TRANSCRIPT OF REMARKS BY AGRICULTURE SECRETARY MIKE JOHANNS AS HE UNVEILED USDA'S 2007 FARM BILL PROPOSALS
WASHINGTON, D.C. -- JANUARY 31, 2007
TERRI TEUBER: The Secretary will walk through a Power Point presentation, and then we'll take questions afterwards. So can you please hold your questions until he completes that. Also just a reminder, please turn off cell phones, blackberries. All that can interfere with our signals and our systems, so please turn off all electronics, and we'll take questions at the end. We have one wireless microphone to hear the questions for all the people on the line. So please just wait for that microphone to come to you if you have a question. With that, Secretary of Agriculture Mike Johanns.
SECRETARY MIKE JOHANNS: Thank you, Terri. Well, welcome. We're glad to have you here. We've been looking forward to this day. I appreciate the fact that this day has been anticipated for a long time. We've worked hard on the proposals that we're going to outline today. They are lengthy, in some areas they're quite complex, so as Terri indicated we would appreciate it if you'd let me get through the presentation. It's probably going to take a half an hour or a little bit more because there is a lot to it.
And even at that, what I would caution you about is: the materials that we will be giving to you after the presentation really contain the full proposal. There are many things that we're doing that I won't mention today that we think are very important, but time will just simply not permit me to go into great detail on I think what has turned out to be about 60 proposals.
Let me, if I might, just take a moment and lay some foundation here for you. As many of you know, I grew up on a farm in North Central Iowa, a small dairy farm. And of course farm policy was something that was a part of our life, for sure. As I started to think about how do we want to go about presenting a farm bill, and who do we want to hear from, and how best can we conduct this process -- we came up with the idea of the Farm Bill Forums.
And the President was very encouraging. President Bush wanted me to go out the country. In fact it's one of the things he said when we talked about the possibility that I might become Secretary. He said, "I want you out in the country talking to farmers and ranchers about things that are important to them." So this seemed to be very, very much just a natural process to build this Farm Bill Forum.
We got great wisdom from these people. Talked a lot about it over the last couple of years. But it was just remarkable, and I'll cite some of this as we go through.
They would show up at a forum after maybe driving a couple of hours. They would walk up to the microphone because it was an open microphone; anybody could testify. And they would say things that, if you listened to what they were saying, I must admit initially it sounded counterintuitive. And I would be thinking, "Does that make sense?" And I'd jot down a few notes, and we'd come back to the USDA and we'd start comparing notes about what we were hearing from farmers and ranchers. And we'd start to study what they were telling us, and lo and behold not only did it make sense but it was exactly how the program was operating and really should not be operating.
And so we learned a tremendous amount from them, and that became the foundation upon which we built these recommendations.
So I did not want to even get into my proposals today without just expressing to all those farmers and ranchers out there, who took the time to come see us and step up to the microphone, to express to them how much I appreciated them doing that and appreciated the wisdom they imparted to us as we started to work on this.
The whole idea here is that we are going to reauthorize a Farm Bill. The Farm Bill covers a number of areas. As you know we cover commodities to conservation to energy to research, trade, food stamps, rural development. This is the year -- if we don't pass the Farm Bill this year, literally we revert back to the 1949 Farm Bill, which nobody wants to do. We want to get a Farm Bill to the finish line this year.
Just as a quick refresher, this is how our money is allocated here at the USDA. The vast majority of our funding goes into food assistance programs. About 26 percent goes into the commodity programs based upon '06 budget outlays, actual outlays. And then the rest is spread about in conservation, international, rural development, research, and other programs.
I said this many times -- I have a history with the 2002 Farm Bill. I was the Governor of Nebraska when it was written. The 2002 Farm Bill, I believe, was the right policy for the times. I supported it. I was lead governor for Western Governors on the reauthorization of the Farm Bill. I was co-lead with Tom Vilsack of Iowa for Midwest Governors. And as I said, I supported it in 2002.
Why was it the right policy for the times? Well, commodity prices were low. Exports had declined for five straight years. The debt-to-asset ratio was not good; it was at about 15 percent for farmers. So the 2002 Farm Bill came in and it provided support. It was the first-ever Farm Bill with an energy title.
And it was a Farm Bill that really stepped forward in the conservation arena. In fact, 80 percent increase in funding arose out of that 2002 Farm Bill.
But like everything, ladies and gentlemen, the times do change, and times have changed. Let me just tick down through some important points here.
Commodity prices are strong for most of the program crops. Exports have increased every year. Last year in 2006 exports were at about $68 billion. We think we're going to set another record this year at about $77 billion. I think in the six years that President Bush has been in office, when it comes to farm exports we've set records three out of those six years. His trade agenda has made a difference in the country.
Look at the balance sheet. We have the lowest debt-to-asset ratio in recorded history, 11 percent -- really remarkable. And of course although renewable fuels have been around a long time, it's really been during the life of this '02 Farm Bill, especially in the last couple of years, that we've seen such significant growth. And now renewable fuels are a significant contributor to the economy of rural America.
As I said to you, as we started thinking about how do we want to approach this, who should we listen to, who should we consult, who should be a part of this process, we came down to the notion that it should be the people most affected: farmers and ranchers.
Maybe you'll challenge me on this, but I don't think a Secretary of Agriculture in history has ever reached out this extensively across the country, and 52 Farm Bill Forums in 48 states, 4,000 comments received. The largest one was in Minnesota. We give Minnesota a gold star today; they turned out 1,600 farmers and stakeholders to talk to us about farm policy.
Forth-one summary papers put those comments together We posted all of that, and then we charged Keith Collins and our economists to do analysis papers. And they did, on five themes. And they've been posted. And we've invited people to offer their thoughts on that.
Here's some of the things that we learned, and talk about prairie wisdom here. We would listen to these things, and like I said I'd be sitting up there on a stool on the stage and think to myself, "Is what they are saying really happening with our farm policy?" Well, a gentleman showed up at our farm bill forum, a forum I did in Lubbock, Texas. And he said, "The current farm program has really served its purpose." Then he went on to say, "It's time to move on, it's time to craft new farm policy."
To create such we need a new look at our success and failures in the current bill.
In Missouri I did a Farm Bill Forum, a gentleman by the name of Larry showed up and said, "We urge you to carefully review how well the current farm program has been working for agriculture, and consider ways to maintain the current farm bill structure as we go forward with the debate."
And I will tell you, that was the theme that we heard pretty consistently across the country -- not unanimous especially in the commodity area -- but a pretty consistent theme was, you know, "It may not be getting the job done here or there, but we like the structure, we like how this thing came together in terms of overall structure." And we paid attention to that testimony.
We also had a woman by the name of Kristina in Virginia, and she said, "Farm bill policies are supposed to preserve family farms." How often have you heard that? She went on to say, "But they disproportionately channel money to big agribusiness." We listened to Kristina.
Len in Wisconsin said something about tax policy. You know, we got it all at these Farm Bill Forums. On any given day you might be talking about farm policy, tax policy, the inheritance tax. I mean literally after the first meeting, you know, we put out those six themes we wanted folks to talk about -- you know we figured out almost immediately, just best to let them talk. We're learning more from them, just saying "The microphone's open, tell us what's on your mind."
Well, Len from Wisconsin said something that we heard a lot about, that it's a piece of the Tax Code, it's Section 1031, and he says, "The 1031 is just driving our land rents and our land values through the roof." He said, "You know, it's getting to a point where even the big producers can't compete."
In my home state of Nebraska, we went out and did a Farm Bill Forum at Husker Harvest Days, if I remember correctly. And we had a gentleman by the name of Ernie show up, Ernie and John from Kansas. This is probably the best example of testimony that at first blush sounds counterintuitive.
Let me tell you why. During the debate on the '02 Farm Bill, I know what I was advocating for. I was advocating for what the farmers were telling me was important to them. They wanted a safety net. They just basically said, you know, "Look, in good times we can set the government to the side; let us farm for price. But there may be times that aren't good, and we want a safety net to try to help us during those difficult times."
Well, this testimony took me off-guard. Ernie said, "Too often our farm policy focuses only on prices. The focus, we feel, should be on revenue, which takes into account both prices and yields." "The current Farm Bill tends to overcompensate," he said, "when it should not, and under-compensate when assistance was needed." You can only imagine, I'm sitting up there thinking, "What is he trying to tell me? I thought we had a true safety net here; you're telling me that we're sending money when you don't need it? And when you most need it, the safety net is not there?"
But then we kept hearing that theme. John from Kansas said, "We didn't raise anything because of drought." Whether you're in Kansas or Nebraska or South Dakota or many other states, you can relate to that comment. So what did he say about our farm program? "The prices went up and we didn't get any payment. We didn't have anything to sell."
As farmers said to us, "You know, Mike, I can't LDP a crop that I don't raise." And you know what? They're absolutely right. You know where they got hit twice? What tends to happen is that if the crop isn't there, the prices go up. Simple supply and demand phenomena. And guess what happens to the countercyclical? It doesn't kick in. When these people are coming to the forums and saying these things, I have to tell you it sounded counterintuitive because I was focused on the '02 bill having solved this safety net problem, when in fact it hadn't at all.
Then we had some comments about trade. Trade would always get people talking. But a gentleman from Georgia said something very important. He said, "If we're going to play in this free trade game and continue to support our farmers, then we need to trade-proof our programs." Now maybe that's because this is a part of the country where they really understand the importance of trade. I talked to a cotton farmer about trade. Eighty percent of the cotton raised in the United States is exported. I talked to a rice farmer about trade, and 50 percent of the rice grown in the United States is exported. Every third row of our row crows is exported.
Ellen in North Dakota, another Farm Bill Forum that I did, I believe this was the North Dakota State Fair -- Ellen showed up and said, "As the program exists right now, there are in fact no limits on commodity payments." This was a very interesting debate, and I kept mentioning, you know, you go to the South, they don't like payment limits; you go to other parts of the country, they'll show up at the Farm Bill Forums and say, "We need payment limits." It was a very, very interesting debate.
Then James from New York said, "Historically this Farm Bill has benefited a crucial group of farmers. However, by supporting expansion of fruit and vegetable purchases, we have the unique opportunity to use the '07 bill to positively impact the health of our children." Again, kind of a provision that maybe not a lot of people pay attention to, but James in New York, this was an important statement that he made to us, that he wanted to make to us, at the Farm Bill Forum in New York.
So here are the principles. You've heard about them. As we started working our way through all of these comments, some things became really apparent. And I started talking about them some months ago. These proposals we believe are more equitable. These proposals are market-oriented. They provide support when revenue is low despite high prices. Remember the comments from Kansas and Nebraska? They are more equitable; they distribute resources more equitably among producers and among commodities.
I've talked many times about where the payments go. I don't need to rehash that today other than to say, these proposals are more equitable distribution, better able to withstand challenge. These proposals transition toward market-based programs and away from programs tied to price or production.
And or course very important, we have to keep that support amongst the people who pay the bill, the taxpayers. I have to be able to go a city in America where there are no farmers and ranchers and effectively make the case that our farm policy is a wise federal investment, which I maintain. I believe these programs wisely and effectively spend taxpayer dollars.
Okay. We get into the heart of the proposals, the commodity proposals. I'm going to walk you through these and maybe catch up to the slides in a moment. Let me, if I might, start out with payment limits. Again, for the moment, I just ask you to focus on me. The slides, I'm going to jump away from for a second because I have some things that I think are just important to say to you.
We have a proposal on payment limits that would end our commodity program subsidies to producers who are among the top 2.3 percent of Americans who file federal tax returns. Basically, the way this works is, we're taking a different approach to payment limits than what you've seen in the past. We are basically saying this: if you have an Adjusted Gross Income of $200,000 or more, your participation in the commodity programs under Title I of the Farm Bill would cease. That is, in the top 2.3 percent of Americans if you look at the statistics of the Internal Revenue Service.
We also go on to say that we are proposing to eliminate the three-entity rule. Let me explain to you how that will work. This is direct attribution, is what we call it. What it means is this. You can receive payments from any number of entities, but you are limited by two things. The first thing will be the $200,000 AGI, putting you in the top 2.3 percent of American tax-filers. And the next one will be a payment of $360,000.
Some of you will ask the obvious question, "Well, gosh Mike, how many people are getting money who are in that range of Adjusted Gross Income, because that is way up there." Well, it will save about $1.5 billion. It's a significant amount of money. It is a significant amount of money.
We also heard this comment over and over again about the safety net. And again, I was educated on this. I thought the safety net was already addressed in the '02 bill. I really was educated by the farmers who spoke about, you know, "I'm getting a lot of money when I'm producing a lot; I'm not getting the safety net when my production is impacted."
We took that to heart, we came back here and started studying that, and we found out first of all that they were absolutely right. During some of the best years we paid out the highest payments.
And so we will be proposing to the Hill a countercyclical program that is based upon revenue. There's been a few stories about this over the past few weeks. We certainly appreciate the work of the Corn Growers, we certainly appreciate the work of the Farm Bureau and others that have worked on this idea. We have spent time working on it.
I won't try to dig down into the weeds because we have many great technicians who can take you as far into the weeds as you want, but I will tell you this. When that gentleman from Nebraska and Missouri, speaking for other farmers, told us the safety net wasn't doing the job, we listened very seriously. This safety net will actually work better across the commodities to provide a true safety net.
We have actually done comparisons here with those commodities where you can look and say, "This will work better." Why? Because it's based upon a revenue trigger and not a price trigger. The price trigger is going to deal people out of the safety net when they need it the most.
Now if I might talk to you a little bit about our proposals relative to loan rates, the Loan Deficiency Payment, and the Marketing Loan Program. One thing that you begin to realize when you start working on farm policy is that everything is very intricately interrelated. It all does have to fit together.
What I'm going to tell you I believe fits perfectly with what we've been talking about in terms of the safety net approach to agriculture. In the marketing loans, we are going to adjust the loan rates down to more reflect the actual market. How will that happen? This is not a situation of saying, "Well, I'm kind of comfortable with this number for corn and that number for soybeans." Not at all. We look at the five years of the last Farm Bill. We take the average price of the commodity for those five years, throwing out the top year, throwing out the bottom year, try to avoid distortion, and take the average price.
We then cap that if it becomes necessary, again not by picking a number out of the air but by using the loan rate approved by the House of Representatives when they passed the 2002 Farm Bill and sent it to the Senate. If you will remember, during 2002 the House went through their process, hearings, debate, whatever, voted, and arrived at a loan rate. And the commodity groups looked at what they had suggested and said, "Hey, not a bad Farm Bill."
We have decided to use that loan rate from House action in 2002 to establish a cap.
Now let me, if I might, pull in another piece of what kind of becomes a complicated puzzle. Many of you were with me when I was out at a convention recently, and I made kind of an off-the-cuff comment. I said, "You know, some of you are probably tempted to tell the WTO to go take a hike!" And I got a little smattering of applause out there, and some of you reported that maybe I was a little surprised by that. Nah, maybe not.
But I went on to say something that really, really is important. Farmers do understand trade. Sure, we had great debates about trade. I can still get a great debate by going to about any coffee shop in a rural community in America, standing next to a tractor with a farmer. They have questions: "Who's winning? Who's losing? Is it fair? Are we getting the best opportunity to trade we can?"
But you know in the end, they understand trade. Why? Because 80 percent of the cotton grown in the United States is sold in the international marketplace. Tell a cotton farmer that trade is not important; you won't get very far. And 50 percent of the rice grown in the United States goes into the international marketplace.
I always say to farmers, "Cuss it, discuss it, the reality is you are farming in an international economy." It just is the reality of the situation.
Our proposals here will result in some savings. One of things you will see is literally item by item -- we don't have a year score yet, we're not quite there yet -- but item by item you will see that we've had some savings there.
We are proposing to increase the direct payment for the commodities. Now how is this going to work? We decided that the fairest way to approach this is if we generated a savings from a commodity we should assign that over to an enhanced direct payment for that commodity. And the net effect of all of that is that for cotton they will get an enhanced direct payment of about 65 percent, and that will kick in the first year of the Farm Bill if our proposal is adopted on the Hill.
For the other commodities out there, they are experiencing really strong prices. But we will increase their direct payment, again not tied to price or production, and it will result in an increase in the third, fourth and fifth year of the Farm Bill in the direct payment by about 7 percent. And that's how that program will work.
Now you know what we've been struggling with, the WTO cotton case. It is real, and like I said the cotton guys sure understand trade. They raise cotton very effectively; 50 percent of it goes into that international marketplace.
Direct payments that are decoupled from price and production as a general rule are compliant with trade rules.
Let's go ahead and flip through some charts here and see if there's anything I left out there. Go on to the next one.
Going through the payment limits. Let me pick up at the bottom of that slide with some things that we could not be more excited about, and again the wisdom for these proposals did not come here in the Beltway from the USDA. They came from farmers.
One of the things we'd hear from farmers out there is, "We love your conservation programs but they do impact the economy of our local area." And we thought a lot about that because if you have land out there in conservation, obviously you're not buying much to make that land work. You may be mowing it periodically and seeding, and that sort of thing, but that's about the extent of it. We are proposing to provide a conservation enhanced payment option, the option to replace commodity support payments with an enhanced direct payment for conservation efforts.
Let me explain how this will work. Maybe a farmer raising a given commodity looks out over the life of this Farm Bill and says, "Man, it looks to me like projections are indicating that I'm not likely to benefit from the Loan Deficiency Payment or the countercyclical program. Prices are really good, really strong. But there are some things on my list that I've been wanting to do from a conservation standpoint on my farm that, gosh, if there was just a program that would work, maybe I would get those things done."
But this program is a voluntary program -- choose it or not choose it. If it works for your operation, great; if it doesn't, that's fine too -- but we say to the farmer, "If you want to place that farm into a conservation program with us, with goals, with standards to be reached, with an idea of what you're going to do from a conservation standpoint, and agree to forego during the life of the Farm Bill -- this is not something you bounce in and out of every year -- commit yourself to this for the life of the Farm Bill and forego the loan deficiency and the countercyclical, we'll enroll you and we'll enhance your direct payment by 10 percent."
Now obviously again it makes a lot of sense from a trade standpoint, but where it really makes sense is that may be the perfect plan for that farmer, and it enhances what that farmer can do with his land. They can still grow corn or soybeans or cotton or rice or fruits or vegetables or whatever they are doing out there. And actually this payment is actually for the commodity title crops.
But it may be the perfect fit for that farmer who is raising those program crops to put that farm in and do some of those conservation things that they haven't gotten done as they look out over the life of this Farm Bill.
"1031." I'll bet if I went out there and started every forum with just one word or a couple of words, "1031," I'd get a debate for the next three hours. You remember the comment from the person who said, "Not even the big producers can compete." Land values have gone up, cash rent is going up. Basically what we are saying is that we will eliminate the commodity program payments on land acquired through a 1031 tax exchange, and this is going forward if I remember. Our proposal is on a going-forward basis. It doesn't impact what happened next.
Now, I want you to be absolutely clear about something. We're not rewriting the 1031. If you own an apartment building here in Washington and you decide that you want to buy Nebraska ranchland with your profits, great. And if you can shelter that because of the 1031 exchange, great. This doesn't impact that.
What we are saying is that if that occurs, that you won't participate in the commodity programs on a going-forward basis that arise on Title 1 of the Farm Bill.
Two quick points on milk and sugar. We are proposing to revise the Milk Income Loss Contract program to make it consistent with the countercyclical program. We will continue the price support program for milk. So those are the two changes.
For those who are really interested in detail, what happens with the MILC program is it's a stairstep down from 34 percent to the last year it would be at 20 percent. But the MILC price support still stays at $9.90.
Sugar. Sugar presents issues for not only us but for folks on the Hill trying to figure out the right approach to sugar policy. We are proposing to keep the sugar program. We are proposing to keep the sugar program with one policy proposal. Currently if we import more sugar than 1.532 [million] tons, we are obligated to lift the limits on the sugar program, the marketing allotments. Now literally what happens is that says to the producer, "Let it go, if you've got sugar, sell it if you choose to." We just basically open it up.
Now the problem that creates for us is, we're also obligated by law to administer this program here at the USDA with no net cost to the taxpayer. As prices go down, once you hit that loan rate area people will forfeit sugar and you would literally have to set aside funds to buy sugar.
We are proposing to keep that program with this policy change. We are saying that if we go over 1.532 [million] tons of sugar, that we could impose the marketing allotments.
Now just to get a little more specific, with NAFTA, which was negotiated and passed now a decade ago, we have been ratcheting down -- according to the NAFTA requirements -- the duties on sugar. Essentially it's an open market now. It is absolutely an open market during the life of this next Farm Bill.
Mexico raises a lot of sugar, but they use a lot of sugar, and typically have a pretty strong price. We adjust to think that we're not going to get sugar every year but it does lead us to think that there may be years that we will get sugar, duty free, under the NAFTA agreement, that could push us over 1.532.
The policy approach to that therefore is to ask Congress for the authority not to lift the marketing allotments which would collapse the program, but to put the marketing allotments in place.
From a standpoint of the sugar industry, sugar producers, I would think, would look at this and say, "This makes sense."
Terri is saying I need to move along.
Continuing with our commodity title, we are proposing to allow planning flexibility of fruits, vegetables, and wild rice on program base acres. You know why? The WTO in the cotton case ruling said that tying direct payments to production results in that going into the amber box.
We are addressing that problem in this proposal. We're requiring basic retirement when all or a portion of the cropland is sold for no-ag purposes. You want to sell your ag land for a shopping center, great. This is America, you can do that. But we retire those base acres.
We expand conservation compliance, we eliminate USDA program payment eligibility on grasslands that would be converted into crop production. We don't have a lot of grasslands left in this country. We believe they are worth preserving. You can still tear up grasslands, I guess, under this proposal, but you can't get the program payments.
Okay. Conservation. I'm going to start rolling now. We've been through the most complicated pieces of the proposal. We're going to increase our -- propose to increase conservation funding by $7.8 billion. We consolidate existing cost-share programs into a newly designed Environmental Quality Incentives Program. Full funding increase to $4.2 billion. And again I emphasize, all the numbers I used today are based on a ten-year score because that's where this starts, with a ten-year score.
We include $1.7 billion for a Regional Water Program. We streamline working lands easement programs into one Private Lands Protection Program and increase funding by about $900 million, and we eliminate some redundancy, some technical work.
We're committed to wetlands as you know, and we increase Wetlands Reserve Program funding by $2.1 billion and increase the acreage to 3.5 million acres.
We increase funding for Conservation Security, and actually, if you will, balance out or straighten out some of the funding issues with that program, but we increase funding by about $500 million. We reauthorize the Conservation Reserve Program with added focus on the most environmentally sensitive areas.
We're going to give priority within whole field enrollments to lands utilized for biomass production. This is a program I am really excited about. We don't want all of our environmentally sensitive land to be driven out of conservation by the price of a commodity, where maybe they grow a crop two years out of five because it's on such sensitive land or in dry areas. What we are saying is: one of the factors we will consider is a program that meets all the environmental requirements, does all of that, meets all of the nesting requirements for birds and that sort of thing; but we will consider as a plus on your application, if you will, and allow you to take a piece of that land for biomass production in terms of harvest.
This works with the working lands concept that we heard as we traveled across the country.
We'll authorize federal agencies to accelerate the development of private methods for trading of ecosystem benefits. This hasn't gotten a lot of attention recently, or maybe ever for that matter. I gave a speech on it recently and so it's something that I think makes a lot of sense for the future.
We're going to consolidate two emergency response programs into a new Emergency Landscape Program. These are great programs -- EWP, ECP -- but we've got everybody confused, probably here and outside, as to where they apply and what they do. We're going to consolidate them into a one-stop-source, under our proposal.
We heard a lot from beginning farmers and socially disadvantaged farmers. We are proposing to set aside 10 percent of all Farm Bill conservation program spending for beginning and socially disadvantaged farmers. I know socially disadvantaged farmers are defined in statute as basically minorities and women. And I think Keith was saying they are also defined -- we define "beginning farmers" somewhere.
Okay. Let me go to our trade programs. A number of things here are very, very positive for the specialty crop farmers in the United States. We're going to increase funding by $68 million for specialty crop technical assistance programs, increase allowable project awards to $500,000. We will increase funding for the Market Access Program by $250 million, but we are proposing to target that toward the non-program crop areas.
We are establishing a new grant program to address emerging sanitary and phytosanitary issues-- again, another theme that we heard from our specialty crop producers.
We're going to enhance U.S. presence with international standard-setting bodies. How many times have you heard me say, "They need to live by international standards?" We believe in this; we're increasing our funding.
We will increase our analytical support and technical assistance to assist limited resource U.S. ag groups. A small group out there gets tied up in a trade question; this would give us authority. It's not a money-based thing, but it would give us very clear authority to work with that group to help them solve their problems. And we are doing some things to expand trade capacity, food safety, and agriculture extension programs into the fragile regions around the world -- Afghanistan comes to mind, Iraq would come to mind. There are other parts of the world where this kind of investment can make a huge difference.
We are reforming the Commodity Credit Corporation's Export Credit Guarantee programs to better withstand challenge and repealing a couple of things that really have fallen out of use.
I don't think these are big issues. For us it's kind of a clean-up thing.
Nutrition programs. We have a number of proposals, but basically what we're trying to do is simplify and modernize the Food Stamp program, while maintaining its integrity. We're going to improve access in a number of proposals for the working poor and the elderly to better reflect the needs of the recipients. And states are going to like some of the things we're proposing.
Advocates have been asking for this for a long time. It's long overdue. "Food Stamps" is really out of the past. There was a day when you walked around with a coupon that we called a stamp. Now we want to call it the Food and Nutrition Program or something different than Food Stamps.
We're going to streamline other food assistance programs to improve administration and efficiency. Emergency food assistance, food distribution on Indian reservations, and our Senior Farmers' Market Nutrition program.
In the nutrition area, we have some things targeted at our fruit and vegetable farmers. We have heard a lot: "You promote eating fruits and vegetables; are you going to follow up in the Farm Bill with what you say people should be doing?" "Yes" is the answer to that question.
We will provide $2.75 billion in additional fruit and vegetable purchases for distribution in food assistance programs. We'll increase funding by $500 million for schools to buy fruits and vegetables. Now this is a program where a school may look at this and say, "We want it in a snack program." Great. We're fine with that. They may say, "We want it in the Breakfast Program," or "The Lunch Program." We want to give the schools the discretion to put the program in place -- as long as they are buying fruits and vegetables that will best serve the needs of that school.
Then we're providing some funding for grants to states to develop and test solutions for a problem of obesity targeted to low-income areas.
"Credit Programs" have gotten to have a lot of attention from certain segments of agriculture. We are going to increase the limits for direct ownership loans and direct operating loans to a combined total of $500,000. Young farmers were asking us to figure out ways to be creative in assisting them in getting started in farming.
We're going to double the percentage of direct operating loans targeted to beginning and socially disadvantaged producers to 70 percent. We're going to target 100 percent of direct farm ownership loans toward beginning and socially disadvantaged farmers.
We're proposing to provide greater down payment loan access and flexibility to beginning farmers and ranchers. Again, a theme we heard often out there. We'll cut the loan interest rate in half, we'll defer the first payment for one year, decrease the minimum contribution toward the property purchase price from 10 to 5 percent, and eliminate the $250,000 cap on the value of property that may be purchased -- all things we heard about in Farm Bill Forums or comments off the stage.
We have some programs in Rural Development that I could not be more excited about, and you know what? The country is excited about Rural Development. Not a single negative comment in any Farm Bill Forum I did.
We're going to do some consolidation of Rural Development programs to increase our flexibility and efficiency. We want to operate better. We want to provide $1.6 billion in loans to complete the rehabilitation of 1,283 certified Rural Critical Access Hospitals in this nation. There are 1,283 hospitals in very rural areas where that hospital care is desperately needed because of distances. There are over 1,200 of those hospitals where we just simply didn't have the money to complete their rehabilitation. I've been to some of these hospitals in rural areas. Without that hospital, people don't have adequate health care.
We are putting money into this program to complete them all. It's a loan program, and this program will allow us to complete the rehabilitation of every single one of those hospitals. We're providing an additional $500 million to reduce the backlog of rural infrastructure projects, a hugely popular program, always more demand than our ability to meet. But we decided to take a step forward on this, and we should be able to address 30 percent, maybe as high as 50 percent but certainly 30 percent of the backlog. Waste disposal, water assistance, loan and grant programs, distance learning, telemedicine, like I said, communities really appreciate this program.
We are proposing a number of things in Research. Again we're very excited about these proposals. Providing additional $1 billion for specialty crops research. One of the things we heard from our specialty crop farmers is, "We need help in this research area."
Provide $500 million to create the Agricultural Bioenergy and Biobased Products Research Initiative. What we're going to be working to do here is to enhance the production and conversion of biomass to renewable fuels and related products.
We're going to reorganize and revitalize the USDA's Research, Education and Economics mission. The goal is to better coordinate our efforts here in-house with what's happening out there with university-funded research.
We heard from forestry. This is a big issue in some areas of our country. We're proposing to initiate a new $150 million Wood to Energy Program. Again this is part of the President's mission to expand the use of renewable and alternative fuels. This is to accelerate development of new technologies to use low-value woody biomass to produce energy. We have an abundance of this around the country, and it would be better for our forests if we could deal with it. This is to try to think about how we can be creative, environmentally sensitive, and use this to advance our energy independence.
We're creating a grant program to develop innovative solutions to local forest management issues.
Energy. A lot of this was unveiled already, so I can hit this quickly, but here's the detail. We're proposing to provide $500 million to create a Bioenergy and Bioproducts Research Program, as I indicated, provide $500 million for rural alternative energy and energy-efficient grants. This goes directly to farmers and ranchers and rural small businesses.
We're proposing to provide $2.1 billion in loan guarantees to support cellulosic ethanol projects in rural areas, to actually build the plants. These loan guarantee programs again, very well-received out there, and it's part of the package that sometimes can make a project happen. I've seen it happen when I was Governor of Nebraska.
We propose to provide $150 million for biomass research competitive grants. Again, the focus is going to be on cellulosic ethanol.
We have a number of miscellaneous proposals. First is to improve our risk management tools for farmers by creating a supplemental insurance program. This is the gap coverage, right, Keith? Yeah. Let me just give you a quick explanation. I'll talk about it a little more at the end of the presentation.
Currently you can buy, let's say, crop insurance for 70 percent of your loss. For some farmers, well-established, that's good. They can withstand the 30 percent loss. Don't like it, it's not a good situation, but it's not going to put them under. We are proposing literally "gap coverage" now where you can buy that gap coverage to cover 100 percent of your loss under the crop insurance program. Something we have heard -- we hope this will help with the annual debate about ad hoc disaster.
We're proposing to increase the efficiency and effectiveness of our crop insurance program with a number of proposals, some of which you've seen in budget submissions. We are revising the dairy assessment requirements to create a more fair system. This is an issue that's really a fairly small issue but important issue. There are some areas where we don't collect dairy assessments. This would solve that problem.
Increase funding for research, data collection, and certification of organic agriculture.
Quick areas of special focus. Our countercyclical program proposal is a revenue-based proposal. There will be a better safety net than what we have now. Our gap coverage in crop insurance will deal with this issue of, "Yes, Mr. Secretary, but I'm uninsured on so much of my loss." This will allow that producer to solve that problem.
We are proposing again that if you receive program payments you should have crop insurance. Crop insurance is widely accepted out there. Some states have 90 percent-plus participation. That's not unusual. We want to get that last piece enrolled. If you get subsidies from the program, we feel strongly that crop insurance is appropriate to help manage in that risk.
Then we have the new emergency landscape restoration program which is actually a consolidation of two existing programs. For beginning and socially disadvantaged farmers, we provide $250 million to increase direct payments by 20 percent for five years. I hadn't mentioned this yet, but beginning farmers said, "Look, is there something you can do?" We thought long and hard about this. We wanted to make sure they could plan on this for a period of time as they start farming. Again, not price-dependent or production, and so we said "Here's an idea; let's propose that a beginning farmer who qualifies for this program will get an increased direct payment -- in addition to anything else we're doing -- of 20 percent for the first five years."
I would point out that if you sign up for this in the last year of the Farm Bill, we have costed this out, so you'd get it for five years. It's a five-year program.
We've revised the Beginning Farmer and Rancher Downpayment Loan Program, which I already talked about. We also reserve 10 percent of conservation financial assistance to beginning and socially disadvantaged farmers.
We provide $2.7 billion in Section 32 funds to purchase fruits and vegetables for food assistance, $500 million for fruits and vegetables in schools, $250 million to increase the Market Access Program, targeted to our non-program commodities.
We're providing $20 million to address sanitary and phytosanitary issues. We are proposing to increase our ability to offer technical assistance, and we're making specialty crop waste eligible under our energy programs.
Summary of the highlights: They demonstrate fiscal responsibility. They save about $10 billion over the cost of the 2002 Farm Bill excluding disaster aid. I will also tell you that they uphold the President's plan to eliminate the deficit within five years. It fits within that plan.
And we also support emerging priorities. We increased funding for renewable energy and conservation research, rural development, and trade. We also provide $5 billion more than would have been provided if the 2002 Farm Bill were just simply extended. Remember a year ago, people were saying, "Well, maybe we should extend this." This proposal actually will provide $5 billion more over that 10-year score. However, it will still fit within the balanced budget plan.
We tightened the payment limits as I have described, and we ensure a strong safety net for our producers. We increased conservation funding. We provide additional funding and new funding for energy research development and production.
We provide $1 billion in loans and $500 million in grants to our rural communities and we dedicate nearly $400 million to trade-related efforts. We target nearly $5 billion in funds to support our specialty crop farmers, and we provide $250 million to enhance the direct payment for beginning farmers.
We support socially disadvantaged farmers with a number of our programs, and we simplify and modernize their Food Stamp program.
I'll just wrap up. I think I'm about out of time, aren't I, Terri? And I tell this story a lot, and it kind of defines for me what this should be about. You know, I think about my own father, and he grew up right on the edge of the Depression years. His productivity was to the extent that he could milk cows by hand. So when he got to 12 or 13 cows, that was pretty well the end of it. That's all he could do. Somewhere along the line, somebody had the vision to say, "You know what, we don't' care if you live on the most remote farm in North Central Iowa or the most remote ranch in Arizona; we're going to get you electricity." And they electrified the countryside.
And all of a sudden his ability to be productive literally doubled with the flip of a switch, and his world changed. And he could maybe go to town and talk to the banker and maybe have money in his savings account and he could buy milking machines to plug in. And all of a sudden it wasn't 12 cows, it was 30 cows. And he provided a better life for our family, him and his wife working together, my mother.
Now I make that point to you because I believe so strongly in what farmers have said to us. They like the structure of this Farm Bill, but they have a big vision for the future. It may be energy in their part of the country, it may be a different crop that they raise, it may be the fantastic result they've seen from increased cotton production because of the enhanced variety of cotton that they can plant today that didn't even exist 20 years ago.
It may be a thousand things. But after listening to farmers all across this country, I came back committed to offering a Farm Bill that did what they asked me to do: "Keep the structure, we like the certainty of the structure, but change where it's not working, and give us an opportunity to expand our vision for the future."
We believe this Farm Bill, America's Farm Bill, does exactly that. Thank you very much.
Okay, I think, Terri, I've run out of time, haven't I? One or two questions.
REPORTER: Are you going to visit Central Valley, California, tomorrow? What titles and issues will be the focus of your visit?
SEC. JOHANNS: They will be especially interested in our trade, our research, and our specialty crop initiatives. I did give a briefing to a lot of folks last night. Chuck and I and others were on the phone well into the evening. One of the people I talked to was A.G. [Kawamura], the Ag Secretary out there, and we pointed out some of the things we were doing to give him just an advanced heads up.
I have to tell you, I think our proposals in the specialty crop area will be very, very well-received because it hits all the issues they talked about -- research, phytosanitary, sanitary, market promotion, purchases of fruits and vegetables to improve the nutritional quality of some of the programs we have.
So those will be some of the themes I'll talk about. I also expect while I'm there to get a briefing on the damage relative to the recent freeze.
REPORTER: Mr. Secretary, what's been the response from lawmakers on Capitol Hill? I know you've been up yesterday, you were up there again this morning. What has the response been to your proposals?
SEC. JOHANNS: Here's what I would say. Boy, farm bills are so challenging because I will work with lawmakers from every region on the country, every crop you can possibly think of. The diversity in farm policy is just huge. I would say this: I do think they are very appreciative of the work that we went to. I think this is being regarded as a very extensive program. Like everything, we got a long way to go to the finish line. But I think if the comments are any indication, they've been very encouraging in terms of us being a part of the process. And for us, that means a lot.
So I certainly don't want to speak for anyone. I've read some of the comments of lawmakers, and I appreciate their comments so much. And we're anxious to move forward and, like I said, get a Farm Bill done in 2007.