. Inheritance tax and reducing capital gains are issues currently more important than agriculture. For enjoyment as a private pilot, he flew around the world in his Cessna airplane on the 60th anniversary of Wiley Post’s flight around the world. He mentioned “spill legislation” regarding storage tanks on farms and the Arkansas Shiner as an endangered species. Global warming is not a man-made activity such as farming and is not supported by scientific evidence. Al Gore’s movie has created a sense of panic in the American people. Senator Inhofe is very concerned about this issue. There would be a $300 billion tax increase if we would tax carbon dioxide producing equipment. He also mentioned the Kyoto Protocol to reduce the emission of greenhouse gasses. Democrats want a specific time for troop withdrawal from Iraq but he has a problem with that. Terrorists will just wait for the date to pass. The Iraqi people vote even though it’s a danger to them. The Senator stated that the media is doing a disservice to our military. The mass graves are no longer there and women are able to get an education. He discussed how far west he has visited his constituents in Oklahoma. Our Guymon class members expressed their appreciation and mentioned that Senator Inhofe has visited them more often than the Governor of Oklahoma.

The day concluded with a prime rib dinner at Tom Sarris Orleans House. Thanks to Terry Detrick, Vice President of the Oklahoma Farmers Union, for providing a variety of wines with our meal.

Scribe: Francie Tolle
March 14, 2007
Washington D.C.

The OALP class gathered at the USDA building for an informative briefing from the American Farmland Trust, the Risk Management Agency, the Maryland Cooperative Extension, U.S. Wheat Associates and the International and Homeland Security Affairs and Biotechnology, followed by a lunch in the USDA dining room.

American Farmland Trust – 2007 Farm Bill Issues

Dennis Nuxoll from the American Farmland Trust (AFT) presented information on their efforts for the next farm bill. The AFT was founded in 1980 and has been working on farm bills since 1981. They have 30,000 + members half of which are farmers. Mr. Nuxoll listed the top four factors that he sees for the 2007 Farm Bill:

  • Globalization and the WTO

  • A much tighter budget than was the case during the 2002 Farm Bill

  • Increased public pressure on current farm policy and pressures

  • A host of unmet needs including not enough funding for conservation and specialty crops.

Mr. Nuxoll passed out a booklet from the AFT titled: Farm and Food Policy for All – Farmers, Citizens and Communities – Agenda 2007: A new Framework and Direction for U.S. Farm Policy. He also told the group a full version of their agenda was available on their website www.farmland.org. He expressed a farm bill needed to look at the long term implications.

The main points of inevitable change the AFT lists are:

  • Most farmers and ranchers do not benefit significantly from current farm policies and current farm policies do not adequately benefit those farmers they intend to support.

  • Our environment is threatened.

  • Many Americans do not have access to healthy, nutritious food.

  • Fresh local foods in our communities are at risk.

  • Subsidies are not helping rural communities prosper.

  • Agricultural subsidies are widely viewed and publicized as a serious potential roadblock to a new agreement to expand global trade. A failure to change U.S. subsidy programs poses a dual threat to non-agricultural sectors. It would prevent progress in global talks designed to reduce existing barriers to U.S. non-agricultural exports and would jeopardize current exports to countries declared by the WTO to be injured by U.S. farm commodities.

The AFT has identified three pillars of U.S. Farm Policy:

  • Safety Net: Commodity programs would become inclusive and would encourage environmental stewardship while protecting against economic adversity. The new safety net would replace existing counter-cyclical and loan-deficiency payments. The safety net would take two forms:

  • Green payments would reward farmers for their environmental stewardship.

  • Risk management programs would help farmers manage revenue volatility. All farmers and ranchers would be eligible for green payments as long as they maintain an established level of environmental performance. A phase in of green payments for environmental performance would be coordinated with the gradual phase out of the current, fixed direct payments that farmers currently receive.

  • Stewardship: Would complement green payments by providing cost-share funding to producers who alter farming practices and land use to improve environmental quality.

  • New Markets: A new $1 billion farm profitability grants program to help farmers and others create innovative business opportunities to enhance rural and agricultural prosperity.

Overview of Risk Management Agency (RMA)

RMA Administrator, Eldon Gould, spoke to the group outlining RMA’s responsibilities. The role of USDA’s Risk Management Agency (RMA) is to help producers manage their business risks through effective, market based risk management solutions. RMA’s mission is to promote, support, and regulate sound risk management solutions to preserve and strengthen the economic stability of America’s agricultural producers. As part of this mission, RMA operates and manages the Federal Crop Insurance Corporation (FCIC). RMA was created in 1996; the FCIC was founded in 1938. RMA employs approximately 530 people in offices around the country. RMA’s administrative budget is $77 million (fiscal year (FY) 2006).

The size of the program has grown tremendously. In FY2005, RMA is estimated to have managed over $44.29 billion worth of insurance liabilities. The Agency currently has three divisions: Insurance Services, Research and Development (R&D), and Risk Compliance. Insurance Services is responsible for program delivery (for example, managing contracts with the companies that sell and service policies), and local program administration and support. R&D is responsible for overseeing product development. Risk Compliance monitors compliance with program provisions by both producers and the insurance companies that sell and service policies.

RMA, via the FCIC, provides crop insurance to American producers. Sixteen private-sector insurance companies sell and service the policies. RMA develops and/or approves the premium rate, administers premium and expense subsidy, approves and supports products, and reinsures the 16 companies. In addition, RMA sponsors educational and outreach programs and seminars on the general topic of risk management.

FY 2005 Program Size

Number of Policies………………………………………………………….1.19 million
Premium Volume……………………………………………………………$3.95 billion
Crop Value Insured ………………………………………………………. .$44.29 billion
Acres Insured ………………………………………………………………..246 million

Mr. Gould also mentioned:

  • How an increase in grain prices will mean an increase in liability.

  • The Pasture, Rangeland, Forage Pilot Product in Oklahoma for pasture, rangeland and forest, which is based up on rainfall index of historical data, the vegetative index which is a satellite imagery systems that is in two month increments and that with those tools technology determines yield.

  • Total Liability for Crop Insurance in Oklahoma is $44,822,401

Food Security Matters, Links between Agriculture and Nutritional Policy

Dr. Bonnie Braun, Extension Policy Specialist from the University of Maryland shared a very interesting presentation that linked agriculture to food stamps and nutritional programs.

  • Rural families have higher risk of nutrition related chronic illnesses, obesity and other debilitating conditions.

  • The average monthly participation in the food stamp program in Oklahoma has increased from 316,659 in 2002 to 435,519 in 2006. In the U.S. participation has increased from 19,095,637 in 2002 to 26,735,518 in 2006.

  • Sixty percent of the USDA annual budget is allocated to food stamps.

  • The food stamp act of 1977 states the act is to:

    • Strengthen the agricultural economy

    • Help to achieve a fuller and more effective use of food abundances

    • Provide for improved levels of nutrition among low income households through a cooperative federal-state program of food assistance.

  • USDA ERS reports the following on the effects of food stamps on agriculture:

    • Supplementation effect of food stamps increases total spending on food

    • Decline in food stamp usage equals a decline in food spending

    • A Decrease of food stamp benefits equals a $5 - $10 billion decrease over 6 years in retail food spending

    • If there is a $4 Billion annually decline in food stamps benefits then farm sector losses are estimated to range from $1-2 billion over 5 years; $1 to $2.5 billion for food processing and distribution sector.

    • The impact on commodities is dependent on changes in food spending, the value of farm component of each food group, supply/demand, and interaction with farm programs.

    • Estimated spending declines by food categories as follows:

      • Beef, grain, pork, dairy, fruit, other meat, fish/seafood, eggs, vegetables.

    • Low income households spend $1 of $3 for animal protein which provides a larger farmer’s share of retail value due to less processing. The impact on the farm sector will be > the processing sector.

  • In 2006, Oklahoma had 435,519 individuals enrolled in the FSP. Average monthly value, $89.42/person for a $39 million monthly flow of federal dollar to the state: $468 M year flow. Every $5 in federal funds generates $10 in economic activity. The economic activity of the current flow of dollars for Oklahoma is $936 million. About 25% of those eligible are not enrolled in the food stamp program. Using the above formula $125 million are not flowing to families and agricultural operations yearly?

  • Implications: When more eligible families use family, community and government food assistance the odds increase that:

    • Child and adult health, school and job performance will improve.

    • Agricultural producers, processors and retailers will see increased consumer food purchases.

  • Opportunities for Oklahoma

    • Encourage participation in federally-funded food and nutrition and nutrition education programs.

    • Conduct a local food security assessment

    • Increase access to farmers’ market purchases

    • Participate in creation and monitoring of local school wellness programs

  • The case for family nutrition support

    • Unless children are adequately nourished and nurtured, they cannot learn

    • If they cannot learn, they cannot earn

    • If as adults they cannot earn they cannot become personally responsible d economically self sufficient.

  • 25% of all farmers are eligible for food stamps.

State of World Wheat

Vince Peterson, VP of Overseas Operation, U.S. Wheat Associates spoke to the group on the state of world wheat. U.S. Wheat Associates maintains offices located around the world in order to pave the way for U.S. export growth in all six classes of wheat: durum, hard red spring, hard red winter, soft red winter, soft white, and hard white wheat. USW provides comprehensive assistance to U.S. wheat buyers, millers, bakers and government officials around the world.

In marketing year 2005/06, the U.S. produced 57 million metric tons of wheat. The American public used over 31 MMT and 27.5 MMT was exported. While the U.S. exports more wheat than any other country, our market share in global trade is 24%, evidence that the U.S. wheat industry has strong competition.

Wheat buyers, whether they are long time customers or new on the scene, need information to stay abreast of the market. To meet those needs, USW experts provide:

  • Information services, such as reports and seminars on U.S. wheat production and marketing.

  • Educational programs for overseas buyers

  • Sponsorship of overseas team visits to the United States

Some importing countries need to learn the very basics about milling, storage and handling, and end-product uses of U.S. wheat. Other countries are past the basics and are exploring new formulations and uses. USW offers:

  • Technical courses at U.S. institutions

  • USW consulting services onsite

  • Establishment of training facilities in wheat importing countries

  • Collaborative research on new and improved uses of wheat in foods

Although most of USW's activities are conducted overseas, market development actually begins within the United States, where government policy can affect the sales of millions of tons of wheat each year. USW supports wheat trade policies that provide for open and fair competition.

Consumer demand drives the market, and in special markets -- especially in areas where per capita wheat consumption is low -- consumer promotion can boost consumption of wheat foods. USW conducts:

  • Surveys that help determine levels of consumer awareness and interest in wheat-based foods and other value-added wheat products.

  • Media promotions, such as print advertising and television commercials

  • Cooking and baking demonstrations and contests

  • American Quality Wheat logo program

How USW is funded: Funding activities that develop and maintain wheat export markets is a cooperative effort between the federal government and wheat producers. Federal programs, including the Foreign Market Development program and the Market Access Program, account for about 74% of USW revenues. Producer check-off funds forwarded to USW through the state wheat commissions, including regular state assessments and state-funded special projects, provide 26% of activity funding. Eight of every ten dollars go to USW overseas activities. The remaining 20% stays in the U.S. for 20 staff members, two offices (in Washington D.C., and Portland), assistance with foreign trade delegations, USW Board of Directors expenses, and information and education for wheat producers.

Production 2006/07

  • World - 593 MMT, down 4% (28 MMT) from 2005/06

  • Problems in nearly all major exporters

  • Northern hemisphere

    • Exporters

      • U.S. drought: down 16% (8 MMT)

      • Black Sea winterkill: down 6% (6 MMT)

      • Late season problems in EU: down 5% (6 MMT)

    • China up 6% (6 MMT)

    • North Africa up 21% (3 MMT)

  • Southern hemisphere

    • Australia down 58% (14.5 MMT) from 25

    • Argentina 14.2 MMT, 10-year average 14.8

Production Outlook 2007/08
United States planted area

  • U.S. winter wheat up 9%

    • HRW 9%, SRW 13%, SW 2%

    • Good weather/crop conditions

  • First U.S. spring wheat estimates out March 30

    • Private forecasters estimate a 6%-15% decline in HRS acres, 8% less durum

      • Corn, barley, oilseeds very profitable

Production Outlook 2007/08
World*

  • World area +3% (6.8 mha)

    • Production up 34 MMT to 624, 6%

  • Sharp increase in world winter wheat plantings**

    • Black Sea Region +5% (2.2 mha)

    • India +6% (1.5 mha)

    • Australia +10% (1.1 mha)

  • Spring wheat planted acreage down

    • Kazakhstan -2% (300,000 ha)

    • Canada*** -15% (1.2 mha) CWRS,

      • Canadian durum up 20%

*(not USDA data), **International Grains Council ***Agriculture Canada

Consumption and Trade
2006/07

  • World use down 1% (5 MMT)

    • Feed use down 3% (3 MMT), decreases in Europe and CIS

    • Food use down 2 MMT, high prices limit growth

  • Exports

    • Up: Canada (4 MMT), Argentina (1)

    • Down: Australian (6 MMT), Black Sea (2), US (4)

    • China to EXPORT 2.5 MMT (mostly feed quality)

  • Imports

    • Indian explodes to 6 MMT from 0.3 MMT last year

    • Brazil to import 7.5 MMT, top importer this year

    • North African imports down 2 MMT

Stocks and Price 2006/07

  • World ending stocks – 121 MMT, down 26 MMT from last year

    • 32% (58 MMT) below 10-year average

    • Stocks to use ratio at record low 20%

      • China is a large part of stock drawdown

  • U.S. farm gate prices rise

    • $4.20 to $4.30/bushel ($154-$158/MT)*

      • $3.42 ($126/MT) in 2005/06

    • World export prices much stronger

*Average U.S. farm gate price, marketing year weighted average World Beginning Stocks
- lowest since 1981

U.S. Share of Wheat Export Market

Top 10 Customers for U.S. Wheat
2005/06 vs. 2006/07
(year-to-date)

Summary

  • 2006/07 Global production down

    • Hard wheat carry-in supplies tight

    • Ample soft wheat supplies

  • 2007/08 winter wheat production to climb

    • Corn, barley compete with spring wheat

  • Stocks to fall in all exporting countries

    • World stocks-to-use ratio to historic low 20%

  • World trade patterns shift

    • India imports 6 MMT

    • Australia, Black Sea, U.S. exports fall

    • U.S. wheat export share to fall from 24 to 22%

Political Opportunities

  • Peru-Columbia Free trade agreement – If ratified by congress it has the potential to give the U.S. a significant advantage over Canada and Argentina.

USDA Homeland Security

Justin Huff, Policy Analyst, USDA/Homeland Security Office spoke to the group and was later joined by Jeremy Stump Sr., Advisor to the Secretary for International and Homeland Security Affairs and Biotechnology. Justin covered USDA’s Homeland Security structure and the office’s responsibilities which are to:

  • Advise the Secretary and Deputy Secretary on homeland security, intelligence and emergency response issues.

  • Coordinate policy and intelligence activities across all USDA agencies and offices

  • Represent USDA’s policy interests externally

  • Coordinate emergency response policy and activities

  • Oversee national response plan implementation at USDA

In order to carry out the mission national field personnel or first responders include:

  • Professionals including veterinarians, plant pathologists, inspection personnel and laboratory staff.

  • Key relationships with the private sector and university community through farm service and extension service staff

  • Physically located on-site in food processing facilities

  • Strong relationships with State partners

    • Lab networks

    • State inspection programs

    • Training for State Veterinarians

Challenges to Protection the US Agriculture and Food Sector:

  • Ag is an open system

  • Animal and plant pathogens and pests readily available overseas

  • Information on their use – on the internet

HSPD-9 Highlights – HSPD-9 sets a national policy for defending our food and ag systems against terrorist attacks, major disasters and other emergencies. Key components include:

  • Awareness and warning

  • Vulnerability assessments

  • Mitigation strategies

  • Response Planning and Recovery

  • Outreach and Professional Development

  • Research and development

What can you do – visit the EDEN site for helpful biosecurity and planning tips at
http://www.eden.lsu.edu/
www.usda.gov/homelandsecurity/

Scribe: Tammi Didlot
March 14, 2007
Washington, D.C.

Mr. Bart Chilton – National Farmer’s Union Mutual Insurance

  • Farm Bill Concerns and the Budget

  • 2/3 of payments are based on the Counter Cyclical.

  • How do you go from a low line Budget baseline and make it a successful program?

  • Fund the Farm Bill at same level as 2002? Probably not going to happen!

  • Permanent Disaster Program Assistance and renewable energy are other key objectives.

  • Looking to make it an Omnibus Bill.

  • Conservation is another area we would like to see more funding.

Mr. Terry Detrick – Oklahoma Farmer’s Union Mutual Insurance

  • Some additional comments about the 2002 Farm Bill

  • We have the cheapest food, most secure, and more choices – This is what the tax payer gets for spending 1% of the total US Budget.

Greg Doud – NCBA – Chief Economist

  • Ethanol is one of the largest challenges

  • Cattlemen just want to be on an even playing field as the bushel of corn.

  • Pro Exporters are the best. It is estimated that 68% increase in railcar miles by 2018.

  • We really need to work on getting that back to the user.

  • We need to understand how to manage this by project.

  • We need to focus on the key markets for beef exports.

Anne Simmons – House Ag Committee Aide to Colin Peterson

  • Pay-Go policy – no deficit spending.

  • Much of the same discussion about budget concerns and the Farm Bill.

  • Create 21 causes her concern because it increases discretionary funds

Lou DeBaca – US Dept. of Justice

  • Changing Face of rural America

  • New immigrant population

  • Federal and state attention is being given to human trafficking and slavery

  • There is both criminal and civil liability to the farmer/owner.

  • Law says the people that are enslaved will put you on the hook if you knew about it. In 2003 the law changed and you can sue in civil court now.

  • This impacts international trade.

  • There is a fear of economic displacement.

Scribe: Curtis Vap
March 15, 2007
Washington, D.C. –Richmond, VA

Class 13 departed at 6:45 Thursday morning traveling south on I 95 to Richmond, Virginia. Richmond is home to the headquarters of Philip Morris USA and one of its cigarette making facilities. Dale Lemmond was chairperson for the day.

On arrival at Philip Morris the class was shown the company museum. After spending some time in it we moved to a conference room and were welcomed to Philip Morris by Jim Burns. Jim works in what he called "leaf dent department", purchasing raw materials for the Company. Two types of tobacco are grown in the U.S. which Philip Morris purchases for cigarette making. One is flue cured or bright tobacco. It is grown in Virginia, the Carolinas, Georgia, Alabama, and Florida. The other is burley tobacco which is grown mainly in Kentucky and Tennessee as well as North Carolina, Virginia, West Virginia, Ohio, Indiana, and Missouri.

Mr. Burns told us tobacco used to be purchased at auction. Now, he said, the company mostly buys directly from growers although some tobacco is still sold through auctions. The company has 13 receiving stations where tobacco is delivered for purchase. Galynn Beer asked if tobacco is quality tested. Mr. Burns said that Philip Morris works with growers and universities to develop the varieties and growing practices that will produce the quality of tobacco the company needs. Wendell Custer asked for the difference between flue cured and burley tobacco. Mr. Burns explained that in flue cured varieties the leaves are harvested and cured by forced air heat. Burley tobacco is stalk cut and air cured. Joey Meibergen asked about FDA regulations. He had read about a legislative proposal that had Philip Morris support. Mr. Burns said Philip Morris policy was to abide by all regulations. They felt that as the industry leader with a 50% market share, FDA regulations created standards for all in the industry to go by.

At this point the class was shown a video titled "Seed to Pack". The video presented some history on tobacco. Jamestown settlers in Virginia found Native Americans in the area using tobacco. The settlers started raising tobacco selling it to English merchants. By 1791, tobacco accounted for 20% of American exports. The video also showed tobacco production on farms. Tobacco is either seeded directly in the field, or is started in green houses and transplanted. The plant will grow to 4- 6 feet tall in 60- 90 days and is harvested. Bright tobacco matures from the bottom leaves up. They are picked first, and then upper leaves are picked as they mature. The harvested tobacco is placed in containers known as bulk barns. Forced air heat flows through the leaves over a 5- 7 day drying process. The drying process gives the tobacco a golden or "bright" color. Burley tobacco is grown like bright tobacco but is harvested and cured differently. With burley tobacco the entire stalk is hand cut, and then it is air cured over an 8 week period. The leaves are hand stripped after curing. Burley tobacco is a reddish brown after curing, darker than bright tobacco. After curing tobacco is delivered by growers to receiving stations the tobacco is unloaded, inspected, moisture tested, and graded. The grower is then paid for his tobacco. Most tobacco is sold this way directly to manufacturers although some is still sold through auctions. After purchase the tobacco leaf stems are removed at a stemmery. The tobacco is then stored for about two years while the tobacco ages. Philip Morris blends bright, burley, and oriental tobaccos together in its cigarettes. Oriental tobaccos are grown in the Mediterranean region, mainly Greece and Turkey.

After the video the class was split up into two groups for the factory tour. Group leaders were Philip Morris employees Bill Vickers and Cindy Moon. Safety equipment, eye protection and toe caps, was put on and the two groups were led off for their tours. At the Richmond facility Philip Morris produces 425 million cigarettes a day using 1 million pounds of tobacco. Tobacco is first delivered to the primary processing section where moisture levels are restored to suitable levels. The tobacco is then cut and blended according to recipes for various brands of cigarettes. Flavors are added according to brand recipe. After primary processing the tobacco is then sent to the cigarette making machines. These machines drop the tobacco onto a moving strip of unrolling cigarette paper. The paper is wrapped around the tobacco and sealed to form cigarette rods. These are then cut to proper length. Double filters are inserted between two cigarettes and sealed to them. The filters are then cut making two finished cigarettes. The finished product is sent packing machines where cigarettes are put into packs, packs into cartons, and cartons into cases. The cases are sent to the finished goods area and prepared for shipment. The finished product is not stored for any length of time but is shipped very soon after production. A high degree of automation was seen throughout the plant from tobacco receiving through cigarette making to shipping.

After the factory tour the class was regrouped and went to the facilities company store. The parent Company of Philip Morris USA is Altria Group which also owns Kraft Foods. Therefore, the store stocked many different food products as well as tobacco products. Many class members made purchases though it seemed most were food purchases, not tobacco purchases. After our shopping binge we were treated to lunch by Philip Morris. Jim Burns returned to have lunch with us and answered a few final questions. Dale Lemmond led the class in thanking Jim and his staff for their hospitality during our visit giving them the customary class directory. The class then boarded our bus to continue our trip.

Our next stop was at Stevensburg, Va. to visit Fresh Tulips USA. General manager Coen Haakman and grower Hans Meester greeted us as we arrived. Both men are natives of Holland. The company is Dutch owned and was started to expand into the U.S. cut flower market. Fresh Tulips USA started production 3 years ago and produced 6 million tulips the first year. Last year production had grown to 26 million flowers. All tulips produced are sold as cut flowers. 80% are sold to supermarkets; the remainders are sold to wholesale markets and through internet sales. Fresh Tulips USA grows all of its flowers hydroponically. Tulip bulbs are shipped from its parent company in Holland. The bulbs are placed in growing trays which are then filled with water. Six weeks later the flowers are ready to be cut. Looking across the greenhouse floor, tulips in all stages of growth could be seen from newly placed bulbs to flowers ready for cutting. Coen Haakman told us the company grows three "lines" of different valued tulips. The "silver" lines bring around 27 cents per flower, the "gold' lines" 30 cents, and the "platinum" lines 50 cents. He said the loss rate of his tulips was around 10% last year which was his biggest cost of production. Flowers are shipped along the East Coast from New York to Miami and as far west as Texas and Phoenix. Easter is the period of highest demand. The Company has 2.5 acres in rented greenhouse space. The greenhouse owner is in the process of building another greenhouse which will double the floor space for Fresh Tulips USA.

Coen spent sometime explaining the equipment in the greenhouse from watering systems to the roof openings. Class nurseryman Bill Farris added considerably to the conversation using his experience from his own operation. One additional enterprise of the operation was noted, using overhead space in the greenhouse to produce ferns.

After leaving the greenhouse we moved to the processing area. Here, the flowers were cut, packaged, and put into cool storage awaiting shipment. Bulbs from desirable lines of flowers were kept to be sent back to Holland for reuse. After viewing the operations of the processing area our tour concluded. Dale Lemmond again led the class in thanking our hosts and we boarded the bus for the ride back to Washington D.C.

Notes:

1. Lennie Gamage of Agrotours had joined us for the tour of Fresh Tulips USA. Lennie and his wife Eija were instrumental in setting up our Washington D.C. trip. Lennie and Eija operate a travel agency that specializes in agricultural tours they can be found at www.agrotours.com.

2. Fresh Tulips USA can be found at www.freshtulips.com. Tulips can be purchased from them at 1-800-flowers.com.

Scribe: Brent Conrady
March 16, 2007
Washington D.C.

We started the day at eight o’clock in the lobby for synthesis. Each chairperson spoke about each day they chaired. The class had a great discussion about there host family and the DC trip in general. This day was a free day for class members to sight see and/or work on team reports.

After that we all went our separate ways and 19 of us went on a tour of the capitol thanks to Sen. James Inhofe’s office for setting up the tour.

This day was a free day for class members to sight see and/or work on team reports.

Scribe: Mary Chris Barth
March 17, 2007
Washington D.C. –Oklahoma City

The OALP group departed Washington, D.C. via Reagan International. Amid snow delayed travelers and numerous on spring breaks. After an extended wait without any major difficulty the group arrived safely home in Oklahoma on schedule.