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  Release No. 0383.07
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  REMARKS BY ACTING SECRETARY CHUCK CONNER TO AGRIBUSINESS CLUB OF WASHINGTON
  Washington, DC, December 19, 2007
 

SEC. CHUCK CONNER: Well, Dave, thank you very much for that introduction. I appreciate your recounting my career path. I've got my two older kids. One is getting ready to graduate from graduate school, and the other one is graduating from Miami of Ohio and hopefully is going to get a job. [Laughter]

That will be a big event in my life.

But they keep asking me about what was your plan at my age. I do have to keep reminding them that even though I want to encourage them to get a job, but not necessarily have to have a five-year plan. Things always do seem to work out.

I will tell you that I'm honored to be supporting today in the capacity of Acting Secretary of Agriculture.

At the Department of Agriculture, many of you have had the opportunity to serve there, and if you do you know what I mean when I say it really is a great place to work. If you happen to have a chance perhaps in some of your public service future, you may have an opportunity I would encourage you to serve. It is a wonderful place to work: a lot of very, very dedicated people, dedicated to farmers, to feeding people, protecting our natural resources.

I've always been remarkably impressed by the people I've worked with. I will tell you, if you will indulge me just for a minute, we are about to lose probably one of the most dedicated people I've ever encountered in this town: Keith Collins, whose last gathering was proof he's been one of many of them. I don't know Keith when we'll see you at these things again on the other side or not. If you want to make an announcement or anything--

[Laughter]

If you haven't had a chance to congratulate or see Keith, do so. Keith, I've had a lot of chances to tell you how I feel, and you know I'm going to miss you tremendously. We really do appreciate what you've done.

[Applause]

Ladies and gentlemen, earlier this year former Secretary Mike Johanns met with this great group and told you about our priorities for the 2007 farm bill. He did tell you that we wanted to make our support for farmers more equitable, talked about making it more predictable, and he certainly talked about making it less vulnerable to international challenge. And he told you that he wanted to accomplish these things without new taxes and by making wise use of taxpayer dollars.

Now, folks, you guys all know me well, and you know that I am a candid person; and so I hope you're not offended by my candor today. But I don't know any other way to deliver a message at this particular time, given the fact that we've spent a year getting to where we are in this current farm bill, than simply to lay it out as I see it. I apologize in advance if my candor offends any of you.

The bill that came out of the Senate last week we believe sadly falls far, far short of where we need to be. The versions of the bill passed by the House and the Senate we believe are both fundamentally flawed. Neither one provides the kind of reforms that we believe represent forward-looking farm policy at a time of record strength in our farm economy. If you don't know the numbers, get hold of those numbers. I won't recount all of them, but they are remarkable.

Congress is proposing to raise taxes in order to increase the scope of our farm bill. That's something we haven't done, haven't done since 1933. I can't imagine a time when we have $85 billion of net farm income to be talking about this being a good time to somehow raise taxes, to increase the scope of our farm bill.

Market prices are at or near record levels for virtually all of our major commodity crops. In fact, some economists are estimating net cash farm income this year will exceed the $85 billion figure I just mentioned, which that number is $18 billion higher than what we had last year. Most of you, if I would have told you last year that these are the numbers we're shooting for, you would have probably called me unrealistic. You would have gone back to Keith and said, Keith, please straighten this guy out! Which he does!

This kind of success does give us an opportunity, we believe, to enact some reforms that are necessary for us to maintain the strength of the farm economy that we are seeing today. And that is our goal, ladies and gentlemen: Is to maintain this strength and not have it simply represent a peak followed by a cliff, that some would have us believe, immediately right after.

If we can't help agriculture become more market-driven and competitive now, when farmers are enjoying the kind of economic times we have today, we really do fundamentally have to ask the question: Is there ever a time? And I think the time is now for these types of fundamental reforms.

That's why I'm disappointed that in a time of such strength the Senate did propose to increase our taxes by $15 billion in order to pay for the farm bill programs. It contains of course $22 billion of unfunded commitments and budget gimmicks.

That's $22 billion, ladies and gentlemen. In fact, before I came over here I was handed a sheet of paper, and in the conference report language of the bill, something we hadn't even seen until this morning, there's another $2 billion of additional revenue in the conference report on the farm bill. So the numbers I just gave you are actually outdated, and we've got to add another couple billion to what they were able to pull off with the nonlegislative language portion of the farm bill. Ladies and gentlemen, that's not where we need to be on the farm bill.

The House bill also relied upon tax increases of $7 billion to fund certain farm bill priorities while claiming an additional $5 billion of illusionary savings by changing the timing of payments. And of course all of these illusionary savings do not change one dollar of federal government obligations.

What's more, at the same time that the House and the Senate are proposing to increase taxes to expand the scope of the farm bill, they are refusing to do what I consider to be even the simplest reforms, such as reforming the Adjusted Gross Income cap. Most of you know the Administration proposed to set the AGI cap at $200,000. We believe there has to be a point in our farm programs where you have amassed enough wealth in this country - and ladies and gentlemen we have a wealthy country - but to be in that exclusive group of the top 2 percent of farmers in a country as wealthy as our own, there has to be a point where we simply say to you, "No, you're not getting income subsidies." Neither the House nor the Senate bill make that call.

We estimated that our change would remove about 38,000 of the wealthiest Americans off our farm program rolls. What we are proposing is quite simple, and that's just to simply say, "You're not eligible above that income category." It's really, really easy to administer. I'll be frank with you that I continue to be amazed that we are in thought on this provision because it is so logical, common sense, to simply say, "Don't take the middle income tax dollars and give it in the form of an income support payment" - and that is what our farm programs are, income support payments - "to the richest Americans that exist today, the wealthiest 2 percent of tax-filers."

It ought to be easy to do it and save well over $1 billion just by one simple change. And again I continue to be amazed at the opposition there has been to this. Congress can't even do this one simple reform. I don't see how we can justify that. I believe in the future we risk jeopardizing our entire agricultural safety net in the future unless we are willing to say to the richest Americans, "No. Find other means. You've already got substantial means, and you're not going to get more payments."

I'm also concerned that the House and Senate bill increases the loan rates and the target prices on nearly half a dozen crops. Simply put, that is trade-distorting, further trade-distorting, and we are going to hear about it from our WTO trading partners. Is there anyone in this room who thinks we will not - not - pay an enormous price internationally for this action? Anyone here think we will not pay an enormous price for that? And all because a few farm groups who have long-standing policies favoring higher loan rates, those policies dating back to the days of parity prices, and make this case "I'm in, I'm out." And the simple fact is, we are going to pay a heavy price.

In fact, just the other day the WTO as you know did agree to investigate a very broad complaint about our current subsidy program that had been brought forward.

I am also disappointed, folks, by the recent announcement of an opinion by the WTO Compliance Panel suggesting that the changes we've already made to our cotton program were insufficient to bring us into conformity with these new WTO standards. Again, these are standards under the current farm bill, not under the farm bill where farm supports have been enhanced for some commodities.

Of course when any of our programs are challenged, I will be clear that we're going to defend our programs and we're going to defend U.S. farm law. We have worked to bring our programs into full compliance with our WTO recommendations following the original cotton case, and we believe that our support and our export credit guarantee programs are consistent and in line with our agreements with the WTO. We're going to continue to stand for reform.

We will continue to advocate for America's farmers as we closely review this report and continue working with Congress and the agricultural community to move our trade efforts forward so that we can sustain a strong safety net for our producers.

But we also must recognize that farmers and ranchers want to know that the support they receive via the farm bill is not going to be taken away from them midstream as a result of a trade case. I think it defies common sense to increase at this time our trade-distorting supports in today's marketplace, particularly, ladies and gentlemen, at a time when U.S. agricultural exports hit a record $82 billion this year. They are projected to go to $91 billion in the year 2008, $91 billion of U.S. farm exports. Ladies and gentlemen, this is not a market that you jeopardize in any way. This is a market that's absolutely essential to our prosperity.

Exports have been crucial in driving our ag economy. At USDA we are, I want to be clear, working to open our markets to more goods so that we can continue to enjoy the dividends of exports including higher prices, including more jobs in our rural communities.

Boosting loan rates and target prices, simply put, runs counter to this goal. I'd like to stress the fact that I'm not just throwing around phrases when I talk about what we've heard from farmers and what farmers may want. I have to remind those that USDA did take time, and many of us were involved in this, to ask farmers and ranchers across the country what they want in a farm policy when we did our 52 farm bill listening sessions across the country in 2005. That seems like a long time ago. We actually thought we might be able to get the farm bill done early. Not.

[Laughter]

I should have known better. You know what I loved about these forums, you guys, and you've heard me say it, they weren't limited in any way to agribusiness CEOs, weren't limited to heads of commodity groups, weren't limited to state Farm Bureau presidents; they were open-mike sessions. We had folks in ties and suits, and we had people come in literally in their dirty coveralls right out of the field. And everybody was treated the same, given the same amount of time. That is why we feel like we've got a pretty good hold on what the producers are thinking out there because we did use those comments, those recommendations, to directly develop our own farm bill proposals which, frankly, are very, very different than the "same old/same old" situation that appears to be coming out of the House and the Senate at this point.

I mention that process because I think it's important to remember the basis for our recommendations, the basis for our strong opposition to the direction that's been established by the House and Senate in their farm bill recommendations. I can tell you these folks, I believe, do not want programs that are funded with tax increases. They certainly are honest, hard-working folks; they don't like politicians who talk about and enact budget gimmicks. They want a straight-up farm bill. They want to know exactly what the farm bill is costing them, and expect the Secretary of Agriculture and their leadership to go out and defend that cost as being good for American agriculture. They are straight-up people, straight-up people.

So for these reasons and a lot more, the President's senior advisors -- folks, as you know -- are recommending that he veto the farm bill as it now stands coming out of the House and the Senate. I am hopeful that we can make some significant progress on this bill as it goes through the Conference Committee. We will need to make significant progress; we will need to make significant changes. I've known most of you in this room for a long time; I've worked with many of you for well over 25 years. I do not believe, folks - and perhaps maybe I'm wrong - but I don't believe I have a reputation among you to misrepresent or overstate the views of those I represent. Perhaps I'm wrong, but I don't think that's my reputation. I hope it's not my reputation. I'm a straight-up, straight-shooting guy.

Please do not make the mistake of believing that the Administration's concerns with these farm bills can simply be made to go away without making some fundamental changes to this bill.

Again to be clear, because some people are in the habit of perhaps parsing words and looking for an opening in every one of these words: to be clear that without fundamental change, the President's senior advisors, of which I am one, will strongly recommend that he veto the farm bill. Now, only the President makes that final call. He will be the one to decide ultimately what to do on this package. But please do not make the mistake of misunderstanding -- of not hearing the very, very clear message coming from me, coming from every one of the President's senior advisors, -- that this if this farm bill looks anything like what we've seen coming out of the House and the Senate -- the very strong recommendation to the President of the United States is to simply veto, go back and do it again and send us another bill.

We need a farm bill that will allow us to make continued progress, ladies and gentlemen, in areas like conservation, renewable energy, food and nutrition programs as well. All this year we've also made the case to significantly expand the funding for research and development of renewable energy, particularly as it relates to cellulosic ethanol. I've had the opportunity, and some of you were there, this morning to participate in the President's signing of the new Energy Bill, a new Energy Bill that talks about 36 billion gallons of biofuels in this country over the next 15 years.

That's a significant challenge, ladies and gentlemen. The farm bill needs to have a strong energy component to it. In order to make that happen, $15 billion of that of course is from grain-based ethanol as well. And so again, we talk about where we are. And our challenges going forward in the future are substantial.

Let me just say, ladies and gentlemen, that I know renewable fuels have gotten a lot of criticism, and I've responded to a lot of questions from folks saying, "it increased my feed price, increased the food prices, what all is going on?"

Let me just tell you, simply put as I travel around the country -- which I have done a lot of in the last few months and talked to folks -- I don't think there's been one moment of waiver from the people you talk to out on the ground. There's strong support of our country producing more of our energy from sources here at home. That has not wavered one bit in the countryside. The support for it is support for home-grown energy from regions of the country. I believe it's as strong as ever.

And on that basis I think you're seeing action on the Energy Bill. I think you'll see action on strong energy titles in the farm bill because this is something that resonates with people all over the country -- certainly farmers and ranchers, everybody else as well. I believe that is going to represent one of our major challenges going forward. I don't see how you can talk about a farm bill, about farm policy, without a huge emphasis upon the future of bioenergy in this country because it will be the economic driver, I believe, in the future.

The House and the Senate bill do recognize this, and we appreciate that, and I need to be careful to always give credit where credit is due. Chairman Peterson actually provided more than what we recommended, and we appreciate that effort. The Senate added a strong energy title as well. So we need to give them a lot of credit for recognizing that vision for the future.

If I could just cut to the chase and get to the bottom line, ladies and gentlemen, it's that although a lot of what the House and Senate have done may not have gone as far as we would like, we believe they have done some things to represent important progress. I mentioned energy, conservation, rural development, all important. But I think they looked at the Administration's recommendations and looked at the input we've received all over the country and simply nodded their head and said, yes, we support those priorities.

We appreciate that, and that's why we're anxious to work with them in the Conference Committees, correct flaws in the bill, but move forward with the priorities they I believe have recognized are important not only to us but certainly important to all the people who came forward to testify at our extensive listening sessions around the country.

So with so much on the table, I believe there should be enough incentive for all sides, I believe, to find a way to narrow these differences, to come together on a bill that does provide real benefits.

We continue, ladies and gentlemen, to have concerns about a stalemate process whereby an extension of current law becomes the only option in that process. If you extend current law, you've got all the problems associated with that that we've identified. You've got farm payments that aren't targeted to those in need; don't have any improvement in terms of the Adjusted Gross Income situation. Obviously the priorities of energy, conservation, rural development, all go by the wayside.

So that's not where we're headed on this, and we want strongly to encourage the Conference Committee to work with us to get this done.

Now if I could, I'm going to close by just reminding you as well that the farm bill is not the only thing we work on at USDA, although sometimes it may seem that way. There are a number of other important dynamics going on, and I mentioned specifically the area of food and nutrition. As you know, this is a substantial portion of our budget. And one of the big accomplishments that we've had over the last year is we've completed the first major rewrite of our WIC food package in nearly 30 years. This is something that's been worked on by every administration, never could quite muster the desire or ability to finish it off.

And we have recently completed that, and the modifications that will assure fruits and vegetables will play a much more prominent role in our WIC food package going forward. It's very, very important that health and general well-being of our low income Americans, mothers who are at high risk in their pregnancies, who have not been eligible for our school lunch programs but still need nutritional assistance. This is a big change. We're going to find these folks off on the right foot in terms of good food habits. Our economy will prosper if we succeed in this challenge because most of you know our highest obesity rates in this country are among our low income population and that is not right we need work with them, give them access to the foods that they need for a healthier lifestyle.

Again, they will be better off as a result of this. We've been trying to do this for a very long time, and it is now done. It's become law, and again we're very, very proud of that accomplishment.

We did as well rework our nutritional guidelines for Americans. This is something that had been around a long time. They reflect the latest science in terms of nutritional assistance out there. Some of the nutritional guidelines in the past involved a lot of push and pull among various interests. We decided, no, we're not going for interests here; we're going with the best nutritional science available out there. And our nutritional guidelines reflect that, reflect the types of meals that get served within our schools, obviously many types of commodity packages available through programs like WIC. It's a very great important, significant change.

We are proud of the accomplishments that this administration has made in the area of nutritional assistance. Even today a relatively low percentage of Americans who qualify for nutritional assistance actually take that assistance. It's kind of hard to imagine here in Washington, DC. But when you get out in the countryside, people don't know about the Food Stamp program, the availability of these types of programs. We have reached a huge new population, and we have raised those eligibility goals substantially just in the last four or five years to a much, much greater percentage of high-risk, low-income people who are hungry and are now being served as a result of our outreach program.

We're proud of that accomplishment, and we're going to continue on that trend, and again we think everyone should know about the availability of these programs, and if they need the help, qualify for the help, they should be given that nutritional assistance so that nobody in America is at nutritional risk.

So we are going to continue to do that. A lot of stuff I could go through on conservation as well in terms of wetlands, milestones that we've reached on wetlands, some of our other conservation programs. I think I'll just move over that quickly, and close by mentioning trade.

Thank you for your help in the passage of the Peruvian Trade Agreement. I look around the room and I see a lot of people who burned a lot of shoe leather working at being bipartisan. I think Peru reestablished trade as a bipartisan issue in the Congress, and that was not a direction that we were on, and we appreciate that bipartisanship. Unfortunately of course, the work is not done. We have Colombia, Panama, and Korea as well to go in this process. We really appreciate, get you guys a chance to get a couple weeks of rest here but know that there's a lot of work to be done beyond that. I intend to devote substantial amount of my time to those free trade agreements.

They are win/win agreements for American agriculture from our standpoint -- totally win/win. Colombia and Panama that's for the most part, have access to our markets. Our farmers needed the reciprocal opportunities to export to those countries. That's what these trade agreements are about, reciprocity in terms of giving to us what has been given to them a long time ago. And we'll prosper in that export potential, in terms of new markets. It's good for agriculture, and we're not going to lose sight of our need to open these markets, whether bilateral, multilateral under Doha, or whether that's individual country negotiation on issues like beef, or ractopamine, or Mexican points of entry for pork, or whatever trade challenge may face us on any given week or month. Just know that remains very high on our agenda for the coming year.

Folks, thank you for the opportunity again to provide probably more candor than what you were wanting, but again you guys know me well and know that I wouldn't feel right if I didn't tell you straight up where we are on these issues. Please don't "misunderestimate" our concerns here.

[Applause]

Questions or comments for me? Yes.

QUESTION: Mr. Secretary, Jim Thrift, the Agricultural Retailer. We are very happy that the economy and farm sectors are doing so well. You may be aware also that crop input materials are going up dramatically, fertilizer, everything from land rents, you name it. I'd like to know what the Administration is doing on fertilizer prices specifically with imported urea. There are still significant tariffs on imported urea, particularly from Russia and the Ukraine, which would be very useful if those were reduced for the American farmers to cut fertilizer costs.

SEC. CONNER: Jim, I'm not aware, and we can go back and check this, but I'm not aware that we have any action pending over whether or not we could even have the legislative authority to eliminate those tariffs on imported urea. I will tell you, this is obviously something you hear about quite substantially in this country with talk about prices being up 20 percent, and that's probably a conservative number from last year, already pretty high, almost - talking about fertilizer expenses nearly $180 per acre before you even buy seed, before you even pay the land rent. These are high cost situations.

It's tempered by $4 corn, no question about that. You do have a lot of producers looking out and saying, "$4 corn now, and if we don't sustain it and prices go to even $3 corn" -- which is still considered historically a very, very high price - "can we cover all our costs associated with this?" It becomes a big factor in the decision-making out there. Longer term, it's an issue we need to be make sure they've got access to reasonably priced inputs here in order to be able to continue to grow this ag economy, to meet not only $91 billion of export demand and obviously 15 billion gallons of biofuel supplies on top of a lot of cellulose material out there as well - we're going to need reasonable price inputs to those objectives.

Yes, please.

QUESTION: (off-mike, question on biodiesel).

SEC. CONNER: I think I'm going to let Dave Hovermale respond to that question.

[Laughter]

Obviously, longer-term we've got a lot of issues to deal with on the whole renewable fuels sector, not only in terms of imports into our country - which are substantial, particularly on the ethanol side from Brazil, close to half a billion gallons of imported ethanol from Brazil, and perhaps a couple other locations as well. Future of tax credits are all going to be subject to a lot of healthy debate, particularly now that we've established sort of a long-term plan in terms of biofuels in this country relative to the energy bill that was signed early this morning. We talked about the tremendous growth we've seen in biofuels in this country, and it has been tremendous. But we're still, Keith (Collins, USDA Chief Economist) into what, the 8 point 5 billion gallon range, something like that, in terms of our ethanol? Not the right number? It's 7, projected to get to 8 and a half.

But this bill has 36 billion gallons, so this is going to have to be something that's going to be the focus of a lot of debate, a lot of policy actions going forward that are all going to be interrelated, and we look forward to that debate.

Other questions or comments?

Let me just say thanks again, everybody. You are old friends. I hope we remain old friends.

[Laughter]

And I do look forward to working with you. Do know in all seriousness that the doors at the Department of Agriculture remain open for you guys. We feel like our responsibility is to be there for you guys, for your members all across town and all across the country, and that's why we're in public service is to serve the public, and not to close our doors off. So if you need to see Dale or me or any of our folks, know that not only is possible, but it's welcome.

Thank you all very much.

[Applause]