SECRETARY MIKE JOHANNS: Well, thank you very much, Audrae [Erickson]. And ladies and gentlemen, thank you. It's good to be with all of you to talk a little bit about the Farm Bill and maybe share with you some thinking about the proposals that we put out just very recently.

Let me just start and say that these proposals offer a comprehensive program that I believe will put American agriculture on a very strong, competitive footing, not only for today but for years to come. I'm going to continue making this claim until somebody challenges me, but I believe that this is the most extensive set of proposals that any administration has put forward on the Farm Bill since Franklin Roosevelt put proposals before Congress about 70 years ago.

In drafting these proposals, we made transparency and inclusive attitudes the guideposts of what we were doing. We have made an extraordinary effort to reach out to the farmers and ranchers whose lives and livelihoods are directly affected by the policies that are set here in Washington.

Over two years, as Audrae mentioned, we held 52 Farm Bill Forums in 48 of our states -- I attended 21 of them myself -- where we gathered comments from some 4,000 farmers and ranchers and stakeholders at these events.

We used basically the same format, and that was: we would publicize that we'd be in a location at a given time, and then we would just tell people in attendance -- and we had very large crowds -- "The microphone is open. Talk to us about farm policy." And talk they did.

Those comments contained plenty of common sense and what I like to refer to as "prairie wisdom," and pointed us in some new directions.

After we heard from the folks on the ground, we had to take a hard look at some of our assumptions. We also had experts inside and outside the USDA to analyze past policies and sliced and diced all the economic data the USDA's crack team of professionals could supply to us.

One of the reasons Congress takes up a new Farm Bill every five years is: it gives everyone a chance to take a very critical look at the policies that are in place and ask the question: Are they working, or is change warranted?

So in preparing for the '07 Farm Bill, we have certainly done that. But I think we have also taken a broader, a much deeper look at the future of American agriculture, and how we might position ourselves to succeed not only in this domestic marketplace but in the international marketplace as well.

In doing so, we have taken both international trade considerations and changing domestic and international market conditions into account. Over the five years that the 2000 Farm Bill has been in place, export markets have grown more and more important to American agriculture. Food and agricultural exports reached a record level of $68 billion last year, and we project another record this year in 2007; we're projecting a number of $77 billion in exports.

The value of these exports is now equal to about one-quarter of our total U.S. farm cash receipts. Exports from our farms and ranches have an impact beyond the farm economy. In 2004 we calculated that every dollar of export activity generated $1.48 in supporting economic activity. In all, some 825,000 jobs were generated from agricultural exports that year; 388,000 on farms and another 437,000 jobs because, you see, somebody must do the assembling, the processing, and then distribute those products for export.

American farmers and ranchers know that foreign trade does matter. They know the international marketplace is their best prospect for finding new market opportunities. Already 80 percent -- 80 percent -- of U.S. cotton goes into the export market. So does 50 percent of our rice go into the export market.

Export rates also run high for high-value products like almonds at 70 percent, sunflower oil at 60 percent, and grapefruits at 40 percent. The mix of products that we send overseas has changed over time, as you might expect. And today it's about evenly divided between our bulk products like grains and our higher-value products like meats and fruits and vegetables, dairy products, and other processed foods.

Now this is a diverse line-up, and it means U.S. producers need broad access to a wide array of export markets. And in coming years as American agriculture continues its impressive productivity gains, it will certainly need more access to markets in the developing world where we know 95 percent of the world's growth in population will take place.

That's why a successful conclusion to the Doha Round of trade talks is critically important. However, it's necessary for a successful conclusion that the U.S. receives a fair shake in the Doha Development Round, and we are working very hard to make this Round successful.

Lowering tariffs and removing non-trade barriers will both give American producers, whether in agriculture, services, or manufacturing, the chance to compete on a level playing field. So yes, trade was certainly on our minds as we sat down to prepare the Farm Bill proposals. But our first consideration, our first consideration, was crafting sound farm policy for the United States and affecting reforms of our current programs wherever there were compelling reasons to do so.

This means taking a more market-oriented approach that is predictable and balanced, one that provides farmers and ranchers with the safety net, yet reduces the distortion of market signals. I believe that good farm policy, quite simply, is good trade policy. Overall our proposals would reduce spending on farm programs by $10 billion below actual expenditures under the 2002 Farm Bill to date, upholding the President's plan to eliminate the deficit in the United States within the next five years.

Importantly, our proposals will shift support away from production-distorting policies to conservation, to rural development, and into other areas.

Now, I will tell you, we have been very pleased by the generally positive reaction our proposals have received so far, especially from Congress and members of the public. But I would have to say the international response is difficult to explain. Other countries seem to be underestimating the far-reaching nature of the reforms that we are putting forward.

In fact, we are recommending several very significant reforms to our current system of support payments for the commodity crops. We propose revising our marketing assistance loans to reduce what some have criticized as the market-distorting effects of the current loan program.

What we heard from many farmers at our Farm Bill Forums was that while they liked the structure of our current programs, there were a number of areas where they felt we come up short. One of those was in the counter-cyclical payments we make to our program crop producers. Under our previous system, some farmers told us that they were getting aid in years when the yields and the income levels were the highest. But they said that they were shut out in years where their yields were poor or where they couldn't plant any crop because of weather conditions. And they asked us to try to figure that out.

So we are proposing to tie our counter-cyclical payments to revenues other than crop prices. This will make this program more effective in aiding farmers in years when yields are depressed but crop prices are strong. Basing these payments on revenues will make this a more rational and a more market-oriented program that will function as a safety net for hard times, as it was originally intended to do.

We will also expand our direct payments program over the life of the Farm Bill by about $5.5 billion. Because these payments are based on historical acreage and they are not tied to current prices or to production, they do not influence a farmer's decision on what to produce.

To make our direct payments more fully consistent with the WTO green box criteria, we also propose eliminating the current restrictions on planting certain specialty crops, fruits and vegetables, and wild rice, on land that is covered by the program. To further boost our specialty crops which now generate sales that equal our program crops, we will provide $3.25 billion to buy fruit and vegetables for our nutrition assistance in school lunch programs. We will also increase funding for trade assistance programs that help specialty crops overcome the non-tariff sanitary and phytosanitary barriers that can block their access to export markets.

The most dramatic funding change we have proposed for the new Farm Bill is in the area of our conservation programs. We heard many complaints from farmers and ranchers about the complexity of our current line-up of programs in this area. We had to concede, they had a point. Sometimes we even confused ourselves by these programs. So we have offered in our proposal a plan to consolidate and to simplify all of our existing programs to make them easier for a farmer to participate in.

And second, we are proposing an increase in funding in these areas, an additional $7.8 billion over the life of this Farm Bill. These conservation programs will offer new incentives to farmers.

One proposal I'm very excited about, because it comes from farmers themselves, is the conservation enhanced payment option -- literally the option to replace commodity support payments with an enhanced direct payment for conservation efforts. With this proposal, farmers can look out over the life of this Farm Bill and decide whether or not they are likely to benefit from the counter-cyclical program or the marketing loan program. If they look out there and say, "I'm not likely to benefit from that, but there are some things that I want to do in the conservation arena on my farm," we will enroll them into the program, the conservation program, for the life of the Farm Bill, and we'll increase their direct payment by 10 percent.

This Administration is committed to supporting agriculture while continuing to reform policies that are no longer compatible with a competitive global marketplace. We believe both our conservation and direct payment programs will qualify for green box -- or most favorable treatment -- by the WTO in its system of categorizing agricultural support payments.

To me, one of the most exciting things about the package we put together is the dramatic expansion it proposes for our commitment in developing renewable energy.

We call for $1.6 billion in new funding over the next 10 years to speed the development and production of renewable fuels. We are right now in the middle of a boom in the construction of new ethanol and biodiesel fuels plants across this great nation -- many of those, if not most of those, located in rural areas.

Ladies and gentlemen, these plants are not only producing the renewable fuels that the nation needs, but they are bringing new jobs and economic opportunities to farm country.

One of the realities of our farm economy is that more farm families are just simply drawing the bulk of their income from non-farm jobs. Today many farmers work in town and also on the farm. Across the entire spectrum of agriculture, large and small, approximately 85 percent of total farm-family income is now coming from non-farm sources. 85 percent. And the renewable energy business is opening up new options for them.

A vibrant, renewable energy industry is vital to the economic strength of our rural areas and it's vital to our farm economy. And so encouraging growth in this sector is an important goal of our Farm Bill proposals. Overall, we believe our Farm Bill proposals represent a strong reform package that signals the seriousness with which we approach international trade issues.

It is true that our proposals are just simply based on good farm policy, not trade negotiations, but there is no question that they represent real reform. In October 2005 the U.S. stepped forward and jump-started the Doha talks with a bold offer to cut our trade-distorting agricultural subsidies by up to 60 percent. That offer got talks going for a time, but no country has stepped forward to match our offer.

Our trade ambassador, Ambassador Schwab, has expressed a willingness to expand on the U.S. offer of October 2005, but only if our trading partners offer more access to their markets.

Now, we have heard a lot of noise, we have heard a lot of criticism, from our partners, that we haven't gone far enough in the U.S. domestic farm bill process -- an interesting distraction by them from where any Doha negotiation movement needs to happen at the Doha negotiating tables. I'm glad that the talks have resumed in Geneva, and Ambassador Schwab and I will continue to meet with our counterparts from other countries to make sure that they stay on course.

The new focus of the negotiations, creating new, meaningful trade flows, while still respecting absolute red lines, holds promise for simultaneous movement -- movement that must be forthcoming if we are to have a successful conclusion to the round.

And openness must come from advanced developing countries as well as developed countries. We must live up to the Doha mandate of substantial new trade flows that in turn generate economic growth and prosperity worldwide. A resolution that is fair to all parties will bring great benefits, not only to farmers here but to farmers all over the world and consumers as well. I am committed to doing all I can to bring this about.

Thank you for having me here with you today. Thank you for the opportunity to offer a few thoughts. I'd be pleased to take some questions. Thank you.

[Applause.]

AUDRAE ERICKSON, PRESIDENT OF THE CORN REFINERS ASSOCIATION: Secretary Johanns is pleased to take questions. Please state your name and your organization if you would like to ask a question. Sir?

QUESTION: I'm Tom Brewer from the faculty of Georgetown University. You probably know, (unclear) the EU trade commissioner suggested a couple of weeks ago negotiating (unclear) tariff on (unclear) goods including in particular energy efficient goods and (unclear) goods. Do you know as of today whether biofuels and feedstocks for biofuels are on the table or not, and does the administration have a position on that?

SEC. JOHANNS: I must admit I did not catch that comment by Peter [Mandelson]. So I'm reluctant to offer very much to you. I'll certainly follow up on it, but I did not catch that. It must have not gotten a lot of coverage in what I read anyway. So.

Yes, ma'am.

QUESTION: (unclear) Doha Round, (unclear) release the Farm Bill. (unclear) on adopting the Farm Bill (unclear) Doha (unclear). How do you see that unfolding that the (unclear portion) when a new Farm Bill will come into play in 2012, or will we see a more (unclear)?

SEC. JOHANNS: Here's what I would offer. I think if you look at our Farm Bill proposal, again I will emphasize we set out to write good farm policy, and, as you point out, hopefully my message on that is clear. But it's also good trade policy. And I think if you look at the Doha negotiations, our Farm Bill proposals would fit very nicely with those negotiations.

So my hope is that the Doha negotiations will continue to a successful conclusion. Again, I believe our proposals will fit very, very well with what we're trying to accomplish. Very simply on domestic support we're trying to get away from trade distortion. Our proposals do exactly that in many areas. And we're trying to increase market flows.

Now we've already done that. We have very low tariffs here in the United States. We just ask the rest of the world to pay attention to the Doha mandate. It really is about increasing trade flows also. So I think all of it's going to fit together very nicely even though I must admit we headed out to do good farm policy, and we think we've got some good ideas on how best to approach farm policy.

QUESTION: But how do you envision (unclear)? You know, let's say (unclear) Doha (unclear) whether you adopt the Farm Bill (unclear) if there is a Doha agreement (unclear). Could you see that happening?

SEC. JOHANNS: You know, it's impossible to predict. We've always said we'll be very, very creative if other countries around the world open up the marketplace. The question is, whether we need to be more creative than what we have been now. I think it's an open question. I think when you study our proposals again, they will fit very nicely with the Doha Round and where that is headed.

This really is significant reform in what we have proposed, and I believe it will work with the Doha Round.

Yes, sir?

QUESTION: Richard (unclear) writer. You have mentioned a couple times (unclear) concern (unclear). Could you go through in detail about what you feel about what the main issues are in that international concern (unclear)?

SEC. JOHANNS: Well, the main issues are this: We still have two pillars -- market access and the domestic support -- that really have not gone along very far in terms of getting a resolution. I think countries look to us and say, "You need to do something about domestic support." We're happy to do that. Our October '05 offer was a bold statement in that regard, a very, very bold statement.

The other thing I would say though is: that was conditioned on better market access. We don't feel that we have seen market access on the table yet that will increase trade flows. And that is pretty straightforward. If you're not moving goods, services, and manufacturing as the result of this Doha Round, then you really haven't accomplished much.

So that's where the hold-up is at. It's still in those two areas. And I would remind people, and I think this is worth thinking about -- we are not the champion of domestic support in the world, not even close as a matter of fact. That title rests with the European Union. They subsidized agriculture very, very significantly. The amount of money that they put into agriculture in terms of domestic support is well beyond anything that we're at today.

And then actually Japan is rated as second, so we're in third place when it comes to domestic support.

I find it always so very, very interesting when the EU talks about domestic support, because they are the A-number-one champion in terms of the amount of money that they pour into agriculture that is trade-distorting, well beyond where we are at or any other country in the world.

Yes, ma'am?

QUESTION: Barbara Lipman, formerly (unclear). (unclear) one of the most controversial things we ever (unclear) negotiate trade (unclear portion). You touched on the renewable sources of energy, and this country (unclear) ethanol comes from corn and other countries (unclear) sugar. Is there anything in this current proposal that addresses a way that U.S. sugar would go into that?

SEC. JOHANNS: Sugar is, you're absolutely right, one of the great international issues and certainly it will be an issue as we sit down and write the next Farm Bill. Here's kind of how I see the sugar program in the United States. The sugar producers would love to just see "a simple extension of the same program, no changes whatsoever, life is good, why bother to undot an I or uncross a T." I mean, that's basically what they would say to me if they were in my office: "We like this program, don't touch it."

Here's the challenge. We can bring into the United States 1.532 tons of sugar under the current law. At that point, if we go over that level we are required to pull off marketing allotments; the marketing allotments are supposed to come off. And at that point, anybody who has sugar or is producing sugar can push more sugar into the marketplace.

And then in that same law we have a mandate to run this program at no net cost to the taxpayer. How do you possibly do that, because if you're pushing more into the marketplace you're going to collapse the program, and folks will forfeit sugar and when they forfeit sugar then the American taxpayer will buy it.

It's just as simple and as straightforward as that.

So the first piece of what we're proposing basically is this: We say: Look, we need a period of time during the life of the next Farm Bill because of the NAFTA agreement, because the border is now basically open between the U.S. and Mexico on sugar, and I think it's possible we're going to get some sugar from Mexico. I don't think every year; they use a lot of sugar themselves. Their prices have tended to stay pretty high. So it's not every year. But I think some years we're going to get some sugar.

And those years where we go over that 1.532 tons we are saying we should be allowed to keep the marketing allotment in place because if we can't manage that, then this program will implode. It just simply will collapse, and you better put aside some money, then, to be buying some sugar. The taxpayers will need to buy sugar.

Whereas, if we can manage the marketing allotments, we think we can get by for the next five years.

Our emphasis in terms of renewable fuels in this Farm Bill is not on corn. We believe there will always be a corn-based ethanol program. A lot of plants are using that as their raw material, and basically that's what's happening in the United States. It's all corn. But our emphasis, our $1.6 billion in research and development that we're proposing in the Farm Bill, would actually go to cellulosic ethanol. It's targeted as cellulosic ethanol.

And so sugar cane, sugar beets, could fit into that category.

We also set aside $2.1 billion in a guaranteed loan program to assist in the construction of cellulosic ethanol plants.

Now I did not just propose something revolutionary here. If you go to Brazil and visit their ethanol plants, what's their raw material? Sugar cane. This is not revolutionary. This has been a part of their ethanol endeavors for a long, long time. There isn't any reason why we can't look at that opportunity here.

I think the alternative for the sugar industry, just to be very candid, is not good. I just think that the way the program is constructed, it will hold back our producers. And they will only be able to grow within a very confined system. And that, I personally believe, is not really what we want to do for those producers. I think we want to offer them some hope for the future, and a piece of that could very likely be ethanol.

Maybe one more question and then I'll move on.

Yes, ma'am?

QUESTION: My name is Marcia (unclear) Law School, Washington. You mentioned support for domestic commodities (unclear) and market access for commodity exports, specialty crop exports. What is there in the Farm Bill that will help small (unclear) producers who are concentrated on the domestic market?

SEC. JOHANNS: In our Farm Bill proposals, we've done a number of things that I believe will be very, very helpful there. For the first time really ever in a Farm Bill, our specialty crop producers have a major place there. You could look from the first Farm Bill offered during the Roosevelt years to the last Farm Bill offered in 2002. I promise you, you will not find this kind of commitment to specialty crop production.

Specialty crop production oftentimes involves very small producers, packagers, and people who move this food into the domestic marketplace. In fact, in certain areas of our country, California most notably, it would not be unusual to find a producer who is literally growing specialty crops in 1 to 5 acres, 8 to 10 acres. Not that uncommon.

So through our program where we are literally dedicating money to buy more fruits and vegetables to put into our schools, to put into our nutrition programs that we run at the USDA, we are going to not only assist that producer but to assist that small person who is out there maybe packaging or shipping or hauling or whatever.

The other thing I would mention again, if you go into specialty crop areas the farmers markets have been enormously positive. It literally has created an outlet, a very successful outlet. We promote that in our new Farm Bill proposal. But another thing that we do, and it's over on the nutrition side, we now say that in our -- I believe it's in our senior program -- that literally we won't count the voucher we give to seniors anymore in terms of determining their eligibility to participate in some of our other nutrition programs like the Food Stamp Program.

And again, that will be very, very helpful to those smaller producers. There's a whole host of other things I probably could mention in the conservation program, but I think it's fair to say that we've really targeted some areas here that are very important.

The last thing I would mention, we heard a lot from what we legislatively refer to as "socially disadvantaged farmers" and from beginning farmers that our programs oftentimes were not well-suited to them. They were well-suited for a larger operator, a bigger producer. And so through a number of efforts we have targeted loan programs; we have made those programs more user-friendly, if you will, for our socially disadvantaged and beginning farmers.

Another thing that we have proposed to do is target certain conservation monies for those two classifications. Again, not only will that help that producer but we believe it will also help the person who's on the other side of that who might be packaging or processing or doing whatever.

So I think if you look through the proposals, we've got some very, very strong things for the areas that you're most interested in. In that regard it's a very unique, reform-oriented Farm Bill.

Again, I don't think in the history of Farm Bills you'll see anything quite as earmarked. And for all the people who showed up at these forums and said, you know, "Mike, your program just isn't working well for where I'm at, I'm a different size than what your program was designed for today," I believe what we've proposed will change some of that.

With that, let me just say thanks. It's been a pleasure to be here with you today.

[Applause.]