Transcript of Remarks by Acting Agriculture Secretary Chuck Conner to the New Jersey Farm Bureau Federation Annual Meeting
Princeton, New Jersey - November 15, 2007
SEC. CHUCK CONNER: Paul, thank you very much for that introduction, and I really do thank all of you very much for having me here today. I know I have disrupted your schedule considerably for this event, and I really do appreciate the opportunity for us to come back to New Jersey to talk once again about the Farm Bill.
Paul mentioned that I am from Indiana, and you know Indiana of course, there's the Indiana Hoosiers, and I think we share something in common in that I'm not sure people exactly understand why New Jersey is the Garden State, I don't know if they understand why we're Indiana Hoosiers, but there's a lot of speculation on what that is. But I will tell you, I really appreciate this state. What you contribute to American agriculture, which is substantial, very substantial. We want to recognize that. I hope you feel like we have recognized that as part of our Farm Bill proposals going forward.
Within your state I am advised that 40 percent of your cash receipts in agriculture come from greenhouse and nursery products, and of course that certainly does enable you guys to carry the label of the Garden State of America.
Specialty crops though, ladies and gentlemen, like these, are becoming increasingly important in American agriculture. When we released our farm bill proposals last January, one of our very top priorities was to distribute federal support more evenly so that specialty crop producers saw benefits from a farm bill that they have historically seen very little benefit from. The discussion on the Farm Bill really is coming to a head this week; perhaps even today as we're speaking it may be coming to a head. And as you know, the Senate has taken up this measure and is literally in the midst of this debate.
I am following this debate closely in hopes that the Senate as a whole will put forth a better farm bill than the one that came out of this Agriculture Committee just last month. I do, ladies and gentlemen, have a number of concerns with that bill. I don't believe it represents the best interests of our agricultural industry if it were enacted.
Let me just say quickly that my first concern in the Senate bill as it stands is it really does very, very little to reform and change our historical farm policy in any way, at a time when our industry is changing rapidly, modernizing and in my opinion in need of new policies, of updated policies.
The proposals we offered in January contained real reform. They increased, increased support for agriculture, but also focused on the near priorities for the future that simply haven't been emphasized in the past farm bill. In addition to calling for greater support for specialty crop producers, they also added more incentives for renewable energy, conservation - something very, very important to this state - and trade. And the goal of these proposals was not simply to increase our support for agriculture but certainly to enhance it going forward.
Enhancing it does mean spending dollars from the federal government more efficiently; it means looking at where we can do the most good. And it means trimming the fat from outdated and ineffective programs, ladies and gentlemen. And there are some of these programs within the Farm Bill.
Today I do want to focus on three reforms that are crucial to making more efficient use of our agricultural subsidy programs. First, let me just say that we've put an end to what we call the "beneficial interest" or the "pick your price" phenomenon. As the policy now stands, government payments can be locked in by our farmers when the market price is very low, but they are not obligated to sell their crops during that period of the low prices. They can hold off, wait and sell those crops when the market price is higher, because there is no linkage and no requirement between executing the loan and the sale of the actual commodity. This leads to outcomes that Congress simply never intended.
For instance, in 2005 in the aftermath of Hurricane Katrina and the price fluctuations that followed it, going all the way into the upper Midwest, the option of locking in loan rates when prices were low, but selling later when they recovered, generated $3 billion in payments to farmers, that while they were perfectly legal, weren't based at all on any actual loss of farm income.
Now, ladies and gentlemen, where I come from in Indiana, I don't know about New Jersey, but $3 billion in the state of Indiana is a lot of cash, and I'm sure it is here too as well. The administration's proposal would require producers to give up their beneficial interest in the crop when they lock in that loan payment. This will ensure that producers receive the price support by the loan rate but not give them the opportunity to collect where no losses have occurred.
Second, and perhaps the most controversial that we have suggested, is that we have proposed reducing the adjusted gross income cap to $200,000. This provision would affect only about 38,000 people who are among the absolute wealthiest 2 percent of Americans. This change would generate about $1.5 billion in savings.
Now as we dug into this issue, ladies and gentlemen, you will note on this map that has been put up on the screen, this map happens to be a map of Manhattan. And to demonstrate just how far our programs have gotten off of track, the red dots on this map actually constitute farm program payments. This is not Manhattan, Kansas, ladies and gentlemen. This is Manhattan, your neighbor across the river. Those large red dots actually constitute payments of $250,000 or more, and you will note those large red dots track that poor, poverty-stricken little area that we call Park Avenue in New York City.
Now ladies and gentlemen, the purpose of our farm support payments is not to do what is in front of you here. The people on Park Avenue can afford to stand for themselves without getting taxpayer funded farm program payments. I stress this point because, again, we could save $1.5 billion in this Farm Bill and use that $1.5 billion to support critical research projects, critical conservation projects, things that are critical to agriculture in the state of New Jersey, simply by saying that if you are among some of the wealthiest people in America, we've defined that as 2 percent of the wealthiest people in America, we're going to congratulate you and say we've got a great country but we're not going to give you taxpayer funded income subsidies any longer. And again, understand ladies and gentlemen, this is controversial. And the House and Senate, as logical as that may sound, have said, no, we can't do that. And we're saying, yes, you can. You can do that. As a matter of fact, you've got to do that in order to give us a farm bill that has credibility in all parts of the country where we can go and say this is a bill that's about a need, it's about helping producers when they're down.
And you know, folks, as I travel the country, there is no one - city, farm, urban, rural, anywhere else - who says don't help farmers. They do a lot for the country, they have a lot of risk, they do great things, they feed us for the cheapest price anywhere in the world. We can justify our farm programs on that basis. But we cannot justify this. It's justifiable. We've got to change that, and we're going to continue to argue with the House and the Senate for this kind of change.
Now to move on, let me just say that the Senate bill also increases target prices and loan rates on about 80 percent of the crops that we provide direct income subsidies for. They increase target prices and loan rates. We believe again this is a step in the wrong direction; it increases trade-distorting support. We believe it paints a bull's eye on the back of American farmers to get sued by our international trade courts, suits that we have already lost, unfortunately, despite vigorous defense. This is the wrong time to be raising price support levels.
And I would say at a time when we are enjoying a $28 billion increase in net farm income, it is hard again to see how we can justify at this point further asking for more from the taxpayers beyond the generosity that they have already given us. The Administration's Farm Bill proposal did propose tying loan rates to the actual average market prices over five years, and this will continue to provide a strong safety net; again, which I believe can be defended in all sections of the country but not one that gets us in trouble internationally, certainly not one that distorts the market in any way.
Again, ladies and gentlemen, this simple change would result in $2 billion in savings that can be used for other very high priority items, priority items that I believe would be extremely important in places like New Jersey. This change would provide some real reform that we need to strengthen our industry.
Ladies and gentlemen, as well, let me just tell you that I do not believe that we can continue to do anything that would jeopardize agricultural trade. It is too important to our economy. The second problem I have with the current version of the Senate Farm Bill is the way that it is being financed as well, financed through tax increases and budget gimmicks. Our analysis shows that it contains nearly $22 billion of budget gimmicks, $22 billion of budget gimmicks; another $15 billion of new taxes.
Is there anyone in this room - folks, I go to a lot of Farm Bureau events. If I could just digress a moment, I will just tell you I have a strong background in the Farm Bureau. My father was a lifelong Farm Bureau member. I grew up from the time I was big enough to walk, going to Pet 'n Hobby - maybe that dates me, maybe that's something the Farm Bureau doesn't even do anymore, but it used to be a youth program for young kids in the Farm Bureau - if that's something you've away from. Farm Bureau has been a part of all of my life. And I worked very, very closely with a member from Indiana who was close to the Farm Bureau as well, so I think I know a lot, quite a bit, about the Farm Bureau. Let me just tell you, I don't go to Farm Bureau meetings where they're going to stand up and say, You know, the federal government is just too small and we need more taxes to make it bigger. Is there anybody here who believes that? I don't think so!
And you know, as I travel, again, all over the country, whether it's a Farm Bureau meeting or somewhere else, no, people in rural America just don't believe we need more taxes to make the federal government bigger.
But that is exactly what this bill does. The current version of the Senate Farm Bill might appear to meet the Congress's self-imposed pay-go rules on paper, but there's no way, ladies and gentlemen, that it meets the spirit of those pay-go rules. The Senate is not being straight with the American people about what this bill will cost and how they are financing it with taxes.
I believe it makes a mockery of any kind of budget process, any kind of normal budget process that you would expect your Senate and House to use. It claims $10 billion of illusionary savings simply by delaying the timing of payments beyond the snapshot of the budget. It speeds up collection of certain payments to bring it within the snapshot of the budget. Of course later on when we do a further snapshot, those payments won't be there, so we'll be creating a problem later on. But within the snapshot of the budget they've moved revenues in, expenses out, and boy their budget looks pretty good. You know, look folks, again, I spend a lot of time with a lot of farmers. All of my family is involved in agricultural production. This is not what the producers that I talk to want from their federal government. It's not what we want.
We want to be able to stand up and say, straight up, we've got a good Farm Bill, this is what it will cost, and I believe again that across America people are going to say right on, keep doing it, because we want to provide a safety net for our producers. But they don't want illusions; they want straight-up talk. And this is going to be essential for the future of our farm policy.
I've shown you here a little bit on this chart, and this again demonstrates a little bit of what I've said, and you can see the light blue is what the administration proposed for the first five years, $4.4 billion. Their bill is $23 billion over the cost of the current farm bill. The current farm bill is one that was fairly heavily criticized for spending too much money. They are spending $23 billion on top of that; over the 10-year cost estimate $37 billion compared to our $3.3 billion.
So you can tell they've gone overboard here in terms of the dollars going out.
Now folks, I know we're close enough to Washington and you guys follow what's going on in Washington. Some of you may just simply be saying, Chuck, you've been in Washington for a number of years and I appreciate what you're saying but this is just Washington, just the kind of stuff Washington does. I've got to tell you folks, I've worked in that town in and out for a long time. I don't accept that. I think we have a responsibility to the American people, and I believe farmers want us to have a responsibility to the American people to spend those tax dollars that we've been entrusted to spend.
I don't like to talk about our tax dollars at the Department of Agriculture. They are not the Department of Agriculture's dollars. They are earned dollars from people out there sweating in a factory doing hard work, earning a living, paying taxes with that. They are the people's dollars. And we have an obligation; we've been entrusted to spend those wisely, not to resort to this kind of stuff.
Any farm bill that resorts to this kind of stuff I will just, again, tell you folks, we're going to have a problem with it. We want straight-up accounting. We don't want to grow the sizes of the federal government with higher taxes.
I do believe, and I want to be clear, that farmers deserve a strong safety net; but I believe also that again Congress risks undermining it by refusing to focus our government support where there is a true need, not on Park Avenue but where there is a true need. And of course asking other sectors to pay for the cost of that bill.
In a highly developed state like New Jersey you know the dangers of this all too well. This isn't a state that is dominated by farmlands. In fact, you work very hard to protect the farmland that you have. When I come here I have to be able to justify farm policy to producers like you, but I also have to be able to walk across the river and into places like New York and justify that same policy. I will remind you that here in New Jersey you do export $750 million worth of agricultural products each year. International trade is important to this state. You've got easy access to your ports. I know you watch a lot of goods come in, but you also export a lot of goods out of the geography that God has provided to this state.
Overall I want to say that our agricultural exports are on track to hit $79 billion this year, $83 billion next. These are very, very large figures, tremendous growth from where we have been. A lot of people say we've got higher prices in agriculture today because of ethanol, and we do. But exports are also fueling those higher prices, generating better times on America's farms and ranches, significantly as well, and we need to continue that trend.
We need farm policies I believe that continue to encourage trade. And I will just tell you, ladies and gentlemen; in the future we talked about the fact that we are going to add one billion new middle class consumers on this planet between now and the year 2020, just about 13 short years of new middle class people. What does that mean? That means these are middle class people who will actually have the ability to buy products, to upgrade their diets.
Now our challenge is that one billion people are not in the U.S. Virtually none are in the U.S. They are overseas, in places like India, Asia, those kinds of places. It's a fundamental question of, are we going to try and sell to these people who have new-found wealth, who have become middle class people on this planet? Or are we going to disregard them and simply say, no, we're not going to try?
I obviously believe we ought to try to sell to those people. I believe our agriculture in this country will prosper if we can sell to those billion new consumers over the next decade. Our policies have to encourage that, pushing policies that distort trade, obviously, again are moving in the wrong direction. And as your acting secretary I can't in good conscience support that kind of policy. And that is indeed the direction that we are headed with this Senate-passed Farm Bill.
As I have noted, obviously a lot of concerns here. I want to be clear, ladies and gentlemen, that if this bill that is currently being debated in the Senate were presented to the President of the United States for his signature, all of his senior advisors would unanimously recommend that he veto that farm bill. That's a tough thing; I'll just tell you that. I am one of the President's senior advisors, and I as well would recommend that veto if this bill were presented to the President.
Now our concerns are serious, but I want to be clear, at the end of the day we want a new farm bill. If we pass the old farm bill, I believe a lot of important issues that were raised by people in New Jersey when you came to our Farm Bill Forum about the importance of specialty crops, the importance of conservation, the importance of farmland protection, all those kinds of things that were priorities for the administration's farm bill, if we simply extend current law all of that goes by the wayside. And that would be unfortunate.
I still think we can get a new farm bill that addresses those priorities, priorities that include rural development which is so critical to certain regions of this state. I believe we can get a bill that achieves those objectives but also one that plays straight with the taxpayers and with our accounting principles in the federal government. And I think we can do that fairly quickly. It's going to require a change in attitude. One of the reasons I am here is to bring a message to you of the need to have that change in attitude so that we can get a good farm bill, one we can defend all over the country and I believe all of us will be better off if we achieve that. And I very, very much want that to happen to meet the many challenges that we're going to continue to face in American agriculture, in New Jersey and in the East Coast in particular, challenges that simply have not been met in the past. I believe they are important challenges that deserve our support, and I look forward to working with all of you.
I will close again with one final comment, and this is a Farm Bureau experience that I've had that will show you the importance the Farm Bureau has always been in my career. When I was a young man 23 years old, I worked for Senator Richard Lugar who is the senior senator from the great state of Indiana. One of the very first committee debates that I got a chance to advise Senator Lugar during that debate, it was about dairy policy. Obviously, being 23 and young and new and wet behind the ears, and green everywhere else, however you want to characterize it, I wanted to be fully prepared to be impressive during this debate. So I had done all kinds of analysis of the impact of this bill on dairy and just gone through charts, graphs, documents, everything. I was ready for whatever Senator Lugar needed. I remember to this day sitting there behind him in this little chair in the Senate Agriculture Committee, and we were in the middle of the debate, and I could see Senator Lugar writing. And I knew he was going to ask me a question. And he turned to me and said, Chuck, what is Farm Bureau's position on this bill? And I kind of flipped through my graphs and charts and I quickly realized I didn't know what Farm Bureau's position was on that bill. I will tell you, ladies and gentlemen, since that point I have never gone into any debate on anything without knowing Farm Bureau's position because of the hard lesson that I learned as a young staffer.
You are a great organization; you do great things not only for your membership but for the young people who aspire to be Farm Bureau members. Keep up the good work. And again, thank you for this opportunity for me to share a few thoughts with you, and I look forward to any questions or comments you may have for me today. So thank you all very much.
MODERATOR: Do we have a quick question or two from the floor? Len Solara?
QUESTION: Could you tell me, please, is there any discussion about national security that includes consideration of the role that local small farms play in feeding local and regional populations?
SECRETARY CONNER: Well, actually I participated in the entire House mark-up of the Farm Bill, and I will tell you there was a great deal of discussion during the House mark-up about this particular topic. Obviously it's becoming more and more of an important topic, important in terms of the percent of the market share that it represents among those consumers out there who desire to purchase products locally. This is clearly a huge growing segment of the market. I think affords many, many opportunities obviously for states like New Jersey that have in this case it would be the benefit of more of an urban/rural kind of mix. You're close to your marketplace. I think it again affords you that opportunity for this growing situation.
We feel like our support for the specialty crop sector within the Farm Bill actually is going to aid this movement pretty considerably. We called for the purchase of a lot of fresh fruits and vegetables as part of our Farm Bill proposals. A lot of these proposals have been picked up by the House and the Senate. Obviously the locally grown produce you're going to have a lot of advantages. We gather these products to sell and provide to our schools through our congregate feeding sites to help low income Americans, this kind of thing. There are a lot of opportunities out there for that locally grown produce, which is again one of our largest growing segments of our ag economy right now.
MODERATOR: We'll take one more if there is. Jim Gemmery.
QUESTION: You didn't specifically address minor crops. New Jersey as you know (unclear). Has the administration - I know there's talk of (unclear)? Can you fill us in a bit more, briefly?
SEC. CONNER: I will. Again, I think I've mentioned this briefly in my remarks, but to give you just a little bit more detail, first of all know that when we went out for our Farm Bill listening sessions, it's not so unusual that you go to the countryside and hear what farmers are thinking. What's unusual is the fact that we covered the entire country with our listening sessions and came to places like New Jersey, we went out West, places that typically don't benefit from farm bill programs, and we asked them what they thought. In those forums including here in New Jersey we heard a great deal from producers saying, I don't grow corn, soybeans, cotton or rice, but I grow a lot of fruits and vegetables, and I may not want direct income subsidies from the government but we've got a lot of challenges within this industry, challenges in terms of promoting our product, meeting environmental requirements, challenges in terms of pests and disease that I can't seem to control and need some help in terms of research - all those kind of things were raised at the Farm Bill Forums.
We address all of those in our proposal, and we provided real money to help our specialty crop producers to the tune of I want to say $4.2 billion. I may be a little bit off on my number there, but a very, very substantial amount of support for the fruit and vegetable sector.
Key point, specialty crop industry now represents a majority of American agriculture today. That industry has a right to be at the farm bill table because they are the bulk of our agricultural economy out there. And we've tried to put them at the table. Again, they don't want - we didn't run into anybody who said, Give me a check from the government. But they said, Help us solve this problem, help us promote our product around the globe, help us get our product into the hands of needy school-aged kids so that we can improve their diets so that perhaps they will eat an apple instead of potato chips. I don't mean that disparagingly against - I'm not trying to start a food fight, but obviously we're in the business of promoting a lot of fresh fruits and vegetables in our school system, making those more readily available is an important part of that as well. All those were included as part of our Farm Bill recommendations.
MODERATOR: Secretary Conner, I said one more question, but our executive director Pete Furey asked me if he could ask one more.
SEC. CONNER: Absolutely.
QUESTION: About disaster (unclear), could you explain the administration's position, Senate Finance Committee (unclear) on the table, needs to be done in this regard?
SEC. CONNER: I know it is, and this is a tough topic for us and always has been. We did not provide any money for direct disaster assistance. We preferred really an approach that focused more on strengthening our crop insurance program. We did so by creating what is called "gap insurance" coverage. One of the big complaints about crop insurance is, you have to have such a large loss before your first level of payments kick in that sometimes it makes it not worth it for a lot of crops, particularly for a producer that's got a heavy amount invested in that crop, a lot of risk associated with it. By the time you get down to a 35, 40 percent crop loss, you're pretty much in deep trouble by that point. We wanted to give you the ability to do crop insurance to insure all the way up to 100 percent. That's what we call our gap insurance idea. That was part of our proposal.
We felt that was a better option. The reason we felt it was a better option, I will just tell you, is that the Senate has provided $1 billion a year for five years to put in this trust fund to create for disaster assistance, $1 billion a year over five years, and then that trust fund terminates at the end of those five years. So that's $5 billion over the next five years, nothing after that.
Here's the problem. On average, what do we need a year in terms of disaster assistance? About $3 billion a year is what we've been averaging in terms of our pay-out. I say $3 billion, that's what we paid. Congress usually asks for $6, and we haggle with them, and you end up giving them about $3 billion. So they are substantially under funding the true need that is out there. Congress will continue to have to come back and debate whether or not to provide additional money on top of the $1 billion that's there. That puts us right back to where were at the beginning, and that is a lot of producer uncertainty where you're out there trying to make production decisions, trying to second-guess whether Congress is actually going to provide disaster assistance or not.
I want to tell you, that's always a pretty dicey business because Congress is pretty unpredictable. That's been my experience for a lot of years up there.
We felt like we needed to take that uncertainty out by proposing a better system that's going to be there regardless of what Congress may or may not do, and that was the reason we went in our direction. We don't see the $1 billion as solving very many problems for the producers out on the ground. So that's our justification.
Thank you all very much. I really appreciate this chance. Look forward to coming back to New Jersey to see you guys soon.