Release No. 0094.99 National Farmers Union Annual Convention Remarks As Prepared for Delivery by Secretary of Agriculture Dan Glickman National Farmers Union Annual Convention Springfield, Illinois March 8, 1999 "Good morning. Thank you, Lee Swenson, for that generous introduction. But more importantly, thank you for the leadership that you and the National Farmers Union have demonstrated on the most important agricultural issues of the day. Specifically, Lee, your work and your contribution to the 21st Century Commission on the Future of Agriculture have been absolutely invaluable. "It's a special honor to be in Springfield, because the U.S. Department of Agriculture owes its very existence to Springfield's most famous favorite son. When Abraham Lincoln signed the legislation creating USDA, he dubbed it "the People's Department." And it's that name that we try to live up to every day. "Our work touches people in every American community. We're responsible for the safety of the nation's food supply. We administer Food Stamps, now the largest entitlement program in the federal government. We're an economic development agency, making critical investments in rural infrastructure. "We also have an important environmental mandate. In fact, this week I announced the 18th sign-up for USDA's Conservation Reserve Program, which provides annual rental payments and cost-share assistance to farmers who establish responsible conservation practices on environmentally sensitive land. Five million acres will be accepted under this enrollment, which will mean annual outlays of $200 million. "The most immediate of my concerns, however and the thing I want to focus on today is the farm crisis that is putting the squeeze on so many of our farmers and ranchers. "I don't have to tell you how bad it is. I'll spare you the statistics and price data because it can't possibly capture the very real human cost involved...the anxiety and hardship being felt in farm country. "Anyway, it's not my job to talk about how bad it is. It's my job to try to do something about it. If this were 1985, that job would probably be a little easier. Back then, the federal government had far-reaching authority to step in and take corrective action when the farm economy went south. "Of course, the 1996 Farm Bill changed everything, completely revolutionizing federal farm policy, scaling back the federal role and putting farmers and ranchers at the mercy of a much more volatile marketplace. "I'm not saying that it was entirely flawed legislation. There were several sound provisions, especially in the conservation and research areas. But in retrospect, it did suffer from a case of shortsightedness. The authors of that bill had a different reading of history, I guess, and somehow managed to convince themselves that high prices, good weather, and strong exports would last in perpetuity. A lot of folks in this room knew differently. "The good times didn't last, of course. Now you have commodity prices falling across the board and a global economy that, if you exclude the United States, is expected to be 46% in recession this year. And just when farmers need it most, there's a giant hole in the safety net. "With our diminished capacity, USDA and the Clinton Administration have had to be creative about finding ways to provide a cushion for American farmers and ranchers. We have squeezed out every drop of our authority and marshaled whatever resources are available. For example, after making only 2,000 loan deficiency payments in 1997, we made an amazing 1.5 million in 1998...and that number will probably go up again next year. "Just ten days ago, the President asked Congress to provide $152 million in supplemental funds, which will allow USDA to extend over a billion dollars worth credit to farmers in need...and also to hire the additional staff at the county level to meet the increased demand for our programs and services. We're stretched very thin our loan activity so far this year is almost two- thirds greater than it was at this point in 1998. So Congress needs to act on this request immediately. "When Congress came through with only $4 billion in emergency relief last year, the President drove a hard bargain, used the power of the veto pen, and got the package increased to nearly $6 billion. "That final version of the bill included $200 million in payments to the dairy industry. But the bill gave us broad discretion as to when and how that money would be distributed. Last year obviously wasn't the right time, with dairy prices strong and other commodities in need of our attention. But throughout the early part of 1999, dairy prices have been in rapid decline, approaching the levels we saw in 1997. And on Friday, we announced that February's Basic Formula Price for dairy would be 37% lower than the January figure. "Now is the time to release the money we've been holding in reserve for our dairy producers. Today, I am announcing that we will begin sign-up for the Dairy Income Loss Assistance Program early next month, with checks going out in June. To ensure we're helping the smallest producers who need help the most, payments will be made on only the first 26,000 hundredweight of production in effect, an average herd size of about 150 cows. "This isn't a panacea. The maximum payment per operation will be just under $5,000. But this modest support, combined with lower feed costs and accumulated returns from last year's higher prices, should help producers get by until dairy prices rebound, hopefully later this summer. Dairy isn't the only commodity we've made special provisions for. It looked for a while last year as though hog producers would weather the storm. But by December, they were staring at in real dollars their lowest prices in history. It was a stressful time. The $6 billion in emergency funds had already been allocated; Congress was on its way out of town; and with the holidays approaching, most of the country's attention was elsewhere. "But we stepped in with a strong action plan. We made $129 million in pork purchases for federal food programs. Vice President Gore announced $50 million in direct cash payments to producers, which we will begin distributing next week, as well as $80 million to accelerate the pseudorabies eradication program. Two days before Christmas, I met with Lee Swenson and the NFU leadership about the hog crisis, and their recommendations were invaluable as we moved forward with our strategy. "We've been very aggressive about moving American wheat in world markets, whether it's promoting traditional sales or buying the food ourselves and shipping it to hungry people around the globe. We have lifted sanctions on Pakistan and India. The Philippines, for the first time, participated in GSM 102. And USDA's intervention led directly to wheat sales in Indonesia. "We're also stepping up efforts to ensure the quality of American wheat products. Today, I'm announcing $3 million in research grants to combat Fusarium head blight, or wheat scab. From 1991 to 1997, the scab epidemic cost American farmers 470 million bushels and $2.6 billion in sales. This research money will be distributed to nineteen land-grant universities around the country and to seven of our Agricultural Research Service labs. "On the trade front, we extended export guarantees worth $4 billion last year, over 40 percent more than in 1997. We increased our food aid program from 3 million to 10 million metric tons of food last year. And with a new round of WTO talks set for later this year, we continue to push for an open and transparent world trading system. "Biotechnology has become a point of contention in some of our most important commercial relationships. The fact is that genetically modified organisms are the future. And while we shouldn't embrace them blindly, without safeguards, we have to recognize their extraordinary potential to feed a hungry world in an ecologically responsible way -- using less land, less water and fewer pesticides. "I wish, however, that some of our trading partners saw it the same way. We're having a hard time, for example, getting our biotech corn varieties into the European Union, an impasse that is costing our corn farmers $200 million a year in lost sales. We have to continue to make the case to our European friends that our biotech approval process is thorough, that these products are safe and have stood up to the strictest scientific scrutiny. "All told, USDA's farm assistance in fiscal year 1999 will come to $18 billion, the highest since the devastating farm crisis of the mid-80s. So for an agency that had most of its toolbox taken away in 1996, we're making a lot of repairs. "Nevertheless, there is a reactive quality to all this. Lurching, ad hoc style, from one form of emergency assistance to another, is not the best or most cost-efficient way to protect farmers. We need to make sure the programs and mechanisms are in place before the crisis hits. "And that's why strengthening the farm safety net is one of my top priorities for this year. We got a good start when we earmarked $400 million from last fall's emergency package for a down payment on crop insurance reform, which will reduce farmers' premiums by 30 percent. "But we've got to do more. We've put forward a series of specific proposals to build on that initial step. For example, we should have policies that cover multi-year, as well as single-year, losses. We should expand the range of insurable crops. We should expand revenue insurance as an affordable option for more farmers. And I think we need a pilot revenue program for livestock...because there's absolutely no reason why we shouldn't make room under the crop insurance umbrella for the largest American agricultural sector. What's more, we've got to bring these products to market as quickly as possible. "Crop insurance, of course, will continue to be the centerpiece of the safety net. But we need to think of other ways to increase farmers' flexibility and help them be prepared for tough times. That means extending due dates on marketing loans to ease cash-flow pressures. And I also want to help finance on-farm storage facilities, something I had the ability to do pre-1996. I want to be vested again with that authority because, right now, too many farmers are forced to sell their products immediately after harvest, with no ability to wait until prices improve. "We've thrown these ideas out on the table and others as well. Now we intend to work with Congress to build a consensus on provisions and funding levels. Already, Senators Bob Kerrey and Pat Roberts have introduced a crop insurance bill that includes many of the principles we have advocated. It's a strong first step toward a comprehensive bipartisan solution. "But by no means should the safety net burden fall entirely on the shoulders of the federal government. The private sector needs to step up to the plate with new risk management tools. And since I'm here in the seat of Illinois government, let me mention that we'll also be looking to the states, because they have both the resources and the expertise to help us tackle this problem. The bottom line is, we're going to need input from all quarters from farmers, bankers, private insurers, public officials on all levels and from both parties. "As rough as things are right now, I really do believe that these short- term conditions are just that short-term. Prices will turn around. The global recession should give way to recovery within the next two to four years. We are already beginning to see recovery in South Korea, for example. So there is light at the end of the tunnel. But how bright is it? There will be life after this crisis. But what will it look like? Will it be a future of level competitive playing fields? Or are we on the verge of a kind of agricultural Darwinism, with survival of the fittest becoming survival of the biggest? "As your convention theme "Leadership for the New Millennium" suggests, we need to look beyond the circumstances of the moment to explore the longer-term, structural changes that are taking place in the ag economy. "I am very concerned about the trend toward concentration. This is a complex issue, so it would be wrong to make a kind of simplistic blanket statement. But the warning signs are all there, that concentration threatens the ability of the small operator to get a fair price in the marketplace...and not just in agriculture but also in other industries like banking, health care and transportation. "Look at the beef industry, where four meat-packing plants now control 80 percent of the steer and heifer slaughter market. We're also seeing a profound restructuring of the hog industry. Since 1967 the number of hog operations has fallen by 90%. Large operators of more than 2,000 hogs represent just under 6% of producers, but account for almost two-thirds of inventory. As more farmers raise more hogs under contract with fewer processors, the very nature of the industry relationships are changing. "We don't want hogs to go the way of poultry, where most of the industry operates under contract, and it's gotten to the point where the farmers are almost extensions of the processors in some ways employees of those firms. That's not the role we want farmers to play in our economy. "At USDA, we've stepped up monitoring and investigation of possible anti-competitive behavior, and we are committed to using the full range of our antitrust authorities under GIPSA. I have asked the Department of Justice and the Federal Trade Commission to examine the Cargill-Continental merger. And just last week, I met with Joel Klein, who heads the antitrust division of the Justice Department, to discuss these issues. "It's kind of ironic that, in this age of information proliferation, a few corporations are able to conduct their business in virtual secrecy. We believe it's time to shed a little sunshine. Last year, we supported mandatory price reporting in the meat industry, but Congress failed to act. Soon we will send legislation to Congress, asking that they grant USDA the authority to impose mandatory price reporting. We believe that this tool would go a long way toward democratizing an increasingly top-heavy farm economy. "If we let this trend continue, it's possible that the family farm will no longer be a viable, profit-bearing enterprise in the 21st century. I don't think there's a single one of us who wants American agriculture to be reduced to corporate mega-farms, on the one hand, and "hobby-farms" on the other. "It's the family farm, after all, that has helped give us the cheapest and most abundant food supply in the world. It's the family farm that has allowed us to be one of the few countries in the world never to go to war over a food shortage. Even as we've transitioned from an agrarian society to a manufacturing economy to a high-tech information age, food production has remained as important to the security and solvency of the nation as national defense. "All the technology in the world can't replace the most fundamental of human needs. Believe it or not, even in this day and age, you can do without a Pentium processor. But we all need to eat. And so there should always be a place for farmers in our economy and in our society. "It was Franklin Roosevelt, speaking about farm foreclosures in this very city in October 1932, who may have put it best: "We cannot have national prosperity without farmer prosperity...It is economically unsound to sell out an honest, hardworking, efficient farmer; but more than that, such a procedure constitutes in most cases a social, moral and a human wrong." "That's as true today as it was 66 years ago. For the sake of the national interest...but also in the name of fundamental fairness...we must ensure that the family farmer has every opportunity to share in the American Dream. Thank you very much." # # #