Remarks by Secretary of Agriculture Dan Glickman Commodity Club Washington,
D.C.   June 8, 1999


                                            Release No. 0250.99

Remarks
          As Prepared for Delivery
                               by
             Secretary of Agriculture Dan Glickman
                         Commodity Club
                Washington, D.C.   June 15, 1999

     "Thank you Chandler for that introduction.   Given the turbulent year
we've been through, I'm glad to be here to recap what USDA has been doing to
help farmers during the farm crisis and what lies ahead.

     "Longest peacetime economic expansion in the nation's history yet these
remain very uncertain times in agriculture.  Even taking into account the $6
billion emergency assistance package the President pushed for and got last
fall bringing total USDA farm assistance to $18 billion this year, the highest
since the mid-80's, times are still rough, and we are in fact, on the edge of
a crisis.

     "The outlook for U.S. agriculture in the near term remains flat. 
However, there are some bright spots.  We estimate that the decline in exports
has leveled off -- so perhaps soon we'll be turning the corner on ag trade. 
In fact, while ag exports are down sharply in value, on a volume basis they
are up slightly over year-ago levels.  This tells us very clearly that the
problem in the world market place is price, just as it is at home.

     "Our efforts over the past 7 months have helped mitigate some of the
effects of the crisis.  Let me just point out some of what we have done:

     - - Within 10 days of passage of the Omnibus Appropriations bill we got
     $2.9 billion in income loss assistance payments going and that was just
     the beginning.  
     
     - Checks for our nearly $2 billion natural disaster aid have already
     gone out ahead of our schedule.  
     
     - The U.S. more than tripled food aid to foreign countries to 10 million
     metric tons this year.  
     
     - Last year, we extended export credits worth $4 billion.  That's 40%
     more than in 1997.  So far this year, producers have taken advantage of
     $3.2 billion in export credit guarantees.  
     
     - We've helped make crop insurance more affordable.  We used $400
     million to reduce premiums as a down payment on crop insurance reform.
     
     - Our Livestock Assistance Program helped 167,000 ranchers with $200
     million in payments.
     
     - Yesterday we started paying out $200 million to Dairy farmers.
     
Hog Producers
     - In December, facing the lowest hog prices since the depression, we
     used all discretionary funds available to help hog producers including
     $50 million in payments, 
     increased purchases for our food aid programs, and accelerated our $80
     million pseudorabies erradication program. 
     
     -We will have an announcement shortly on additional targeted funds for
     hog producers.

LDPs
     "Were trying to ease the burden on farmers by simplifying our programs
and applications process.  For example this year, we significantly reduced the
amount of paperwork needed from farmers applying for loans.

     "We're also working to simplify the Loan Deficiency Payment Program. 

     "Up until last year, that program was hardly used by farmers in the
newly covered commodities -- wheat, corn, soybeans, oats, barley and sorghum -
- because it wasn't needed.  But when prices declined sharply, LDPs became a
lifesaver for many farmers.  

     "Last year, we processed more than 2 million applications for loan
deficiency payments, a nearly 1,000% increase over 1997.  So far we've paid
out well over $2 billion for 1998 crops, and because of persistent low prices,
we expect payments on 1999 crops to be even higher. 

     "And while this was welcome relief to farmers -- and while we are all
thankful that it is one of the few safety net programs that was preserved in
the farm bill    the widespread use of LDPs brought to light some aspects of
the program that created certain inefficiencies and inequities.

     "Let me explain to you what I mean by a couple of examples from the many
across the country:

          Consider the LDP rates from Texas for soft red winter wheat from a
     single day just two weeks ago. In a circle of about 75 miles around
     Dallas, LDP rates varied from a low of 47 cents to a high of 95 cents,
     with rates of 59 cents, 79 cents, and 80 cents in counties in between. 
     This area is served by good interstate highways, making it clearly
     beneficial to the farmer to haul the grain to get a rate that is as much
     as 48 cents a bushel above his local county rate.  

          Along the Minnesota-Iowa border last fall during the harvest, LDP rates
     for corn in Minnesota were regularly 6-8 cents higher.  When we adjusted
     the formula to equalize this difference,  there was a collective howl
     from folks in Minnesota, who were flabbergasted that we would take this
     step, even though our formula in Minnesota had been running consistently
     below local market prices.  In the Pacific Northwest, LDP rates for soft
     white wheat in Washington regularly exceeded those in neighboring
     counties in Oregon by 10-15 cents per bushel.  

How do we explain these disparties to farmers in neighboring counties?  The
truth is we can't. 
     "That's why we need to simplify this very popular feature of the safety
net.  We are working on a single rate plan that would cover what I call the 4
Es.  --  Equity, Efficiency, Ease of Understanding and Enhanced Income.

Equity
     "For the 1998 crop year, rates were set on a county by county basis.  So
while one farmer got one rate, another farmer 5 miles down the road, growing
the same crop, would qualify for another.  Sometimes these differences were as
much as 5 or 10 or more cents per bushel, thus the government made one crop a
lot more valuable than the other when, in reality, they were essentially the
same.   

     "The new plan we are working on would seek to address this inequity by
establishing a single national rate.  

Efficiency 
     "The second E is efficiency.  Because we pay benefits according to where
the grains are stored, and with varying rates from county to county in effect,
the resulting system caused inefficiencies.  Farmers would ship or drive their
crops to wherever they got the higher rate.  That resulted in a multitude of
transportation inefficiencies.   

     "The system diverted grain from warehouses farmers would normally do
business with, further upsetting the apple cart.   And,  because of the luck
of the draw   a sort of geographic lottery   one farmer might be able to
travel a short distance to get a better rate while a farmer living in another
part of the state wouldn't be so fortunate. 

     "Under a single national rate plan, the government won't be providing
the incentive to transport crops in this manner, thus returning to a more
efficient use of transportation and warehousing.

Ease of Understanding
     "The third E is Ease of Understanding.  Under our new, simplified single
rate plan, farmers will no longer be perplexed by the LDP formula.   A
simplified plan means they can focus their energies on what they know best,
farming, leaving the LDP program to take care of itself. 

Enhanced Income
     "The final E is Enhanced Income.  Depending on budget considerations,
the new plan would pump more dollars into the farm economy at a time that they
are sorely needed through an increased rate.  In order for the plan to work we
expect it could cost an additional $400 million or more.

Budget
     "The LDP program has evolved into a central feature of the farm safety
net.  But as we've seen in the past year, the safety net still falls far short
of what farmers and ranchers need when times are tough.

     "That's why we must be very careful that the budget for 2000 is not
shortsighted in projecting the real needs of the people we serve.  I realize
we are dealing with a fluid process, but at this very moment, depending on
which version you look at, House or Senate, the current appropriations
proposals in Congress would cut $600 million to $1 billion from the
President's proposed budget for USDA. 

     "Cuts of this magnitude could have serious consequences for our programs
and those who depend on them   programs that touch the lives of millions of
people such as in farm services, conservation, research and food assistance. 
Such cuts would also affect our ability to deliver these badly needed
services.  USDA has been in the forefront of government downsizing.  Our
workforce is 22,000 people less than it was 5 years ago   a 17% cut.  We've
been able to continue to effectively deliver a range of services while
absorbing such deep reductions but our resources are being stretched to the
max.  Current proposals will no longer be cutting fat.  They will be cutting
muscle.

     "And even while Congress is fiddling with cutting our budget, the fact
of the matter is, things aren't getting any better out there, so there will be
calls for more farm assistance this year.  I can't tell you how much or in
what form farm assistance will take, but there will be another short term fix.

Conclusion
     "The basic tenet of the farm bill, that government should get out of the
business of micromanaging farming, is a good one.  But inherent in the freedom
to make one's own planting decisions is the individual responsibility that
goes with it.  But, I believe, due to the risks intrinsic to agriculture and
the importance of agriculture to our nation, that government has a
responsibility, too. We need to ensure that no farmer who makes wise, prudent
decisions will lose their family land to an act of God.  And we need to work
with farmers to ensure they have the tools and the opportunities to compete in
the marketplace.  

     "Thank you." 

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