Transcript of remarks by Agriculture Secretary Mike Johanns President

Transcript of remarks by Agriculture Secretary Mike Johanns President

SEC. MIKE JOHANNS: Thank you very much. Well, thank you very much, President Jischke. I really appreciate the opportunity to be here today. I have to admit in front of this crowd with some trepidation that many years ago when I was looking around for undergraduate schools I did not have the good sense to come to Purdue. But I did do the next best thing, ladies and gentlemen. And I told the last group I spoke to that I thank the Dear Lord for Indiana every night when I lay down and go to bed. Now you probably wonder why I'm gushing about this. It's because I married a Hoosier, so I did the next best thing.

Well, I do want to say thanks for the excellent tour. This is one of those tours where you walk in, you know you're going to have a limited amount of time, and you wish you could spend all afternoon. It was very impressive.

With the great work that is going on right here and at other universities and research centers across this nation. I am really more confident than ever that we will unlock the secrets of cellulose before very long. Maybe in a generation we'll be looking back on gasoline the way that people looked back on whale oil today and wondering what all the fuss was about.

Well, energy is on everybody's minds these days, and I do want to visit with you about that. I also thought that maybe this would be a great opportunity to give you a quick overview of our proposals, the Administration proposals for this year's Farm Bill because they affect energy so directly and they affect the agricultural sector.

So while I speak here, if the technology is working right -- yes it is -- we're going to walk you through a PowerPoint here.

When I came to Washington a little more than two years ago, the Farm Bill was already visible on the horizon. I saw the run-up to the bill as a chance to really examine what was working with our farm policy and quite honestly what wasn't working. I saw it as an opportunity to connect with people whose lives were very directly impacted by our policies.

So we began by talking with farmers and ranchers all across this great nation to see what they thought about the current policy, and we got a lot of valuable insights.

Ladies and gentlemen, all told, we collected more than 4,000 comments from farmers and ranchers and agricultural stakeholders in the 52 Farm Bill Forums that we held across the United States. We analyzed what we heard, we did some rethinking, and we came out with a set of Farm Bill proposals that I believe provide a very strong safety net for producers, while moving us to a more market-based approach, and setting an ambitious agenda for renewable energy.

Now as this slide would indicate, the Farm Bill is a very important piece of legislation. I think sometimes people look at the USDA and they say to themselves, well that's where the farmer programs are managed. And yes, we do manage farm programs there. But we do so much more.

The Farm Bill really sets the direction for all of USDA's programs. The previous law, the 2002 Farm Bill, will expire later this year and Congress will have to choose to either extend it or replace it, and these are all the areas that will be impacted by that decision.

To step back a little bit, the 2002 Farm Bill in my judgment was the right answer at that time. And I will tell you, as the governor of Nebraska, a major farm state, I supported that bill. We had just come off several years of weak prices and declining exports, so expanding the safety net for farmers made sense at the time. It was also the first Farm Bill to include an energy title. I find that a remarkable statement today when you think of the profound impact energy is having on agriculture, and the '02 bill was really the first time we had an energy title in a Farm Bill. It also greatly expanded our conservation programs -- two important policy choices that were made during that Farm Bill that are even more relevant today.

But going to the next slide, let me point out some things. Times do change. And times have changed. And the world is changing around us. We are now in a much stronger farm economy than we saw in '01 and '02. Corn prices recently hit a 10-year high, and soybean prices also have been strong. In fact, except for cotton, prices for all major program commodity crops have been strong. Farm cash receipts should reach a record $259 billion in '07; that's up $20 billion from just two years ago and up $16 billion from just last year. Those are very large jumps.

We recently bumped our export estimate this year to $78 billion. This means a one-year increase of $9.3 billion which is the second largest year-to-year increase on record.

Times do change, and of course one of the major changes is that the demand for energy crops is literally transforming rural America.

Going to the next slide, we had a few basic principles in mind as we sat down to shape our proposals. First, we wanted to make our support for producers more predictable. At our Farm Bill Forums, we heard from many farmers that our countercyclical program payments weren't providing support when it was needed most. You see, our system was based on price, but it did not take into account revenue or yields. So in years where the production was down because of drought or other problems, and prices were high, the countercyclical did not kick in; so there was no help for farmers.

But during years of high production, those good years when prices were fairly steady, they were getting payments from us and very large amounts that they would tell us at the forums, quite honestly, were more than they needed.

We propose moving to a revenue and a yield-based system to rectify that issue. Now producers will get help in years when they need it most.

Secondly, we wanted to distribute our support more equitably amongst the agricultural sectors. So we decided to expand our support for farmers who grow fruits and vegetables or other specialty crops as they are referred to in Washington. This segment of the market has been showing strong growth and last year sales at the farm gate of these products reached $37 billion. Yet they received virtually no support, and definitely no cash support from the subsidies.

To make sure our support is distributed more evenly among producers, we're also proposing new payment limits, and we have lowered the cap on the adjusted gross income from $2.5 million annually to $200,000. So if you go over $200,000 worth of adjusted gross income, you would graduate from the cash subsidy payments.

Third, we wanted our farm programs to be better able to withstand the challenges we face in the international trade arena. Support tied to price or tied to production opens up challenges under the rules of the World Trade Organization, and over the last few years we've had to deal with a series of legal setbacks on our support programs. We are reforming these programs to make them more market-oriented and to ensure that Americans and not our trading partners are setting the future direction of our farm policy.

You see, it makes no sense whatsoever to pass a program that in effect paints a bull's-eye on the back of the American farmer. That's no safety net at all.

And fourth, we wanted to make sure that we were making wise and effective investment of taxpayer dollars. I believe strongly in providing support for farmers and ranchers. I think it is an investment in America; I believe it's a wise federal policy. But we also have to respect budget constraints and exercise fiscal responsibility.

The next slide indicates kind of the macro picture of our proposals. Altogether, our proposals would save more than $10 billion over the next five years compared with what was actually spent over the last five years relative to the '02 bill. They would also fit within the President's plan to eliminate the budget deficit by 2012. Yet they would still deliver $5 billion more in support than if we just simply said, let's extend or reauthorize the current '02 bill.

The major new spending commitments we have proposed are in conservation and in the energy title. We would direct an additional $7.8 billion to conservation programs over the next 10 years. These help us support farmers without affecting the price for production of crops. And we also propose $1.6 billion for renewable energy initiatives, which I'll talk more about in greater detail in just a moment.

The next slide indicates we would also propose $1 billion in loans, and $500 million in grants to assist rural communities. These funds would help to rehabilitate rural critical access hospitals, and I might mention that you have 36 of those hospitals in the state of Indiana. These funds would also go toward rural infrastructure needs.

I mentioned specialty crops a minute ago. This slide depicts what we're proposing to do with our specialty crop programs. We want to target nearly $5 billion in support to specialty crop producers. Specialty crops are now close in value to our program crops; yet as I said, they receive virtually no cash subsidy support.

And we heard so much about the need to support beginning farmers. All the young people that are here today, this is an area of my presentation that I would strongly recommend you make some mental notes or jot down some notes. I'm especially pleased with these proposals. For starters, we're proposing a $250 million increase in direct payments to beginning farmers in the program crop area, and we've proposed other changes to make loans more accessible and flexible, those details are available on the USDA website, USDA.GOV.

As you can see, ladies and gentlemen, there's a lot in this Farm Bill. Now I'd like to focus on just one part of it. I came here today to see what you were doing with renewable energy, and I have to tell you I was impressed.

Going to the next slide, energy as we all know is a critical national security issue. It's an economic security issue, and it's an environmental issue. I believe it's especially appropriate to be talking about renewable fuels on National Agriculture Day because agriculture is going to be a very big part of the solution to our nation's energy challenges, and more specifically renewable fuels are going to play a very big role in the future of agriculture.

Going to the next slide, the President's Farm Bill proposal includes more than $1.6 billion for research and development in new renewable energy funding. A big piece of it, $210 million to support $2.1 billion in loan guarantees, is there to help build commercial skill cellulosic ethanol plants in rural areas. But there is very much more. For research, $500 million over the next 10 years for a major new bioenergy and biobased products research initiative. I saw the research you are doing here at Purdue, as I said, this is one you want to pay attention to.

And there is another $500 million in grant money which would go directly to farmers and ranchers and rural small businesses to invest in renewable energy and energy efficiency projects. Then with specific focus on cellulosic ethanol, we would commit $150 million to biomass research and $150 million to wood-to-energy research. And provide $100 million in direct support to cellulosic ethanol producers to help them reach commercial skill operations.

It just seems to me with the research you are doing here in cellulosic energy, there's some opportunities. Bottom line, energy is a priority for the country, for the President and for the United States Department of Agriculture. The Farm Bill touches on initiatives spread throughout the Department.

Biofuels are a good a place to begin. Ethanol and biodiesel in my judgment are the new frontier for corn and soybeans. U.S. production capacity for both fuels has grown very rapidly over the last few years. Today for ethanol it's 5.6 billion gallons with another 6.4 billion under construction. And for biodiesel, it's 864 million gallons with another 1.7 billion under construction. Our production numbers haven't caught up with our capacity yet, but they have been rising sharply.

I might mention, we recently displaced Brazil as the world's largest producer of ethanol.

The president of the Renewable Fuels Association, the Ethanol Industry Group, will be joining us by a conference call I believe in just a few minutes. I'll let him tell the rest of the story. It's a great story.

Biofuels are already driving commodity prices. They are also producing a wave of new jobs, new businesses, new construction, and new infrastructure, and what I find exciting is it's happening in rural America. Wind power has also grown rapidly. Wind may not be the crop we can grow, but it is a resource that we can harvest. Because of siting constraints, wind farms have to be built mostly in rural areas, and they will be paying royalties to farmers and ranchers and other rural landowners. Installed wind capacity in the United States has quadrupled since 2000. It's gone from 2,578 megawatts of installed capacity to 11,603, and that's a remarkable amount of growth. Some of these new wind farms are being built by rural electric cooperatives which we helped finance, or by rural investors assisted by the USDA Rural Development program.

As part of his strong leadership on energy issues, the President has set a national goal of boosting our annual production of renewable fuels in the U.S. to 35 billion gallons within the next 10 years. He has also tasked us to cut our annual consumption of gasoline by 20 billion gallons at the same time.

These are a challenge, but they are attainable targets. The President is very simply counting on the creativity, the ingenuity and the enterprise of the American people to close the gap between where we are today and where we need to go; and history tells us that's a sound bet. We recognize that we won't be able to reach the renewable fuel goal the President has set just by relying on corn and soybeans.

That's why, ladies and gentlemen, we're giving a very high priority to research into ways to make cellulosic feedstocks, such as grasses, and woodchips and agricultural waste, a cost-effective alternative to corn and soybeans, or an addition, in making ethanol and biodiesel fuel. The answer to this puzzle is going to be found in the research lab.

That's why I'm very excited about what I see here at Purdue. The work that is being done here is truly trend-setting, it's incredible. And we're proud to be a partner through CSREES, the Cooperative State Research Education Extension Service, in funding some of the research.

The work on biocatalysts, yeasts and plant lipids being done right here at Purdue is an important part of our effort to unlock the energy that nature has stored in our plants. USDA's own scientists, especially at the Agricultural Research Services Peoria Center, are also in the hub. They are developing new enzymes that can be used to break down cell walls. And the Forest Service, which is USDA's agency, is doing its own work on woody biomass into energy and cellulosic ethanol.

Perhaps this gives you a flavor of what USDA is all about and why we're starting to talk about the USDA being the energy agency. Since 2001, the USDA Rural Development area has invested more than $480 million in 1,100 renewable energy and energy-efficiency projects. We do everything from farms to biorefineries to solar power to methane gas recovery. The list just goes on and on.

Today, we're announcing the availability of $176.5 million in loan guarantees and $11.4 million in grants under our Renewable Energy and Energy Efficiency Program. These funds can support renewable energy and energy efficiency projects that are undertaken by farmers and ranchers or small businesses. In Indiana last year, we committed $500,000 under this program to Integrity Biofuels in Morristown. Our grant is helping Integrity double production to 14 million gallons a year.

Not too long ago when you looked at a map of ethanol and biodiesel industries, there was a big blank where Indiana was at. But your governor Mitch Daniels, your director of Agriculture Andy Miller, the great work of institutions like Purdue, have turned that all around in a big hurry. Indiana is benefiting from strong leadership.

There's another initiative we are launching today that I hope will be of interest to you. As a research tool for you and for anyone in the private sector or academia who would like to partner with us, we have developed a new web tool called the Energy Matrix. No, we didn't name it after a movie. We named it the Energy Matrix because it is a matrix. I hope you'll check it out. The Energy Matrix is easy to navigate on-line system that lets you search a cross the USDA by agency, technology type and type of activity. There's a lot to explore; energy touches everything. It involves challenges, but what great opportunities.

Let me just wrap up with this thought. You know, if you think about it, what I just said is the opposite side of the same coin, and the American free market system has a genius for flipping the coin, for turning problems into opportunities. We believe that's going to happen in energy as well. The President's Farm Bill proposals, America's Farm Bill, are an aggressive, realistic investment in America's energy future.

And it's been a privilege for me to present that to you this afternoon. Thank you very much.

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