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TRANSCRIPT OF A DISCUSSION OF THE ADMINISTRATION'S BEGINNING FARMERS; FARM BILL PROPOSALS WITH AGRICULTURE SECRETARY MIKE JOHANNS; MIKE DUFFY, DIRECTOR OF THE IOWA STATE BEGINNING FARMER CENTER; NATIONAL FFA VICE PRESIDENT, JANETTE BARNARD; FSA ASSOCIATE ADMINISTRATOR, GLEN KEPPY; IOWA DEPUTY SECRETARY OF AGRICULTURE, KAREY CLAGHORN; AND JAYME UNGS, VICE PRESIDENT AND SENIOR LENDER U.S. BANK; MODERATED BY KEN ROOT OF WHO RADIO
AMES, IOWA - April 17, 2007
DEAN WINTERSTEEN: Thank you, Ken. Well, welcome to Iowa State University, and a special welcome to Secretary Johanns who's here to organize a roundtable discussion on beginning farmers. I'd like to also welcome all of our FFA students to Iowa State University and the more than 5,000 other students that couldn't join us today due to our seating constraints.
It's my pleasure to introduce our panelists, and I'll begin though by introducing our moderator, Mr. Ken Root, from WHO Radio in Des Moines. Ken has nearly 35 years of experience as an agricultural professional, as a vocational agricultural teacher, agricultural broadcasting, environmental consulting and association management. Ken.
Our next panelist I'd like to introduce is Dr. Mike Duffy. Dr. Duffy is the director of the Iowa State University Beginning Farmer Center. He is a professor of Economics and Extension Economist and Farm Management.
Janette Barnard is the National FFA's Western Region Vice President. She is a senior in agricultural economics at the University of Arizona where she has served as a College of Agriculture ambassador and a member of the Sigma Alpha Professional Agricultural Sorority. She is a native of Wilcox, Arizona, and shared with us earlier that on her family farm they grow peppers.
Glen Keppy is the associate administrator for programs for USDA's Farm Service Agency. He is responsible for supervising and administrating farm commodity programs, farm loans, conservation programs, and disaster assistance. Glen is a third generation family farmer and has owned and operated a diversified crop and livestock farm in Eastern Iowa for more than three decades. He is past president of the National Pork Producers Council, has served on the Executive Committee of the U.S. Meat Export Federation, served on Harvest States Cooperative Board of Directors, and the Federal Reserve Bank Advisory Committee.
I have to also interject that Glen's son Paul is currently studying political science at Iowa State University and another son Neal earned a bachelor's degree in agricultural studies here.
Jayme Ungs is the senior lender and vice president with U.S. Bank in Boone, Iowa. He has been involved in agricultural lending for the last 10 years. He received Iowa Agriculture Development Authority Banker of the Year Award in 2004. Jayme grew up on a dairy farm near Luxemburg, Iowa, and graduated from Iowa State with a bachelor's degree in agricultural business and in finance, with a minor in agronomy. You were busy. He is currently vice chair of the Iowa Agriculture Development Authority.
Before I introduce the Secretary and begin our discussion and turn the program over to Ken Root, it's my pleasure to also introduce Karey Claghorn. Karey will give a few comments before we move on. Karey is the Iowa Deputy Secretary of Agriculture. She grew up on a livestock farm near Bloomington, Indiana. She graduated from Indiana University and later moved with her family to Iowa. She currently lives on a farm in rural Warren County growing row crops, hay and running a small cow/calf operation.
MS. CLAGHORN: Thank you, Dean Wintersteen, for that introduction. I'd like to welcome you all here today. In particular, Secretary Johanns, we are so pleased to have an Iowa native back home where you belong. And we appreciate the powerful, effective voice you are for all farmers across the country.
I also have the pleasure of working with Iowa's Secretary of Agriculture, Sec. Bill Northey. He sends his regrets. He is out of the country and is unable to be here today, but he's very disappointed because young farmer are a passion of his. He wants to ensure that we have the next generation of farmers and agricultural leaders and that they have more opportunities than the generations before them.
It's encouraging to see young people here. The energy last night at the opening was just amazing and it was one of the things I communicated with the Secretary this morning. It is just amazing, and you can feel the excitement about agriculture. We have powerful opportunities like we've never seen before, and it will be exciting for your generation.
I'm excited to hear from the panelists. We've assembled a great group of agricultural leaders, so I look forward to the discussion, and thank you for inviting me.
DEAN WINTERSTEEN: Karey, thank you very much. It's now my pleasure to introduce Secretary of Agriculture Mike Johanns. Secretary Mike Johanns was sworn in as the 28th Secretary of the U.S. Department of Agriculture on January 21, 2005. He brought to this position a lifetime of involvement in agriculture and a long record of a faithful service to America's farmers and ranchers. He still describes himself as a farmer's son with an intense passion for agriculture.
Secretary Johanns was born in Iowa and grew up on his family's dairy farm near Osage. Prior to coming to USDA, Secretary Johanns was Nebraska's 38th governor. During his six years in office, he was a strong advocate for rural communities and farmers and ranchers. Please help me welcome the Secretary.
SEC. MIKE JOHANNS: Well, thank you very much. Thank you. Please. Well, thank you for that very, very nice, warm welcome. It is great to be back in Iowa, the state where I did grow up on a dairy farm, actually just north of here a little bit in Mitchell County near Osage, Iowa. I want to start out and remember my manners, Dean, and just say thank you Iowa State. I have been made aware of the fact of the preparation that was involved in this, and I can't tell you how much I appreciate that. I just so appreciate it. I have to tell you also, Dean, that had I been much smarter and a better high school student I might have gone to Iowa State, but you know, it didn't turn out that way. But what a great school.
Ladies and gentlemen, today I'm going to talk to you about something that is very near and dear to my heart these days, and that's our Farm Bill proposals. We started out a process to try to gain input on what the next Farm Bill should look like, and that process took us all across the United States. One of the things that I knew was going to happen when I was appointed Secretary of Agriculture was that we were going to deal with a Farm Bill because in 2007 in this year we must decide what to do with this farm policy we have. This is the law that one way or another we have to address this year. It's not optional to just simply ignore it.
And so the President of the United States, actually we talked a day before I was nominated, and we talked about the Farm Bill. And one of the things that he made very clear to me is he wanted me out of Washington in the country talking to farmers and ranchers. So we traveled all over the country, 52 Farm Bill Forums in 48 states. We got about 4,000 comments. We had 41 summary papers put together as a result of that process that we posted on our website. And then we decided to delve more deeply into some themes that we heard over and over again across the country, and our USDA economist published five analysis papers. And that was just getting us started in this process.
The purpose of Farm Bill legislation, I think some look at the Farm Bill and say, "Well that's all about farmer programs". And yes, it is. The commodity title is Title I; it's a very important title in the Farm Bill. But look at all of the other issues we address. We address not only the commodity program support; we address conservation and forestry, renewable energy research, trade, Food Stamps, and rural development. And as I said, this bill expires this year. We have to act on the bill this year.
The 2002 Farm Bill in my judgment was the right policy for the times. I will tell you, I have some history with that bill. I was the governor of the state of Nebraska during that period of time. I was the lead governor for the Western Governor's Association on the reauthorization of the Farm Bill in '02, and I was the co-lead governor for Midwest Governors with a gentleman that you know well here in Iowa, Tom Vilsack, who was governor of Iowa at that point in time.
But it was the right policy for those times. Commodity prices were low, exports had declined for five straight years, the debt-to-asset ratio for agriculture was nearly 15 percent. So the '02 Farm Bill did some very positive things. It provided some much-needed cash support into agriculture, it was the first ever Farm Bill that had an energy title. Can you imagine that, the first one ever? And look at ethanol across Iowa today. It expanded our Conservation Programs and it increased funding in that area by about 80 percent.
But times do change, and times have changed. Commodity prices are strong for virtually all the major program crops. The only real exception to that at this point in time is in the cotton area where we have not seen the strength of prices we've seen in the other four program crops. We've also seen a very dramatic increase in exports. They've increased every year to a record $68.7 billion. We project for this year 2007 that our exports will be $78 billion. In the entire history of recording this data at the USDA, we have the lowest debt-to-asset ratio in recorded history. It's about 11 percent in 2006, dropping from that 15 percent number I cited.
And renewable energy is now a significant part of not only energy policy but farm policy.
So as we listened to farmers across the country, it became clear to us that they were looking for these elements in the next Farm Bill. They wanted it predictable, and we believe that the proposals we have released at the end of January do exactly that. They are market-oriented, they provide support when revenue is low, they are more equitable. The proposals distribute the resources more equitably among producers and amongst commodities. They're better able to withstand challenge.
International trade is a very, very important issue in agriculture these days; 75 percent of our cotton produced here is exported, 50 percent of our rice, about a third of our row crops, and these proposals just work better in the international trade arena, and they wisely and effectively spend taxpayer dollars.
I as Secretary should be able to justify farm programs whether I'm in town or in the country because, after all, these programs are paid for by the American taxpayer. To demonstrate fiscal responsibility; they save about $10 billion over the spending in the '02 bill. That would be for the past five years excluding disaster aid, and they uphold the President's plan to eliminate the federal deficit in the next five years.
I will add, however, that if you reauthorized the '02 bill, if you just said look, it's good enough for me, Mike, let's just do it again for another five years – actually our proposals spend $5 billion more than the simple reauthorization of the '02 bill. We support emerging priorities. We would increase funding for renewable energy and conservation in our proposals.
Let me if I might now address some of the specifics of the proposals. When it comes to conservation funding, we increased funding by $7.8 billion. This is historic. No other Farm Bill has allocated this kind of funding in the conservation measures relative to agriculture. We provide $1.6 billion in new funding for renewable energy research development all targeted at cellulosic ethanol – not that we don't believe in corn-based ethanol. We do. We think it has a very, very bright future. But in order to meet the President's goals, we need to step it up here. We need to give farmers an option and our nation an option of producing energy from cellulosic products. We support $2.1 billion in loan guarantees to build cellulosic ethanol plants.
We provide $1.6 billion in loan guarantees and $500 million in grants for our rural communities. This probably was the most surprising thing about my participation in the Farm Bill Forums. I began to realize about halfway through the forums that we had yet to receive a critical comment on our Rural Development programs. And in all the forums I did, which were over 20 of them, I did not hear a single negative comment about Rural Development.
But what we are proposing to do here has been very well accepted. There are critical access hospitals throughout the rural areas of America. Some of those have been rehabilitated and brought up to current standards. Some will benefit from a loan guarantee program which we are proposing will complete all those rural critical access hospitals and bring them up to current standards if you will, rehabilitate those, and this program will be fully funded.
We're also putting additional money into infrastructure projects – water and sewer and telecommunications projects – to encourage rural development in our smaller communities, and we do some consolidation of our Rural Development programs. We dedicate an additional $400 million to trade-related efforts, again emphasizing how important trade is today to the American farmer.
We target about $5 billion in funding to support specialty crop producers. We do this in a number of ways – purchasing fruits and vegetables, funding research, fighting trade barriers, expanding markets.
Let me tell you, I've had an opportunity to visit with farmers all across the United States. In fact, one of the things I insisted on with my Farm Bill Forums was that I get in every region of the country. I could be in a region of the country today, let's just identify California as an example, and I would see basically the same phenomena I'm seeing here. I would see young people in blue jackets; I would see farmers who are here, may be interested in what I am proposing.
And you know what? They grow a very different crop than what I grew up with. You know, in Mitchell County we grew corn and soybeans and alfalfa and oats, and we had the dairy farm and all of that. They may grow strawberries or apples or something like that, but they have been basically left out of past farm policy. Ninety-three percent of the cash subsidies go to five crops—corn, wheat, rice, cotton and soybeans.
What we are proposing to do here is not to provide cash subsidies into that area, but to increase funding to buy fruits and vegetables for school lunch programs and breakfast programs and snack programs and to fund research and assist them with phytosanitary/sanitary issues -- needless to say, a proposal that's being very, very warmly received by that piece of our agricultural economy.
Okay, now let me if I might talk about beginning farmers, because as I have pointed out a number of times I see so many young people here today in your blue jackets, and I'm hoping you will have an interest in production agriculture. But we're doing something here that quite honestly is far beyond what has ever been done in a Farm Bill for beginning farmers. We are providing $250 million to increase direct payments for beginning farmers and ranchers. What will that mean? If you are a beginning farmer or rancher and qualify and you are raising one of our program crops, we are going to increase your direct payment by 20 percent for the first five years of your farming operation. We'll reserve a portion of our conservation assistance funds to support beginning farmers. We'll provide more loan flexibility for down payments in land purchases.
In all of our Farm Bill Forums we started with an FFA member and a 4-H member. Some of these ideas came directly from that participation.
Now let me talk to you if I might about some of our other commodity programs, and this is some highlights. We are revising our marketing loan rates to provide a true safety net. In other words, what we should be doing for agriculture is a safety net, not an incentive to plant one crop versus another. That should be a decision you make based upon your operation. We're increasing the direct payments to farmers by $5.5 billion. We're creating a revenue-based countercyclical program which again just simply works better for farmers as a true safety net, and one of the proposals that has received the most comment, the most controversy, is we say if you have an adjusted gross income of $200,000 averaged over three years, at that point you graduate from cash subsidies.
Now for any of you who are out there worried about this, let me tell you, it is going to impact about 38,000 farmers across the United States, not a very large number when you consider there's about 2.1 million farmers. Adjusted gross income is not your gross income. It's after you have deducted everything you can deduct to arrive at adjusted gross income, and even at that you would be allowed to have a net income of $200,000 per year averaged over three years before you would be impacted by this proposal.
Okay. The Beginning Farmers and Ranchers Proposals, again we're increasing the direct payment, we're reserving 10 percent of our conservation financial assistance to both beginning and socially disadvantaged farmers. We are increasing the limits of direct ownership loans and direct operating loans to a combined maximum of $500,000. We are doubling the percentage of direct operating loans targeted at beginning and socially disadvantaged producers to 70 percent. We are targeting 100 percent of direct farm ownership loans towards beginning and socially disadvantaged farmers.
We are providing greater down payment loan access and flexibility for beginning farmers and ranchers. We're proposing to cut the loan interest rate in half to 2 percent, defer the first payment for one year, decrease the minimum contribution toward a property purchase from 10 percent to 5 percent, and eliminating the $250,000 cap on the value of property that may be purchased. Land values have gone up, so we eliminate that cap.
Again, I'll guarantee you, if you look back over the entire history of farm policy, you would never find anything as forward-leaning as what we have proposed for beginning farmers. With that, that's an outline of our proposals. Our complete information is on our website, USDA.GOV. We encourage you to take a look at that, and I think we probably brought extra books with us that we can hand out.
Ken, with that I'm going to hand the microphone over to you, and I think we're ready for a panel discussion.
MR. ROOT: Mr. Secretary, thank you. U.S. Ag Secretary, Mike Johanns.
MR. ROOT: All right. For the next few moments you're going to note I'm a bit nervous because I'm going to try to time being able to get into a 10-minute segment of this that will be able to go live on our radio stations. If you would like to ask a question, we have two microphones here. If you'd like to make your way up to the microphones now, if you've seen how long he is on this PowerPoint, and if you listened to how long he is on answering any question, along with three or four other panelists, you may want to move to the microphones now if you want to get your question asked a little later today. So please don't be bashful in moving to the mikes.
The rule is, you'll have two minutes. You may make a question in less than that length of time, you make a statement if you wish. We'd ask you be respectful obviously of the people to whom you are speaking and that you remain at the microphone until the answer is given and then step back and allow another person up there.
We will also have some media on the telephone line for those of you listening here or taking this feed we will call upon you a little bit later on, and I'll give you a means by which you can ask a question to let the operator know that you're ready to ask a question. Our people in AV up in the booth in the back are going to be able to notify me and you as well to let you know that it's time for you to ask your question. So please if you wish to ask a question, go ahead and make your way up here.
To our panelists today, good afternoon to all of you. Mr. Keppy, how are you doing? I can't hear you.
MR. KEPPY: Doing very good.
MR. ROOT: Okay. You're going to have to work those microphones. Jayme, good to see you.
MR. UNGS: Thank you.
MR. ROOT: Mike, haven't seen you in a number of capacities. Good to see you here.
DR. DUFFY: Good to see you.
MR. ROOT: Head of the Young Farmer Program. And Janette, is it Barnerd or Barnard?
MS. BARNARD: Barnard.
MR. ROOT: Barnard, okay. Good to see you. Welcome to Iowa.
MS. BARNARD: Thank you.
MR. ROOT: Winter was until about three days ago.
MS. BARNARD: I heard.
MR. ROOT: So from Arizona you timed it just very well. And Mr. Secretary as well.
Now, any of you and all of you may respond to a question that's being asked by someone in our audience. If you'll just give me a high sign that you'd like to respond to it, and if you wouldn't, or if your part's answered go ahead and put your hand down and I'll try to get to you. So we'll work with you as the panelists as well as our audience here. I'm looking at about four minutes before we go live. Okay. Do we have to give away hats to get you to come up and ask questions or make comments here? Yes, sir. Please come on up. Give us your name, where you're from, and what you'd like to address.
QUESTION: Kyle Moss, Iowa State. We often hear about the disadvantages beginning farmers have, and you've identified a lot of positive notes. Could you expand on some of the additional positive notes and advantages that beginning farmers have over more experienced?
SEC. JOHANNS: You know, I'm going to let maybe some of our panelists, Dr. Duffy works in this area extensively for example. But I have to tell you, I've been around agriculture I guess dating back to my birth in 1950. I don't believe I have ever been more excited about the opportunities available for young people in agriculture. You know, if you think about this, just since the '02 bill, we all of a sudden have a new dynamic in agriculture, and it's called renewable fuels. In this state, we're most used to ethanol and biodiesel, but I am absolutely confident that the research is going to take us on to a next step, and that next step is going to be cellulosic ethanol.
So all of a sudden farmers have new markets and new opportunities. The other thing I would mention and I'll wrap up with this comment is, farmers have always told me, Mike, get us a level playing field and we can compete with anybody in the world in terms of marketing our products. And you know what? They are absolutely right. If we can get trade barriers down, if we can get tariffs down, I believe our products will compete with anybody. I believe our farmers will compete with anybody. I have seen it. And so there's a great opportunity in the growth of the middle class around the world.
But it's occurring in developing nations because one of the first things they do when their lifestyle improves, they look for the enhancement of their diet for their families. And again, that's our products, that's our beef and our pork. It's an opportunity to really market to those countries.
MR. ROOT: Dr. Duffy, do you want to make a few comments? I have a couple of minutes.
DR. DUFFY: Well, I really agree with the Secretary that we are in new dynamics, but as we look for the beginning farmer, I think the mention of increased funding and looking at new programs for fruits and vegetables and alternative crops is a big area that we've tried to get beginning farmers to think about and looking at options and alternatives. The marketing now, the number of the people that we work with are marketing over the Internet. And there's just a lot of tools that are available now. The whole local food movement and everything, so it really is an exciting time, and a lot of options.
MR. ROOT: Let me ask Janette if you would to respond to things that you feel young people may be able to deal with in the marketplace in technology that an older generation may have trouble with?
MS. BARNARD: Definitely. I think having the chance to visit with students across the countries who are in agriculture education, I think we're seeing that high school students are very savvy as far as technology and education and their ambition, and so for a young person coming from an agriculture education program who has the drive and desire and background and interest in production agriculture, they are really being prepared. And so they are going to be ready for those careers and they are going to embrace the technology and embrace these new opportunities that are being talked about. So that would definitely give them an advantage.
MR. ROOT: Mr. Keppy, it's been a few years since you were a young farmer, but what would you say the advantages are for the next generation that you didn't have?
MR. KEPPY: My father told me there was tremendous changes that happened during his career as a farmer. I have told my sons that there has been a tremendous change and challenges in agriculture, and we have all worked together to try to level the playing field to make agriculture able to be more responsive to the needs of our consumer.
I really think the golden opportunity is here for the next generation, and I have two sons at home. I've been able to help them get started farming. I think that if you at all have any interest in going into agriculture, spend your time wisely at this university or other ones and absolutely there will be a future for agriculture. This country has the climate, the soil, and we have the technology. I had to chuckle, Ken, when you said the older generation. I am not going to use a computer, although being out in DC for the last year I have had to learn how to use the computer. My sons and you folks adapt to that, catch on to it and use it and that will be a win/win situation.
MR. ROOT: Thank you, Mr. Keppy. Hello to our audience. Right now we are at Iowa State University. You are part of a forum on the Young Farmer provisions of the 2007 Farm Bill and other programs that can assist the new generation to enter agriculture. As well today we have the FFA on hand, as they are holding their annual convention here with several thousand FFA members from across the state of Iowa. Also Iowa State University students who wish to go back into agriculture.
So Secretary Mike Johanns has joined us along with a panel which includes Janette Barnard who is the National FFA Vice President from Wilcox, Arizona. Janette, glad to have you with us. Mike Duffy, director of Iowa State's Beginning Farmer Center. Glen Keppy, who you just heard a moment ago who is an Iowan, a farmer, associate administrator for programs at the USDA's Farm Service Agency. And Jayme Ungs, who's vice president and senior lender for U.S. Bank in Boone, Iowa.
We'll continue with our questions. Sir, give me your name and where you're from.
QUESTION: Bill Hammoth. I'm the ag ed instructor at Wilton High School. And somewhat of a comment to get your response: through the years animal agriculture is what has allowed young farmers to really get established into farming. With the EPA regulations, with the communities not wanting large-scale animal operations close, people moving out into the rural areas, they don't want to have a swine operation, a beef operation, with the flies and odor – they're putting restrictions. And I see that as causing restrictions for those young farmers who want to get started because the animal agriculture is what has given them the steady source of income. I just wonder what your comments are, what can be done to help ensure that is still there for them.
MR. ROOT: Would you like to have an animal agriculture guy on this end talk about it first, and then Mr. Secretary we'd love to hear from you. Glen Keppy?
MR. KEPPY: What you have laid out on the table is very much an issue that has been discussed. I think there's been some very good dialog. I think that together we can find some win/win situations with the environmentalists and with agriculture. It wasn't too long ago that they called manure a byproduct and a waste. Today, that is one of the most valuable products that comes out of the livestock operation.
MR. ROOT: It's also being called a hazardous waste, though.
MR. KEPPY: There's some definitions that I'm not in favor of. I think that, treated properly, it is no different than any other waste that comes out of any type of corporation or industry that we have. It takes common sense, takes the technology that needs to be developed in institutions like this, and it will end up being a win/win situation.
MR. ROOT: Mr. Secretary?
SEC. JOHANNS: Let me just start out and say, I'm a big supporter of animal agriculture. I believe there is great opportunity here. I think of the days when I grew up on the farm and the difference in how we treat animal waste now. Glen is absolutely right. This has every potential to be a very valuable resource and can be a profitable part of the operation of a farm. I would suggest a couple of things. One is, I think we have to continue to tell the story, we have to continue to promote animal agriculture. After all, that hamburger that somebody enjoys on the grill on a Sunday afternoon has to come from somewhere.
The second thing is that I just believe the technology is going to continue to improve as it has, dating through the entire history of farming, in terms of how to handle animal waste.
Then the third point I would make is, you're absolutely right. We need to tell the story about how this is oftentimes the entry point for young people in agriculture because they can go out and buy a few cattle or hogs or whatever and start their operation and grow the operation from there.
So personally I believe there's a future in this area. We have the challenges you've mentioned, but I think we can overcome those challenges.
MR. ROOT: Thank you. Mr. Keppy, I didn't mean to pick a fight with you there because I've seen how big your hands are, and I'd lose in the first punch.
MR. KEPPY: I forgot to say, jobs and taxes are the other thing that this state and a lot of other states that have livestock look at, and it helps the economy of this state.
MR. ROOT: Yes, absolutely. We're the largest hog producing state in the nation. Young lady, give me your name, please?
QUESTION: My name is Coral Conant. I'm an Iowa State student originally from St. Louis, Missouri. My question is about climate change. It's becoming a very prominent issue around the world and in the U.S. There was a rally just this weekend, actually over 1,400 rallies held across the nation of people asking Congress to step it up and make climate change policies. And as agriculture is one of the very many, many things that is contributing to climate change, I wonder how the Department of Ag is going to work to reduce those greenhouse gas emissions?
MR. ROOT: Mr. Secretary?
SEC. JOHANNS: You will like what we're doing. In our proposals for this upcoming Farm Bill, time is always a little bit of my enemy because our proposals are contained in a183-page document, and I'd love to go into every item. But there's never enough time. But let me if I might just expand a little bit on what we're doing. One of the areas where we've asked for some additional funding is in the area of advancing credit trading because farmers often do very, very positive things on their land. Is there an opportunity for a farmer who has done those things to own those credits and work maybe with a company in town who needs to improve what they are doing from an environmental standpoint?
So we've kind of looked ahead to the future and said, how can we improve this situation? Our conservation programs, which again I will point out to you the largest increase in funding we've asked for is in the conservation programs, a $7.8 billion increase over what we're doing already. Farmers have the potential with that funding to be real leaders when it comes to conservation, environmental positives, and again that's in our proposals.
The other thing I'll mention just very quickly and I'll wrap up with this although there's other things that I'd love to show you or talk to you about – our renewable fuels initiative is very, very positive when it comes to the environment, and we've asked for additional funding to try to take a next step into cellulosic ethanol, both in terms of research and development – some of that research and development could very well be done right here at Iowa State under this Farm Bill, and then $2.1 billion to actually build renewable cellulosic ethanol plants to process biomass into cellulose. So again I think in this area we've really done some exciting things. Like I said, there would be more I could mention but I don't want to take the whole time we have today.
MR. ROOT: Let me ask any of our other panelists if you think there is an opportunity for profitability in agriculture if we are moving toward this, not only in the carbon credits but in any other area, either our banker, young farming guy – what do you want to say?
Mr. Jayme Ungs.
MR. UNGS: I think agriculture right now has tremendous opportunities in multiple areas, and I do believe moving forward that our farm communities do have the chance to help out in that area. I know our machinery dealers and manufacturers are moving to cleaner emission, tractors, and combines and we are taking those steps I feel. And I think the young person and farmers in general will have the chance to maybe benefit from what's going on and help the environment. And the farmers out there really are trying to do their best to take care of the environment. I work with a lot of people that are involved in the Conservation Security Program, and they're doing a lot of things in regards to taking care of their land and trying to help out with everything.
MR. ROOT: Jayme, thank you very much. To our radio audience, we are going to leave you, although we have a long line of people on each side asking questions here. Later on in the day we'll post a podcast at WHOFarm.com if you'd like to check out that podcast either later today or tomorrow. We are at Fisher Auditorium, the U.S. Secretary of Agriculture is our featured guest. We also have a panel. We are discussing the issues that will impact young farmers in the future from this forum at Iowa State University.
QUESTION: My name is Andy Larson. I'm here in the agribusiness MBA program and a minor in sustainable agriculture, and my ultimate goal, be it under this Farm Bill or the next one or the next one, is to get back to a family farm in Northern Illinois. And I was curious about, in light of our current international trade situation and the high commodity price levels right now, how that is going to affect the farm programs and their associated payments long-term, including how policy is going to be shaped around the ecosystem services that farmers provide such as the Conservation Security Program that Jayme mentioned.
SEC. JOHANNS: I think it has an impact, and I think the impact today is very apparent. Now we're still operating under the 2002 Farm Bill, but I can tell you what's happening today, and if you're talking to folks back home or talking to farmers in Iowa they will tell you this is what's happening. Commodity prices are historically high. You know, we have corn – I was listening to the prices, Ken, as I was waiting to come on with you today, and we have corn prices that are $3.00-plus all over the country. Wheat prices are high. We've set ten-year highs in that area. Our soybean prices are strong. Our rice prices are pretty strong. Like I said, cotton not so much. But the net effect of that is it reduces the amount of money we are paying out. Why? Because they are tied to price and production.
Now here's what I would offer you. In terms of international trade, we have a case pending against our cotton program which is already, the WTO has already found that we're in violation of international trade rules. Brazil has come back now to levy punishment, if you will, for failure to comply. And we're battling with them on that.
Canada just filed a case on our corn program. There's a threat against our rice program. It's been around since the day I walked into the job as Secretary of Agriculture. There's no doubt you can support agriculture financially under WTO rules, but if you tie to price or production I would argue you don't have a safety net anymore for farmers. You've got a bull's eye tied to their back.
Now on the other hand, if you move to direct payments that are decoupled from price or production, there's no WTO consequences. You can lawfully do that. Environmental programs such as CSP or CRP, any of our environmental payments, again not tied to price or production can be lawfully done and you can support agriculture in that way.
So what this Farm Bill proposal does is takes us a step in that direction. This just simply works better for international trade, it works better for those cases pending against us.
Last thing I'll mention here, very, very important point. If the WTO negotiations collapsed this afternoon, if these Farm Bill proposals absolutely died on the vine, the WTO cases don't go away. You still have the corn case by Canada, you still have the cotton case by Brazil, you still have the threat of a case against our rice program.
I would much rather we write our farm policy than have it written by case after case before the WTO. That doesn't make sense to me. Let's seize the opportunity and try to do the right thing here in terms of a good, solid safety net for our farmers.
MR. ROOT: Mr. Keppy?
MR. KEPPY: I just want to say, congratulations to you for going back home to a family farm. You know the hard work that's involved and the challenges that are involved, and anybody else that's in here that's going home to their home farms, congratulations. But I don't want to miss the point, there is a tremendous amount of agribusiness and other individuals that need to help the farmer, both on the input side and on the marketing and output side. And so if you're involved in that, you're also helping the farmer.
The other thing that I have to say is, I took my E-85 car out to Washington, DC. I am so proud to fill up with Midwest ethanol at the Navy Exchange which is right next to the Pentagon and between Arlington Cemetery and know that I'm filling up and they have a biodiesel pump there also. So corn and soybeans from the Midwest is being used down in DC.
MR. ROOT: Now are those public pumps where we can go fill up there too?
MR. KEPPY: Yes, they are. There's four of them in the town that I live in, and around the Pentagon.
MR. ROOT: I know there's four, and I know there's some college students who have proven you can drive across the nation and not run out of fuel and still fill up with the 85, a bit challenging but you can get it done. Ma'am?
QUESTION: Hi. Traci Bruckner with the Center for Rural Affairs. And Secretary Johanns, I want to applaud you on some of the great proposals you came out with for beginning farmers and ranchers. At the Center – you're familiar with the Center for Rural Affairs, being from Nebraska and all – we run a beginning farmer program. And I probably get at least one to three e-mails a week from beginning farmers. And I got to say, most of those beginning farmers are not looking to get into conventional agriculture. They are looking for the high value niche markets where they can enter smaller and be more profitable.
So there's one program that your proposal does not mention, and it was authorized under the 2002 Farm Bill called the Beginning Farmer and Rancher Development Program. And that program Congress failed to fund under the '02 Farm Bill, so it hasn't been implemented yet. But that would really, it would be a mentoring and educational program that would reach out to those young farmers who are looking to get started in high value niche markets where they can be profitable and afford to farm full-time. And I would just like to see if that's something that you could answer in your proposals yet and show support for that because we're going back at that and trying to get that reauthorized, and we want to get the mandatory funding attached to that.
So I'd just like to hear your comments on what you think the role of that program could be.
SEC. JOHANNS: Yes. This will maybe surprise a lot of people in the audience, not so much you because you work this area, and certainly not me at this point because I've been Secretary for a couple of years. There was much about the 2002 Farm Bill that actually was good but never had funding attached to it. It was discretionary funding, so it never got funded. This is one of those programs. But as you probably have read over the past week, we are actually preparing legislation now, and one of the things we're looking at is, which of those programs do we ask reauthorization for, if you will, because it hasn't been funded?
And so I promise you, I will take a look at this program although I think I have already. But I promise you I will double-check when I go back and make sure we're paying attention to it.
And then the next question is going to be the funding. You speak of mandatory funding. A lot of what we have done is mandatory funding to try to make sure that these programs are funded. Whether those programs would get mandatory funding really depends upon the budget and where Congress wants to allocate the funding.
And, boy that whole battle is still ahead as you know. So stay tuned. I will look at this program again and then we just go off and try to figure out what's funded and what's not.
MR. ROOT: Mike Duffy?
DR. DUFFY: I just wanted to echo what Traci said as far as, and what I tried to say earlier about beginning farmers needing to look at alternatives rather than strictly volume. And that's a way for some of them. And the development program I think is a good example. We have another good example of a program that was passed. It's a tax credit for people that rent to beginning farmers, and I think that's another example of programs that can try to help people get started.
MR. ROOT: That program in Iowa for those people that rent to beginning farmers, it's a tax credit against your state income tax. Is that correct?
DR. DUFFY: That's correct.
MR. ROOT: It can only reach a certain level.
DR. DUFFY: Right. And we also, it was set up so that if it's cash rent it's at one level, if it's a crop share it's at another level, or share which obviously is a better deal.
MR. ROOT: Does it exclude relatives?
DR. DUFFY: No. Relatives are included.
MR. ROOT: Okay. So go home to grandpa and hit him up. Go ahead, sir.
QUESTION: Thank you. My name is Paul Brown. I'm the assistant director for Agriculture and Natural Resources Extension here at Iowa State University. And Secretary Johanns, I would like to second your comments as well that indeed we are at a time of tremendous opportunity in agriculture, not only in Iowa but nationwide, and probably for the first time to this extent since the 1970s.
At the same time we in Iowa are facing a crisis of beginning farmers. And this next generation to come out on-line, and I'm sure Dr. Duffy could substantiate these numbers, but in Iowa we have about three times as many over-65 as under-35, and historically it used to be the other way around. I'm talking about the production side of agriculture.
I was just curious to ask if in your Farm Bill proposals, and the kinds of things, programs you've talked about, are you thinking about additional funding for education and research that looks at alternatives? Then the second part of my question would deal with the other side of the coin. You talked about some programs related to the beginning farmer, where producers side. But what about the retiring farmer who holds the assets, and how do we look at various means to transition those assets to this next generation?
SEC. JOHANNS: In reference to your first question, we substantially increased research dollars in these proposals, and they are kind of scattered throughout the titles, not in a willy-nilly fashion, but it's just that when you talk about renewable fuels you will fund additional research there, and we've boosted that by $1.5 billion. We boosted research for specialty crops by like $1 billion, so significant emphasis on additional funding for research.
We're also making a proposal to do some things internally at the USDA which we believe will create a better working partnership between us and institutions like Iowa State. That's where we think we can really do some exciting things. So that's there.
Then in the other area that you've mentioned, here's what we decided early on . There are some things for example we really believe in. We believe very strongly, for example, that the estate tax should be phased out and eliminated. We did not propose that in the Farm Bill for this very straightforward reason. That's a whole different committee than the Ag Committee, and then you start running into jurisdictional issues which really can be a problem in trying to get a Farm Bill passed. So we decided we're going to have to stick to what we can accomplish with our Ag Committees, which is really, those are my committees of jurisdiction. Senate Ag and House Ag. So I could give you a whole big speech on what I think we need to do in those areas, but we really confined ourselves to ag policy.
MR. ROOT: Mr. Secretary, one of my favorite farm writers, that would be me, once said that the best way to help young farmers is to stop subsidizing old farmers. And it's a challenge because right now one of the biggest battles on CRP that's being fought with the IRS is to see if you can still get CRP benefits without strings attached after you retire. So how do you work a situation, and I'd ask others this – how do you work the situation when this morning Senator Grassley called a young farmer "anybody under 50," and be able to give those any benefits, when all the cards basically are held by people who have no retirement age.
SEC. JOHANNS: Can I offer a couple of thoughts, because this was a pretty constant theme at our Farm Bill Forums, and it didn't matter whether you were in Virginia, Iowa, Pennsylvania, California, wherever. We heard it all across the country, "what about this transition." The average age of the U.S. farmer now is right about my age, about 56, 57 years old. And what you describe in Iowa is exactly what I saw as governor of Nebraska. I would go to events in our rural areas and look around the room, about 25 percent were 35 or younger. About 75 percent were my age or older.
That is a huge demographic issue that we are facing. Well, in our Farm Bill proposals we've identified very specific things that are going to help the beginning farmer. I think those things will make a big difference. Our loan portfolio is better. If you're raising a program crop, boosting that direct payment by 20 percent, those kinds of things can make a big difference.
However, we even went beyond that because many farmers do not raise those program crops. Many farmers and young farmers are out there, and they are going to raise a crop like peaches or strawberries or whatever, melons, whatever it is in that part of the country. But we have a $5 billion initiative in this proposal for those specialty crops, increased research, phytosanitary/sanitary, buying fruits and vegetables in our schools. It's no wonder we've had such strong support across the country for that initiative. And you know what? That's going to help those beginning farmers, because oftentimes in those areas the land that they would start farming may be as small as 20 acres or 30 acres or 40 acres, maybe even less. And that's how they get started, and that's how this goes.
Land prices are very high these days in terms of a beginning farmer trying to get started, so our loan programs will help, but some of the other things we've done in our proposals are also very, very friendly toward beginning farmers and socially disadvantaged farmers.
MR. ROOT: Mike and then Jayme.
DR. DUFFY: I just wanted to add that I didn't hear Senator Grassley, but young is, I think, 60 now; at least that's the way I try to look at young. It's been going up every year. But the Secretary I applaud in the discussion on beginning farmers, because what we're seeing is a lot of people that are coming back, some as second careers, some that are coming back and they work part-time, and then they are beginning in that way. And so it's a rather amorphous group that is harder to identify, and I'm very happy to see the discussion on the beginning farmer.
MR. ROOT: Jayme Ungs.
MR. UNGS: As a lender I'm very familiar with the Farm Service Agency young farmer programs and beginning farmer programs, and I applaud the administration for trying to get more money into that program and make the standard for getting the money a little bit more accessible. Some of the proposals that are outlined here today make me very excited as a lender because there are some great things that I think they can do that will really help the young farmer. And the program that we have here with the Farm Service Agency along with the program here in Iowa with the Iowa Agriculture Development Authority can be used together. And I've been a very big fan of that program. I've worked with probably 25 young farmers with this program, and they can be used together. And it really helps put people on the farm.
And we also are looking at more niche type operations. I've had people working with more food type things or more meat goats has become very popular in this part of the country. So there are things out there that are very exciting. I think this new program could be very, very good for the young farmer.
MR. ROOT: If you're a young farmer, don't think traditional because most of that's taken. Sir? Your question.
QUESTION: Josh Shenick (sp), Mt. Vernon, Iowa. I'm a student here at Iowa State, and I plan on going back to the farm after I'm done here, and our farm is roughly 700 acres located in Iowa City, Cedar Rapids corridor. And one of the growing pressures we're noticing is urban sprawl pushing out from Iowa City and Cedar Rapids directly affecting our land, our prices. We're seeing $400 cash rent, $5,000, $6,000, $7,000 an acre land prices, most of it because of speculative residential areas.
What steps have the United States government taken to help urban sprawl to keep from taking that family farm in terms of being able to actually be able to afford to go back and continue farming that land? I know the state of Iowa has worked on the eminent domain last legislative session.
MR. ROOT: But that doesn't affect a willing seller.
MR. ROOT: So what has the state of Iowa done, or what has the U.S. government that will help you keep that farm in an area where other uses for it wish to offer a greater value?
MR. ROOT: All right. Stand by.
SEC. JOHANNS: Well, in another life I was a county commissioner and a city councilmember and mayor of Lincoln, Nebraska. And I tell you that because what I'm going to say to you is that the federal government really does not get involved in land use planning issues. And I might add, based on all that experience my preference would be that they not, that those issues should really be handled at the local level and to some extent at the state level, but mostly at the local level.
What we can do, however, and what we have done is, we do have some conservation proposals that would have a positive impact on some of the pressure that you are seeing. Again, this is a national phenomenon. If you are anywhere near an expanding urban area, you are feeling this pressure. I happen to be very familiar with that corridor that you're talking about, and my goodness, talk about urban pressure. It does not surprise me that your land prices are that high. It does not surprise me that your cash rents are seeing that kind of pressure.
But what you might do is, and again these are only proposals – Congress has not enacted them. The other thing I will mention, and it was in Iowa that we had the most discussion about this issue, 1031 exchange, okay? Here's how it works. 1031 basically is the section in the Internal Revenue Code. It says essentially that if I own an apartment building, say, in Iowa City, and I decide that I've made good money off that from my rents and I've had great capital appreciation, that I can sell that property and in order to avoid paying taxes when that property is sold, I can roll that gain into some farmland or other capital property.
The feeling in Iowa is that is causing a tremendous spike upwards in terms of land values and pressure on land values. One of our proposals in the Farm Bill basically says this: we're not proposing to change Section 1031 of the Internal Revenue Code. We can't. It's that jurisdictional issue I talked about earlier. What we are saying, however, is that if you roll a capital asset into a piece of agricultural land, you cannot receive Title I commodity payments on that land. You are free to protect the gain. We're all for that. That's what the Internal Revenue Code says. But we say that you can't get Title I commodity payments.
Again, here in Iowa that was really a big issue when we did our Farm Bill Forum, and it hasn't gotten a lot of attention yet, but I suspect you'll be reading about this.
MR. ROOT: Janette, I bet you could knock our socks off on some stories in the state of Arizona as far as land being converted from agriculture to being subdivisions, couldn't you?
MS. BARNARD: Definitely. Especially in the Phoenix area. The area is just growing so much, and as it's primarily, it used to be a lot of agriculture operations there, and the city is just growing and expanding. But one thing that we're seeing is that some producers are taking that as an opportunity. And so dairy producers right outside the city are being bought out, and then they are moving further out, and they are building bigger and better facilities, and so they are able to take that and enhance their operations. And so sometimes those opportunities present themselves.
MR. ROOT: We probably didn't make you feel one bit better, but there is a reality that I think you have to get in your head, and that is that agriculture remains the lowest valued use of land. I was in the San Joaquin Valley a few weeks ago in Central California, where they can grow tree crops and all kinds of agriculture, and some of their land for agricultural purposes is worth $25,000 to $35,000 an acre. Subdivisions are buying that land for $125,000 an acre. So you lose anyway. But isn't it amazing the situation that you go through as a person who starts as a young man or woman with nothing, get ahold of a piece of land, keep it for a lifetime, and then wind up with that worth millions of dollars. You can't really deny that to people within our free market system. But at the same time, it hurts to lose a farm when it gets close to an urban area. Thank you very much.
All right. Ma'am? Over here?
QUESTION: I'm Amy Ludson. I'm the ag teacher at Pitson High School. And my question is, since we're dealing with so many youth going back to the family farm, what is your one word of advice, or your advice to give as an ag teacher so I can bring it back to my students that want to go into production agriculture?
MR. ROOT: Explain that a little bit further. Your one word of advice regarding what?
QUESTION: Just going back to the family farm. Since it is sometimes a challenge knowing that I cannot go back to the family farm and had to go into a different route, into an agriculture career.
MR. ROOT: I'm sure it depends on the month on the calendar as what advice you give. If it was before October of last year you'd have a different opinion than right now.
SEC. JOHANNS: Yes. But I would offer this. You know, recognizing the tremendous diversity of U.S. agriculture, like you say on any given day I can be talking to young farmers who will be raising specialty crops or the next day I can be talking to young farmers who plan to raise program crops, corn or wheat or soybeans. But here's the best advice I could give to young people. This is such a dynamic industry. Look how it's changed since '02 when we passed the last Farm Bill. The energy title will be a big part of this Farm Bill, and it was only first in a Farm Bill in 2002. But my best advice to young people is to do everything they can to stay connected with the changes and the dynamics in what's happening.
Now what does that mean? That means, stay connected with USDA, connect to our website, come out to our Ag Outlook Conference every year if you can if you can raise the money, or maybe you just drive yourself out there. It is a wonderful conference that talks about future trends. Stay connected with your land grant institutions. Stay connected with places like Iowa State. Maybe take a course now and then.
Here's what I'm seeing when I go to the country, and I see it over and over again. I'll go sit down and there will be a farmer about my age. And he will introduce me to his son and daughter and maybe son-in-law, and then they will each tell me about something they are doing as a specialty in that farming operation. One will fire up the computer and show me what they are doing with maps and fertilizer and etcetera, etcetera. The next one will fire up the computer and show me their marketing strategy that they have identified for their farming operation. The third one will talk to me about the latest techniques in equipment and plant varieties and fertilizers and maybe somebody is talking about animal livestock and what they are doing and the latest genetics, etcetera. That's what farming is all about today.
And then the last thing I would mention, and I take this from the Center for Rural Affairs, not every farmer sees themselves farming 2000 acres. There are some tremendous opportunities in niche markets today. You know, there just is no doubt about it, take a look at those niche markets. It may be perfect for that young person wanting to get a start into agriculture. So tremendous opportunity, tremendous diversity, continue to educate yourself. That would be my best advice, because it's going to change. You know, we're going to pass a Farm Bill in '07, and you know what? We're going to look at it in '012 and say, well that was pretty good for '07 but man has the world changed!
And that's only five years. That's what agriculture is all about today. The only guarantee I can offer young people, it's going to change, and you've got to stay up with the change. Don't leave Iowa State and think you've been to your last class. Think of it as a beginning of a wonderful profession and career.
MR. ROOT: Well, that ruined a lot of people's day.
SEC. JOHANNS: Okay.
MR. ROOT: Janette?
MS. BARNARD: I just would like to add that as an agriculture educator you have a real exciting opportunity because the USDA recognizes that there are 300 careers in the industry, and definitely a huge portion of those are in production agriculture, and that's foundational, and absolutely, absolutely necessary. And that's what we're here to talk about. But at the same time, we also have an exciting opportunity to prepare students to be involved in careers that support production agriculture, and in the supporting industries such as floriculture or agribusiness and fertilizer, and all these different areas of agriculture. So I think that being a part of those industries is what helps to make a strong production agriculture.
So as a teacher you have an opportunity to help your students be prepared for that.
MR. ROOT: Mike Duffy, if you were 21 today, knowing what you know now at the age of 30, would you recommend that people go back into agriculture?
DR. DUFFY: Oh, very much so. I think it depends and somewhat in response to Amy's question I think one of the things I really what to echo what the Secretary said and what Janette was saying, and that's never quit learning and always be learning and try to instill that into students that this is going to change. And I think that the other thing would be, make sure that you know what your resources are and that you have goals consistent with your resources.
And as the Secretary was saying that, you know, you look and you decide what it is that you want to do and then go forward with it. And that's why in the very beginning I said, this is such a great time because you can strive to be the large operation and there's good prices out there or there's opportunities now we have local food, we have the slow food movement, we have farmers markets, we have marketing on the Internet, all kinds of – there's a young man I know up by Osage that's making a good living raising carrots and sweet corn. And so you know there's just a whole variety.
MR. ROOT: Let's ask the banker, because it's a hard line on profit or loss. How do you go about it? How do you go back into agriculture and have a chance of making a living?
MR. UNGS: Well, as a lender, one of the things that I look at when someone comes to me, and I would strongly recommend this to people who are trying to enter into agriculture – obviously we're in a high capital-intensive industry. And when you walk in, it helps me when you understand the financial side of things. If we're going to take a risk, it's nice to know that the people who we're betting on understand what they are about to get into and truly do have more of a business management feel to what they are doing. I'd also encourage you not to just think of agriculture as producing number 2 yellow corn or hogs or beef. There's a lot of other things out there.
Right now we're organizing, in our community, a local food support group to provide more of a local foods to the area. And there's tremendous opportunities there for young farmers to get in, maybe at a less capital intensive area. And I'd also recommend that to serve in production agriculture you don't have to be in physically production agriculture. You can serve the agriculture community by taking many of the jobs that are available. Look at myself for example; I came from a dairy farm. My family no longer dairy farms, but yet I'm still extremely involved in the agriculture industry. And I think we need those people out there too.
MR. ROOT: Anybody from a dairy farm ever wind up with a good life afterwards that anybody would know? Mr. Secretary? Glen, do you want one shot at this quickly here?
MR. KEPPY: No.
MR. ROOT: All right. Let's move over to this young man with the John Deere shirt on. Your question, sir?
QUESTION: Thanks, Ken. My name is Tyler Buckman. I'm a graduating senior here at Iowa State, and I currently farm with my parents up by Waverly, Iowa. One question that I have is, what are we trying to do instead of having such a cash-rent intensive area to try to get more of the renters wanting to rent to young farmers instead, instead of that high cash where they go to town and they say they rent their land to a young farmer – what have we been trying to look at some little things?
MR. ROOT: Instead of cash rent, you'd like a participation – working with you to farm their land?
QUESTION: Yes, where they would have their land to young farmers. I know we do the tax break, but what else is there that people in the community can say they rent their land to young farmers instead of just a high cash rent basis.
MR. ROOT: You can't brag about that. It's not quite so, but you raise a very interesting issue that many people of the senior generation will give great lip service to bringing young people back into agriculture. Yet they won't rent to you because you got no money, you got no equipment.
MR. ROOT: So where do you start, where do you stop? You're asking them then, how can you change that mindset?
QUESTION: Kind of, I guess.
MR. ROOT: All right. Got a psychologist up here? Mike, you're the closest to it I think.
DR. DUFFY: Well, I think that the issue that you're raising is a very valid one, and it's one of the things that we try to do through the Beginning Farmer Center is to work as much with the retiring farmers as with the beginning farmers, and try to convince them, you know as Ken said you hear a lot of nobody left in the neighborhood, and what's the highest cash rent? And I think it's not something you can legislate, I don't think. I think you can provide incentives and so forth, but you can't force people to do the right thing.
MR. ROOT: Anyone else wish to address this area? Mr. Secretary?
SEC. JOHANNS: All I was going to offer is, take a very, very close look at what we're proposing here because if you're farming and you want to expand that operation, and maybe move beyond your family, I think we have some excellent opportunities for you, the enhanced direct payment, the targeted funding for conservation, the better loan program. All of these things I think for somebody like you offer great potential and are very, very exciting. The other thing I would offer there are ways that you can structure an operation with that senior farmer that maybe gets you into his farming operation over a period of time.
For example, what if the two of you were to sit down and he were to do a corporate structure that allowed him over a period of time, him and/or her , to transfer shares of that corporate structure to you over a lengthy period of time? That way, he insulates himself from your liabilities in case it doesn't work out for you, and he can also do a purchase-back of those shares if it doesn't work out.
So again I think there's ways of being creative here. Here's kind of the bottom line. If most of the farmers today are my age or older, somebody like you has some pretty significant opportunity because, you know what? There's going to be a day where that land has to transfer. I don't think you can take the deed to Heaven if you know what I'm saying.
Just to be very direct about it, there's a point at which we've got to find the strategies to bring young people into agriculture. That's why we've paid so much attention to this in our Farm Bill proposals because there's a huge demographic issue out there that we've got to come to grips with. And it won't go away by ignoring it. You're exactly what I want to see. I want to see that young generation finding ways to work with the neighbor whose children maybe all went off and decided not to farm, to find ways to get into a farming operation over a period of time. That's what we want to see happen.
MR. ROOT: Be persistent, and try to convince them that they will get a better shot of going to Heaven if they rent to you, sell to you, than if not.
QUESTION: All right, thank you.
MR. ROOT: All right, a young lady in a blue and gold jacket. Your name and question?
QUESTION: Alicia Moser. I'm from Garden Grove, Iowa. My family and I raise about 500 head of sheep, and we custom own and harvest about 3,000 acres of farmland. My question is about fuel. When prices are over $3.00 for a gallon of diesel, how are we supposed to be able to harvest our stuff and still be economical with our prices that we are asking?
MR. ROOT: A real economics question! Who's a real economist?
DR. DUFFY: I guess I have the initials after my name. I think the fuel savings is one thing that we've looked at a lot. It's not directly related to beginning farmers, but really all farmers. A lot of the things like the number of trips across the field, making sure you are using the proper sized implements with the power unit, different varieties will dry down faster, use less drying at harvest. A lot of proper inflation in the tires, a lot of the operations like that, I think what's going to start happening is, we have to start thinking about energy as a cost and looking at where can we make savings on things like that?
In the past we never really had to, but in the future it's going to be high. Also, fertilizer. It's a big energy.
MR. ROOT: Mr. Keppy?
MR. KEPPY: You bring up an issue that has been haunting agriculture for a long time. The minute that it becomes profitable, corn and beans going up, livestock at a good price now, the input cost that we put into the operation goes up. So it's a long time that this has been going on, and I agree with Mike that we've got to find ways. I mean we use less than half the fuel on the farm that I come from than we did 10 years ago. I think all of agriculture is doing that. And there's a lot of other ways you can cut the input costs in half and still have the crop that you're expecting.
MR. ROOT: Mr. Secretary?
SEC. JOHANNS: A couple of suggestions. And again it kind of goes back to what I said before—never quit learning. Go to USDA.GOV. We developed an energy strategy when we saw these prices go up. We have a number of sites that are excellent sites where they are interactive, and you can do some things that just simply make you more efficient. Low till for example. You know, we used to go out and cultivate the corn just because it was that time of year. That's not necessarily good for the ground. It costs money. Why do it if you can do a low till operation? Use of fertilizers. All of these things are on our website.
The other thing I will tell you is this. In your life you'll find out that agriculture is the epitome of tug and pull. What do I mean by that? Why are you getting $3.00 a bushel for a bushel of corn today-plus? On the board we saw it as high as $4.00. Why are you getting high soybean prices when we have the highest reserve of soybeans and the largest crop ever in the history? Why are you getting that kind of price for soybeans? You know why? The price of fuel is high. What caused that? What was one of the effects of that? Ethanol all of a sudden exploded. And ethanol, which has been around a long time, all of a sudden became the most unbelievable growth area in agriculture. And it improved the price of corn, it improved the price of soybeans. It just rippled through all of agriculture.
So again, you're going to see this tug and pull in agriculture. The challenge that we always have is, how do we get smarter, how do we use less fuel? Glen's comment is right. Farmers that have been trying to stay ahead of this will tell you today, they are using less fuel than maybe they ever have in their farming operation. They are trying to become more efficient, doing the things that we recommend on our website. So look at the website, but again part of what you're seeing in terms of the higher prices is that fuel price went high and it made ethanol very, very profitable.
MR. ROOT: We'll take one more question. This gentleman right here.
QUESTION: My name is Ben Shletzer (sp). I'm from Le Mars. I'm a student here at Iowa State. I'm a firm believer in the value of having family farms and smaller farms around as well as beginning farmers. But I've had people ask me, why do we want to continue to support these family farms or smaller farmers when perhaps the large corporate farms could produce the food a few pennies less per bushel or at a cheaper price? Can you make a few comments about that?
SEC. JOHANNS: I would love to, and I could give a whole speech about this. I'll share a story with you though. When my mother was still alive – she passed away about four years ago – one of the things she really enjoyed when I would come back to Osage to see here was to get in the car and drive around the section. She just wanted to see how the farm was doing, what the crops looked like, and we would do it every time. Didn't matter if it was the dead of winter or the middle of summer, she wanted to get out and see the farm.
One of the last times that I was with her, something struck me, and I don't know why I hadn't noticed it because it was so obvious to me. I noticed that as we drove around that section there were very few families that were actively engaged in agriculture on that section compared to when I grew up. And I could literally point to the farmhouses where somebody was retired. I could even point to a farm location that wasn't there anymore because it got hit by a tornado in the 1960s and it never really got built back, and eventually somebody bought the buildings and just knocked them over with the bulldozer and buried them, and now it's growing corn or soybeans or whatever.
I preface that by telling you that that has an impact in my judgment on the social structure of rural America. If we can provide an opportunity for young families in rural America, they have children, and those children go to school in that town, if we can provide that critical mass of families and children, then all of a sudden the economics of that small town become better because then they can sell the furniture or the carpet or whatever to that family.
Ending up with one farmer per county in the United States in my judgment is the social dynamic that you will pay a big price for. And I would argue, it's not a good social dynamic. So in our proposals we put emphasis on that young farmer, that socially disadvantaged farmer. We just boldly say, there's a point at which in agriculture you graduate from subsidies. Now this is America. We applaud your success. If you come to me 30 years from now, good Lord wiling I'll still be on this earth and you'll say, you know Mike, I just want to tell you I farmed 10,000 acres today – I'll applaud you. Great. But I do think there's a point at which you graduate from cash subsidies. And so we say, at $200,000 AGI averaged over three years you don't get those subsidies anymore.
I think whatever we can do to encourage that younger generation to transition into production agriculture, really any part of agriculture is very important, I feel very, very passionate about this because I will tell you, reviving a community that has almost died is much, much tougher than protecting that community and doing what you can to build its economy over the long term. You know, if all the people move out of the county, you're not going to have vibrant rural communities. You're just simply not.
So it is very, very important. I believe in rural America. I believe in those smaller communities, and whatever we can do to support agriculture and support that rural development phenomena I believe will pay huge dividends for our nation in the long term. And I could go on and on, but time is limited. Right, Ken?
MR. ROOT: Dean Wintersteen, would you please come back up here for a moment? Ladies and gentlemen, I think you have just heard a lot of options, a lot of suggestions from people who have been through a time that has given them experience. And I think also who want to share with you that there are opportunities out there today if you could just sort through things to be able to find those opportunities. I think one of the classic things is illustrated here by our Secretary of Agriculture. In my professional lifetime, we haven't had anyone as dynamic and hard-working, and as the Secretary of Agriculture, and who truly cares about you as Mr. Mike Johanns.
SEC. JOHANNS: Thank you.
MR. ROOT: Thank you very much, sir.
MR. ROOT: And to our other panelists, Janette, Mike, Jayme, Glen – thank you very much for being here as well today. We appreciate that.
MR. ROOT: And Dean Wintersteen, we'd give you the last word today here at Iowa State. Thank you for hosting this. Thank you for allowing all of us on campus and off-campus the opportunity to be here.
DEAN WINTERSTEEN: I have to tell you, I'm surprised that Ken will give anybody the last word. But what I want to say is what many of the panelists have said today, and that is the future is achieved through science and education. And I really do build on the words of our panelists. Come to Iowa State University, get a great education, continue to work with us in your career so that you can deal with the rapid rate of change that, as our panelists said, is the only certainty that we have facing us. So come see us. Let us work with you. Thanks, Ken.
MR. ROOT: Thank you.
MR. ROOT: Okay. Since the Dean said I couldn't give anyone else the last word, this is one you'll enjoy. I have been notified that there's plenty of food available downstairs if you'd like to join our group, and I believe the Secretary will be available for media outside. Is that correct? Outside here in just a few moments.
Thank you everyone for being here today!