Hearing of the Joint Economic Committee - How Are High Food Prices Impacting American Families?

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Hearing of the Joint Economic Committee - How Are High Food Prices Impacting American Families?

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SEN. AMY KLOBUCHAR (D-MN): Thank you, very much, Mr. Chairman, for holding this hearing.

As you all know I come from a farm state. We are a third in the country for corn and third in the country for ethanol. So, I say that on the outset, but I would also like to say that I've seen first hand the middle-class families who are struggling in our state.

I've seen seniors who, in our state, some of them are so focused on not getting any government help that they're embarrassed to go the food shelves and they take a bus to the next town so people don't know that they did it. I spoke at a food shelf event a few weeks ago and it was predominantly seniors that were there giving ten, twenty dollars that they had for years, and this food shelf was having a very hard time making it.

So, those are the things that I've been seeing in my state and we when we hear from the witnesses today, some of the things that I've been focusing on in terms of solutions are: first of all, of course, this farm bill. I am one that believes we need some more reform in the farm bill, but I also believe that the nutrition part of it and the food stamp part of it is incredibly important. And we have to look at that as part of a solution -- a short term solution for this crisis that we are seeing.

Secondly, that we look at the ethanol industry, and not just quickly and with a dismissive way, and blame everything on ethanol, but instead talking about transitioning to cellulosic ethanol -- switch grass, prairie grass, other parts of the corn, that will -- that actually are higher in energy and will actually will be better for the environment. And that we look at transitioning because I'm very concerned that if we just pull the rug out from an infant industry at a time when countries like Brazil have leap-frogged us in our energy independence.

When I talk to our farmers, their input costs are, in part, oil. And we are so incredibly dependent on foreign oil and Senator Schumer and I have had focus on pushing OPEC and stopping putting oil in the reserves right now, and prices so high and doing some other things with speculation in the oil market, but I think we're at a precarious time here. We want to transition to a higher energy ethanol and not just pull the rug out from under them.

Another part of this, of course, is focusing our research on hybrid cars, electric cars, and, as one of my colleagues mentioned, if we could put a man on the moon and you think about all of the developments that came with that, that we should be able to do as well as Brazil when it comes to being energy independent.

And then, finally, I'd like to hear -- and one of the things I've heard talked a lot about in the farming community is just the increase that we've seen in hedge funds and money going into commodities that have inflated the price. What I've heard is that when the subprimes when bad, the money went out from that and into commodities, and that that has, in part, pushed up these prices. And I'm concerned about the fragile state when that money starts coming out for our farming community, which could, in fact, make the prices even higher if we don't have a steady output of farm production.

So, those of the solutions and ideas that are in my mind as we approach this, and I'm looking forward to hearing from the witnesses.

Thank you, very much.

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SEN. KLOBUCHAR: Well, thank you. Thank you. It's been very interesting testimony. Mr. Reinwald, I'd be remiss not to say my best friend since I was five years old is Amy Scherber who owns Amy's Bread in Manhattan. And she has sent me several e-mails about the wheat prices so your group is doing your job.

But I wanted to ask you as we look at this wheat issue that Mr. Reinwald raised, Minnesota and other states -- Dr. Glauber, could you talk -- and just in general I think one of the things that I didn't bring up in my opening statement was this export market. I was just thinking of -- some of the soybean producers came in and they said their biggest market right now outside of the United States is China for fish food or aquaculture, or -- yeah, fish food for China, and that we're just seeing more and more of a demand for our products, as you pointed out, with the weak dollar and other things.

MR. GLAUBER: No. And that's exactly right. We've seen very strong demand for protein meal, for meat in general as these -- particularly economies in Asia increase and we see an increase in middle class in Asia, the diet shift towards meat. And because of that, people are either importing more meat products, or they're importing the feed to feed the animals. And as I think I mentioned at our -- or someone mentioned -- we saw corn exports go to two and a half billion bushels this year, a very large increase, much larger than we had anticipated when we were doing forecasts at the beginning of the year. Soybean exports have just -- if you look at protein demand for soybeans --

SEN. KLOBUCHAR: What do you think of Mr. Buis's idea about this food reserve idea like we have with oil as if you look at these trade agreements that some of our people are getting affected by this and hurt by the prices?

MR. GLAUBER: Right. I think -- Tom and I agree on a lot of things. We'll probably disagree on this one. I don't think it's a good idea I think largely because these reserves -- our experience, at least here in this country, is that we tend to accumulate a lot of grain and it doesn't get released on the market. It hangs over the market. And when it comes out, it doesn't do particularly a lot of good. We have a small reserve here, I might add, the Bill Emerson Trust reserve that -- we just released a little bit of wheat out onto the market. But it's just tough to coordinate that worldwide.

And we've had -- historically we've had commodity agreements worldwide. They just haven't worked particularly well.

SEN. KLOBUCHAR: And then, Mr. Buis, I just wanted -- one last thing that I discussed was this cellulosic ethanol. I know there's -- some people say, oh, it's so far away, but yet there's plants right now in Canada. And we have a legitimate concern in Minnesota with some of the price of corn -- with the turkey producers. As you know, we're number one in the country with turkey producers -- I don't know if you knew that, Senator Casey -- as well as the pork producers and others.

And so -- could you talk a little bit about your knowledge of what's going on with cellulosic -- we have some incentives in the farm bill. And by the way, Mr. Braley --

MR. BUIS: Absolutely.

SEN. KLOBUCHAR: -- I'm not going to get to you, but thank you for talking about the nutrition programs in the farm bill.

MR. BUIS: Oh, absolutely, Senator. Corn ethanol is sort of the first generation for renewable energy. And I don't think any of us -- there's not a corn farmer in America that would say that that's going to be the ultimate answer. It's part of a whole menu of items. But it's paved the way because, number one, corn is easily grown, stored, transported.

We figured out how to extract the sugar out of it long ago. It's been 30 years in the making, but it's paving the way for that next generation. And cellulosic ethanol is where we're going to get the big numbers in order to significantly reduce our oil imports.

If we gave up on corn ethanol today, it would send the wrong signal to those in the cellulosic industry. One, it'd be --

SEN. KLOBUCHAR: Did you describe for those people that aren't on the Ag Committee just when you talk about cellulosic the kinds of things you're talking about?

MR. BUIS: Absolutely. You're talking about extracting the sugar and converting it to energy from crops, such as switch grass, corn stover. I suppose you could even get into biomass.

SEN. KLOBUCHAR: And would that -- would the prairie grass, switch grass -- I mean, we have a lot of our conservation groups interested in this because if it's done the right way, it can create habitat.

MR. BUIS: Absolutely.

SEN. KLOBUCHAR: One of the things I've heard -- and I'm sure Mr. Reinwald's ears are going up -- would be would this supplant then more wheat? And what I've understood is because -- the price -- the way the prices work it would most likely be grown on marginal farmland, highway medians, whatever. Could you talk about that?

MR. BUIS: Right. Well, first of all, in order to get more wheat you're going to have to offer a price attractive enough to want farmers to produce it. They can't continue to produce at a loss. And that's been happening in wheat country for quite some time. The income's been made up by government transition payments or incentives or subsidies, but at some point the industry is going to have to realize they want more wheat, they're going to have to pay their farmers to grow it.

But cellulosic ethanol would compete primarily on grazing acres around the country. I don't know if it'll compete with wheat unless wheat drops back to $4 a bushel, and then it probably would. But we don't have a market yet for cellulosic. We don't have the technology worked out. It's not energy -- or it's energy efficient. It's not economically.

SEN. KLOBUCHAR: But aren't there some plants in Canada? Part of my frustration is I think we do need to, you know --

MR. BUIS: Absolutely.

SEN. KLOBUCHAR: -- make this transition, and that we've been -- until this Congress has come in and been pushing some of these issues. We basically have been dormant with a lot of the --

MR. BUIS: Sure.

SEN. KLOBUCHAR: -- policy on energy and moving to the next -- and getting those hybrid cars moving as fast as we can, things like that. And so how close do you think we are to getting there with cellulosic?

MR. BUIS: I think it's a few years away yet, but one of the recent developments in the farm bill development that, as you know, has been going on for way too long, is a reduction in the tax credit for ethanol production, the blenders credit, which we will be put into the advancement for cellulosic, an additional incentive. And I think that's necessary to get the industry started.

SEN. KLOBUCHAR: I see the vice chair is getting her gavel ready. Mr. Buis, thank you very much.

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