REPORTER: Mr. Secretary, what do you think about the AGI cap that the panel has already approved?

SEC. JOHANNS: Let me offer a couple of thoughts, and then I'll answer your question. First thing I do want to say is, I appreciate the work of the Chairman and the committee and Ranking Member Goodlatte. I said to the Chairman before we reconvened that it's gratifying to me, after spending so much time on the Farm Bill, to actually see our ideas incorporated in a mark-up process. And so that's very encouraging. And we're literally looking at the work title by title, and we just see a lot of USDA ideas that are there, and again, we appreciate that.

Having said that, getting to your question, there's more work to be done in certain areas. The AGI cap I think is a very good example of that. I appreciate that it does save some money. I think the Congressman or the Chairman indicated that the 10-year score would be about $500 million?

VOICE: $522.

SEC. JOHANNS: $522 million. Our proposals save about $1.5 billion over the 10-year score. And you can just see where the difference is. The difference is at the cutting point there, so we put our proposal out recognizing that it would affect some people, but the reality is, even our proposal only affects 2.3 percent of those who file a tax return and even less than that because not all of that 2.3 percent gets farm subsidies. So that's an area where more work needs to be done, but there's a lot of process left. You know, keep in mind this is just the first mark-up. We have House action, then we have Senate mark-up, we have Senate action, and then we have a conference committee.

REPORTER: Are you going to need more progress on this to get a bill that's acceptable? It sounds like they're not quite there yet.

SEC. JOHANNS: There's a number of areas where we want to see more progress, and you know at some point down the line from here we decide where we're at on the whole bill because even what they do here in mark-up could be changed. So again, until you get a better idea of what this is all going to look like, it's premature to make that kind of assessment. But there's a number of areas I'm confident that we will identify as areas that we'd like to see more work.

REPORTER: For a young farmer back in Iowa right now -- and listening to everything the committee was able to put together in this package, what if anything can make you feel good about the kinds of provisions they have here for younger farmers dealing with $5,000 or $6,000 an acre cropland and huge input costs, higher energy cost?

SEC. JOHANNS: There are some things that are good for young farmers. You know, they've done some things with credit title and so there have been some beginning farmer initiatives, some very similar if not identical to what we talked about. There was one area where at least for program crop beginning farmers we enhanced the direct payment, and the value of that was about $250 million. We appreciate there's a cost to that, but we thought it was a very valuable program. It does not look like that's going to be in the final mark. Again, I think beginning farmers is a concept that everybody can embrace, so add that to the list of areas where we'd like to see more work. But they have done some good things in the beginning farmer area, and I don't want to discount that.

REPORTER: You talked about the problems with LDPs after the hurricanes. What do you think about the lifting of any caps on marketing loan gain?

SEC. JOHANNS: Well, there's actually a couple of issues there. One is that with the marketing loan gain kind of set aside from the payment limits, that's exactly what you end up with. The issue that you're talking about is a little bit different issue, but the issue is still there and hasn't been remedied, at least yet in this mark-up process. And that is just a simple situation where it's kind of a pick-your-day sort of situation with the marketing loan.

And so when the price dropped they were able to, very legally, to pick that day.

VOICE: (unclear)

SEC. JOHANNS: That's not in there, Chuck, yet.

REPORTER: Mr. Secretary, before we came out here the committee had that little bit of a tussle over what sort of offset would be acceptable for the Farm Bill. Republican members said tax increases are not acceptable offsets. What do you think is an acceptable offset?

SEC. JOHANNS: We don't support tax increases. I mean that's not how we believe this should be put together. We built our proposal, recognizing it was going to be a tight baseline, and built it with a goal of balancing the budget within the next five years. And in fact we fit within that goal. So I don't know. I don't know where they're going to find the offsets. We haven't been given any clue on that. The bill is going to need offsets; I think that's obvious. And so that's a piece of the picture that we don't have today. And I even hate to venture there because I don't know. I don't know what they will do to find offsets.

REPORTER: I'm curious Mr. Secretary. This is your first time you've come up here, and it's kind of fascinating that you arrive half an hour before the Republicans have a (tips). Was it coordinated?

SEC. JOHANNS: No. Here's what I would say. The best technician in my judgment that the USDA has relative to farm policy is the guy who's been here, our deputy. This, I think, is his fifth Farm Bill. This is the guy who works through this sentence by sentence, paragraph by paragraph, and I have every confidence in him. And so quite honestly it just seemed absolutely appropriate. He's attended all the subcommittee mark-ups, oftentimes when I wasn't even in town because of my travel schedule. So having Chuck here not only I think was the right decision but I can tell you every member of the committee that I ran into expressed great appreciation for the good work that he has been doing. I'm glad I got an opportunity here to stop by, and the Chairman gave me an opportunity to say thanks. And we do appreciate the work of the committee. Are there issues that we're going to work on? Yes, of course. But I would guess that's true of probably every committee member there. There are certain things that we'd like to see yet, but I don't want to discount the fact that the committee has done a lot of good things here.

REPORTER: -- belabor a point but Chairman (unclear) promised money for the nutrition programs, also the specialty crop money is dependent on that funding. Is there any way of knowing if that's coming from tax increases or from savings? Have you had a -

SEC. JOHANNS: Offsets would seem to imply to me that they're finding some way of saving money. I mean, that's what it would seem to imply to me. I don't know that anybody knows that. But apparently there's a feeling that they can put that money together. I do think there are some very valuable reforms that we have suggested that do save money. Our payment limit proposal would save an additional $1 billion. Our initiative in terms of what I call the pick-your-date lock in the LDP has an opportunity to save money.

Again, we kind of went through the same process. We looked at all of the various aspects of farm policy, we identified areas where we could save money, we identified areas where we wanted additional investment because that's what we heard in our Farm Bill Forums. And we came up with a total package that worked with the balanced budget plan.

Part of this story is not yet told. We don't know where that money is going to come from. I'm as anxious as anyone to see, but I don't know the answer to that question.

REPORTER: Sir, do you think there's support among the committee Republicans for dropping the AGI all the way down to the $200,000 level you proposed?

SEC. JOHANNS: Here's what I can say. I'm very, very pleased that AGI is the methodology that has been used. I'm not sure. I've not polled the individual committee members. I would guess that some won't support that. But again, I think it's an issue that deserves debate and discussion. My hope is that our proposal is adopted. I think it's a sensible proposal, and I think if you ask citizens in America, do you agree with this proposal, it would be overwhelmingly supported.

REPORTER: Is this bill that you are seeing developed by the House Ag Committee something that will help us in trade negotiations and reassure trade partners, or are we still not going far enough on that?

SEC. JOHANNS: Loan rates by and large have gone up more than they've gone down here. They've either stayed the same or gone up with a few minor exceptions. And I can tell you that by any definition under the trade rules, that program is regarded as amber box, which is the most trade-distorting approach.

So that of course is concerning.

We've got a lot of cases pending challenging our subsidies. The case that's furthest along is cotton. We're probably going to have an idea in the not-too-distant future where we're at in that case, but so far as much and as aggressively as we've defended that program we have not been successful.

REPORTER: So is this a step in the right direction or a step in the wrong direction?

SEC. JOHANNS: As we said a few days ago, raising loan rates, doing anything to increase your challenges in the amber box category, is not a step in the right direction. It will create more problems.

REPORTER: -- amendment on the floor on the $200,000 AGI limit?

SEC. JOHANNS: What we will do over the next week to 10 days is try to identify those areas where we think additional work needs to be done - I've mentioned AGI - and try to make a decision as to where in this process we can have the greatest impact to try to get a result that we're happy with. So there's just a lot of process left, but we'll be doing that over the next week to 10 days before whatever days are left before they go to the floor.

REPORTER: Did you see (unclear) Farm Bill?

SEC. JOHANNS: I did not see President Bush today but I was over at the White House today, and I was over at the White House yesterday.

REPORTER: Have you had any discussions with him since -

SEC. JOHANNS: I've had some general discussions with him. He's always interested in where things are at and what's going on and that sort of thing.

REPORTER: They took the USDA graduate school out of USDA today too in amendments, kind of an esoteric subject maybe, but do you have an opinion on that?

SEC. JOHANNS: I guess what I'd like to say, I wasn't aware of that until you asked the question. I'd like to see what they did before I offer a thought.

REPORTER: So should this committee pass this bill today?

SEC. JOHANNS: Should the committee pass the bill? I think in an effort to move the process forward my hope is that they approve a bill. I want to indicate again, I think they've done good work. But I also want to indicate that doesn't mean I'm satisfied with all of the various items. There are things where I do think there's additional work to be done. But the process has to start somewhere. We put our proposals out, now the House is very close to putting their proposals into legislative language and out to the floor, and so I just think each step we're making progress.

Let me just say this. Today I am very encouraged by what I am seeing. You know when we put AGI out some months ago, we really were the first that were talking about that approach for payment limits. So to see that as the methodology is very encouraging. Are we satisfied with the level? No. Is there more work to be done there? Yes, of course. But again, I see that as positive.

The revenue-based countercyclical approach, again very good work because we think we have a lot of support out in the country for that kind of approach. And I could name item after item after item where we feel that progress has been made for good farm policy. And there will be items where there's more work to be done.

REPORTER: So would you approve of the plan to give farmers an option? In other words, you advocated switching over to a revenue-based system, and they're sort of doing that. But they are also giving farmers options that would be price-based. Is that okay?

SEC. JOHANNS: The biggest concern I had about the option was where's it going to fit in dollars and cents-wise? And as I understand it, there's a sense that this may actually save some money, probably not as much as what we had in mind. The money piece of this I must admit is still a little unclear to me because we do have a situation where some of the savings realized are not as much as we realized in our proposals, and how it all fits together with the offsets and what Ways and Means might do I don't think is going to be answered today. So we're very anxious to see that piece of this.

So the money piece of this I think is still kind of up in the air.

REPORTER: I wasn't really talking about the money piece because when you talked about this before you mainly said, well if farmers don't have a crop because of whatever then they can't get their payments because it doesn't work for them.

SEC. JOHANNS: I would prefer a revenue-based approach across the board. Having said that, if it works from a financial standpoint giving the option, I think it's something we're going to be able to live with, something that we'd find acceptable. But again, I've got to see how all this fits together in the final product from a financial standpoint. It's got to work financially.

REPORTER: There was a meeting of committee members right before you arrived. Were you in that meeting?

SEC. JOHANNS: I wasn't. I walked right up to the dais and started talking to members and then waited to say hello to the chairman. So I did not get back to any other meetings.

REPORTER: How do you describe why you're here today? We're very pleased to see you but -

SEC. JOHANNS: Thank you. I appreciate that. I have been updated on the work of the committee as you might expect on a pretty constant basis, and I've been encouraged by the work of the committee, and I wanted to stop by and say that. I wanted to stop by and say to the committee and to the chairman and to the ranking member, we appreciate the work they are doing. Now that doesn't mean I just signed off on the bill. As I've indicated, there are areas where we feel more work needs to be done. But I think that's been the tone of the last day and a half. Even the chairman mentioned that about an amendment.

You know, this isn't a perfect amendment; it's going to take more work. But you know, my hope is that we can continue to work with the House, the Senate, and we can get a bill done. And that's what we want to try to achieve here. And so take my presence as an opportunity for me to stop by and say thanks, and now we're going to keep working with you. We'll disagree, we'll agree, but our hope is to end up with a Farm Bill. And I think they've made progress over the last day and a half, and that's to me very, very encouraging. And so I'm glad I got an opportunity to say that.

REPORTER: Will we see you at the Senate mark-up?

SEC. JOHANNS: Yeah. I think you'll see me at all the Senate mark-up, although the lead guy here, the best technician in my judgment for farm bill policy is Chuck Conner, and this is just a great opportunity for me to say thanks to Chuck and his team. They are just great technicians. They have been through more farm bills than I'm probably going to live to see in my lifetime, and when it comes to grinding through amendments and that sort of thing, I could not have better people here than what was here. And I don't hesitate to say that. They've done a great job and they have my confidence. So you'll see them there too, probably more than Mike Johanns.

TERRI: Thanks everybody. Thanks very much.