TRANSCRIPT OF REMARKS BY AGRICULTURE SECRETARY MIKE JOHANNS AT THE AMERICAN FARM BUREAU FEDERATION'S ANNUAL MEETING
SALT LAKE CITY, UTAH - JANUARY 8, 2007
SECRETARY MIKE JOHANNS: "Well, thank you. Thank you for that nice introduction, and thank you for that very warm welcome, ladies and gentlemen. I've told this story so many times you probably heard it, but at the risk of you hearing it and repeating it one more time I'll share it with you. I had just been elected the governor of the great state of Nebraska but I hadn't been sworn in yet. And I was -- (cheers) -- yep, there's Nebraska over there. But I hadn't been sworn in yet, and I was invited to go to Kearney, Nebraska, to give a speech. And so Stephanie my wife and I drove out to Kearney.
And we got out there and the same sort of thing -- nice introduction. And as I'm making my way to the podium, everybody stood up and applauded just like you did. And so I got to the podium and I said, 'You know, folks, that's really very nice of you, but I haven't done anything yet.' And somebody in back yelled out, 'And when you do, we won't be standing!'
So it's nice to see I get a nice, warm welcome after doing this job.
Well good afternoon. Thank you very, very much for inviting me to be here with you today. It's always a pleasure to speak to the American Farm Bureau Federation.
A great deal has happened in the last year since I last spoke to you. We're continuing to regain our beef export market, although I have to tell you, more slowly than I would prefer. We have reopened or maintained the markets in 25 countries that closed or threatened to close their borders to U.S. beef products after the first detection of BSE. We have made progress in countries such as Vietnam and Thailand and Mexico; others remain challenging.
Korea has presented an especially frustrating situation. We are continuing to talk to our counterparts over there, but to be very honest with you their protectionist position is making progress very slow and very difficult.
But despite these obstacles, our beef exports are increasing. They are up about 65 percent over a year ago.
Renewable energy production grew dramatically in 2006. What a story. We held a very successful Joint Renewable Energy Conference with the Department of Energy. Some of you were probably there in St. Louis. It brought together the various stakeholders that will need to collaborate to achieve energy security in this United States.
I'm proud of these achievements since they reflect the hard work of my colleagues at the USDA, the hard work of our farmers and our ranchers, and the hard work of partners like the Farm Bureau. But there remains a great deal of work to be done as we begin this new year. And of course, foremost on our agenda is completing our proposals for the 2007 Farm Bill.
Last year your membership voiced its support for renewal of the 2002 Farm Bill. We now know that a simple extension of the '02 Farm Bill, with today's stronger program crop markets, would translate into much lower projected spending. In fact, there are probably a number of estimates floating around about what the baseline funding is going to be for agriculture, but I don't think there's anyone out there that isn't projecting that it's going to drop. Some have argued it might drop as much as $20 billion from when the 2002 Farm Bill was developed.
I suspect that that is factored into decisions to change course. Instead of an extension, there are those that are now examining funding levels for the '07 Farm Bill. It reminds me of Garth Brooks' famous lyrics, 'Some of God's greatest gifts are unanswered prayers.'
Now, you are not alone in examining what funding will all be about. That's what is going to happen in Washington in the weeks ahead. We are hearing far fewer calls for an extension of the Farm Bill and far more recommendations relative to funding levels.
But I will tell you why I'm concerned about focusing this conversation solely on the funding level. Good policy must take into account much more than dollar count. It must be tailored to provide strong support that is relevant to current trends and forward-looking for the future growth.
I've heard repeatedly from farmers who say they want to farm for a profit, not for the government. I heard it from my father's peers when I was growing up on that farm in Iowa, and I heard it across the country during the Farm Bill listening sessions that we conducted in 48 states, 52 of them -- 21 of them I did myself.
As Doug from Missouri said, 'The U.S. farmer is one of the most innovative, hard working people in the world. Get rid of the payments and restrictions, and let them find ways to market and grow the things that would allow them to make a profit but not have to rely on the government for a handout,' unquote.
Right now we have a unique opportunity to help America's farmers and ranchers pursue that goal. Now, ladies and gentlemen, I will be the first to argue that the 2002 Farm Bill was good policy for its time. It was the first Farm Bill to include a title on energy. It had a sharply expanded conservation title with more funding and more programs.
But the agricultural and economic realities that influenced the development of the '02 Farm Bill, they simply don't exist. Today, we are presented with an opportunity to help our farmers and ranchers work for a profit in the marketplace rather than an envelope from Washington in their mailbox.
This opportunity simply didn't exist in 2001 when President Bush took office and the current Farm Bill began to take shape. Let me, if I might, just take a moment and give you a simple side-by-side comparison that really reveals some incredible differences.
In 2001, agricultural experts said exports had declined for five straight years and were down to $50 billion. Since then exports have risen every single year to a record of $68.7 billion in '06. In '07, they are expected to reach a staggering $77 billion.
In 2006, despite several weather problems, we saw record or near-record numbers in production or yield or both for soybeans and corn and cotton and rice. Farm cash receipts increased for the fourth consecutive year in '06 to $242 billion. Now, that's a $42 billion increase since 2001.
In 2001, the debt-to-asset ratio was at nearly 15 percent. In 2006 we reached a significant milestone: the lowest debt-to-asset ratio in recorded history. It is estimated to be approximately 11 percent.
Clearly we're seeing a much stronger agricultural industry than we saw five years ago. Interestingly enough, in Fiscal Year 2000, right before the writing of the '02 Farm Bill, we provided the highest subsidy payments on record: $32 billion in subsidies were provided in 2000, the highest subsidy level on record, and yet the farm economy was far, far from impressive.
If dollars alone are the answer to supporting agriculture, then why did we not experience better performance at the record-high subsidies? Today, the level of subsidies has decreased to about $20 billion. Again, our ag economy is far stronger. This, too, would suggest that high subsidies do not necessarily equate to a strong ag economy.
Never before have we been better positioned o do what a gentleman named Arnold in California asked us to do. He talked about how to remove barriers for beginning farmers, and he said, and I'm quoting him directly, 'The answer is simple,' he said. 'Have an attractive profit motive. That is all we need to address, and it will happen,' unquote.
And in the state where I came from, a gentleman by the name of Luke wanted us to consider whether our subsidies were having the desired impact. He asked, and again I'm quoting directly, 'Are we assisting family farms, or are we subsidizing the growing of crops?'
That's what concerns me about the idea of focusing strictly on the dollar. It seems to me, in order to be responsive to Doug and to Arnold and to Luke and to American farmers and ranchers, we must look at far more than dollars when we contemplate future farm policy. I would suggest we must broaden our scope and consider policies that will help our farmers and ranchers succeed in the marketplace, just as these farmers have asked us to do.
Now, I know there's a lot of common sense in this auditorium, and it's going to occur to you that if we're seeing such a strong outlook for agriculture why change our policy? I'm sure some of you are sitting there thinking, 'Mike, if it ain't broken, don't fix it.'
But the agricultural economy is enormously complex. The '02 Farm Bill was written for an industry that is already so different than the industry of today. Since President Bush took office in '01, unemployment rates have dropped and the GDP has grown. These have combined to bring a much stronger domestic market for our agricultural goods.
We've had both good yields and strong prices which have created an increase in revenue. The increase in exports that I mentioned has had a significant positive impact on agriculture in our country because we're taking advantage of greater international demand for the products that you raise.
Biotech crops and other technological advances have improved yields, proved more resistant to weather damage, and lowered cost, and, perhaps most significantly, the renewable energy industry has just grown exponentially, which is creating a ripple effect throughout our ag economy.
Granted, the growth causes concern for sectors dependent upon corn for feed. But I believe the market will adjust. New sources of renewable energy will gain momentum, and the overall benefits to rural America, I believe, are going to be astounding.
Six years ago, ladies and gentlemen, there were 54 ethanol plants in operation which could produce a combined total of less than 2 billion gallons per year. Today, more than 100 plants now produce a combined total of more than 5 billion gallons per year. More than 70 additional plants are under construction, expected to increase our production capacity by 8 billion gallons. That, ladies and gentlemen, is a lot of corn.
Just in the last year, the amount of corn used for ethanol production rose from 14 percent to 20 percent, and soybeans have experienced a similar phenomenon. So there have been strong advances that have paved the way for the strong agricultural industry we see today.
Never before have we had this kind of opportunity to allow farmers to work for themselves -- for a profit -- instead of for the government.
Doug and Arnold and Luke were not the only folks we heard at the Farm Bill Forums. We collected more than 4,000 comments about future farm policy. In fact, as our farm proposals begin to take shape, they are being formed around the themes that surfaced in these 4,000 comments that we received. We are taking those themes and contemplating how best to provide the support that will help farmers succeed in the marketplace.
For example, during our forums we repeatedly heard about the need to improve support of beginning farmers. Devan from Kentucky said, 'One of the biggest barriers, I believe, facing a new generation of farmers is the inability to start farming from scratch. It's extremely difficult if not impossible to simply start farming,' unquote.
Marion in Pennsylvania said, 'Land values, especially those in productive areas that are under development pressure, are escalating at a pace that is having a profound impact on beginning farmers' ability to purchase land,' unquote.
Many of the comments we received requested higher loan limits for beginning farmers or other approaches. I can tell you that we have listened.
We want to encourage future growth in agriculture by reducing barriers for the next generation of farmers and ranchers and help them establish a solid footing to compete in the marketplace.
There are other types of barriers that interfere with the ability of our farmers and ranchers to compete in the marketplace that we have come to know as the international marketplace. I'm referring to trade barriers, and we run into them every day.
We heard the call to eliminate unjust barriers during many of our forums. Wendy in Iowa said, 'Efforts should be continued to reduce trade barriers, providing a level playing field for U.S. exports in the international marketplace.' Barry in California said, and I'm quoting, 'Our ability to increase exports is hindered by the reality of non-tariff trade barriers.' He went on to say that USDA technical assistance funds have provided important support, and he asked that we expand them.
Again, ladies and gentlemen, we have listened. We're looking closely at how we might strengthen our efforts to harmonize trade standards and expand markets. There is no question that exports are now a vital source of income, now equal to about one-quarter of cash receipts.
Also on the international front, we want to ensure that our programs are better able to withstand challenge. When the WTO ruled that part of our cotton program is inconsistent with our trade commitments, it established that broader programs are open to challenge.
Just this morning we heard a troubling announcement from Canada. They are requesting WTO consultations related to our domestic support programs for corn. This is another of several challenges that are concerning us and concerning our producers.
As you know, Brazil is not satisfied that we've complied with the WTO ruling. Despite having eliminated the Step II program along with other changes, we are engaged in another proceeding related to our marketing loan and our countercyclical programs.
Now, ladies and gentlemen, I want to assure you that we will continue to aggressively defend these programs, but there is no denying that we are being challenged on the world stage.
And it's troublesome for a couple of reasons. First, it means that without reform we're accepting the potential that the safety net that you rely upon could be pulled out from underneath you. I want to stress that we will continue to vigorously defend our programs.
Secondly, it means that we're jeopardizing markets for our agricultural products, markets that are vital, critical to our producers.
As we develop our farm bill proposals, we're paying attention to trade commitments. Of course, we are not the first to do so. Previous farm bills have acknowledged the importance of trade and trade commitments, but never has it been more important.
Now of course the temptation may be to say to the WTO, 'You know what, folks? take a hike!'
Let's think about that for a moment. I suspect there are people in this room who raise cotton. Well, 80 percent of your cotton goes into the export market. Do you want us to discard international standards?
Now, surely there are people in this room who grow rice. 50 percent of the rice that you grow goes into the international market. Do you want us to ignore the WTO and jeopardize that market?
For those of you who raise cattle, 75 percent of your cattle hides go into the international marketplace. Do you want that door slammed shut?
Corn and soybean farmers know that every third row goes to another country. I suspect that you would also want us to pay attention to our international commitments.
You know, when I was growing up on that dairy farm in Mitchell County, Iowa, my competition at least you could argue was probably in St. Ansgar or Stacyville just down the road. The competition, though, for your sons and daughters will be Brazil, China, India, and other countries.
The market that we don't claim will be claimed by somebody else. You can cuss it, you can discuss it, but it's reality. So we must pay close attention to our international trade commitments as we contemplate future farm policy.
Another change competing in the marketplace, and a vocal focal point for our forums, is research. No one questions the importance of advances in technology, genetics, and techniques. They have transformed this industry. As Chet from Florida said, 'In the past 20 years our commodity has increased in value five-fold, and we're positioned to double our value in the next decade, and that is largely due to the research that has been conducted by our Land Grant institution.'
Research has been a critical component of the technological advances that set America's producers apart from anyone else in the world. Through research we've made astounding progress in animal heath issues, sanitary and phytosanitary concerns, drought resistance of crops, and increased nutritional value in food.
And we haven't seen anything yet. We are working on proposals to invest more in competitively funded research, and I look forward to sharing those with you in the not-too-distant future.
We want to ensure a strong future for agriculture by maintaining the natural resources that keep the industry strong. We certainly heard support voiced for conservation in our listening tour. Jeremy from South Dakota expressed a common opinion: 'Conservation programs are a great way to ensure income while benefiting the entire population with clean water, reduced erosion, and wildlife benefits.'
Producers are believers in conservation and protectors of the land. But they are facing more challenges from local, state, and federal environmental regulations. We want to make sure that they have the support they need to comply with the regulations while remaining competitive. We're investigating ways to increase our investment in technical expertise, management tools, and performance-based incentives to help our farmers and ranchers in the challenges.
We also want to do more to strengthen the rural economy, as we were so often asked to do during our tour. Strong rural economies can be of great benefit to farmers and to ranchers. Cliff of Oklahoma told us about Rural Development funds used for the Oklahoma Rural Water Association which serves 100 rural water districts throughout his state. He said, and I'm quoting again, 'Small communities and towns benefit from this program. We were able to go out and train operators and bookkeepers and managers and all sorts of things that will upgrade the living standards of our rural population.'
A nearly unanimous praise for our Rural Development programs inspired us to dig into these programs to find out where we could make the real difference in rural America. Today America's farmers are more reliant on off-farm income. Many farmers work in town and also farm. Across the spectrum, large and small, approximately 85 percent of total farm family income is now from nonfarm sources -- 85 percent.
By investing in rural America, we're increasing business opportunities, raising standards of living, and improving schools and hospitals. So our Farm Bill proposals will address funding for infrastructure and technology needs to increase economic development and growth in rural America.
I have not been shy about discussing another area that's been a huge driver in the ag economy: renewable energy. I mentioned it a few minutes ago. We want to make even greater strides in advancing our energy independence. Renewable energy, produced in the heartland of America, has many advantages over imported fossil fuels. I don't need to list them for you; you know them well.
Ethanol, biodiesel, and other renewable fuels are being introduced in dramatically larger quantities and the demand has never been greater. Our Farm Bill proposals will look to the future and try to anticipate the next steps in this industry and what we can do to make sure those steps can be taken with a sure foot.
Two quick issues I want to mention. Providing equitable support should be a basis upon which we build farm policy. So we've looked at ways to distribute our support in a more even-handed way. Currently 15 percent of the largest farms in America, farms with sales of $250,000 or more, collect about 54 percent of all farm program payments.
We've all read about the payment recipients who exceeded payment caps and payment limits. There's been criticism of the three-entity rule and other payment limit provisions like the Adjustment Gross Income eligibility requirement.
We're considering all of these issues in our proposals and we're looking at better ways to set up those systems so they will be equitable, effective, and hopefully less complex.
We're also taking into account the fact that 60 percent of producers receive no direct cash payments, despite facing the same challenges as our program crop producers. The five major program crops account for about 20 percent of cash receipts in agriculture and receive more than 90 percent of Farm Bill commodity program payments.
We've heard a great deal about these inequities as we traveled the country. I heard loud and clear the request from specialty crop producers to have a seat at the table. We have listened. I believe the next Farm Bill can do a better job of more evenly distributing support.
For instance, we can better assist non-subsidized producers through research, conservation, and rural development, and market development.
We're also looking at more general ways to make our programs more responsive to market-based incentives so that our producers can be ensured a competitive edge. That means looking at the effects of our support. The 2007 Farm Bill should be predictable. To the extent possible, farmers and ranchers should know what kind of support to expect from us and when that support will be delivered.
Under the 2002 Farm Bill, loan deficiency and countercyclical payments were largest during years of record-breaking harvests and record farm income. Yet in these same years, natural disasters that caused complete crop loss often left a producer with no safety net whatsoever. John from Kansas tried to exercise wise management practices, but ended up getting no support under the current system. He said, 'We didn't raise anything because of the drought. Prices went up and we didn't get any payment. We didn't have anything to sell.'
The current price-based programs tend to, quote, 'under-compensate when yields decline and overcompensate when yields increase.' You don't need to be an economist to see that this structure for support is simply counter-intuitive.
As one farmer told us, 'Subsidies drive up prices all along the production chain, from land to equipment to labor prices. Let free market principles determine the price of a combine, not commodity subsidies,' unquote.
We've heard a lot about revenue-based programs, but we're taking a look at all suggestions. We've also questioned whether basic support on the daily-posted county prices is the best approach. Again we've had a lot of input, and we're looking at all suggestions.
Ladies and gentlemen, just to wrap up, these will be our greater priorities as we complete drafting our proposals. I look forward to sharing with you our proposals to allow our farmers to compete and to succeed in a fair marketplace. We've received tremendous input from farmers and ranchers all across this great country. We're working hard to put to good use the advice we received.
I'm confident that we can put forth proposals that provide an important safety net in support for agriculture. This support must ensure the longevity and the continued growth of our industry, while focusing more resources on emerging priorities like energy and research and trade.
And our proposals will ensure support for our farmers and ranchers that bring more equity and predictability to farm programs while minimizing our vulnerability to international challenges.
As I said many times, I believe that federal support of agriculture is a wise federal policy. How we provide that support is immensely important to you. I thank you for your collaboration. I look forward to sharing our proposals with you in the very near future.