SEC. ED SCHAFER: Thank you, Larry. Thank you very much, and thanks too for your efforts along with the Farm Service Agency, the Foreign Agriculture Service, and U.S. Agency for International Development for bringing us all together here today. I really appreciate the invitation and the chance to be with you.

When Larry was reading through that introduction, I got to thinking, "boy, you know, it's kind of dragging out here, it's getting pretty long." It reminded me of the time shortly after I was elected governor of North Dakota in 1992. We had gone on kind of the celebratory trail, and we were going to banquet after banquet. And Nancy my spouse and I were being honored and applauded for, and would go over and over and over again. And after seven or eight of these banquets in a row, we were walking out one evening, and Nancy turned to me, and she said, "Now I know why I don't particularly like to go to all these banquets. Every time you appear they read your obituary."

[Laughter]

But I do thank you for the introduction, the warm welcome this morning. And I see that some of you are still eating. I saw the breakfast set-up in the hall, a lot of good fruits and pastries out there. And please continue to eat breakfast if you are doing so. In fact, if you want to clang your silverware or toast each other or chat or do whatever you'd like, you know as the governor I'm used to speaking to the legislature.

[Laughter]

But anyway, thanks again for the invitation to be here. I really am proud to be with you here in Kansas City because of the importance of the work that you do-and not only the importance of the work that you do today but how timely these discussions are as we see the problems coming from, you know, food price increases from the issues that we're facing today all over the world. So it's a good time to get together here.

There are some here today who have nurtured this meeting along from its modest start just 10 years ago. You have given us a forum that's growing each year, and it's a chance to talk and to debate and to keep open the channels of international understanding. And I thank you for that, your presence here. And I certainly salute our international guests from 25 countries. It's a strong statement about the things that connect us, a strong statement and a compassion for the most vulnerable among us, and a commitment to carry forward this important and often difficult work.

You know, in many ways agriculture is one of our deepest ties. Choices that we make today will affect not only the future of our farmers and our economies but also our ability to feed the growing world populations. Yet it's hard to look at the future when food assistance budgets are strained to the breaking point today, and I certainly don't need to tell you that we're in an unprecedented situation.

Earlier speakers have given us the details on the soaring commodity prices, but let me quickly recap. World grain prices have risen 55 percent since 2005, and oil seeds 37 percent. Increased demand for many commodities is outstripping available supplies. And this is pushing world stocks to low levels.

For wheat, stocks are at their lowest point in decades. We've seen food riots break out in some emerging countries, bans on foreign sales, pressure on food banks here in the United States. The current situation is serious, and you know that better than anyone.

Our President recognizes the gravity of this crisis as well, and that's why he authorized me to respond to current conditions by drawing down the wheat stocks held by the Bill Emerson Humanitarian Trust. This will generate $200 million in additional food aid, and that will be distributed by the USAID. By converting wheat into cash, we can turn today's high commodity prices to our advantage and respond flexibly to the most urgent food needs in Africa and elsewhere around the world. And we will continue America's tradition of leadership in humanitarian food aid. I'll be proud to carry out the President's directive.

We will also continue to urge Congress to approve USAID's request for $350 million in emergency food aid funds that's been pending on the Hill since last fall. These are two very important steps that the Administration and Congress can take immediately to deal with this crisis. But we also need to step back and look at how we got here, what we can do not only as individual actors on the stage but as a global community to make certain that food supplies keep pace with the world's growing populations.

Clearly complex factors are at work. Some economists have called it the perfect storm of issues. First, we're seeing the unrelenting growth in demand for food, especially in the fast-growing nations in Asia, Latin America and the Middle East and in Africa. Second, key commodity stocks held by major exporting nations have dropped to their lowest level in decades. Many have been hit by bad weather and their crop yields haven't been keeping pace with increased demand.

To reduce pressure on their domestic food prices, some countries have restricted exports, and that's pushed global commodity prices even higher.

Third, the global push for biofuels has stimulated demand for grains and oil seeds. At the same time, higher oil prices are forcing up processing and transportation costs, and these impact greatly commodity and food prices. Energy is the real issue here, not biofuels. In fact in the U.S., the volume of ethanol used in gasoline actually keeps the price down. Without that 10 percent of ethanol blend being mixed with gasoline and sold at the pump, we would be using more fossil fuel at a higher price.

In short, biofuels are a factor, but currently under the price situation not 'the' factor.

All the factors that I outlined, along with the lessening value of the U.S. dollar, have helped increase those commodity prices.

And the good news here is that farmers do respond to the market. The U.S. Planting Intention Report, which we just released, is our best snapshot of what's happening out there in the countryside.

Here in the U.S. producers are increasing acreage for wheat, and they are adding acres for soybeans to meet the growing demand for vegetable oil for food and for biodiesel and for meal for animal feed. At the same time, our farmers are reducing acreage for crops like corn and cotton and all in all we expect farmers and ranchers to bring more than 6 million additional acres into production for our major crops this season.

And I'm pleased to tell you that U.S. wheat exports should reach a 15-year high this year, and corn exports should also hit record levels.

In the short term, prices should ease a little, but in general they will remain higher for much of the coming decade.

The challenge we face is one that's been with us for centuries-hunger and malnutrition. No country has been able to escape its grasp, not even our own.

And I ask you today, how can we work together and within our own countries, to make sure that food gets into the hands of those who need it most?

I ask developed nations to take a greater share of responsibility and to find new and creative ways to meet the critical need for food aid. For more than 50 years Americans have responded to hunger and poverty with an abundance of generosity. Our contributions still provide one-half of the total food aid distributed around the world.

Last year the American people helped feed more than 35 million folks in 78 countries through our food aid programs. We were able to do that thanks to the partnerships that we have with so many of you. We are able to do that because of your passion and your commitment and for your hard work.

Together USDA and USAID provided 2.6 million metric tons of food with a value of more than $2 billion. And today 70 percent of the food aid we provide goes to meet emergencies around the world. Last year it reached 23 million people in 30 countries.

Through programs like the McGovern/Dole and Food for Progress, we helped children learn, and we helped communities build livelihoods and take control of their futures.

But these programs like others worldwide shipped less tonnage last year due to higher commodity prices and increased transportation costs.

This is unacceptable to us, and we knew that we could do better. You've already heard the details of our Stocks for Food Program, so I won't go through that again. But I want to stress that the inspiration for this program came from an urgent need right here in the United States.

Just over a year ago a crop freeze put many agricultural workers in California out of work. They needed help quickly, so USDA exchanged raw commodities held in inventory for finished products that could be distributed right away to food pantries and in homes. The program really worked. As a matter of fact, it worked so well that the innovative staff at USDA led by Dr. Mark Keenum looked beyond California to the critical situation beyond our borders.

And my message is this. If the United States can draw a lesson from its domestic emergency that helps extend the hand of aid to people around the world over, other nations can do so as well.

I'm proud to say USDA donations under our Stocks for Food Program will exceed $100 million for domestic and international programs. And while this program is humanitarian, it works so well because it's practical and it's flexible and it moves food quickly to the hungry at home and abroad.

Ladies and gentlemen, our administration believes that this kind of flexibility, especially at this time, is vital to meeting food emergencies around the world. When famine, political upheaval and natural disaster create a food crisis, desperate people aren't interested in lead times in agencies and other logistics of our stressed food aid distribution system. They can't wait weeks or months for food to arrive.

To help us move quickly in these emergencies, we are looking to our new Farm Bill legislation-now before Congress, hopefully just for a few more days-to let us use up to 25 percent of food aid funds to buy food locally when people are in crisis. At the same time, we oppose the hard earmarks that House and Senate are imposing on non-emergency Title II funding. These restrictions can't be waived in emergencies, and they would limit our future flexibility.

By setting aside $600 million for non emergency food aid, the Senate would reduce emergency food aid by $250 million. That's equal to the entire food operation in Darfur, the food operation in that country, Sudan, for a full year. It would cut out U.S. food aid for up to 8 million people and weaken our ability to save lives in emergencies.

The House requirement to devote $450 million to non emergency food aid would have similar devastating effects. And the bottom line is this: We recognize the urgency of all food assistance programs. Whether we're feeding people in refugee camps, school children overseas, or providing food aid for developmental purposes, we must continue to have the flexibility to respond to the critical, the unanticipated and the necessary needs of people in crisis.

And we must have the best forecasting tools as well, like the Famine Early Warning System Network. With funding from USAID and staff and support in satellite imagery from USDA, FEWSNet keeps African nations abreast of food security situations, and it helps us target our food aid to meet those most critical areas.

We need the flexibility to make sure the food gets to those areas. Today all nations are facing a challenge of food security. And I want to thank the international community for coming together to fight this great threat. We have never been less secure about the near-term future of wheat. Here in the U.S. it is our most basic crop, with a farmgate value of $16 billion. World wheat stocks are at an unprecedented, historic 30-year low, and U.S. wheatstocks are at an unprecedented 60-year low.

Against this background we see the highly virulent African stem rust appearing quickly. This epidemic began in Kenya and Uganda in 1998. It spread through Ethiopia and Yemen and is poised now to move into India and Pakistan. And it's now been identified and found in Iran.

With over 75 percent of the U.S. wheat acreage planted to varieties that are highly susceptible to this disease, the threat here at home is real and it's urgent. To fight this new African rust pathogen, USDA scientists have been sending collections of U.S. wheat germplasm and breeding lines to East Africa for a rust resistance screening. The work that is being done there is helping to find new sources of protection.

And this is an international science partnership at best in the face of a crisis that threatens much of the world's wheat.

Ladies and gentlemen, the Bush Administration believes strongly that the foundation of progress, the certainty of the engine there, is driven by U.S. agriculture. And it's driven by science. That's why we want to see this Farm Bill boost the federal dollars we invest in cellulosic ethanol and specialty crops and other efforts. These will help reduce our dependence on imported oil costing over $100 a barrel these days, and it will help us improve the diets and the overall health of Americans.

The funding and reforms we are trying to achieve represent new policy for a new era. And I ask you that you contact your members of Congress now and ask them to support your efforts.

You know, last night I flew in from Chicago, and to shake off the trip a little bit, the travel, I took a walk. And I looked out the window of the hotel before I left, and there's a big memorial right across the street. I think those of you that face west in your rooms can see it; I wasn't aware that it was there.

I was curious to go see what it was all about. It's a beautiful monument, and it is dedicated to those who lost their lives in the Great War, the Great War that was to end all wars. And unfortunately now the term is the First World War.

But as I reflected on the names of the people who fought and died for our liberty and our freedom and our country, I was struck by an engraving that's on the big stone that's on the north side of that beautiful edifice out there. It's just engraved up on the top. And it says: "What does the Lord require of thee, but to do justice and to love mercy."

And I thought, you know that was really a good message for us today. Folks from that war, many who lost their lives, those who came home, those who came home came back to the land; they came back to the farms and ranches in rural areas of this country. And they committed themselves to produce the food and the fiber that would feed and clothe the world. And wouldn't they be interested now to find out that their descendants, those who followed, are now also producing fuel to energize this world. They'd be surprised about that.

But they and those who followed created this opportunity in a critical and challenging time, a partnership that every one of us has the opportunity to be included in-in helping others.

You know, they created a country that supplies one-half of the food aid in this world. They did so with the responsibility for making this country great, and those that followed made this the greatest country in the world.

And I think we now have a responsibility to follow in their footsteps in this angry and war-torn world where oppression and failed leadership have turned countries from food exporters into countries where 80 percent of the people are unemployed and famine and hunger reign. We now have a responsibility to march on in the people that are memorized here across the street's memory. We have to march on for freedom, freedom for others away from oppression, freedom from pain and freedom from hunger.

We all have a role in that effort. You know, my role is to continue to send this message of our responsibly from this country. Your role is to continue to reach out and to seek out and to identify and to deliver. And USDA's role is to continue to provide, to preserve and to prepare those in the agriculture arena that provides the foodstuffs, the fiber for this world, so that we can reach out in mercy and we can walk justly as we deliver the love and compassion for the people in this world.

Thank you very much for all your efforts. I really appreciate what you do. And now I believe we have some time to take some questions.

[Applause]

MODERATOR: We have somebody out here with a mike that's walking around. If you would stand and we'll have the mike delivered to you. Anybody have a question? Right down in front.

SEC. SCHAFER: Is that Ellen? I knew you'd be the first one.

QUESTION: Thank you. Ellen Levinson, Alliance for Food Aid, a group of nonprofits, PVOs and cooperatives that conduct international food aid programs. We are very grateful for what the Administration did by releasing commodities from the trust. We believe it's important to have contingency, you know backup for emergencies, and that that should be part of the policy of the United States government is to have a mechanism to respond timely when needed. And we think this is a very good mechanism.

So we've been fighting for replenishment. The Congress has been generous and given some money back over the past several years, and we're hoping the Administration will support that because you were mentioning it is important to have contingency for emergencies. And we don't think it's the best contingency to dip into development programs because they're being conducted in very vulnerable areas. And we can actually be the eyes and ears on the ground to give the early warning signals above and beyond FEWSNet.

So I wanted to mention that can you work with us and maybe help us to do more with the Bill Emerson Trust, and maybe we need to raise that profile and its importance as a contingency mechanism so that replenishment can take place and you really do have that tool, that mechanism, in your arsenal against hunger. Thank you.

SEC. SCHAFER: Thank you, Ellen. You know, it's a great comment, and certainly we at USDA-and I can't speak for USAID but I know for sure we want to work with you to develop the additions. You know, it's interesting that the Emerson Trust is kind of a backstop, it's the last piece there, it's the one that's set aside for emergencies. Larry, when was the last one that was passed? In '05. So it isn't something that's used all the time.

But you know, the balancing act that we have at USDA now is saying, okay, we're going to release 9 million bushels of wheat and there are 30 plus million bushels in there. You know, how far do we draw down in the arena of virtually no wheatstocks across this world? Do we take it down to zero because we need it? Do we hold some in there because who knows what's going to happen for emergency purposes later-very difficult issues.

And so we need people out there that are not only championing the trust and its ability to respond in an emergency, but also our Congress to say it needs the funding, it needs to be replenished. We can't just take it down and leave it there because this isn't an effort to get rid of our stock. This is an effort to use it in a case of emergency and then replenish them for the next emergency.

So thank you in advance for your help and I very much look forward to working with all of you to make sure that mechanism and others are available for us to meet the growing demands of emergency food aid across the world.

Thank you. You're all taking it easy on me here this morning.

QUESTION: I'm Chuck Davis.

SEC. SCHAFER: Morning, Chuck.

QUESTION: Working with (unclear), a member of the North American Grain Export Association. I'm wondering if the Administration has anything new developing in the discussions regarding early release of Conservation Reserve Program acres for either spring or fall planting.

SEC. SCHAFER: The CRP issue, Conservation Reserve Program, has been an interesting item in the news these days because there has been a lot of pressure on both sides to allow an early release from contracted acres that are set aside from production without a penalty.

Farmers and ranchers signed a contract for this land, they set it aside, and they are paid by funds from the citizens of the United States to let that land be idle. We also pay them upfront some money for fencing and land preparation and things like that, and the penalties for early release of the time that they've agreed to are meant to pay back the taxpayers for the money that they used in the upfront set-aside of this land.

The question is, should we in light of yields and stocks and things these days allow an early release without penalty from the contracts that were signed? For the '08 crop, we have made the decision at USDA that we will not allow early release without penalty on CRP acreage. That's for this crop.

We think that if there's about a million acres that are coming out of enrollment in '08 the difference that would make is negligible, if any, in the pricing structure out there. Even if it went all to corn or all to wheat, it wouldn't make any difference in the price situation. It may advance a little bit some stocks. But the yield curve that's going on there with existing acres planted is picking up the increased demand right now.

So we don't think in '08 that's an issue. In '09 however we've got about 4.5 million acres that come out of enrollment. We are looking at all the factors at hand, the stocks, the prices, the weather, the numbers of productive land acres that are in the program versus those that could be productive. We're looking at all of those things, and we'll make a decision for the '09 crop sometime around August or September so that farmers and ranchers can make the proper planting decisions in the fall.

But '08 we've said no early release; '09 we're still looking at it, and we'll make the decision in late summer.

Thank you. Yes?

QUESTION: Good morning. Charles Uphaus with Bread for the World. I understand the Hunger Committee has voted out a couple of titles of the bill. I wondered if you had any reaction to that, and the general prognosis for having a bill out of the conference that the Administration will be able to approve?

SEC. SCHAFER: Well, the Farm Bill is all-consuming these days as we look at the time, a couple of days from now being the deadline of having the Farm Bill on the table. I must say the prospects do not look good. We are in a situation now where the Administration has come to the table with increased funding than our original plans. We've agreed to a $6 billion over-baseline spending, when we started out at $4.5; and we went to $6 [billion] because there are more needs out there that we should fund.

As the Senate and the House have come down from their unrealistic over-spending bills, they have started to circle around a $10 billion level over baseline spending, and we at the Administration have committed to that $10 billion level. But we have shown them a pathway to get the funding to do a $10 billion level by identifying over $20 billion worth of acceptable offsets in funding sources to use in the farm bill.

So we think in the Administration we're moving in the right direction.

We've also made some changes in our policy or our directives on some of the reform issues, and I don't need to go into all those. But we think we're moving to try to come together with the new Farm Bill. Unfortunately as of an hour ago the House and the Senate are still fighting over three major issues, and we at the Administration are virtually standby observers.

The House and Senate cannot come together on the overall spending level, they can't come together on the funding sources to get to whatever spending level, and they can't agree on the reforms that we've asked for in the bill.

So in the eleventh hour here, I think the prospects of getting a new Farm Bill by Friday are pretty dim.

That said, the House today, this morning, probably as we are speaking, is voting on a one-week extension. When the President signed the last extension it was for 33 days, and he said, "I'm not interested in signing a whole bunch of short-term extensions; get the work done at the deadline."

If we don't have that extension, if we don't have a farm bill by the 18th of April, we really should look at extending the current legislation for a minimum of one year and maybe longer so that our operators around the country know under which rules they are operating under, and can make appropriate decisions then.

So Friday, we're looming. The President said he doesn't want to seek anymore, won't sign anymore extensions. Congress has not been able to come together. If they can't come together, if the House and the Senate continue to fight, we can't negotiate with them.

That's between the two agencies on the Hill. And unless we can see some significant progress here today and through some meetings we have set up tomorrow, I don't know what's going to happen.

If the Congress has come together, they've got a framework; they've got everything ready except for some minor details and some crossing the "Ts" and printing of the reports and things like that. I believe I could recommend to the President that we sign another short-term extension if it's a matter of a week or two to allow just the mechanics to get done.

But if we're sitting there Friday and we have no progress on overall spending, on funding or reforms, we just are not going to be able to look at long-term extensions, and I don't know what that means from there.

The options are to craft a bill, throw it together, send it over to the President, the President vetoes it, they come back, and they either override or they don't.

Another option is to write a Farm Bill and get it on the table fast. The third option is to allow it to fall to permanent law, which would mean 1948 and '49 prices, a difficulty. For instance, the price of milk would quadruple overnight. That's not a good option. Then the other option is that longer-term extension of the current legislation.

So that's what we're faced with. The clock is ticking, and we're trying desperately to craft together a bill that the President can sign and that Congress would be happy about. But at this point in time, we're just not there.

Sorry for the bad news. (pause)

Well, thank you all. So we have another? All right. Sorry.

QUESTION: Matt Welsh with Salesian Missions. I wondered if you could give us some insight as to the outlook of USDA in terms of PVOs as standard priority recipients of food aid and PVOs in general smaller organizations such as the one that I work with. Thank you.

SEC. SCHAFER: Well, I had that conversation with some others this morning, and I appreciate the question. You know, I'm one that, I'll only be at USDA for the rest of this administration so I'm starting out; I'm a short-termer already.

But my philosophy is, you get the best information from the people that are closest to the issues. And I get concerned when we start to block out, barricade, put barriers up in front of those organizations that are on the front line. Those are the people that are close, that collect information, that know how best things work, and that can deliver in the best possible manner.

So I can tell you my philosophy-which I hope translates throughout USDA for the time I'm here-is that we support PVOs, that we want to see non-government agencies involved; we want to see the small organizations which come from a state background that I'd identify as a community organization. Those are the people I think have the best information, do the best job, and can give us the best delivery. So I hope that we maintain the focus there and we'll be fighting to do so. Thank you.

That's it. Thank you.

[Applause]