[Senate Hearing 107-434] [From the U.S. Government Publishing Office] S. Hrg. 107-434 NOMINATION HEARING FOR MARY KIRTLEY WATERS, LOU GALLEGOS, AND J.B. PENN ======================================================================= HEARING before the COMMITTEE ON AGRICULTURE, NUTRITION, AND FORESTRY UNITED STATES SENATE ONE HUNDRED SEVENTH CONGRESS FIRST SESSION __________ MAY 9, 2001 __________ Printed for the use of the Committee on Agriculture, Nutrition, and Forestry Available via the World Wide Web: http://www.agriculture.senate.gov U.S. GOVERNMENT PRINTING OFFICE WASHINGTON : 2002 ________________________________________________________________________ For Sale by the Superintendent of Documents, U.S. Government Printing Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; (202) 512-1800 Fax: (202) 512-2250 Mail: Stop SSOP, Washington, DC 20402-0001 COMMITTEE ON AGRICULTURE, NUTRITION, AND FORESTRY RICHARD G. LUGAR, Indiana, Chairman JESSE HELMS, North Carolina TOM HARKIN, Iowa THAD COCHRAN, Mississippi PATRICK J. LEAHY, Vermont MITCH McCONNELL, Kentucky KENT CONRAD, North Dakota PAT ROBERTS, Kansas THOMAS A. DASCHLE, South Dakota PETER G. FITZGERALD, Illinois MAX BAUCUS, Montana CRAIG THOMAS, Wyoming BLANCHE L. LINCOLN, Arkansas WAYNE ALLARD, Colorado ZELL MILLER, Georgia TIM HUTCHINSON, Arkansas DEBBIE A. STABENOW, Michigan MICHEAL D. CRAPO, Idaho BEN NELSON, Nebraska MARK DAYTON, Minnesota Keith Luse, Staff Director David L. Johnson, Chief Counsel Robert E. Sturm, Chief Clerk Mark Halverson, Staff Director for the Minority (ii) C O N T E N T S ---------- Page Hearing(s): Nomination Hearing for Mary Kirtley Waters, Lou Gallegos, J.B. Penn........................................................... 01 ---------- Wednesday, May 9, 2001 STATEMENTS PRESENTED BY SENATORS Lugar, Hon. Richard G., a U.S. Senator from Indiana, Chairman, Committee on Agriculture, Nutrition, and Forestry.............. 01 Domenici, Hon. Pete V., a U.S. Senator from New Mexico........... 02 Lincoln, Hon. Blanche L., a U.S. Senator from Arkansas........... 03 Nelson, Hon. Ben, a U.S. Senator from Nebraska................... 15 ---------- WITNESSES A Panel including: Gallegos, Lou, of Rio Rancho, New Mexico, Nominated for Assistant Secretary for Administration, U.S. Department of Agriculture... 05 Penn, J.B., of Lynn, Arkansas, Nominated for Under Secretary for Farm and Foreign Agricultural Services, U.S. Department of Agriculture.................................................... 06 Waters, Mary Kirtley, of Champaign, Illinois, Nominated for Assistant Secretary for Congressional Relations, U.S. Department of Agriculture.................................................... 04 ---------- APPENDIX Prepared Statements: Domenici, Hon. Pete V........................................ 24 Gallegos, Lou................................................ 27 Penn, J.B.................................................... 29 Waters, Mary Kirtley......................................... 26 Document(s) Submitted for the Record: Gallegos, Lou, Biography..................................... 46 Penn, J.B., Biography........................................ 60 Waters, Mary Kirtley, Biography.............................. 32 Questions and Answers: Harkin, Hon. Tom............................................. 92 Lugar, Hon. Richard.......................................... 99 Cochran, Hon. Thad........................................... 107 Daschle, Hon. Tom............................................ 101 Dayton, Hon. Mark............................................ 108 Roberts, Hon. Pat............................................ 105 NOMINATION HEARING: MARY KIRTLEY WATERS, LOU GALLEGOS AND J.B. PENN ---------- WEDNESDAY, MAY 9, 2001 U.S. Senate, Committee on Agriculture, Nutrition, and Forestry, Washington, DC. The committee met, pursuant to notice, at 9:33 a.m., in room SR-328A, Russell Senate Office Building, Hon. Richard G. Lugar, [Chairman of the Committee], presiding. Present or submitting a statement: Senators Lugar, Lincoln, Nelson and Domenici. STATEMENT OF HON. RICHARD G. LUGAR, A U.S. SENATOR FROM INDIANA, CHAIRMAN, COMMITTEE ON AGRICULTURE, NUTRITION, AND FORESTRY The Chairman. This hearing of the Senate Agriculture Committee is called to order. Before I begin, let me just mention that it is anticipated that at 9:35, just minutes from now, we will have a roll call vote. I suspect that many of our colleagues are not present for the moment because they are on the floor, hoping to vote early and then to come back to join us. At the same time, I appreciate the fact that our nominees are here, and I will commence the hearing. There may be at various stages appearances by Senators who will wish to introduce you or to say some endorsing words about each of you as distinguished nominees; and at that point, I will break into the action, recognize the Senators, and try to accommodate both their schedules and your own. Let me simply mention at the beginning that we convene today to consider three very important nominees for positions at the United States Department of Agriculture. The Department is not an easy department to manage. A wide range of issues and diverse interests contribute to the difficulty of that task. The nominees before the committee today represent extensive work experience in the public and private sectors. All three have previously served in Government, and they are to be commended for their willingness to return to this service at the Federal level and at this time. Today we will hear from Mary Waters, nominee for Assistant Secretary for Congressional Relations; Lou Gallegos, nominee for Assistant Secretary for Administration; and J.B. Penn, nominee for Under Secretary for Farm and Foreign Agricultural Service. Next week, a week from today, on May 16, during the hearing on the credit title of the Farm bill, we will consider the nominations of Eric Bost to be Under Secretary for Food, Nutrition and Consumer Services, and William Hawkes to be Under Secretary for Marketing and Regulatory Programs. Let me mention for the record that I have visited with the FBI and read the background records of the three nominees today. This is a service that is afforded by the FBI, and the Chairman is strongly encouraged to do that, which I have done. Likewise, staff on both sides of the aisle have met with our nominees prior to this hearing so that they have been briefed and have been able to brief their Senators on the background of our nominees prior to the nomination. At this stage, before we begin the hearing and go further, let me ask you to take the oath which is required of all nominees. If you would all stand, please, and raise your right hand and repeat after me--do you swear or affirm that the testimony you are about to provide is the truth, the whole truth, and nothing but the truth, so help you, God? Ms. Waters. I do. Mr. Gallegos. I do. Mr. Penn. I do. The Chairman. Thank you very much. We are now joined in a timely way by my dear friend and distinguished Senator from New Mexico, Pete Domenici, who has a statement. STATEMENT OF HON. PETE V. DOMENICI, A U.S. SENATOR FROM NEW MEXICO Senator Domenici. Hi, Mr. Chairman. How are you? The Chairman. We are pleased to have you with us this morning. Senator Domenici. It is nice to be here. I am sorry I was late. I do not know all of the nominees, but I am here to speak in behalf of Mr. Lou Gallegos. The Chairman. Please proceed. Senator Domenici. Mr. Chairman and members of the committee, I guess I should start by saying that I first became acquainted with Lou Gallegos when he was working for the Department of Agriculture, and he was in charge of food stamps in very difficult areas--for example, he had to put a food stamp plan together for the Navajo Reservation for the Department. Somebody told me about him and that he spoke Spanish eloquently, that he was a New Mexican and was off in some other city, working for the Government. Without knowing him, I hired him over the telephone, and from some lesser jobs, he grew and became my chief of staff here in Washington--a long time ago. Then, after doing that in a marvelous way, he went back to New Mexico, where the last years of his life have been tough ones, because he has been chief of staff for the Governor of the State of New Mexico. When you add all of those things together plus the fact that he is a very practical man--and he had a little intervening time to acquaint himself with the Federal Government when Secretary Manuel Lujan from Interior asked him to be the chief of staff for the Secretary of Interior. I have a prepared statement that enumerates a few more of the exciting and relevant aspects of his life. I would just ask that you make it a part of the record. The Chairman. It will be made a part of the record in full. Senator Domenici. I am hopeful that, not only for his sake but for the sake of the Department of Agriculture, he will be confirmed and sent over there quickly. I note the job he has, and Mr. Chairman, I think the administration has picked the perfect person for that level in the Department, with those responsibilities; he will do them well. Thank you, Mr. Chairman. [The prepared statement of Senator Domenici can be found in the appendix on page 24.] The Chairman. Thank you very much, Senator Domenici, for coming today. Let me just mention that in that period 1977 to 1984, when Lou was serving you so well, Mitch Daniels was serving me, and I found out that the two had coffee together on many mornings, perhaps comparing their experiences and their difficulties in our offices. Nevertheless, both have survived to this important point. Thanks so much for coming, Senator. Senator Domenici. Thank you, Mr. Chairman. The Chairman. Now I would like to recognize our colleague, Senator Lincoln, who I know has a comment that she would like to make this morning. STATEMENT OF HON. BLANCHE L. LINCOLN, A U.S. SENATOR FROM ARKANSAS Senator Lincoln. Absolutely, Mr. Chairman. Thank you very much. Mr. Chairman, I am certainly proud to be here today to introduce one of our own from Arkansas to the committee, Dr. J.B. Penn, but I would also like to welcome and recognize Mary Waters and Lou Gallegos, because these are two fine, remarkable people, and are excited and looking forward to working with you through the committee. President Bush and Secretary Veneman have made an excellent choice for Under Secretary for Farm and Foreign Agriculture Services, and I urge all of my Senate colleagues to support his nomination. Dr. Penn is originally from Lawrence County, Arkansas, where his father and mother still reside. His father is 96 years old, so that certainly tells all of us that J.B. comes from great stock. Dr. Penn studied at LSU and Purdue, but he received his first degree from Arkansas State University, which is a great university located in the Mississippi Delta region of Arkansas in Jonesboro. His accomplishments are numerous, but I think what most qualifies J.B. for Under Secretary is his diverse background in both public and private sectors. J.B. previously served as an economist with USDA and has also worked in the real world, Mr. Chairman, serving as senior vice president and manager of Sparks Companies, Incorporated. I am sure that he will be able to bring a refreshing private sector efficiency to the Farm and Foreign Agricultural Services here in Washington. I am very proud that such a distinguished and great Arkansan has been nominated to serve at the Department of Agriculture, and we very much look forward to working with you, Dr. Penn. To all of you, good luck and congratulations. Thank you, Mr. Chairman. The Chairman. Thank you very much, Senator Lincoln. At this point, let me mention that there are folks accompanying our nominees. Ms. Waters, would you like to introduce those who have come to support you today from your family? Ms. Waters. Thank you, Mr. Chairman. I have with me my sister, Karen Brice, who has traveled here from Evanston, Illinois; my father-in-law, Terrell Waters; my eldest son, Joey; and my youngest son, Jimmy, is in school today, but I wanted to make sure that he got in the record. Most importantly, the chairman of ``Team Waters,'' my husband Vic, who has been just a terrific partner in these endeavors. The Chairman. Very good. Wonderful. Mr. Gallegos, would you like to introduce those accompanying you? Mr. Gallegos. Yes, Mr. Chairman. Senator Domenici does many things, and this morning, he married me. Ms. Rita Larson Nunez is my fiancee; she is the short person in the front row. The Chairman. Welcome. We are delighted that you are here. Mr. Penn. Mr. Penn. Mr. Chairman, I am pleased to introduce my wife, Kristin, who is here today. The Chairman. Thank you very much for coming. We are delighted that all of you are here. At this point, I think we will recess--the vote has commenced--and that way, we will have each of your opening statements in full when we return. Please be prepared to give your opening statements then; and then, Senators will assemble and ask questions of you. For the moment, we will recess the hearing. [Recess.] The Chairman. The hearing is reassembled, and we will now ask the witnesses, in the order I introduced them, to give their opening statements. First, Ms. Waters. STATEMENT OF MARY KIRTLEY WATERS, CHAMPAIGN, ILLINOIS, NOMINATED FOR ASSISTANT SECRETARY FOR CONGRESSIONAL RELATIONS, U.S. DEPARTMENT OF AGRICULTURE Ms. Waters. Thank you, Mr. Chairman. I am honored to appear before you today as President Bush's nominee for Assistant Secretary of Agriculture for Congressional Relations. I am grateful to President Bush and to Secretary Veneman for the trust they have placed in me by supporting my nomination for this position. I very much appreciated the opportunity to introduce my family members, and I would like to give you a little bit of background about my work in agriculture previous to this nomination. My background is extensive, beginning with my upbringing. My father was a professor of livestock marketing at the University of Illinois and moved to Washington, DC to take a sabbatical with USDA. More than 20 years ago, I had the distinct honor of working for my Congressman from Illinois, former Secretary Ed Madigan. His knowledge and passion for agriculture was instrumental in my own professional decisions to pursue this area. I worked as director of the Agriculture Task Force of the Republican Research Committee when the 1981 Farm bill was signed into law. The following year, my agricultural experience took on a decidedly Southern flavor when I work for Congressman Larry Hopkins from Kentucky and was on his staff during passage of the 1983 No Net Cost Tobacco Act and the 1985 Farm bill. Upon graduating from night law school in 1986, I left public service to work for ConAgra Foods, a diversified food company headquartered in Omaha, Nebraska. This experience helped me develop expertise on a wide range of agricultural issues, including commodity policy, trade, food safety, and changes in industry structure. More importantly, I developed valuable working relationships with government, industry, and consumer representatives who are intimately involved with agricultural issues and policymaking. Throughout my career, I have very much enjoyed working with the members and staff of this committee. I again thank you for this opportunity to appear before you today, and please know that if confirmed by the Senate, it would be an honor to serve in this administration. Thank you. The Chairman. Thank you very much, Ms. Waters. [The prepared statement of Ms. Waters can be found in the appendix on page 26.] Mr. Gallegos. STATEMENT OF LOU GALLEGOS, RIO RANCHO, NEW MEXICO, NOMINATED FOR ASSISTANT SECRETARY FOR ADMINISTRATION, U.S. DEPARTMENT OF AGRICULTURE Mr. Gallegos. Good morning, Mr. Chairman and members of the committee. I am honored and privileged to appear before you today. My name is Lou Gallegos, and I am the President's nominee for Assistant Secretary for Administration at the U.S. Department of Agriculture. As you know, Departmental Administration supports the Secretary and the Department's agencies through central management and administrative policies, programs, and services. Simply put, Departmental Administration's job is to help USDA fulfill its mission. I am no stranger to agriculture or to the U.S. Department of Agriculture. My service in the Food and Nutrition Service during the expansion of the Food Stamp Program and later as State Director of the Farmers Home Administration in New Mexico imbued me with an appreciation and understanding as to why it is more appropriate than ever today for the U.S. Department of Agriculture to be called ``the people's Department.'' Agriculture means more to me than public service alone. Agriculture is part of what I am. I am the descendant of sheepherders who subsequently became migrant farm workers in the asparagus fields of California, the potato fields of the San Luis Valley of Colorado, and ultimately the sugarbeet, onion, tomato, and melon fields of the Arkansas Valley. At 11 years of age, I was proud to be counted as one-half an employee for hourly wage purposes, which gained me $2.50 per day in earnings. It is in that context that I grew up with agriculture--a hard row to hoe, you may say--but precisely why I am particularly grateful for your consideration today. For that 11-year-old toiling in the fields to grow up, if confirmed, to become Assistant Secretary of Agriculture is a vivid symbol of America's promise. My pledge if confirmed is to discharge faithfully and diligently the duties and responsibilities of Assistant Secretary in keeping with the finest tradition of the U.S. Department of Agriculture. I am delighted at the prospect of working with Secretary Veneman and with this committee and the whole Senate and the whole of the Congress. Thank you very much, Mr. Chairman. The Chairman. Thank you very much, sir. I have to interject at this point, because nostalgia overtakes me, but your mention of your work in the fields as an 11-year-old reminds me of my brother Tom and me in my dad's soybean field, where we had to pull out volunteer corn for 10 cents an hour. It remains vividly in my experience--they were very large fields. [Laughter.] [The prepared statement of Mr. Gallegos can be found in the appendix on page 27.] The Chairman. Mr. Penn. STATEMENT OF J.B. PENN, LYNN, ARKANSAS, NOMINATED FOR UNDER SECRETARY FOR FARM AND FOREIGN AGRICULTURAL SERVICES, U.S. DEPARTMENT OF AGRICULTURE Mr. Penn. Thank you, Mr. Chairman. It is a great honor for me to appear before you today as President Bush's nominee to be Under Secretary for Farm and Foreign Agricultural Services. I certainly appreciate the trust and confidence that the President and Secretary Veneman have shown in me. I also very much appreciate the kind introduction by my home State Senator, Senator Lincoln. I am both pleased and humbled to be here today. There are perhaps few times in our history when agriculture and the food industry have faced challenges quite as daunting and from so many different directions. Our industry today is grappling with assimilating a wide range of new and potentially very powerful technologies, ranging from biotechnology to e-commerce to precision agriculture. It is also confronting globalization and experiencing rapid restructuring in every, single segment. At the same time, far-reaching new policies must be developed that will importantly influence the industry throughout the decade and well beyond. Those new policies include new agricultural legislation to replace the expiring FAIR Act, and that deliberation must address some very fundamental philosophical issues concerning the direction our modern farm sector should take in the 21st century. Our window of opportunity for a successful new multi- national round of trade negotiations could soon close, and we must quickly buildupon the progress made in the historic Uruguay Round or lose the chance to do so for perhaps a decade or longer. Major policy initiatives are underway to create a Free Trade Area of the Americas and also to expand trade with the important Asian region under APEC. The next few years will prove extremely important in determining how successfully our industry will adjust to all these new forces and how it will fare economically in the new century. I would be very pleased to have an opportunity to participate in this most important process. As Senator Lincoln noted, I come to this position from 20 years in the private sector, with much of that time closely monitoring and analyzing developments across the industry, and working with companies and organizations in all facets of the farm and food business. I also have been fortunate to have gained considerable direct experience in the international aspects of agricultural, both through work in many parts of the world and in analyzing trade flows and agreements. Before my private sector career, I served in Government, both in USDA and on the staff of the President's Council of Economic Advisers. I hasten to add that much has changed in the interim, but suggest that the understanding gained during that time will prove very useful in this new endeavor. My training is as an economist, and my entire professional career has focused on the economics of the agriculture and food industry. Thus, it is from the primary perspective of an economist that I approach the position rather than from a particular philosophical or political orientation. I am also proud to note that my background includes having been raised on a small family farm in northeastern Arkansas. I would highly value the opportunity to work with all the dedicated employees of USDA, especially those in the farm and foreign ag services mission area embracing the Foreign Agricultural Services, Farm Service Agency, and Risk Management Agency. In this capacity, I would welcome the chance to work to expand markets for all of our producers and effectively and efficiently implement agricultural policies and programs for farmers and all Americans. If confirmed, Mr. Chairman, I am committed to cooperate fully with this committee in helping to meet the unprecedented challenges facing American agriculture and the entire economy. Thank you. [The prepared statement of Mr. Penn can be found in the appendix on page 29.] The Chairman. Thank you very much, Mr. Penn. I will commence with questions for Ms. Waters, and I will ask you a question that I will ask each of the nominees to begin with. Do you agree that you will appear before any duly constituted committee of Congress if asked to appear? Ms. Waters. Yes, Mr. Chairman. The Chairman. Thank you for that response. In our legislative efforts and oversight function in this committee, we often seek information from the Department of Agriculture. Do you promise to respond quickly to letters or other requests from the committee? Ms. Waters. Yes, Mr. Chairman. The Chairman. We are aware that you have recently been employed by a large corporation with interest in the functions of most, if not all, of the agencies of USDA. What steps do you intend to take to avoid any conflict of interest or any appearance of conflict of interest? Ms. Waters. Mr. Chairman, I have sent a letter to the Office of Government Ethics, and I have been working closely with the Office of Ethics at the Department of Agriculture. I resigned from my position at ConAgra Foods on April 13, and I have committed to the Office of Government Ethics and to this committee that within 90 days of confirmation, I will sell all stock that I own along with that of my minor children. I also have some vested stock options which I will also exercise and sell. I also have a 401(k) retirement plan which contains ConAgra stock, and that is in the process of being rolled over to an outside account with a diversified stock portfolio that the Office of Government Ethics has cleared as being acceptable for someone in my position. The Chairman. It would appear from that recitation that you have taken very thorough steps to meet this obligation. Have you worked with counsel from the committee and from the Department of Agriculture and with others as they traced through your financial statements and assets to make certain that this was a complete situation? Ms. Waters. Yes, and I believe your staff may know my assets more thoroughly than my husband does at this time. The Chairman. Well, we do, in fact. [Laughter.] The Chairman. We have a very good background of you, Ms. Waters, as you would anticipate. How has your employment by one of the country's largest agricultural corporations affected your views of the appropriate structure for agriculture? Ms. Waters. Yes, Mr. Chairman. I have worked for a diversified food company in my most recent experience and have represented the views of those shareholders. I think that that experience has given me an opportunity to show the skills that I hold as far as problem-solving, addressing issues in a collaborative manner, trying to create coalitions to work on problems as they arise, and providing useful information in a timely manner. I am hoping that the skills that I used representing that organization would be helpful for this committee to consider when looking at my nomination. The Chairman. Have you visited with Secretary Veneman about your responsibilities in Congressional Relations? Do you have any format or any background that you can give to us as to what those activities might include? Ms. Waters. We have had an initial discussion of it, and she is very interested in the working of that office and is obviously very familiar with it from her previous tenure at USDA. She has met with all of the nominees for Under Secretary positions and has expressed an interest that once we are confirmed, we should sit down in a collaborative manner, as a team, and start addressing the specific issues that will be before Congress. I think the office will play a great role in that, and I am looking forward to talking to the Secretary once confirmed. The Chairman. In your work both as a staff member of a Member of Congress as well as your work in private industry, have you met or are you well aware of the members of the committee, both the House and the Senate committees, and feel comfortable working with them? Ms. Waters. Yes, very much so. Many of the Members of the Senate, I developed relationships with while they were still House Members in their previous lives. That was, frankly, one of the things that so interested me about this position, that I very much enjoy working with the members of this committee and their staffs, and I have been doing so for a long time. The Chairman. Well, we look forward to working with you if you are confirmed, and we very much appreciate your appearance before the committee this morning. Ms. Waters. Thank you, Mr. Chairman. The Chairman. Mr. Gallegos, let me ask you the mandatory question: Do you agree that you will appear before any duly constituted committee of Congress if asked to appear? Mr. Gallegos. Mr. Chairman, yes, sir. The Chairman. Thank you for that response. Let me just mention at the outset, because I want to approach this thoughtfully with you, that the United States Department of Agriculture has had longstanding problems in the area of civil rights, and this has been apparent in hearings that we have been conducting now, unfortunately, for several years. The problems plague both programs that deliver services as well as employment at the Department. In response to an inquiry made by distinguished ranking member Senator Harkin of Iowa and myself, it appears that in January, USDA had more than 500 unresolved program complaints that averaged almost a year each to process. With respect to employment complaints, as of January, there were 1,870 unresolved complaints averaging more than 600 days to process. Are you aware of this problem, and how do you plan to resolve these civil rights difficulties at USDA? Mr. Gallegos. Mr. Chairman, members of the committee, this is a problem that Secretary Veneman herself acknowledged. I take it very seriously as a problem. I have looked into it in recent days. Mr. Chairman, I believe that the solution is not a mechanical one. It is a situation that is ripe for very strong leadership and attention in this particular area. Mere pronouncement of non-discrimination or non-tolerance are not enough to solve these problems. At the same time, I am satisfied that the fundamental structure to begin to deal with backlog problems at the Department is beginning to take shape, and I believe, after a preliminary discussion with Secretary Veneman, that this absolutely has to be a top priority of the Assistant Secretary for Administration, and it will be, sir, if confirmed. The Chairman. Well, I certainly appreciate that affirmation. I would just observe, and I think Senator Harkin would agree, that the civil rights record at the Department has really been so dismal that some have suggested placing it in receivership--namely, over in the Department of Justice--or trying to find some external alternative resolution. Obviously, it would not only be preferable but it would be appropriate for USDA to be able to resolve these cases and then to bring about a situation which we are unlikely to see so many cases, simply because things are done right from the beginning. You have mentioned that the Secretary has this right in front and center in terms of priority, and obviously, you do, given the position that you seek. This is an area in which the committee has tremendous interest, and I wanted to take the opportunity of this hearing simply to highlight that, because I know that we will be returning to it probably with you sitting where you are now and explaining at an appropriate time what happened and how things were resolved, how justice occurred, or whatever you have to say about the situation before we take action. We certainly wish you well and a running start in what has been daunting, at least for your predecessors. Let me ask as you approach this particular position--you have been serving the Governor of New Mexico for several years as chief of staff; you have served Senator Domenici, as he testified, for a period of eight years or so as his chief of staff--what similarities and what differences do you see? Do you have some idea of the scope of the Department at this point? Have you had a chance to discover all the far-flung empire that includes FDA and all of what are sometimes called the ``stovepipe'' division in which people find it difficult to communicate with each other, quite apart from even the Secretary or the Under Secretaries. Having analyzed all of this, what comment do you have to make about how you will proceed into your office? Mr. Gallegos. Mr. Chairman, there are significant similarities. The central element is that it is about management, it is about managing and integrating for a common purpose diverse interests within the organization, and admittedly, there are diverse interests in the Department of Agriculture as there are in a Cabinet-organized State. It is about getting results and getting them with the cooperation and the willingness of the players. The Chairman. Well, more power to you. I would just say, as we discussed this privately during a conference in my office-- and I appreciated each one of you coming to visit before visiting with the staffs on both sides of the aisle on our committee--but over the course of time, one of my missions has been to encourage the Secretaries and the Under Secretaries to be that for all of the Department--not just as a closed group visiting with each other--because my own experience has been that frequently, there are large sections of staff at USDA that are off by themselves, or at least have had much of an isolated status, and this has made overall policy very difficult. As I related to some of you, during our hearings on the Y2K problem--although that, thank goodness, did not ultimately appear to be a problem for the Department--it did reveal the lack of communication, even among computers back and forth and personnel in various situations. We learned a lot about ourselves during that process, threw out a lot of computer systems prior to the fateful day or night, and have been trying to think through the presentation of the Department, both to the Congress and to the public and, most importantly, the people that we serve in all agencies. I thank you for that testimony and for your affirmation. Mr. Gallegos. Thank you, sir. The Chairman. Mr. Penn, let me ask you, do you agree to appear before any duly constituted committee of Congress if asked to appear? Mr. Penn. Yes, I do. The Chairman. I thank you for that affirmation. As you have testified in your opening statement, one of the primary functions in this Congress for this committee will be the drafting of a new Farm bill as we work with our colleagues in the House and as we work with the administration. If you are confirmed, obviously, your responsibility will be to oversee an important part of the USDA that deals with farm programs, trade programs, and other things that you have mentioned in your testimony. As you envision the situation now, what will be the USDA role in helping to shape the Farm bill, and will USDA provide bill language or an outline; and in what form is that leadership likely to come? Mr. Penn. Mr. Chairman, the Secretary has indicated that in this particular Farm bill round, she wants the Department to play a very significant role and a very cooperative role with congressional committees in developing the new legislation. If confirmed, one of my very first responsibilities will be to develop a process within the Department by which we can bring together all of the expertise, and we can make that cooperation and contribution to the process. This is a very important piece of legislation, and we hope that we can get all of the segments of the Department talking with each other--it involves more than just farm commodities-- and we want to try to have a cooperative process within the Department, and then we would like for this to be a much more cooperative process with the committees than perhaps has been the case in the past. If confirmed, I am looking forward very much to working with this committee and the House committee in the development of new legislation. The Chairman. Once again, do you have any idea in what form this advice or counsel might come? Mr. Penn. Yes. Given the state of play with the considerable process that has already been made by the House committee and by this committee, I would expect that it is not practical for the Department to attempt to develop a full-blown proposal with detailed legislative language. It is probably more practical for us at this late date, assuming that we are confirmed and working in the next few days, to develop something on the order of a red book or a green book, or principles or guidance--something of the kind that has been done before. We would expect to treat all of the areas that are included in the Farm bill, but again, to advice ideas and suggestions for consideration by the committees. The Chairman. Let me just say on behalf of myself and Senator Harkin that clearly, we both recognize--because this is the first hearing that we have had with regard to nominees in the Department since the presence of the Secretary herself before the committee shortly before the Inaugural, and this is already May 9, and that you have had no control over nor have we--on the other hand, the Department is about to be formed, at least in terms of the top-level appointees and some of your subordinates who require confirmation. We have had in this committee, as you have observed, very good hearings on the research, conservation, and trade titles. These are important parts of any farm legislation. We have not commenced drafting those chapters yet or amending what we have done in the past, although staffs on both sides of the aisle have thought a lot about this. Many Senators have strong enthusiasm in these areas. I think we have tried to maintain at least a pace that gives some opportunity for the Department through the Secretary, through yourselves, through other gifted people over there, and maybe through others in the administration who have some ideas about this, not only to be heard but to participate as vigorously as you wish. I think this is important, because ultimately, as my experience has been, we have both Houses passing farm bills, usually very difficult conferencing of those issues, but finally, at the end of the day, the President must sign that bill. This usually means that the Department or the White House counsel or whoever is interested in this have to have some enthusiasm or affinity for this. There are several players in this that we need to recognize, and this is why we have not rushed to justice, but on the other hand, we will need to pick up the pace of things. I hope that, as you wish and the Secretary may wish, you will begin to funnel to us these books of advice or guidelines or what-have-you, to give us some idea of where at least the administration is headed so that we are not surprised--or you are not surprised--by this, and that we can work with our House colleagues, hopefully, hand-in-hand so that we have at least as good an opportunity as possible. Without going into endless anecdotes, I recall the last Farm bill, and essentially, our conference resolved that sometime in February 1996. It was a very long and difficult conference. It occurred in this room. The final night and day and morning of it were continuous--as I recall, for the better part of 12 hours or so, with small groups dispersed in rooms that were close by as they tried to work out problems--and even then, it was not for sure that we would have a successful conference or that we could come together on these things. You have been through this process, all three of you, from different vantage points, watching it, but ultimately, Chairman Combest and I have some responsibility to try to pull all of our troops together and to keep talking about it and to keep in touch with you. I take this opportunity simply to spell all of this out as explicitly as I know how, because it is very important from the beginning that we take off. Now let me ask you, Mr. Penn, in your work with the Sparks Companies, you have worked with a large number of clients who have interests before USDA, and your wife works for a large agricultural concern. How do you plan to avoid the appearance of impropriety or conflict of interest with regard to all of these entities? Mr. Penn. Mr. Chairman, like my colleagues, I have spent quite a lot of time with the ethics lawyers and have developed an agreement, and in that agreement, I will recuse myself specifically from any matter pertaining to my former employer, and I will recuse myself from any matter pertaining to my wife's employer. Beyond that, if any event arises involving any of the numerous companies or organizations that I have had contact with in the past, I will consult the ethics personnel in the Department for guidance as to how best to proceed. The Chairman. Well, you have anticipated the second question I asked of Ms. Waters--namely, you have consulted carefully with counsel of the Department and the committee; you recognize not necessarily the problem, but likewise, the dilemma that these ethics issues bring as you fill out all of these forms, revealing your life history of financial dealings and that of your family. I appreciate the conscientiousness with which all of you have approached this. I raise it specifically in open hearing as a question because these confirmation hearings are supposed to explore the sensitivity of the nominees so that we are all on the same track. Mr. Penn, let me ask you this broader question. In the January 2001 Sparks document entitled ``Agricultural Policy Discussion Paper: A Categorization of the Farm Sector into Three Distinct Groups,'' which you found as commercial, transition, and non-farm farms, this work suggested that farm policy should not have a ``one-size-fits-all'' approach and that there should be more discussion of the focus of farm policy. The paper concluded--and I quote--by saying ``The commercial farm sector would be the focus of one component, treating issues and concerns such as risk management, trade expansion, et cetera. Another component could focus on the transition farms if desired, with programs appropriate to helping them become viable over the long run or assistance in more viable endeavors. Other components could address the rural policy aspects for the much larger number of places not connected to agriculture--conservation and the environment and other special concerns.'' I read that paper in January and in fact have quoted from it in a number of speeches, because I think it makes an enormous contribution to the scholarships and the economics of agriculture. Let me ask you, as author of the paper or at least as one who brought it about, what was your idea in formulating this paper--and for those who have not read it, there are very interesting statistics about the numbers of farms--for example, 157,000 as commercial farms and 189,417 as transition farms and 1.57 million as non-farm farms, with the latter receiving on a net basis all of their income from off the farm, which means that some get some money on the farm, but others lose enough that, as a net basis for that group. This is a striking revelation about the structure of American agriculture. I want to give you this opportunity to elucidate more of what you had in mind and how this might affect your views with regard to the current Farm bill formulation. Mr. Penn. Mr. Chairman, our original intent was to explore the specific question as to why farmers were not responding to the low prices in the same way that they had earlier responded to the high prices. That is, when prices fell from the high levels they had reached in 1996, why did farmers continue to expand acreage and expand input use and expand outputs with what lots of people thought were exceedingly low prices. We thought there was some disconnect there, with all the concern about economic conditions in the farm sector, but at the same time, land prices were continuing to increase, cash rents were continuing to increase, and farmers were generally expanding output. The Department of Agriculture had just released the new 1997 Census of Agriculture at that time, and we thought that perhaps the answer might lie somewhere in looking at the structure of the farm sector, and that is what we did. We explored the 1.9 million places that are counted as farms, and we discovered these three groupings that you mentioned. There are about 1.6 million farms that are much more connected to the non-farm economy through jobs and wages and employment opportunities in the rural areas generally than they are to the price of agricultural commodities. On the other end of the spectrum, we found what we call the commercial farm sector, which had 157,000 farms, and they were exceedingly efficient. They had a much lower cost per unit for producing commodities than did the other farms. They were much better at marketing. They were able to obtain a much higher price per unit than were the other farms. With the market environment that existed and with the benefits from the Government programs, we found that these farms were indeed profitable, that they were earning a competitive rate of return, and that they were able to continue to buy land and continue to produce. It was that production-- these farms produce about 72 percent of all the output--that was keeping the downward pressure on prices. Then, of course, as you indicated, there are the 189,000 or so farms that are in the middle, that have sales between $100,000 and $250,000. They are the ones who are not so technically efficient; their costs are not nearly as low as the larger farms. They are not quite as good at marketing; they do not obtain as high a price as the other farms. Their margins are much less, much reduced from what the margins are for the large farms, so they are the ones who are struggling during this period. That led us to suggest not any particular policy prescriptions but to the conclusion that you mentioned, that maybe this ``one-size-fits-all'' approach that farm bills in the past have employed may not be the most appropriate way to proceed in this new, modern era; that perhaps there are other approaches that might try to develop policies and programs for the 1.6 million farms that comprise rural America and policies and programs for the commercial farms that produce most of the food and fiber and are most concerned with the export markets. That was the point of that exercise, and thank you for noticing it and for citing some of the statistics from time to time. The Chairman. Well, I think it was a remarkable paper, and I want to ask some more questions about it, but at this point, I want to recognize Senator Nelson, who has joined us. We appreciate your coming, Senator, and if you have either comments about the nominees or questions of them, please proceed at this point. STATEMENT OF HON. BEN NELSON, A U.S. SENATOR FROM NEBRASKA Senator Nelson. Thank you very much, Mr. Chairman. First of all, I would like to welcome the nominees here today. It is good to see Mary Waters again; from her association with a Nebraska-based company, we are very familiar with her good work. Mr. Penn and I spoke yesterday; and Lou, of course, having worked for Senator--or, for Governor Johnson-- how quickly we forget our former titles--it is good to see you again. We appreciate your being here. J.B., as we were talking yesterday, a lot of changes are certainly going to be developed in the future and are going to occur because of what we do and sometimes will occur in spite of what we do. Can you lay out your vision for what a surviving operation might look like in the future? I have already suggested to the Chairman that I am a little nervous when he categorizes himself as ``in transition.'' I do not know if he is transitioning up or transitioning down. The Chairman. I am trying to find this out, too. [Laughter.] Senator Nelson. Exactly. It might help the Chairman, and it certainly would help me to have some idea of what you think the surviving operation in the future might look like. You have indicated how important it is to be able to have some economies of scale and certainly efficiency in operations, and what you have described seems to apply more to big than it does to medium and small. Maybe you could give us some idea of what you think it is going to look like when this is all settled out. Mr. Penn. That is a very interesting question, and in a lot of the analysis that I have been involved in in the past, we have taken a look at these very efficient, large, leading-edge farms, and we found that they did have some characteristics that were different than the medium-sized and smaller farms. As you indicated, they are technologically very efficient; they adopt all of the latest technology. They are always looking for any new way to reduce their unit cost. On the other side, they are very sophisticated in their marketing approaches. They use the futures markets, they use forward pricing, they use crop insurance and other risk management tools--and they are also very careful in their input purchasing. They try to buy in volume, and they try to jump over segments in the supply chain and go directly to the source. In short, Senator Nelson, they are operated much like any business would be operated. There is specialization in management. The larger farms have people who are focused on crops and people who specialize in livestock and in machinery and in finances. They are organized and operated much like any other business. I expect whether we think that is appropriate or whether we like it or not, that is probably what the surviving major commercial farms of the future are going to look like. There are opportunities for other-size farms as well. We are seeing more and more farms explore options dealing with biotechnology products where they can produce a value-enhanced product that does not require the same size and scale as the larger farms. We are seeing farms, even smaller farms, entering into niche markets such as for organic produce and things of that nature. I would expect that in the next 10 years or so, through biotechnology, we will see a lot of opportunities for industrial products, for maybe an entirely new market involving nutriceuticals or medicinal products as well as products that have involved nutrition for all these years. I think the future is probably evolving in some way along those lines. Senator Nelson. It is not inevitable then, that small goes out of business, medium becomes small, and only the large get larger? Mr. Penn. No, I do not think so. I think we have a mind-set in this country that is focused on commodities. We have focused on No. 2 soybeans, No. 2 yellow corn, and that does involve size, because the margins are small. I think that with the advent of biotechnology and value-added products in other areas, there now may be a focus on widening margins from the revenue side as well as the cost side, and that may not have to occur as it has in the past. Senator Nelson. Even in the case of the large and particularly in the case of the medium and the small, until you get a good market price for the product, even the bigger truck and the better technology and the better economies of scale don't get you into profitability--is that fair to say? Mr. Penn. I think that is fair to say. I cannot miss an opportunity to plug expanded trade and foreign markets. I think that is one of the biggest opportunities for improving the price of our products is to get our producers much greater access in foreign markets. As the Secretary has pointed out repeatedly in her statements, 96 percent of all the consumers in the world live outside the United States, and we have the capacity in this country to produce far more than we need to feed our own population, so we need those foreign markets and to continue to try to expand those markets. Senator Nelson. Will you be supportive of and pursue aggressively the expansion of the Export Enhancement Program and the Market Assistance Program and other pump-primers that will help us expand into many foreign markets? I have made a lot of foreign trade missions as Governor. Having had that experience, I know that even there, the strong dollar, with all of our efforts, unless we get into the pump-priming process even more aggressively, we can talk about expanding the trade opportunities, but it is economically very difficult to do so. Mr. Penn. The Department has a number of these pump-priming and market-opening tools, as you indicated, and if confirmed, I will certainly be trying to use those in the most effective way to expand markets for our producers. Senator Nelson. Of course, focused as well on what we can do with renewable resources in the area of growing our own fuel through ethanol, soy diesel, and the biomass and bio-fuels, I assume? Mr. Penn. Yes. Senator Nelson. Thank you very much. I appreciate it. Mr. Penn. Thank you. Senator Nelson. Thank you, Mr. Chairman. The Chairman. Thank you very much, Senator. I certainly share your enthusiasm for biomass, ethanol from every source that can come off of a farm. We tried to stress that with the Secretaries of Energy and others who also have some look-see into our situation. I appreciate that the Senator has obviously been listening to my comments about your paper and identifying my farm as one of these transition farms, as I have identified it that way. I have looked into your paper to see what happens to farms about the size of mine, and essentially, you point out that the large farms are more sophisticated in terms of their marketing, and as I recall, your paper showed they often get 20 cents more per bushel for wheat than do some of the other farms down in even more of a differential with the smaller farms, and likewise for corn and so forth. Essentially, these marketing tools, whether they be futures markets or sophistication of that sort, pay off for these folks, and in other planning ways. The point, however, that you made earlier is an intriguing one, and that is you tried to discover why, given low prices, we seem to be having decisions in American agriculture to produce more. This is sort of counterintuitive. As your paper points out, not counterintuitive, if you take a look at at least a couple of things--and you cited many more--but for example, even our loan deficiency payments, as low as they may seem to many corn farmers, say, if you are one of these very efficient farmers, you can make money because your costs are even less, in a marginal sense, than the loan deficiency payment. Even that may spur you on. This is very difficult, I think, for all of us to understand, but at some point, either you or someone else cited that we may have had as much as three percent more production spurred by even the floor or the safety net than we would have had otherwise. Or, take the crop insurance bill we passed last year--that may have spurred another three percent production. That here we have a situation in which we are all lamenting how low the price are, but adopting policies, for good reasons--safety nets or all risks and so forth--that may be incentives to produce more and thus create lower prices. You also point out in your paper that one effect, of our payments, AMTA payments or double AMTA payments or all the things we do, is to steadily increase the price of farm land in most States of the Union, and farm rents derivative from that, which is difficult, then, for the entering farmer or younger farmer situation, or even for those who do not own land but are renting from others; they have a cost there that is going to be higher, based really on many of the policies that we are adopting. Then, as Senator Nelson has pointed out, the trade problem has not worked out so well for us, in part because of Southeast Asia difficulties or trade protectionism or all of the reasons. Here we have a situation--and you are quit correct, if we can move the product, quite clearly, that would help price, but we have not been able to move the product. We are sort of stymied in our trade negotiations, and hopefully, we will do better. In the face of this, offering incentives to farmers either through crop insurance, through LDP, or through whatever we are doing, while having a much more constricted market domestically, without the push we had, of course, is likely to lead to even lower prices. It is a circular argument of many farmers coming to this committee, hoping for relief, for more payments in one form or another, and for a broader group of crops all the time. One of the ag newsletters yesterday reviewed all of the different kinds of specialty crops in which the Department is now involved in making payments or ascertaining and calculating how payments could be made. It was a list of four pages, and as I recall, 40 or 50 different programs, going through many fruits and vegetables and mohair, and honey is back, and a good number of things like that. We are attempting to fix almost every, single farm situation, regardless of size. In the midst of all of this, how do we address the problem, say, of these 1.57 million farmers. This is the huge majority--82 percent of farm entities who in fact, as you point out, are getting 100 percent of their money from off the farm but nevertheless are a part of the Farm bill, the farm picture. For these transition farms, you mentioned that perhaps some other programs might be more appropriate; and what about the incentives that we are giving to overproduce, even while we lament the overproduction and the lower prices and the constructed trade? Can you give us any views of the figure that bring some new focus in a farm bill that we might write? Mr. Penn. Mr. Chairman, it seems to me that you have developed a pretty good outline for a new farm policy there in your statement. As I indicated in my statement, I have approached these issues as an economist, focusing on the economic impacts that come from these very different policies. I have also been aware that politics plays a large element in developing these farm programs, and there is a little bit of a gap there between what economics would suggest and what the politics would dictate. I do think that we need to explore in the development of this next Farm bill the kinds of questions that you very clearly stated there. I do think there are problems in rural America that would be treated much more effectively outside the farm policy context. We have noted the economic well-being of not only these 1.6 million farms but of tens of millions of other people who reside in rural America. Their well-being is much more dependent on macroeconomic conditions, on the development and creation of new jobs, on wage rates, on having appropriate infrastructure in order to be gainfully employed, such as access to the internet and all of these sorts of things. My colleagues at the Department in the rural services area I know are going to be exploring some of those options. I think that is one possibility. For the middle-sized farms, the 189,000, I think there is some part of those that really belong with the 1.6 million. They are going to continue to exist regardless, and what happens to the price of corn and soybeans and wheat will not be of material significance to their overall well-being. Then, that leaves us with the difficult questions, as you note, of what to do about the commercial farm sector, and I do not have any particular policies to advocate, but as an economist, I know that I share your concern that we may be unwittingly doing things that are going to cause us some considerable misery at some point in the future. If most of the benefits of these programs continue to be bid into land prices, that creates an artificial market for land, and at some point, there would be a day of reckoning which would involve not only the farmer but the lender, the rural businesses, and others. There is also another side to this--to the extent that cash rents continue to be bid up, reflecting the increase in the asset value, that reduces our competitiveness in the foreign markets. We are already in a position in which we are losing market share, and it seems to me we need to be focusing on a more efficient and increasing market share rather than doing things--certainly self-defeating things--that preclude us from a greater market share. Those are the kinds of discussions that I certainly hope we can have in the development of the next Farm bill. The Chairman. I thank you for that comment, and I don't want to belabor the issue, but just making your point again, I think the tables in the USDA reports that we consult in trying to think, for example, as we did last year about doubling the AMTA payment--we looked at the net farm income for all farms in America, and roughly, we were heading toward a target of about $45 billion, which had been the net farm income a couple of years back. I think the prediction was 41 or 40 or thereabouts, and we plugged in 45, to get it back up to 45. Once again this year, it looked as if, without there being more payments, it might slip to 41, and maybe in a second year down to 38. It is not surprising that we have plugged in some more money to get it back up to 45. This is a net farm income--this is income, not loss--for all the farms in America--$45 billion. There is no other business in our society in which anyone is overseeing it in this way--machine shops or drugstores or dot- coms that are going out of business or what-have-you. We have made a deliberate attempt as a Congress and as an administration, with the last administration, to do this kind of work. One of the other results in the tables and one not often noted is that the net worth of American farmers as a group has been going up each year. The public asks how in the world could this be given low prices, rock-bottom prices, historically low, as is often mentioned around this table, and the potential for farmers going out of business wholesale in every direction. How in the world could net worth for the whole group be going up? This is why work such as you are doing is very important. You do ont offer all the answers to this--but one reason, of course, is that land values have been going up. We have been plugging in money, putting money into the country, and the values of those basic assets go up. What is happening on that land may not be doing so well given trade policy or whatever else, but certainly the net worth is doing well--if you are in the game now and if you are in it big. If not, you have got some problems. What I hope--without your trying to illuminate this today, because these are very big subjects--is that as money has been set aside by the Budget Committee--and we will be voting on that budget probably sometime today or tomorrow and then working from that--but some of that money, perhaps, should go for conservation; some of that money may very well want to go to rural America in terms of trying to develop a basis for income for people who are on these farms now, the 1.6 or 1.7 million who are not doing very well. That will take some creativity, but that could be a part of a farm bill. I think that we probably need to give a lot of thought to that if we are humane about this process, because we have noted in this committee only 300-some counties of America have even 10 to 20 percent of their income coming from farming--and that is the high water mark out of 3,000. Another 300 have, say, 5 to 10 percent, as I recall; about 2,400 have virtually no impact, whether they are rural or not; 1,800 are rural, and farming does not make a whole lot of difference right now in terms of their incomes, although we often talk as if it did, that we are preserving the infrastructure. I hope that in your creativity in your shop of economists, you will really take a look at the actual realities of what is happening in rural counties in America, what the impact is of our policies and what it might be in the best of all worlds, to help rural people, all of the rural people, of the country, and in addition to the very special producers who are doing a great job. When 8 percent of American farms produce 72 percent of all that we are doing, that is a remarkable feat, and we want to encourage those farms. At the same time, I think you and your associates have revealed a landscape that is something different than the 8 percent, the other 92. Life for them is right now very different. Let me just ask one more question, because this has been raised, and I want you to clear the air. In August 3, 1999 testimony to this committee, you commented that ``The average variable cost of producing corn in the corn belt area was probably 95 cents to $1 a bushel.'' As I understand it, variable cost is a concept used by economists to categorize some but not all the costs of production. Can you describe for us the difference between variable and fixed cost, and what is the Department of Agriculture's current estimate of the average variable cost of producing corn in the corn belt area? Mr. Penn. Well, I think you explained it very well, Mr. Chairman. In that testimony, I did talk about ``average variable cost,'' and that is an economist's term. As you may know, that was misinterpreted by some to mean total cost of production, and I did hear from a few producers who said, ``I cannot grow corn for anywhere near $1 a bushel or whatever number you cited.'' Of course, I was only referring to cash cost or out-of- pocket cost. As you indicate, total cost of production includes the very considerable land cost, depreciation, and some other overhead costs. The comparison I was trying to make is the one that we have discussed earlier this morning, in that when farmers go to make a planting decision each year, they look at their cash cost versus the guaranteed price, which is the loan rate. If you have a cost of production of $1 a bushel for corn, and the loan rate is $1.89, you have covered your cash cost, and you are likely to continue to produce. It is this Marketing Loan Program which explains a lot of what we would at first glance think is a lack of response to the lower prices. Thank you for allowing me to clarify that. The Chairman. Well, it is a very important point, and it illustrates one of the thoughts that I had earlier on. One reason for over-production on my farm or any other--if we have a variable cost of $1 a bushel--is it pays us to produce as much as we can. We are going to get $1.89 for every bushel we can get down there to the elevator. That is why all of this is sort of counterintuitive--low prices do not necessarily mean lower production or some adjustment if in fact your cost structure is such that you make money on the thing. I appreciate your illuminating that further. Senator Nelson, do you have more questions of the nominees? Senator Nelson. If there is one thing that would be the most important thing that you could do that would have the greatest positive impact on farms as part of a farm bill, what would it be--one thing that would be the most important; the biggest idea that we could come up with that would have the greatest impact--maybe not do it all; it certainly has to be part of an overall package; it is multifaceted--but so we do not worry that Senator Lugar is going to put a ``for sale'' sign out if he reads another paper you write. Mr. Penn. We certainly want him to transition up. [Laughter.] Mr. Penn. Senator, that is a very, very difficult question. My answer would be that I think the most important thing that public policy can do for the long-term health of the farming industry is to expand the foreign market. Now, that is not exactly a component of the traditional farm bill, but as I indicated before, we have a vast wealth of natural resources, we have an accommodating climate, we have made huge capital investments in our farming system, we have the latest technology, and we can produce food rather cheaply, and we can feed a lot more people than just the 275 or 280 million people in this country. Senator Nelson. Even with high land costs and everything factored in, both the variable and fixed costs. Mr. Penn. Not in every commodity. We are not competitive in every commodity. In the mainstream staples--corn, soybeans, and some of the other major crops--we are very competitive, and we can be very competitive, and that is why it does pain me a bit to see us reduce our own competitiveness. I mean, we have enough other problems with relative currency values and demand and growth in other markets. I think if there is one thing that is going to influence the overall economic vitality and viability of our industry, it is going to be continued access, expanding access, to these foreign markets. Senator Nelson. Thank you. The Chairman. Thank you very much, Senator. We thank each one of you for your opening statements and for your forthcoming responses to our questions. I just want to announce that I hope staff will inform all members that they may wish to ask further questions of the nominees, but please do so, if you will, by the end of business today. In the event questions are raised by committee members, please respond as rapidly as possible. Then I will count on staff to inform me when it is useful that we might have a meeting of Senators, perhaps off the floor, in the event we do not have another meeting, and we do not have one scheduled for this week, in which we would come together, in which we might take action on the nominees and try to make certain our Department is better staffed--namely, the three of you, in addition to the Secretary. We will ask all Senators to cooperate with the questions and you to cooperate with the responses and attempt to resolve the issue of your confirmation as rapidly as possible, and leave that then to floor action for final confirmation. The Chairman. We thank you all. The hearing is adjourned. [Whereupon, at 11:02 a.m., the committee was adjourned.] ======================================================================= A P P E N D I X May 9, 2001 ======================================================================= [GRAPHIC] [TIFF OMITTED] T9495.001 [GRAPHIC] [TIFF OMITTED] T9495.002 [GRAPHIC] [TIFF OMITTED] T9495.003 [GRAPHIC] [TIFF OMITTED] T9495.004 [GRAPHIC] [TIFF OMITTED] T9495.005 [GRAPHIC] [TIFF OMITTED] T9495.006 [GRAPHIC] [TIFF OMITTED] T9495.007 ======================================================================= DOCUMENTS SUBMITTED FOR THE RECORD May 9, 2001 ======================================================================= [GRAPHIC] [TIFF OMITTED] T9495.008 [GRAPHIC] [TIFF OMITTED] T9495.009 [GRAPHIC] [TIFF OMITTED] T9495.010 [GRAPHIC] [TIFF OMITTED] T9495.011 [GRAPHIC] [TIFF OMITTED] T9495.012 [GRAPHIC] [TIFF OMITTED] T9495.013 [GRAPHIC] [TIFF OMITTED] T9495.014 [GRAPHIC] [TIFF OMITTED] T9495.015 [GRAPHIC] [TIFF OMITTED] T9495.016 [GRAPHIC] [TIFF OMITTED] T9495.017 [GRAPHIC] [TIFF OMITTED] T9495.018 [GRAPHIC] [TIFF OMITTED] T9495.019 [GRAPHIC] [TIFF OMITTED] T9495.020 [GRAPHIC] [TIFF OMITTED] T9495.021 [GRAPHIC] [TIFF OMITTED] T9495.022 [GRAPHIC] [TIFF OMITTED] T9495.023 [GRAPHIC] [TIFF OMITTED] T9495.024 [GRAPHIC] [TIFF OMITTED] T9495.025 [GRAPHIC] [TIFF OMITTED] T9495.026 [GRAPHIC] [TIFF OMITTED] T9495.027 [GRAPHIC] [TIFF OMITTED] T9495.028 [GRAPHIC] [TIFF OMITTED] T9495.029 [GRAPHIC] [TIFF OMITTED] T9495.030 [GRAPHIC] [TIFF OMITTED] T9495.031 [GRAPHIC] [TIFF OMITTED] T9495.032 [GRAPHIC] [TIFF OMITTED] T9495.033 [GRAPHIC] [TIFF OMITTED] T9495.034 [GRAPHIC] [TIFF OMITTED] T9495.035 [GRAPHIC] [TIFF OMITTED] T9495.036 [GRAPHIC] [TIFF OMITTED] T9495.037 [GRAPHIC] [TIFF OMITTED] T9495.038 [GRAPHIC] [TIFF OMITTED] T9495.039 [GRAPHIC] [TIFF OMITTED] T9495.040 [GRAPHIC] [TIFF OMITTED] T9495.041 [GRAPHIC] [TIFF OMITTED] T9495.042 [GRAPHIC] [TIFF OMITTED] T9495.043 [GRAPHIC] [TIFF OMITTED] T9495.044 [GRAPHIC] [TIFF OMITTED] T9495.045 [GRAPHIC] [TIFF OMITTED] T9495.046 [GRAPHIC] [TIFF OMITTED] T9495.047 [GRAPHIC] [TIFF OMITTED] T9495.048 [GRAPHIC] [TIFF OMITTED] T9495.049 [GRAPHIC] [TIFF OMITTED] T9495.050 [GRAPHIC] [TIFF OMITTED] T9495.051 [GRAPHIC] [TIFF OMITTED] T9495.052 [GRAPHIC] [TIFF OMITTED] T9495.053 [GRAPHIC] [TIFF OMITTED] T9495.054 [GRAPHIC] [TIFF OMITTED] T9495.055 [GRAPHIC] [TIFF OMITTED] T9495.056 [GRAPHIC] [TIFF OMITTED] T9495.057 [GRAPHIC] [TIFF OMITTED] T9495.058 [GRAPHIC] [TIFF OMITTED] T9495.059 [GRAPHIC] [TIFF OMITTED] T9495.060 [GRAPHIC] [TIFF OMITTED] T9495.061 [GRAPHIC] [TIFF OMITTED] T9495.062 [GRAPHIC] [TIFF OMITTED] T9495.063 [GRAPHIC] [TIFF OMITTED] T9495.064 [GRAPHIC] [TIFF OMITTED] T9495.065 ======================================================================= QUESTIONS AND ANSWERS May 9, 2001 ======================================================================= [GRAPHIC] [TIFF OMITTED] T9495.066 [GRAPHIC] [TIFF OMITTED] T9495.067 [GRAPHIC] [TIFF OMITTED] T9495.068 [GRAPHIC] [TIFF OMITTED] T9495.069 [GRAPHIC] [TIFF OMITTED] T9495.070 [GRAPHIC] [TIFF OMITTED] T9495.071 [GRAPHIC] [TIFF OMITTED] T9495.072 [GRAPHIC] [TIFF OMITTED] T9495.073 [GRAPHIC] [TIFF OMITTED] T9495.074 [GRAPHIC] [TIFF OMITTED] T9495.075 [GRAPHIC] [TIFF OMITTED] T9495.076 [GRAPHIC] [TIFF OMITTED] T9495.077 [GRAPHIC] [TIFF OMITTED] T9495.078 [GRAPHIC] [TIFF OMITTED] T9495.079 [GRAPHIC] [TIFF OMITTED] T9495.080 [GRAPHIC] [TIFF OMITTED] T9495.081 [GRAPHIC] [TIFF OMITTED] T9495.082 [GRAPHIC] [TIFF OMITTED] T9495.083 [GRAPHIC] [TIFF OMITTED] T9495.084 [GRAPHIC] [TIFF OMITTED] T9495.085 [GRAPHIC] [TIFF OMITTED] T9495.086 [GRAPHIC] [TIFF OMITTED] T9495.087 -