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Dinner Remarks by the Hon. Chuck Conner, Deputy Secretary, U.S. Department of Agriculture Delivered at the Farm Journal Forum
Washington, DC, December 2, 2008
Well, Roger (Roger Bernard, Farm Journal editor), thank you. Thank you very much for that introduction. Good evening everyone. It really is a pleasure for me to be here with you tonight. I know many of you, some of you probably too well; and some of you probably know me too well too, I suspect. But it is really a pleasure to be here. You know, folks, we're in the time of transition between administrations, and for an old Washington hand that's always a very interesting time to be around this town.
Folks, family and farming have gone together really since I grew up on my family's farm in Benton County, as Roger has noted. And my brother Mike does still run that farm, and I appreciate that he is patient with me when I go back. And I probably get in his way more than I do help him. But it's still a lot of fun to get back there and help out.
My own professional career though really has been here in Washington since 1980 when I arrived to work for the senior senator from Indiana, Dick Lugar. And since then, working on Capitol Hill, trade associations, White House, and the USDA, I've really been affiliated now with over six farm bills, and I guess by farm bill standards, that's a lot of legislative activity.
They do have a way of taking over your life, and every one of them has involved so much pain and drama that it does almost feel like you're giving birth. And some of you have heard me talk about a very true story that I have in terms of giving birth with my wife Dru. She's never really thought it was a valid comparison when I talk about giving birth and working on the farm bill. And it was in 1985 that this was a particularly memorable farm bill for us because my wife and I had planned our second child to be born after the farm bill was completed. I was young, and...you know -
And for those of you who have been around, and Roger remembers this as well, the '85 Farm Bill was delayed in its passage. And so the time came for my son Ben to be born right in the middle of that process. So my wife went to the doctor on this one fine Thursday and was told, "Everything's ready to go, so it's now just a matter of whenever labor is going to begin." And that same day I was informed that we were getting ready to go to the floor to debate the Farm Bill the following Monday. And so very sheepishly I had to inform my wife that either Ben was going to be born in the next couple of days or I probably was not going to be around for his birth.
So my suggestion wasn't a very good one, but I did suggest to her that perhaps we could have the child induced early, around my Farm Bill schedule. This is a very true story.
Those of you who know my wife know that she is a peach, and she even agreed to my claim, and my son was born that weekend. I was there. That following Monday I was on the Senate floor performing my responsibilities to get a farm bill passed.
Now don't think too badly of my wife if you think she's too agreeable in circumstances like this ...because she continues to make me pay for this action.
You can bet that any time there's Christmas, birthday, anniversary, anything like this, Dru is quick to remind me of 1985. It's like, "Well, honey, maybe I might like that new car," and it's pretty hard to say no after a sacrifice like that. So I am still paying for that farm bill. My son Ben was born that year, a healthy child; and as a matter of fact, he's now working at the U.S. Department of Energy. But I often refer to him as my million dollar child because he has cost me dearly.
So the farm bills certainly left their mark on my life. And I will say similarly, the marks aren't always very positive as well. Just again to share a story, I do remember literally breaking up a fight in my office between two Senate staffers over a farm bill disagreement. A literal fight. And so, you know, these things can get pretty intense.
The farm bill that came out this year was certainly the product of a great deal of debate, certainly a product of a lot of sharp disagreements that led to the first presidential veto we've had on a farm bill since the 1950s. That goes without saying. The good news is that there was a lot of bipartisan work going on to get that farm bill done and no fights broke out during that process, to the best of my knowledge. So it wasn't bad.
I don't think it's any secret to those of us in the administration that the final results did fall short of what we had hoped for in the way of some of the reforms. But I believe that the effort that we put in formulating our own proposals for this year's farm bill, the discussions and the debate we opened up across the country where everyone participated, really did have a positive effect upon the process.
The fault lines that we believe we exposed during this farm bill debate - fault lines involving priorities between rural and suburban members of Congress, between traditional ag interests, if you will, and those who advocate perhaps less traditional funding for nutrition and conservation programs - I think those fault lines are only going to grow weaker and wider as time goes on.
That's why we did seek very much to try to bridge as many of those difficulties and gaps as we could in our farm bill recommendations, really what we call trying to modernize existing farm policies. We sought to broaden the farm policy base that was out there as much as possible, A farm policy to be based so that farm programs were looked upon favorably in all regions of the country, not just in a couple of states but in all regions of the country.
I will tell you folks that in light of the budget pressure the next administration is facing, the debate is over income and payment limits. We talked a little bit about this in particular, and I think it is going to come back and face us again. I for one do believe that per our farm interests, we ourselves need to deal with this issue. We need to deal with it ourselves, or else I believe somebody else is going to deal with that for us because I just think many aspects of who is getting the payments and how those payments are being distributed are just very, very difficult.
And we can't have a program survive when literally every editorial page in the entire country is writing against us. I think it's a challenge for us, that we fix this problem ourselves so we can have a farm bill that truly does benefit all of production agriculture in a way that is sustainable and supported by a broad range of people. I think there's a general support out there in the public for helping the farmers in general, particularly during tough times, but not the kind of help that we see, fundamentally they looked at some of the flaws that we saw in the current farm bill - a missed opportunity, we think, to fix the farm bill and actually have something that was more broadly supported by Americans wholeheartedly across the country.
I will tell you in fact on this same topic, we've already heard the President-elect questioning the share of farm subsidy payments going to people who are among the wealthiest Americans among us. It was the one example the President-elect cited when asked by a reporter what specifically he intended to do to reduce federal spending. This was his response. So we have not dodged this bullet. And again I would argue this is something we ought to fix ourselves - fix within our own family so that we can do this right and make sure that we continue to pass sustainable farm bills that help production agriculture in the future.
But to step back a bit and look where we've been for the last eight years, very quickly folks, I think all of us would agree that this has been certainly one of the most remarkable times in American agriculture. Strong commodity prices, rising export demand, and the rapid growth of renewable fuels have given us literally unprecedented, unheard of growth in our farm economy.
To me, I will tell you, one of the greatest signs of strength in agriculture is the share of our net cash farm income that is being generated by market prices and market receipts as opposed to being generated by very, very large government payments. We don't have large government payments right now. We are getting our income from the market; 80 percent of our net cash farm income we're forecasting for this year is coming from the marketplace for the entire commodity prices. This is a good thing for American agriculture.
This strength in the marketplace is reflected in the value of farmland, which in turn drives up the total value of farm assets. Today those assets are worth more than $2 trillion in our farm economy. Folks, that is by far and away an all-time record beyond anything we've ever begun to approach. It's more than double what the value was just nine years ago.
At the same time the debt/asset ratio for our farms today is now below 9-point-2 percent. Again, this is recent data, folks; this reflects a lot of changes in our general economy just in the last few months that have not been very good. We're not seeing that in our farm economy at this point - 9-point-2 percent debt/asset ratio.
Roger and I were around in the mid-1980s when we hit a lot of speed bumps in American agriculture, and I remember celebrating during the 1980s when our debt/asset ratio in agriculture dropped below 15 percent. So we are well, well below any historical standard, certainly below any standards we had during times when our general economy has been in a recession. We're just simply not there in American agriculture. Our strength, or asset ratios, our land values, all still continue to show remarkable strength.
You've got to keep telling this folks, and I'm not sugarcoating the fact that there are problems out there that I foresee on the horizon. But at the same time, too don't let ourselves get talked into a bad farm economy here. Our underlying principals of strength are as good as they've ever been in recent, recent history.
A foundation of strong balance sheets and strong commodity prices is I believe a pretty good place for us to hand over the reins to the next administration for starting out on their own farm policy venture over the next four years.
But I will tell you, we also must remember the important role that agricultural exports have played in this success. I must tell you in all sincerity, ladies and gentlemen, that it gave me great pain to hear just how easily populist, anti-trade rhetoric rolled off the tongues of politicians during this last campaign cycle, just how easy that rhetoric came from these people seeking elected office.
This year we did set an all-time record, more than $115 billion in exports; we generated a third of our farm cash receipts as a result of that unprecedented export market. American agriculture I believe has a lot of work to do to change the dynamic of this political debate in the future where politicians simply cannot get by - it's not politically popular to rail against exports, to rail against trade, as has been the case in the last couple of campaigns. We've got a lot of work to do to make sure that that is not the case when American agriculture is dependent upon these export markets. That kind of talk, that kind of anti-trade rhetoric frankly is just lethal to our industry, just lethal to it.
We are seeing strong demand around the world, particularly from the emerging economies. The great part about it is that so much of it is value added - we're traditionally an all-commodity exporter. Today we are exporting our beef, our pork, our chicken, dairy; we're big exporters of dairy. Roger, 15 years ago if we'd talked about dairy exports, people would look at you like, "Where are you from?" Today most of you guys from the Midwest where I come from, where it's corn and soybeans, understand that when we export that powdered milk or export those slabs of bacon and beef and everything else, we're exporting corn and maize with that same product. It's just value added, and we win very much in that situation. So there's great news in these developing markets.
That is why throughout the eight years President Bush has been in office this administration has put expanding trade opportunities as the highest priority item, and we promoted it frankly through thick and thin. Sometimes it was a popular message and sometimes it was like "here they go again." I will tell you, we believed strongly in that situation, and believed strongly in the impact that it has upon the livelihood of our farms and ranches across the country.
Obviously I think the results really do kind of speak for themselves. We've got $30 billion a year of trade under NAFTA. Our Dominican Republic, Central American Free Trade Agreement is exceeding expectations. We're now exporting $2 billion worth of farm goods there. We pushed hard for bilateral trade agreements with Colombia, Korea, Panama. And I hope, ladies and gentlemen, that Congress has the fortitude to approve those agreements. Those are agreements that are just a win/win situation for American agriculture. And again, without those markets -- it's pretty hard for somebody to say they are a friend of agriculture when they are not going to allow those selling opportunities in other markets.
Again, I underscore the fact that particularly in those free trade agreements these are countries that already have unfettered access to the U.S. market in both agriculture as well as nonagricultural goods. These are trade agreements that are being held up, refused to pass, that only benefit our own exporters and particularly in this case agricultural products. They are hungry for our beef, they are hungry for our pork down there. It's beyond me how we've dealt with passing those agreements.
So bottom line, U.S. ag agenda is by no means concluded. We're going to hand off that important agenda to the next team coming in, and I think the question becomes what do they do with that, whether they are going to continue to seek those kind of market opportunities or are they going to pull back a little bit and perhaps go a little bit more to the populism of the anti-trade rhetoric. I sure hope it's the former in this case. For American agriculture's sake we need that to be the case.
I will tell you also that I would urge the next Secretary to make dead certain that our American farm policies are seen as fair and market-based by both taxpayers as well as our trading partners abroad. I will just tell you folks that my experience as the deputy secretary, time and time again, we have to treat our foreign trading partners in the way that we expect to be treated by them. The golden rule of trade, if you will, is very inflexible here. And if we're going to hold up their products, I can guarantee you there's going to be retribution on their part. It doesn't pay to do that kind of thing. And again, we're so dependent, why are we risking that kind of thing when $115 billion of our goods is going for that purpose.
I will tell you finally that over the last eight years one thing we are very proud of is the administration's commitment we have made to conservation resources in this country. Conservation resources, rural development funding, as well as renewable energy initiatives. The 2002 Farm Bill did mark a historic increase in funding for conservation; that historic increase continued throughout the 2008 bill as well. Together these two landmark measures resulted in an increase in conservation funding of $21 billion.
Conservation and environmental issues perhaps - I say "perhaps," the jury is still out - represent the area where we are likely to see the greatest challenge with the incoming administration - conservation and environmental issues.
As we know, President Bush and the Bush team believe strongly in the concept of cooperative conservation on America's farms and ranches. In our opinion, the American farmer, in order to have good stewardship, does not need a regulator; they need a partner. They need someone to come along beside them to help them with incentives, to help them with technical assistance, because they want to do the right thing. They want to farm better; they want to have less of an impact on resources around the globe. And that's been the hallmark of our conservation policy - cooperative conservation incentives, technical assistance, work with the landowner.
I'll just tell you again, the jury is still out a little bit so I may be getting ahead of myself, but I expect the new secretary of Agriculture will have some very interesting battles in the years ahead with the new EPA administrator, who is, I think, not to favor the concept of cooperative conservation. He is very, very likely to be one who is going to favor more of the regulatory approach of, "We don't want cooperation, just simply want you to do this and we're going to tell you how to do that, and if you don't there will be consequences associated with that."
Those are the fundamental choices, choices again I think you could see some substantial difference between the way things have been in the past and the way things may be headed in the future in this area as well.
Finally, I'll just say that over the course of our term we have committed over $110 million to rural infrastructure and services and to creating jobs for rural America and some economic opportunity. Ladies and gentlemen, having grown up in a small town of about 700 folks, our small rural town, as a lot of them are, is in very, very tough shape. Health care issues, clean water, basic emergency services is something that hits very, very close to home with me with my mother, you know, living out in a small town far away from any kind of emergency services.
And of course, jobs in our rural areas are just fundamental issues. These are all issues where frankly USDA and our Rural Development programs can have a tremendous impact. We have some very, very good programs designed to help our rural communities in some of these areas with challenges. But I will tell you the farm bill continues to place a low priority on these kinds of programs, particularly when it comes to funding. They are regarded as second-class citizens and whatever money is left over in the end is pretty much what goes into these kinds of programs.
This is something we'd like to see changed as well, and I hope this is a legacy we can hand to the new team as we have attempted to move these Rural Development programs forward. You know, this benefits all of agriculture, not just the farmers and ranchers who live in these communities but we still have 56 million people in America today who are out there in rural lands and benefit greatly by these kind of efforts. It improves the quality of life a great deal.
Finally I will just close with a quick comment about energy in particular. You know, we don't talk quite as much about energy in the last few months because things have changed a little bit. But you still have to strongly recognize the impact that energy is having upon the agricultural economy in this country, and it's still substantial. And I will tell you one of the points we continue to try and make - and I hope again this is a legacy we can hand to the new team so they can make these points as well - is we've had some food price inflation in this country. Our team of economists are telling us they are at a little over 6 percent now is what we're expecting. That's high by historical standards, not something you like to see in terms of rising food prices.
But we still estimate that within that 6 percent that only somewhere around point-4 to point-8 percent of that 6 percent is attributable to biofuels and the rising demand for ethanol - point-4 to point-8, somewhere in that vicinity, a very small proportion of that 6 percent. And again, this is a point we need to continue to make.
Whether you are for or against biofuels, that's one thing, but let's at least have a legitimate debate based upon the facts. And these articles that just simply say, "We've got an increase in biofuels and because of that food price inflation is now 6 percent," well you know they need better analysis, better numbers associated with that so we can make real honest assessments.
I think one of our roles we've tried to play over the last several months is just simply being the teller of factual information. Obviously we like biofuels in the Department of Agriculture. I'm not hiding from that. But at the same time, we have an obligation to provide factual information in this debate. And we need to continue that course. It's not been centered on a lot of factual information.
Again, I hope the new team will pick up that tenor and continue to be an advocate for good, solid analytical information as to how we proceed forward with our renewable fuels market which is having, again, such a tremendous impact upon our agricultural situation these last 18 months.
So folks, with that, there's a few thoughts about where we've been, a few challenges to the new team coming in. Just know that within the Department of Agriculture folks it's going to be a very smooth transition, provide the new secretary and his team - we're going to make sure they have all the information they want. You know, agriculture is not a particularly partisan environment, so we don't expect to be trading barbs with the incoming team. We expect to help them in whatever ways they want to be helped and to make sure they've got all their information. That process is going on now with a good team within our agency, and they are working to make sure on January 20th when the President-elect Barack Obama is sworn into office, that there will be an orderly transition. And hopefully for folks out in the countryside, they won't even know it's happening because we've done our job well. And that's how we intend to handle this.
So thanks, folks. It's been an honor to be here. I am in wrap-up mode as you can imagine, six or seven years ago here, but I've enjoyed every minute of being a part of the Department of Agriculture. This has really been my life.