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Transcript of Remarks by Acting Agriculture Secretary Chuck Conner to the American Seed Trade Association Corn and Sorghum and Soybean Research Conference and Seed Expo
Chicago, Illinois - December 5, 2007
SEC. CHUCK CONNER: Well, Mike, thank you very much for that introduction this morning. And I appreciate all of you having me here with you as well. Coming to Chicago in many ways is like coming home for me, and I enjoy it much. You know that as Mike indicated I'm from the state of Indiana, but I'm actually second-generation Hoosier, and my grandfather was born in Iroquois County, Illinois, which is just not too far south of here. And a lot of that land still remains in Conner hands today there in Iroquois County.
So I'm glad to have a chance to come back here, and it is great to have a chance to speak with you today. I do want to just simply offer, Andy, my congratulations for 125 years of this organization being in business, and it's a great organization, and you have great leadership. And we appreciate working with you.
As seed producers, ladies and gentlemen, you have had a major role in our record agricultural exports that are ongoing, and 2007 makes five years running of setting records in our agricultural exports. I am excited about some of the stunning numbers we just released last Friday. We now have the final numbers for 2007, and our ag exports this year hit a record $82 billion. The good news there is that we're expecting even better numbers in 2008, and we're projecting another record sales year for major commodities with our agricultural trade actually reaching, next year, $91 billion. Obviously, the thought of even approaching the $100 billion mark is something not even on our radar screen at all just a few years ago. So we're excited about that.
Seeds, of course, did play a major role in that in many ways. The export of the seed itself is close to $1 billion this year; we're projecting that number to grow significantly next year, and so this is a very viable business for your industry, that understands the importance of creating strong markets for the quality goods that you produce.
Looking to the markets for guidance has certainly created more efficiency, and it's brought better returns for our producers as we have given them more freedom to choose what they produce, to choose what the market is telling them to produce, in effect getting their signals from the market and not from the government.
Right now, ladies and gentlemen, we have a great opportunity to set agricultural policy on a road to a very competitive future through this year's farm bill. We are fortunate to be enjoying some very strong numbers in terms of our farm economy, with market prices at or near record levels for all of our major commodities. This is something we have never seen in our history, strong, strong prices for all of our commodities. And what's the interesting part is that, as I've just noted, higher prices have not thwarted demand. We're seeing incredibly strong demand coming in from foreign buyers as well.
Just last week our economic Research Service projected net farm income this year to come in at $87.5 billion. Of course that is an all-time record. It's $28.5 billion higher than just last year, and I do remember the days, ladies and gentlemen, when we talked about we needed to push net farm income over $50 billion in order to show that we had a good year. Obviously, those numbers are highly antiquated as we have superseded that by many, many magnitudes. This kind of success gives us a chance really to take a long-term view and to work together to put American agriculture on the strongest possible footing in order to sustain these great economic times and to deal with the competitive challenges that continue to lie ahead of our industry. That is the best way to assure future growth, we believe, and prosperity for our industry.
At the moment, the farm bill is stalled in the Senate, and you all know this. I know this is frustrating for your industry, and it's certainly frustrating for farmers who are eager to make planting decisions based upon all of the details and facts they can gather out there about farm programs. I want you to know that it's frustrating for me too.
Fortunately, we do have three more weeks until the new year begins, and I continue to believe, ladies and gentlemen, that that is still enough time to pull together and produce a good farm bill with an emphasis of course on "good." But the window of opportunity is obviously closing very fast. Every day without action is critical to our ability to get a farm bill.
I can tell you that the President, and I saw him just yesterday, very much wants to sign a strong farm bill, and a strong farm bill by the end of the year. At the moment, we do have still some very important differences over the farm bill, particularly the bill as it stands in the Senate, differences over the substantial tax increases it calls for, over how the actual costs of the bill are being misrepresented, and of course over the lack of any reform that it brings to some of our existing farm programs.
But I think, ladies and gentlemen, it's also important at this point to step back and look at just how far we have already come in this farm bill process, and how much has already been achieved in both the House and the Senate versions of the farm bill.
We believe a great deal has been achieved. Both of these bills offer important gains to American farmers and ranchers and for nutrition programs on which our neediest citizens continue to rely. We should not let our differences obscure the fact that a broad consensus has emerged over what needs to be done in a whole host of vital areas.
Throughout this year those of us at USDA have made the case for what we heard across the country in our 52 Farm Bill listening sessions. We heard that our current system of countercyclical supports failed to deliver help to our farmers – simply put, when they need it the most. As well as that time has come to provide more support, we believe, for our specialty crop sector, which now represents a majority of American agriculture. And finally, we believe it is time to come forward and provide greater help to beginning farmers and ranchers in order to help them get their toe inside the door in this business that has a lot of barriers to entry.
Both the House and the Senate versions of the farm bill have addressed these issues. Their approaches may not have gone quite as far as we would like, but we've acknowledged that they represent important progress. The House and the Senate, for instance, have laid out different paths for reforming our countercyclical program, but both would give us the optional support based upon total revenue to the producers, rather than price levels.
And I want to be sure you understand what I mean by that. Even if you have $11 soybeans, $4 corn, and $9 wheat, if you have no crop it does nothing. The price of wheat might as well be $30 a bushel if you have no crop to sell. The purpose of our reform of the countercyclical program is to simply provide help to producers during those times when they've had a total crop loss, or a large crop loss. That's obviously the time when they need the government help the most, and I understand under our current farm bill in that scenario that's when they get the least amount of help. That simply needs to change.
As well, the House bill would provide $215 million in funding over the next five years for research, competitively awarded research specifically targeted at the challenges of our specialty crop sector.
And both the House and the Senate provide for expanded farm operating and ownership loans for beginning farmers. The Senate bill, it's important to note, would also give beginning farmers and ranchers new priority in terms of access to our conservation programs as well. For agriculture, we believe to have a future, we must make it possible for the next generation of farmers and ranchers to get their start by working their own land. And we believe these provisions are a step in the right direction for some to see that dream materialize.
Expanded funding for conservation is in order to help farmers meet ever-increasing environmental requirements, and it was a cornerstone of the administration's farm bill proposals. These programs deliver important financial support to farmers in a non-trade-distorting way, a non-market-distorting way, while bringing of course greater environmental benefits which we are always under pressure to be delivered. The Senate bill expands the conservation stewardship program, CSP, by enrolling over 13.2 million acres nationwide every year for the next five years. And it would provide nearly $2 billion in funding for this program. Eligibility criteria is based upon local input as well, again in order to address those local environmental pressures that continue to plague many of our producers.
We have also made the case for significantly expanded funding for research and development on renewable energy, particularly for cellulosic ethanol as an alternative, a supplement, to our grain-based ethanol and biodiesel industries. Ladies and gentlemen, renewable fuels have taken a lot of criticism in the press in recent months, and I read each one of these with great interest. But I will tell you as I travel and travel extensively with the support that I find among all Americans for the U.S. continuing to produce more and more of our energy here at home rather than relying upon foreign imports, particularly imports from countries who simply don't like America – that basic notion enjoys broad public support. It has and continues to enjoy broad public support. We remain a champion of biofuels, and we want to see greater emphasis on those fuels going forward, not less.
Both the House and the Senate farm bills recognize the need for greater investment in renewable energy. The Administration's proposal called for $1.6 billion of funding over the next several years, and the House bill would provide nearly $3 billion in new mandatory funding for renewable energy programs, a significant investment.
The House and the Senate bills would provide mandatory funding as well to stimulate the production, storage and the harvesting of cellulosic feedstocks for biofuels, an area we think represents tremendous growth potential in the future. I know a lot of seed you sell in this room goes to corn and soybean producers, so these provisions will be very important to your future business opportunities as well.
The bottom line, ladies and gentlemen, is that there is a lot of good in this year's farm bills, so by not acting responsibly today there is a tremendous amount at stake for our agricultural industry, both to gain as well as to lose.
If I could, let me just offer a few thoughts on where I think we are right now with regard to that farm bill debate and how we can go about capturing the good that has come about in these bills by removing the ill-advised, ill-timed, and in some cases irresponsible provisions that are in this bill.
First of all, I think we all would pretty much agree that farm bills have a very difficult time when they are based upon raising taxes on other Americans and other American businesses. And unfortunately these bills do that. Not since 1933 has a farm bill raised taxes and grown the size of government through greater taxes, and that particular farm bill of course was eventually declared unconstitutional. So this is a path that is unprecedented for all practical purposes, and it is a bad path. Farm bills should not result in higher taxes upon an already heavily taxed American private and business sector.
Secondly, let me just say the farm bill that raises our trade-distorting supports above the already-established levels in the 2002 bill that has already been challenged and been successfully challenged I believe is destined to bring about problems for American agriculture. It is destined to bring about even greater challenges from the international community – again, challenges where there is already a precedent for foreign nations being able to win successful cases against our current programs, to raise them even higher. We have described this as painting a bull's eye on the back of the American farmer. This is not, again, the area that we need to go.
And finally, number three, ladies and gentlemen, is that we must recognize that today's farm programs are providing income support only. They are no longer used as a means by which we control production, control our output. Therefore, we must deal with the fact that under an income support program some of the very wealthiest Americans get taxpayer-funded income subsidies. Now, again, this is something that I will acknowledge to you is highly controversial, but I will tell you I put up a map here that shows farm payment recipients with red dots noted. For those of you in the front, you can see there are quite a few red dots, in fact some big dots on there as well representing some very, very large payments. Now, ladies and gentlemen, if this were Benton County, Indiana, or an agricultural county in Illinois, we'd have no problem here. This is what you'd expect to see because there are obviously a lot of hard-working farmers in those counties. Unfortunately though this map is a map of Manhattan. And I say Manhattan—that is not Manhattan, Kansas, ladies and gentlemen. This is Manhattan, New York City. If you track those very, very large red dots you will note that that yellow line is Park Avenue in New York City.
Now farm subsidies are paid for by tax dollars, ladies and gentlemen. And when we allow farm subsidies to go to situations like this along Park Avenue, New York City, which I am advised represents some of the most expensive real estate that exists in the world today, people who can afford to reside on Park Avenue, can we possibly think that we can justify giving them our very scarce farm program dollars? When we allow payments to go to people with adjusted gross incomes of more than $200,000, simply put we are asking that 98 percent of Americans to pay income subsidies to the 2 percent of the people who represent some of the wealthiest Americans that exist today.
And obviously, ladies and gentlemen, we live in a wealthy country. We have a lot of success stories of people who have done well for themselves, and they have created enormous wealth. Our point is, it's a great country, more power to those folks. Don't ask the 98 percent of the rest of Americans to be paying more income subsidies to these people who have fully realized the American dream. You can't justify that. I believe we risk jeopardizing support for any farm bill for the entire agricultural community and the safety net that I believe is so important to our producers out there. This is the kind of thing that, again, gets people pretty riled up. We've got to put an end to it. We've got to start spending taxpayer dollars to subsidize farmers who are truly in need.
With so much on the table and so much at stake, there should be enough incentive for all sides, I believe, to find a way to narrow our differences, to come together on a bill that will deliver real benefits, a real safety net to American farmers who need it, and of course to the American public who benefits from it.
Three points I've outlined are the strong basis for the beginning of a reform-minded bill, one that is not dependent on the government getting bigger, one that targets benefits toward those most in need, and certainly one that delivers the most help when producers need it the most, not when they need it the least. These are three fundamental points, changes made that I regard as being easy changes to make. If these changes are made, we are well on our way towards wrapping this farm bill up in very short order.
It's taken a lot of work, ladies and gentlemen, for us to get where we are today. I want to note for those of us at USDA this is not a new process. As we began our 52 Farm Bill Listening Forums over two years ago, in fact in the summer of 2005 we began preparing for this farm bill as we collected comments from producers literally from all over the country, over 4,000 comments from producers who came to the microphone to share with us what their thoughts were. This started us off on the road to reform, started us off along the lines of what I've outlined today, to modernize our farm programs in order to respond to these new market conditions which have changed so dramatically for us just in the last two years.
One of those changing market realities that I do want to note for us currently as well as in the future is that growing force again on agricultural trade. That is why I'm very pleased that the Senate voted yesterday to approve the Peru Free Trade Agreement by a strong bipartisan vote of 77 to 18. I don't think the Senate's voted that wide a margin on anything for the last five years that I'm aware of, but a strong, strong vote. This is an important step forward. With the House now having approved the Free Trade Agreement it is ready to go into effect. On the first day that it's in force, 90 percent of our food and agricultural products will enter Peru duty-free, 90 percent. Soybeans, soybean products, range from 4 to 12 percent. All of those duties will be removed. We will export more soybeans, we will export more wheat. All these products, again, have very, very high tariffs currently.
In the end, American producers sold nearly $333 million of agricultural goods to Peru. We believe with their growing middle class, this is a very, very important market, and there's plenty of room to grow this. The American Farm Bureau Federation estimates that we can more than double these gains in a fairly short period of time. That's why we support Peru, why we're going to continue to press as well for other pending free trade agreements that have with Panama, South Korea and Colombia. If Congress ratifies these agreements, our ag producers will enjoy additional markets that represent over $3 billion for us in a very, very short term.
While there is much that can be achieved through these bilateral agreements, I will note as well that the Administration continues to work hard, to work aggressively on the Doha Round of international trade talks for a multilateral agreement involving many, many nations. Reaching a multilateral agreement that lowers tariff barriers, trade barriers around the globe, will simply benefit American ag producers.
An important thing to note, ladies and gentlemen, is in the future there's going to be a tremendous population growth in this world. There's going to be a tremendous increase in the number of middle class people on this planet. But guess what! That is not going to occur in the United States, and if we want to export to these people, want to export to all this new population in places like India, China, elsewhere, if we want to export to this new middle class which is going to be improving and upgrading their diets, we simply have to have trade barriers removed. To me it's absolutely fundamental for future prosperity of American agriculture.
To keep you fully updated on the trade front, do know that I will be heading for China later this week as part of a delegation dealing with trade along with economic and environmental issues as well. As our number one market for soybeans and cotton, China has been moving up, as many of you know, in the ranks. It's now our fifth largest overseas market for agricultural products.
One sign things are rapidly changing is that next year we expect China to move up to fourth place, and they will actually be a larger market for our agricultural goods than all the European Union combined.
You know better than anyone that foreign trade does matter, and that's why, again, we are working hard to maintain our existing export markets while gaining new market access opportunities for our producers going forward. Through the farm bill, through free trade agreements, through Doha we believe we have a tremendously bright future to build together. I just thank you for your organization, for the interest that you have shown in our work at USDA for the support that you have given us through your leadership. We want to continue to work with you. We know that you have interests and want to be vigorously involved as well in these debates. I thank you for having me here today, and really again look forward to that continued dialogue that I know we will have with your organization.
So thank you all very much.
MODERATOR: We have just a few moments. I think the schedule is a little compressed but I believe we still have time for just a couple questions. Is the plan to bring them up on cards?
SEC. CONNER: If I can read your writing, I promise I won't screen these questions. The question is, do you support the limited use of existing CRP acreage as part of the dedicated energy crop for use in cellulosic ethanol production? Great question. This was something that was a part of our farm bill recommendations where we proposed creating a CRP style program that would operate much like the current CRP, have great environmental benefits associated with it, but, but allow some harvesting, timed harvesting, on that land for purposes of producing cellulosic ethanol.
This is something I will tell you that has created a lot of interest on the Hill. We're continuing to press it. I think we still may stand a chance of getting some authorities in the final farm bill for this purpose. There's always going to be demand for a CRP that looks much like the current CRP. We are champions of that. We also feel like there can be additional acreage out there that given an economic opportunity to produce some biomass off that land, you get environmental benefits, you get energy benefits. To me that's a win/win, and we would like to see that happen.
The next question is, does the recent WTO ruling on the U.S. cotton program impact farm policy going forward? It does impact a great deal. I mentioned in my remarks that one of the big concerns we have about both the House and Senate versions of the farm bill is, both of those bills increase our level of trade-distorting supports beyond the current farm bill. And in this WTO cotton case, that was a challenge to provisions in the current bill, and we've lost those challenges. We've vigorously defending our farm bill, appealed it at all the appropriate time, but the simple fact is that we have lost. And now Brazil is contemplating retaliation against us.
To go back and actually add, if you will, fuel to the fire by further raising support prices even beyond the levels that have already been challenged successfully you can argue is going in the wrong direction. It's not going to provide stability in terms of our farm programs out there. It's going to probably result in a lot of consternation around the world, and that's not what our U.S. producers need.
Third question is, How serious are the ethanol infrastructure issues which appear to be stalling planned new production plants?
Great question. I've noted that ethanol has come under some fire of late in a lot of the popular press. Certainly we're in a situation right now where ethanol prices are substantially cheaper than what regular unleaded gasoline is selling for. Having said that, we've had a tremendous growth in ethanol production in this country, remarkable, many felt impossible. But we're going to roughly be by next year in the 8 to 9 billion gallon range, something like that, okay? Understand in this country we consume 140 billion gallons of unleaded gasoline, 140 billion. So if you take a 10 percent ethanol blend, not counting E-85, anything like that, but just a straight 10 percent, that's 14 billion gallons of ethanol right there.
So what is my point? My point is, I still see a tremendous upside potential here. I see Congress as well being very, very interested in following the President's suggestion for a change in the renewable fuel standard. The current RFS is actually 7.5 billion gallons, so we're about there right now and going to exceed that pretty considerably. I see Congress raising that RFS, perhaps in the 20 to 30 billion gallon range.
And so we're going to continue to need biofuel capacity in this country. It's not to say there's not going to be market movements; things go up and down during periods of time where perhaps the market economics will slow down, investment a little bit. These are naturally occurring events in a marketplace. But the long-term projections in terms of where I see demand for these fuels going suggests we're still going to need a lot of capacity out there.
Okay, Mike. Thank you again. It's great to be with all you guys. Thank you all very much.