On behalf of the 82,000 family farms and ranches that produce sheep in America, of which 1,200 are right here in Idaho, I am very appreciative of this opportunity to discuss our nation's agricultural policy with the agriculture leadership of the U.S. House of Representatives.
I am Cindy Siddoway, past president of the American Sheep Industry Association (ASI), the national trade organization of the sheep industry. My family and I own and manage a five generation sheep ranch in eastern Idaho with 20,000 head of ewes and lambs. We are extremely proud of our rich heritage in Idaho and in the sheep ranching industry.
A half a billion dollars in lamb, wool, sheep milk and breed stock sales at the ranch level supports an additional $1.3 billion in economic activity for a total contribution to the nation's economy of $1.8 billion. The industry is a mainstay of many rural communities including many in Idaho where sheep are a key use for grazing and pasture land.
Our industry greatly appreciates the opportunity to participate in the current Farm Bill as well as in this and future hearings with the committee as you prepare for the next Farm Bill.
Sheep producers were encouraged when the 2008 legislation extended the loan deficiency program for wool with an increase in the base loan rate from $1.00 per pound to a $1.15 per pound. That loan rate increase was implemented January of 2010 and so far there is still only one of the nine loan categories being used by producers.
Total wool payments nationally, since inception of the program in 2002, range from $6 million to $8 million annually. This is far under the original CBO projection of $20 million per year. We believe this is primarily due to the fact that participation has been in only one loan category-a category that was intended as an opportunity for the smallest farms to participate in the program even though their volume of wool didn't justify the expense of quality testing.
The rest of the loan categories are geared to specific grades of wool that match the actual trading in the international wool market and are determined by yield and grade testing that producers conduct on their wool. The loan rates have consistently been less than market prices over the years even though wool prices have varied dramatically between 2002 and 2010.
An increase in the base loan rate and a discussion of the loan rate formats similar to those currently used by other USDA fiber programs may be in order to deliver a "workable" safety net for producers.
The current legislation also authorized a Sheep Industry Improvement Center under the U.S. Department of Agriculture. This program, to be implemented and administered by the Agricultural Marketing Service, is designed to fund business ventures that strengthen the sheep business infrastructure from wool warehouses to processing equipment to lamb slaughter companies.
The Farm Bill provided a million dollars in mandated spending and authorized appropriations up to $10 million per year through 2012. We anticipate the oversight board will be appointed by the Secretary and the program will be operational before the committee finalizes the new Farm Bill. We believe the Center will provide much needed capital to the industry and would request it be continued in the next Farm Bill.
A national plan to increase the sheep inventory of the United States is being developed in 2010 by lamb and wool companies, sheep producers and feeders to address the shortage of sheep production in America. We anticipate that portions of the plan may fit the Committee on Agriculture's goals in the 2012 Farm Bill.
The entire sheep industry and the lamb and wool business chains from farm to processor have been working to build a plan that prioritizes the most critical items needed to increase sheep production. Producers and companies alike believe they must find ways to replace retiring producers and attract new producers or the infrastructure of the industry will be at risk. Fewer companies mean less competition and less ability to market to American consumers and to export markets. The lack of both lamb and wool volume continues to squeeze the ability of businesses to buy and process our annual crops. Declining inventory of sheep since 2005 has not been due to any collapse in lamb prices at the farm gate nor extreme volatility of lamb prices. In fact, lamb prices weathered the recession better than other categories of livestock, yet we still lost production.
We look forward to sharing the plan to stabilize sheep production and rebuild the inventory, which is positive for rural economies and sheep farms and ranches.
Of interest to the Committee is a report issued this winter titled Nontraditional Lamb Market in the United States: Characteristics and Marketing Strategies. www.sheepusa.org Fully one-third of American lamb production is now sold through smaller markets and nontraditional markets from direct consumer sales of lambs to farmers markets and to small processors serving local communities. The dramatic shift in lamb marketing of the last five years is changing the sheep industry as it strives to serve traditional retail and food service accounts as well as the increasing nontraditional markets.
One issue that has not changed from the sheep industry perspective since the 2008 Farm Bill is the international situation. The United States has no barriers to lamb meat imports and as such has become the market of choice for lamb exporters from around the world. However, we have not had new markets opened up to our products, including China.
Similarly, the European Union continues to provide subsidies to sheep producers estimated at $2 billion annually under their whole farm payments. Additionally, the European Union maintains strict and effective tariff rate quotas on lamb imports. Our industry looks to both the Agriculture Committee's role in industry programs in the next Farm Bill and the Committee's role in pushing for aggressive reform of Europe's agriculture programs and barriers to assist the domestic sheep business.
We greatly appreciate the opportunity to discuss the sheep industry with the Committee and commit our support to the effort of drafting the next Farm Bill.