AMERICAN FARM BUREAU FEDERATION ANNUAL MEETING Release No. 0013.98 Remarks OF SECRETARY DAN GLICKMAN AMERICAN FARM BUREAU FEDERATION ANNUAL MEETING CHARLOTTE, NORTH CAROLINA -- JANUARY 12, 1998 INTRODUCTION Thank you, Dean [Kleckner], for that introduction and for having me back again this year. We have quite a USDA contingent here. I'm told this is the first time Farm Bureau's had both the Secretary and Deputy Secretary of Agriculture at your annual meeting. Neither one of us wanted to pass up the opportunity to be here. I want to thank Dean Kleckner and Dick Neufer for the tremendous job they've done this past year representing America's farmers and ranchers on issues ranging from farm policy to trade policy to economic policy to the environment. In the years ahead, farmers will need to lead on some of the most critical debates of our time -- debates that have to do not just with agriculture's future but our world's, and these guys do an outstanding job of making your voices heard. They've certainly been a strong ally of mine ... most of the time. You know, I just got back from England where I gave a speech at Oxford University. I talked about what's happening in Asia, and how we all have a shared stake in preserving global economic health. I talked about the success and popularity of the farm bill these past two years, and I encouraged the European Union to get government out of the day-to-day business of its farmers. I delivered a tough message on phony science trade barriers, saying it was wrong to exploit the public's food safety concerns for political gain. And, I talked about the importance of biotechnology to our world, stressing that our decisions on this subject must be based on sound science -- which time and time again has proven the products of biotechnology to be safe. After explaining the world according to Dan Glickman,' I learned something myself. I opened a British phone book and saw in their yellow pages that farming had its own listing as an occupation. That's something you won't find here which, I think, says something about the U.S. perspective on agriculture. It seems the more productive and efficient our farmers become, the less urban and suburban America understands the hard work behind U.S. agriculture's success. So in 1996, while farmers were celebrating their freedom to plant for booming world markets, taxpayers were happy to see expensive government farm programs phase down. And, why not? Getting rid of costly programs helped us reach the historic milestone we just passed -- one that Farm Bureau has championed for years now -- the first balanced federal budget in three decades. With the lowest unemployment and inflation rates since the 1970s, with more than 13 million jobs created since 1993, with a deficit that's dropped further than anyone dared dream just a few years ago, there's really no question that the United States today -- both politically and economically -- is the undisputed leader of the world. Our overall economic strength, in combination with a healthy global economy that's hungry for our agricultural goods, has created an ideal situation for the transition of U.S. farm policy to greater market orientation and the transformation of government's role in agriculture -- from dictator of farm decisions to back-seat booster supporting agriculture's success. UNFINISHED BUSINESS OF 1996 FARM BILL Given the past 2 years record and near record farm incomes and exports, there can be little question that when markets are strong the farm bill works quite well -- for farmers and all balanced-budget-minded Americans. It's been a particularly sweet deal for farmers. Just to give you a comparison between the old and new ways, I recently asked my chief economist: how much farmers would have gotten from Uncle Sam these past 2 years if we still had commodity payments? The combined answer was somewhere between $3 billion and $4 billion. You know how much farmers got with market transition payments? About $11.3 billion ... on top of strong prices and world demand. So it doesn't take a Harvard economist to figure out that generous, fixed payments and strong prices make for one very popular farm program. I'm glad to see farmers doing so well. It's certainly made me look good these past two years. But before we close the book entirely, I think we need to think carefully about the clouds gathering on the horizon. As we see prices come down, as we see export projections come down, as we see some uncertainty in the global economy, I want to take you back to that day in 1996 when President Clinton signed the Farm Bill. He talked about the importance of producers making their own planting decisions; he talked about agriculture's opportunities in a new world; he also raised serious concerns about the lack of a safety net for farmers. As a son of rural America, he saw firsthand the hard work that farming required and the risks it involved, President Clinton knew that even with government easing off the controls of agricultural production, government could never leave farmers to face agriculture's risks alone. The safety net's been a non-starter of an issue these past 2 years with the farm economy so strong. But 1998 is starting off looking like a different sort of year. With record world agricultural production and faltering economies in the East, I think it would be a wise time to settle the unfinished business of 1996 and answer the question: in the post-farm-bill world, what is the proper role of government in helping farmers should the markets take a turn for the worse? A few years ago, the answer would be simple: Crank up commodity payments, open up the acreage reduction program, drive down production and drive up prices. But all these programs -- that give government the power to manipulate markets -- are gone now. They're gone for the right reason. We in agriculture looked ahead to a new world that's taking shape and recognized that, in order to maximize our farmers' and ranchers' success, government needed to get out of the day-to-day business of agriculture, and free farmers to make their own decisions and take advantage of a world of opportunity. This new division of responsibilities between government and farmers requires all of us to use our wits and be smart about the decisions we make in a more uncertain market environment. That being said, I believe that should markets take a turn for the worse, farmers, ranchers and the American people -- notwithstanding the 96 Farm Bill -- will want government to be an active partner and not just sit on the sidelines. FARM POLICY FOR THE FUTURE While I hope that we can all agree on that, how we do it gets a little more complicated. 1996 was basically the end of farm policy as we knew it, which was mainly commodity policy -- government controlling supply and demand. Without these market manipulating tools, farm security today depends on addressing a wide array of issues that impact the farm economy. For example, the American people today expect agriculture to produce not just abundant, affordable food, but also clean water and healthy soil and wildlife habitat. That's an important priority. How do we make it an economically realistic one for farmers? Through a strong commitment to voluntary, cooperative, well-financed conservation programs that offer farmers serious financial and technical assistance. Programs, like the new Conservation Reserve Program and the Environmental Quality Incentives Program, are giving farmers real help in achieving what must be a sustainable future for our agriculture. In a few weeks, I'll announce the results of the 16th sign-up for the CRP. I believe it will show that we are striking a responsible balance between the need for agriculture to be competitive today and sustainable tomorrow. Food safety, too, is emerging as a major world issue. I heard on the radio the other day a list of the top three stories of 1997: Number one was Princess Diana. Number two was Iraq's chemical weapons. Number three was the Hudson Beef recall. From consumer education, to stepped-up efforts to keep unsafe food out of our country, to investing in science to improve our ability to prevent and control outbreaks of food-borne illness, to our revolutionary new high-tech meat and poultry inspections, the United States is leading the world in raising the bar on food safety -- protecting the public health and farm incomes which hinge on a basic market fact: Safe food sells. Farm security in the 21st century will also mean looking beyond just farm programs for other ways to help farmers. Look at what we were able to accomplish this past year with tax reform: a $500 per child tax credit; significant reductions in the capital gains tax; deductions for the cost of health care for the self-employed; and more than doubling the estate and gift tax exemption. That last change alone cuts in half the number of farm estates that are taxed as they pass from one generation to the next. These changes will make a real difference for America's farm families -- about a $1.5 billion difference every year. While it's true that about 350,000 farm operations do most of agriculture's business and are highly capable of success in a deregulated farm economy, a safety net for the future must ensure that the small farmer, the family farmer and the beginning farmer, have a place in agriculture's future. We need to ensure that those who are less capitalized are not washed away by a single change of tides in the marketplace. President Clinton's next budget proposes to nearly double funding for farm ownership loans, and substantially increase the budget for farm operating loans to help beginning and family farmers get and stay on the land. USDA will also continue to use its anti-trust tools to ensure that small producers get a fair shake in the marketplace. Transportation is an often overlooked, but crucial component of agriculture's competitiveness. A good chunk of the cost of our products is the cost of transportation. The more affordable it is, the more competitive our prices in world markets, the more our farmers can sell. Reliability is equally crucial. We can't afford to have grain on the ground across the Midwest at harvest time. No matter how high-quality our products, if we cannot deliver reliably and affordably, we cannot compete. Right now, countries like Brazil and Argentina are investing heavily in infrastructure -- railroads, highways, bridges and ports -- recognizing that an efficient transportation system is critical to their success in a global economy. We must be willing to make the same long-term investments. USDA is right now weighing its options in anticipation of this year's reauthorization of surface transportation legislation. Agriculture's needs should not get second-class status. We need an efficient, seamless transportation system that America's farmers and ranchers, and all our customers around the world can count on. This transportation legislation is also expected to include this Administration's proposal to extend the ethanol tax exemption for seven years to help develop a strong market for an environmentally friendly, made-in-America fuel. That must be a priority -- not just for the sake of farm incomes, but our environment and America's fuel independence, as well. Research can also make a major contribution to economic security on the farm. A new crop of bioengineered seeds, for example, can dramatically decrease input costs and increase yields. Investments in scientific advances are investments in the viability and strength of our agriculture, and our ability to feed a growing world. Congress' reauthorization of our research legislation this year will be a critical debate about government's role in securing the future of U.S. agriculture. All of these items play a significant role in farmers' future success, alongside the traditional items we now think of as government's new role. Government needs to give farmers effective tools to manage risk and secure their own long-term economic viability. We need to see that producers get the market data they will need to make informed business choices. We need to leverage existing resources and programs, and seek out new, innovative tools, like revenue insurance. In just a few years, it's grown from a small pilot experiment to a popular security blanket that farmers for most major row crops use to protect themselves from weak markets, and cushion the impact of price dips. Now, USDA's looking at the potential of the futures markets. We've had a pilot program for grain and are about to start one for dairy. Basically, it helps producers use futures markets to do what government programs used to -- smooth out the peaks and valleys of the market and give producers some economic stability. These are more sophisticated tools than we've used in the past. They require us to be well-informed about the marketplace. This means that risk management education is also key. After all, good tools are only as effective as the people who use them. I want to thank Farm Bureau for being active on risk management education, especially with USDA's advisory committee. We expect to announce grants soon for state and local groups to develop new education tools and help farmers make smart business decisions in this new environment. TRADE Of course, if we want to keep farm incomes strong, it would make a big difference if we could increase our sales. U.S. agriculture must not be a shrinking violet in the world, but aggressively pursue opportunities. Agriculture's future depends on expanding trade. If we don't grow, we die. It's that simple. The more productive we are, the more customers we need buying our products in order to keep prices strong. I want to thank Farm Bureau for its leadership in the fast track debate. With a third of our products sold overseas and that dependence only increasing with time, agriculture is one of the most compelling examples of why America needs to engage the world. Take the situation in Asia right now. In the past, the knee-jerk response to uncertainty would have been to prop up trade barriers and dump products on world markets. We know from the lessons of history that if that had happened this time around, the world's economic problems would have deepened, having a significant impact on U.S. exports. Fortunately, Asian nations recognized the value of the global economy, and are largely staying the course toward free and fair trade, and the United States and others are stepping in to help steady their economies. We did this for our trading partners, but we also did this for ourselves. After all, strong economies make for strong customers. We are in a global economy now, and that means that what happens halfway around the world has an impact -- for better or worse -- here at home. Just look at what happened on Friday. We got some bad news about Indonesia's recovery efforts, and the Dow fell nearly 250 points. So we clearly want to see that region get back on its feet ... particularly those of us in agriculture. ASIA TRADE MISSION As much as any farm policy, as much as any trade dispute -- no matter how high the stakes; the overall health of the global economy has as much if not more to do with the strength of farm incomes here at home. We have a huge stake in the world. This morning, I dispatched a high-level team of USDA officials to Asia. Lon Hatamiya, the new head of our Foreign Agricultural Service, and Chris Goldthwait, our General Sales Manager, the person who heads up our credit assistance to the region, are headed out today to Bangkok and Kuala Lumpur. Next weekend, they'll meet up with Gus Schumacher, our Undersecretary for the Farm and Foreign Agricultural Service, and go on to Jakarta, Hong Kong, Seoul and Tokyo. Their mission is intended to affirm the importance of Asian markets to the United States. We will use the trip: To get a better handle on what is happening with the region's agricultural markets, so we can better gauge what the impact will be on U.S. ag exports and how long it might last; To follow up on the $2 billion in export credit guarantees that USDA has made available in the region. These guarantees help countries overcome the cash crunch and keep importing U.S. goods. We will help banks and importers understand the program, and be on-hand to trouble-shoot should any wrinkles in our assistance crop up. The team will also talk with experts in the region about what other assistance might help maintain our markets in Asia while helping countries ride out the economic turmoil. CONCLUSION So we have our work cut out for us in the year ahead. Things aren't likely to be quite so easy as they have been these past few years, but if we are smart about the challenges ahead, and work together, I believe that American agriculture's future prospects will remain strong. But I think it would be wise to heed the lessons of today's uncertainty, keep a close eye on the adequacy of the safety net, and recognize that in this new environment, there is no one magical solution to ensuring American agriculture's success. We need to be committed to trade, to risk management tools, to research, to transportation, to all the factors that play into our competitiveness in the world. I believe that American agriculture will continue to be strong. I believe that our farmers, more than any other, are ready to succeed in a world. We just need to use our heads, be mindful of both the risks and opportunities of this new world, and stand united and ready to turn them to our full advantage. Thank you. # NOTE: USDA news releases and media advisories are available on the Internet. Access the USDA Home Page on the World Wide Web at http://www.usda.gov