Remarks by Secretary of Agriculture Dan Glickman National Pork Producers Association Nashville, TN -- March 5, 1999 Release No. 0093.99 Remarks As Prepared for Delivery by Secretary of Agriculture Dan Glickman National Pork Producers Association Nashville, TN -- March 5, 1999 "Thank you, Donna (Reifschneider, President) for that introduction. I want to thank you and Al Tank and your staff for the tremendous work you do in Washington on behalf of pork producers. "Coming to Nashville brings back some fond memories. When I was in Congress, I had a chance to meet Tammy Wynette here. She invited me to sing a duet with her of "Stand by Your Man." That was a big moment for a boy from Kansas. And, let me just say that the performance was memorable. After we were through, she gave me some important advice that I keep with me to this day: 'Don't quit your day job.' I promise I won't be singing for you today. "So it's my day job that brings me here, and I am glad to have this opportunity to talk to you today. As you know, this Administration is fully engaged, dealing with the pork crisis on a daily basis. Back in January, I was in a meeting at the White House with hog farmers, several Senators and White House Chief of Staff, John Podesta getting a grass roots perspective of what's going on out there. Toward the end of the meeting, President Clinton dropped in. "As he spoke, it was clear how comfortable everyone in the room felt with his knowledge and understanding of what's happening to pork producers. In fact, everyone was so at ease, that after 20 minutes with the President one farmer -- Craig Christensen from Iowa who is here today actually had kicked his shoes off. As Craig said later, he didn't realize it at the time, but that's how relaxed President Clinton made him feel. Coming away from that meeting, we all knew that whatever needed to be done to help pork producers, this Administration would do it. I would however caution everyone here today that no matter what I say, please don't follow Craig's lead. "Last October, when President Clinton signed the $6 billion disaster relief bill, the situation in pork had not yet reached crisis levels. "Ironically, this all happened during a booming general economy. We have the longest peacetime economic expansion in the nation's history. Since 1993, we've created 18 million new jobs and reached the highest level of home ownership in the nation's history. We have low unemployment, low inflation and the lowest interest rates in a generation. For the second year in a row our President will submit a balanced budget to Congress, and we are projecting a surplus in the range of $500 billion to $1 trillion over the next 20 years. "Yet with all this good news around us, pork producers are in serious trouble. Though they're the hardest hit, the problem isn't limited to pork. Other sectors of agriculture also felt the sting grains, sugar, corn, soybeans. So have other segments of our economy -- energy, natural resources and minerals. These are the building blocks of the production side of the economy. "A combination of factors came together to put the stress on American agriculture, principle among them the world economic recession. As the Asian contagion spread, no one knew for sure how deep an impact it would have. For pork, we all know what happened. Record low prices were bad enough, but the fact that it was too late to be included in the emergency relief bill gave producers that sinking feeling that there was nowhere to turn. "This Administration was determined to help. We looked at any and every authority we had -- marshaled whatever resources were available. We believed that eventually the markets would right themselves. But I was concerned that a particularly stressful short-term situation such as this could have serious long-term implications on the structure of the pork industry. "As the crisis unfolded, it became very clear, very quickly that all operators -- big, medium and small -- were being crushed by the sheer magnitude and speed of the price dive. Recognizing the need for immediate action, I convened a Pork Crisis Task Force to provide me with recommendations on a daily basis. Whatever we could do to alleviate the pressure, I wanted done. "As Vice President Gore announced, we are making up to $50 million in direct cash payments for small producers. About 50,000 hog farmers have applied for this assistance and we will begin distributing the funds in 10 days, on March 15. The Vice President also announced that we are allotting $80 million to speed up our pseudorabies eradication program, which could remove up to 1.9 million hogs from the market. We've accelerated purchases of $132 million of pork for our domestic food programs the maximum allowed under law. We included 50,000 tons of pork in the food aid package to Russia and we expect that early next week the Russians will begin the process to buy this pork. "We took steps to urge hog producers who traditionally have not taken advantage of our guaranteed loan programs to get into our Farm Service Agency offices and apply quickly. I issued a moratorium on the use of USDA credit to build new pork production facilities. We deferred payments on farm operating and ownership loans, and we're working with lenders to reschedule loan payments or write down portions of a loan depending on individual circumstances and eligibility. And, I'm pleased to announce that, in response to our request, the IRS has agreed to provide expedited processing of hog farmers' tax refunds for 1998 to help ease the cash crunch. "And I recognized the importance of using the bully-pulpit of my office. I brought in retailers, packers, processors, banks, farm groups and others to listen to their suggestions, made some of our own and explored ways to work together to alleviate the crisis. I spoke with members of Congress, Governors and CEO's of major packers and processors to see what can be done to increase slaughter. "We encouraged retailers and consumers to take advantage of a good buy. I contacted other federal agencies such as the Defense Department, Veterans Affairs, the Justice Department and the Bureau of Indian Affairs and asked them to increase the amount of pork in their purchases. "Most importantly we asked, and we continue to ask, why? Why did this happen and how can we avoid it in the future? I do not want to see the kind of bottleneck in any ag sector where the people who end up sacrificing the most are family farmers who work just as hard as anyone else and who deserve to compete on a level playing field. "In the last three decades, we have seen a profound restructuring of the hog industry. Since 1967 the number of hog operations has fallen by 90% with large operators of more than 2,000 hogs representing just under 6% of producers, but accounting for over 63% of inventory. Add to that the fact that the top four slaughter houses cornered about half the market and control of the industry falls into relatively few hands. Moreover, the very nature of the industry is changing the relationship between producer and processor. More farmers are raising more hogs under contract for fewer and fewer processors. "Look at the poultry industry. After precipitous price declines, not unlike what hog farmers face now, most poultry is grown under contract. The farmers are extensions of the processors in some ways employees of those firms. And that is a fundamentally different role for farmers than the one we have known in this country, and that I think most of us want to preserve. What does it mean if the same thing happens in pork then cattle, wheat, corn? "I am not making a judgement as to whether these trends toward concentration and vertical integration which we see throughout the economy are good or bad. It's important that agriculture become more productive, more efficient and more globally competitive. But it's also important that these changes do not come at the expense of the independent minded producer who also deserves a fair shake in the marketplace. "What I am asking is: Has this restructuring had anything to do with the recent crisis and, if so, what can we do to ensure that independent producers are adequately prepared and protected in the future? With rapid industrialization in the livestock industry, we need to know more about the implications of these changes, so within USDA we've stepped up monitoring and investigation of possible anti-competitive behavior. We are looking at ways to increase our investigations of pricing practices in all livestock. I have also asked the Department of Justice and the Federal Trade Commission to examine the current record price spread in pork. And, earlier this week I met with Joel Klein, who heads the Antitrust Division of the Justice Department, to discuss these issues. - "Last year we supported mandatory price reporting in the meat industry but Congress failed to act. Shortly, we will send Congress legislation asking that they grant USDA the authority to require mandatory price reporting. I believe price reporting is a necessary tool which will go a long way toward giving small and medium producers the information they need to effectively compete. "But we are in an era where government is taking a more hands-off approach in the day-to-day business of agriculture. Some people believe that means the government should do nothing, just let the chips fall where they may. But history has shown that food production is as important to the security and solvency of our nation as national defense. The fact that we've gone from an agrarian to an industrial to a technological society hasn't changed one fundamental fact that agriculture is still the backbone of this nation. So government has an important fundamental responsibility to ensure the continued strength and prosperity of American agriculture and I believe that includes maintaining the diversity of producers from small to large. "But with a new agriculture structure emerging, managing risk has become of primary importance to farmers and ranchers. Changes in agriculture are putting more of the risk management responsibilities on the shoulders of producers. That is not to say they should go in it alone. Farming is risky and there are factors that individual farmers have no control over -- like weather, worldwide production and foreign financial crises. Government has a role in protecting people from forces beyond their control. That's why, when he signed the farm bill, President Clinton insisted on a stronger safety net that adequately protects farmers and ranchers. "I have said that I want to make 1999 the Year of the Safety Net. But when we say safety net, I don't want people thinking that there's one big government program looming on the horizon that will be a catch-all for whatever calamity hits agriculture. Because there isn't. Instead, the safety net needs to consist of a host of programs, strategies and on-farm practices implemented by farmers, federal, state, and local governments, farm groups and businesses. We all have an interest, because we all will pay a price if we fail. "A strong insurance program will be a major component of the safety net. We want to help farmers protect their downside while still remaining competitive, so this year we're asking Congress to authorize a pilot insurance program for livestock. "Soon, USDA will hold regional forums around the country and I'm inviting members of Congress to attend. I want to hear from farmers, ranchers, bankers, local officials -- anybody who has an interest in agriculture -- on what they think should be included in a farm safety net. "It is imperative that this be an effort that cuts across the political spectrum. A strong safety net will be costly. But I believe that, if Congress and the Administration work together, we will find the money, just as we have in the past. "But by far the best medicine for protecting the downside is a strong upside. The bottom line is we've got to sell, sell, sell -- here and overseas. That's why we will continue to work to expand markets overseas. The fact is that while agricultural exports are down considerably from their highs of 1996, the demand is out there. "In 1998 U.S. Pork exports increased by 23% over 1997 and in 1999 we project pork exports to increase another 10% to 445,000 metric tons. So, though prices are weak, U.S. pork is increasing its share of the world market. And, as financial pressures begin to ease, pork producers will be in a strong position to increase sales. In short, there is light at the end of the tunnel. "Last year, we expanded meats as an eligible commodity in our Export Credit Guarantee program. South Korea alone used the program to guarantee $13 million in pork purchases. And today our Agriculture Counselor in Seoul is talking with Korean officials about our 1999 Export Credit Guarantee Program for South Korea which, as you know, includes pork. "Last year we also exported pork to Taiwan for the first time, a country that used to be our largest competitor in the Japanese market. Vice President Gore announced in November that we will open Argentina to U.S. pork. Our pseudorabies irradication program will help open more markets that were previously closed to U.S. hogs and swine genetic material because of the existence of the disease. And, under our Foreign Market Development Programs, we've allocated $12.5 million to the U.S. Meat Export Federation to promote beef and pork worldwide. "The bottom line is that our team is out there trying to help U.S. agriculture as best we can. By opening new markets and maintaining existing ones by fighting for fair competition, both here and abroad and in general by making sure you have the tools you need to succeed. "But none of this changes the fact that right now, today, times are tough. Even though prices have tripled since their dreadful lows in December, the spot price remains below break-even. You don't have to be an MBA to know that's not a good way to run a business. "But one thing is clear about the folks here today. You take the long- term view. You have been there on food safety with, among other things, your Pork Quality Assurance Program and your strong support for USDA's new food safety system (HACCP). You have been there to help protect the environment. I want to thank you for the leadership you've provided in developing a program that will allow producers to evaluate their own operations for environmental risk and hazards. It shows that pork producers are part of the team, willing to shoulder their fair share of responsibility for our land and water. I believe strongly that you are doing the right thing for the environment and for American Agriculture. "We all know there will be life after the current crisis. The question is, what will it be like? Are hogs going the way of poultry? Or can we ensure the development of a middle ground, where independent farmers have the same opportunities to succeed as the big farms? For me, I will take that as a given. I firmly believe there will always be a place for small and medium hog farmers. Not just to survive, because that is not acceptable, but to prosper -- to share in America's continued economic growth and success. Our job, all of us together, is to ensure that hog producers have that chance. "Thank you." #