MR. CARNEY: Thank you very much. Welcome, everybody, to the White House for your daily briefing.
As I think you had advanced warning of, I have with me today the Secretary of Agriculture, Tom Vilsack. As you know, he briefed the President today on the drought that is affecting a significant portion of the country. The President asked for this briefing. And I asked that Secretary Vilsack join me here today to give you an update and to take your questions on issues surrounding the drought.
If you could, as is past practice, hear Secretary Vilsack's presentation, then ask questions that you have for him. I will, of course, remain here ready to take your questions on other subjects.
And with that, I give you Secretary Vilsack.
SECRETARY VILSACK: Jay, thanks very much.
I did have an opportunity to visit with the President. He is very well informed on the circumstances surrounding a very serious drought -- the most serious situation we've had probably in 25 years -- across the country. Sixty-one percent of the land mass of the United States is currently being characterized as being impacted by this drought.
And our hearts go out to the producers, the farm families who are struggling through something that they obviously have no control over and trying to deal with a very difficult circumstance.
There's no question that this drought is having an impact on our crops: 78 percent of the corn crop is now in an area designated as drought impacted; 77 percent of the soybeans that are being grown in this country also impacted. It also obviously involves other commodities as well -- 38 percent of our corn crop as of today is rated poor to very poor; 30 percent of our soybeans poor to very poor.
And this obviously will have an impact on the yields. Right now we have indicated yields will be down about 20 bushels to the acre for corn and about 3 bushels to the acre for beans. That may be adjusted upward or downward as weather conditions dictate.
This will result in significant increases in prices. For corn, we've seen a 38 percent increase since June 1st, and the price of a bushel of corn is now at $7.88. A bushel of beans have risen 24 percent.
This administration has taken quick action to try to provide help and assistance. At the instructions of the President, the first thing we did was to streamline the disaster declaration system and process, reducing the amount of time it takes to have a county designated. That means that producers in those counties and adjoining counties are able to access low-interest loans.
The President instructed us to reduce the interest rate on those loans from 3.75 percent to 2.25 percent. He also instructed us to open up new opportunities for haying and grazing -- our livestock producers are in deep trouble because of the drought. They don't have anyplace for their cattle. They are looking at very high feed costs. So we are opening up areas under the Conservation Reserve Program for emergency haying and grazing.
Normally when that happens, producers have to return a portion of the CRP payment that they receive. We've reduced the portion that they have to return from 25 percent to 10 percent.
Our tools are somewhat limited and so we're going to need to work with Congress to provide opportunities either through the passage of the Food, Farm and Jobs bill or through additional disaster programs, or perhaps additional flexibility in the Commodity Credit Corporation to provide help and assistance to our farmers.
The question that a lot of folks are asking is what will the impact be on food prices. Because livestock producers will begin the process of potentially reducing their herds in light of higher feed costs, we would anticipate in the short term actually food prices for beef, poultry, pork may go down a bit, but over time they will rise. We will probably see those higher prices later this year, first part of next year. Processed foods obviously impacted by crop yields, and we will likely see the increase of that also in 2013.
It's important to note that farmers only receive 14 cents of every food dollar that goes through the grocery store, so even though prices on commodities increase significantly, it doesn't necessarily translate into large increases for food prices. And if, in fact, people are beginning to see food price increases now, it is not in any way, shape, or form, related to the drought. And we should be very careful to keep an eye on that to make sure that people do not take advantage of a very difficult and painful situation.
There is some degree of uncertainty about all of this. Technology has allowed us to have more drought-resistant crops. The spotty nature of drought, the spotty nature of rains can sometimes result in better yields than anticipated. We're just going to have to see. As of today, 1,297 counties have been designated as Secretarial Disaster Areas. That's approximately a third of the counties in the United States. We're adding 39 counties today in eight states -- those states are New Mexico, Tennessee, Utah, Wyoming, Arkansas, Indiana, Georgia, and Mississippi.
We have staff that is now traveling to 12 states significantly impacted by the drought in order to get a firsthand look at conditions, and we'll do everything we possibly can to help folks. But we're obviously going to need some help, working with Congress, to create greater flexibility in programs, to revive the disaster programs that were allowed to expire last year, or to pass a Food, Farm and Jobs bill.
Jay, with that --
MR. CARNEY: Yes. Ben.
Q Thank you. Thank you, Mr. Secretary. Two questions. To follow up on the point you just made about your tools are limited, is there a specific amount of aid that you'll be seeking from Congress?
SECRETARY VILSACK: It's very difficult to pinpoint that with specificity because we don't really know what the impact could be. For example, based on our current estimates today, the corn crop would still be the third largest corn crop in the United States history. And the reason for that is because there were more acres planted at the beginning of the year.
So we just have to wait to see what our yields are going to be. In the meantime, though, we can create a structure and system, either through a revival of disaster programs or passage of the Food, Farm and Jobs bill that contains some relief for livestock producers, or some flexibility in CCC, so we're prepared to move as soon as we know precisely what the impact is going to be.
Crop producers have the ability to utilize crop insurance, and for the most part, crop insurance will provide historically about 72 percent coverage of yields and revenue loss. But it's the livestock producers that are in the biggest and most troubled situation because they simply don't have any disaster program and there's no such thing as a crop insurance program for livestock producers.
Q I just have one other question. You gave us some specific numbers about crops and prices, but this drought is obviously happening at a very difficult time for the whole country and the economy. Can you give us a macro sense of how this drought could affect the economy?
SECRETARY VILSACK: Well, right now, the rural economy is one of the bright spots in the economy. We're seeing record farm exports; we're seeing expansion of new markets; we're seeing development of a bio-based economy with record amounts of biofuel being produced; and we're seeing outdoor recreation opportunities take off because of more acres in rural and conservation programs.
So it's a little difficult to say what the macro impact will be. One out of every 12 jobs in the economy is connected in some way, shape, or form, to what happens on the farm. We're actually seeing farm implement -- up to this point, we saw an increase in farm implement manufacturing and shipments at record levels.
Obviously, this drought will provide some degree of uncertainty, but the most important thing is for Congress to take action to provide some direction and assistance so that folks know what's going to happen, what kind of protection they're going to have. That certainty is really important. And that's whether they want to get to work on the Food, Farm and Jobs bill, they want to develop a separate disaster program or an extension of existing programs, whatever it might be -- having that done as soon as possible will be quite helpful.
Q Mr. Secretary, two questions. Number one, you mentioned farm exports as being a bright spot. Do you have any sort of estimates on the amount of reduction on exports for corn and soybeans now, given the drought situation -- even a range? And second, will there be any EPA assessment of the mandate using corn for ethanol?
SECRETARY VILSACK: There's no need to go to the EPA at this point in time. Based on the quantity of ethanol that's currently in storage, there's no problem in that area at this point in time.
On exports, we would anticipate and expect they would be reduced. But again, the area and the amount of reduction depends on what the yields are, and I won't know what those are until we, in fact, harvest the crop.
Based on what we have today, I would anticipate and expect a small decline, but that could be changed next week if the crop conditions continue to worsen, or it could be improved if we get the right rain in the right places at the right time and the right amount.
Q Secretary Vilsack, going back to the issue of crop insurance, I was told that crop insurance is very expensive, with the premium, maybe for some farmers, $15,000 a year. What happens to those farmers who cannot afford the crop insurance? Those small, minority, women farmers who just can't afford it -- what is in place or what are you talking about putting in place to help them in the midst of this drought situation?
SECRETARY VILSACK: That's why the President was so insistent on taking a look at the interest rate on the emergency loan program that we have. And that basically reduces -- it provides emergency loans to get people through a tough period of time. And the interest rate was reduced from 3.75 percent to 2.25 percent for those producers who are located in counties that have been designated as a disaster area.
So the emergency loan is one opportunity. The second opportunity for those producers would be a situation where Congress would provide for a revival of the disaster programs that expired. We had a program last year called SURE that provided supplemental protection; livestock producers had a livestock indemnity program -- they could bring those back. So they could create opportunities within the Commodity Credit Corporation for us to provide financial assistance to those farmers.
So there's a whole series of options. But right now, the only option we have is to reduce the interest rate on the emergency loan and make sure that haying and grazing is available to livestock producers.
Q So what are you doing to make sure, to ensure -- because right now you're still dealing with a lot of minority, Indian, and women farmers who are having complaints about the subsidy programs that you offer. What are you doing to ensure that there's an equitable process that they are able to obtain those loans now?
SECRETARY VILSACK: We have in place a process by which we compare the amount of loan activity in counties where there are significant percentages of socially disadvantaged farmers or minority farmers to make sure that the amount of loans that are being authorized and approved are roughly equivalent to the percentage of the population of the socially disadvantaged minority. So that we keep engaged and if we see that there's a significant difference, we'll obviously pay attention to that particular county.
But I think everybody understands that now it's all hands on deck. The President is very concerned about making sure we do everything we possibly can to help as many producers as we can through this difficult circumstance.
Q Based on what you know today -- and understanding it's imperfect information -- how do you think this drought is going to compare with the '88 drought? Do you think it could be worse than that?
SECRETARY VILSACK: If we were comparing it today to potential yields, the '88 yield would have the corn crop being about 25 bushels less than what we have today. The beans would be roughly five bushels less. So we're not at the '88 level.
There's probably a larger area of the country that's impacted, but the severity is not as deep yet. But every day that goes by without rain, depending upon the state and the condition of the soil, and what was planted and when it was planted -- part of the problem we're facing is that weather conditions were so good at the beginning of the season that farmers got in the field early. And as a result, this drought comes at a very difficult and painful time in terms of their ability to have their crops have good yields.
Q Sir, could you elaborate on your concerns about short-term gouging or taking advantage of the situation? And at what point in the food chain does that occur?
SECRETARY VILSACK: Well, everybody knows there's a drought and everybody knows it's severe, and everybody knows that the corn prices and bean prices have gone up, and that impacts livestock producers in the long term. What folks don't know is it does take some time for those prices and that impact to be felt. Nor do most people realize how little farmers get out of that food dollar. So even though prices are increasing, it may not translate into significantly higher food costs.
Right now we estimate our food inflation rate somewhere between 2.5 and 3.5 percent. In fact, this last month it was at 2.7 percent, which was one-tenth of a percent less than the preceding month.
So it's complicated. Because it's complicated, some people could say, well, this is an opportunity to potentially raise costs now. And we want to make sure people understand that now is not the time that they should see higher food costs. If there are going to be higher food costs, you would likely see them later in the year and in the first part of next year.
Q And what are you doing -- what's the Agriculture Department doing, what can it do, to track for this kind of activity?
SECRETARY VILSACK: Well, through a number of nutrition assistance programs, we can kind of keep an eye on what we're spending and where we're spending it and whether or not it is historically in the norm. And if it's not, we can take a look at it.
But I think the most important thing right now is for consumers to be aware and to keep an eye on it, and begin asking questions -- if they see a dramatic increase in hamburger costs or steak costs -- they should ask, what's with this? And if someone says it's the drought, they should push back and say, now, wait a second, that's not the reason. We should actually -- given that herds are being reduced and potentially liquidated, we should actually be seeing a little lower cost right now. And that pushback may make a difference.
Q Thank you.
Q Mr. Secretary, you've mentioned corn and beans several times. I'm wondering why the focus on that and not other crops. Is it because they have such a multiplier effect throughout the economy, throughout the food supply?
SECRETARY VILSACK: Not so much that. It's primarily the area of where the drought is most severe is primarily where corn and beans are raised. Wheat, somewhat impacted. The biggest other impact is for livestock producers -- hay is obviously going to be much more expensive because there's going to be a lot less of it.
That's why we're deeply concerned about the importance of getting action with our friends in Congress to try to provide some degree of assistance and help. And they have multiple ways they can do that. We just want to encourage them to do it as quickly as possible.
Q Mr. Secretary, thank you for doing the briefing. I know that the U.S. sells some of the livestock to Russia and probably to other countries. So do you expect an increase in the export of livestock because of this situation?
SECRETARY VILSACK: Well, it's conceivable in the short term -- as herds are liquidated, it could provide opportunities with lower costs for us to be even more competitive than we already are in that export market. Frankly, we are looking at record exports, notwithstanding the difficulties we're facing here. We had a record year last year; we're looking at a strong year this year.
As it relates to Russia, hopefully Congress will act and make sure that Russia enters the WTO in a way that allows us to put them in a process where they're in a rules-based and science-based system. That should increase and should help our export opportunities in Russia, more than just the current situation.
Q Could you talk a little bit about the drought itself? Is it very unusual? Did anyone see it coming? Is it from climate change? Is there anything you can do to prepare?
SECRETARY VILSACK: I'm not a scientist so I'm not going to opine as to the cause of this. All we know is that right now there are a lot of farmers and ranchers who are struggling. And it's important and necessary for them to know, rather than trying to focus on what's causing this, what can we do to help them. And what we can do to help them is lower interest rates, expand access to grazing and haying opportunities, lower the penalties associated with that, and encourage Congress to help and work with us to provide additional assistance. And that's where our focus is.
Long term, we will continue to look at weather patterns, and we'll continue to do research and to make sure that we work with our seed companies to create the kinds of seeds that will be more effective in dealing with adverse weather conditions.
It's one of the reasons -- because they have done that, it's one of the reasons why we're still uncertain as to the impact of this drought in terms of its bottom line because some seeds are drought-resistant and drought-tolerant, and it may be that the yields in some cases are better than we'd expected because of the seed technology.
Q I want to follow up on Andrei's question -- just the other way. Wouldn't it first make sense to increase imports of crops to feed the herds, instead of slaughtering? I mean, it's unconventional for this country to think about improving imports instead of supporting more exports, but --
SECRETARY VILSACK: Well, I think that the margins, particularly for livestock producers, are pretty tight. And those margins don't necessarily -- aren't necessarily impacted or affected by importing more costly feed. They have to make a tough decision and a difficult decision, and it's particularly difficult in light of the fact that the disaster programs that we're there to protect them under these circumstances -- to give you a sense of this, the disaster programs that we had under the 2008 Farm Bill, for all producers, including livestock producers, provided nearly $4 billion of assistance to 400,000 producers that suffered from floods and droughts and storms and fires and so forth.
So that was a significant help to those livestock producers. We don't have that today. We need something like that, and a lot of vehicles to get it. But in the meantime, I think the producers will make the decision to reduce herds, which is how they normally react to a circumstance like this, so they can minimize what potential loss they may be facing.
Q Secretary, should we be expecting that you and the President will be heading to a drought-stricken area soon? That's normally a path that you take when you're trying to show something is a priority.
SECRETARY VILSACK: Well, I can't speak obviously for the President's schedule, but I can tell you that actually I was in Pennsylvania yesterday. We do have the Deputy Secretary going to Georgia tomorrow. We've got the Under Secretary of the Farm Service Association traveling to several states that are drought-impacted and affected. We have a Deputy Under Secretary also traveling. So we actually are fanning out across the country to get a sense of what the conditions are.
It really is also an opportunity for us to underscore what we have done and what needs to be done, and the help that we need from Congress. So, yes, we're going to be continuing to travel throughout the country. I'm scheduled to go to Iowa next week to talk to Farm Bureau members and I'm sure that I'm going to have an opportunity to visit with them about the conditions of the crops in Iowa.
Q Mr. Secretary, I want to follow through on the climate change question. Is there any long-range thinking at the Department that -- you had the wildfires and the heat wave and the rise in sea levels, and now this drought -- that there's something more going on here than just one year of a bad crop, and you need more than better seeds, maybe do something about climate change?
SECRETARY VILSACK: Our focus, to be honest with you, in a situation like this is on the near term and the immediate, because there's a lot of pressure on these producers. You take the dairy industry, for example. We've lost nearly half of our dairy producers in the last 10 years. They were just getting back to a place where there was profitability and now they're faced with some serious issues and, again, no assistance in terms of disaster assistance.
So that's our near-term focus. Long term, we obviously are engaged in research projects; we're obviously working with seed companies. Don't discount the capacity of the seed companies. These technologies do make a difference. And it's one of the reasons why, at least based on the yields today, we're looking at potentially the third largest corn crop in our history. Now, that may be adjusted downward, it may be adjusted upward -- depends on the rain, depends on circumstances. But even with the difficulties we're experiencing, we're still looking at a pretty good crop as of today. Tomorrow it could change, obviously.
MR. CARNEY: We'll take one more for the Secretary. Yes, sir, right here.
Q I'm Dr. Harper, the Intermountain Christian News. And Governor Perry last year had this national day of prayer and fasting, and he was encouraging people to pray and fast in these national disasters. Do you have any figures on that?
SECRETARY VILSACK: Well, I can only speak for myself. I get on my knees every day and I'm saying an extra prayer now. If I had a rain prayer or rain dance I could do, I would do it. But honestly, right now the focus needs to be on working with Congress -- they have the capacity to help these producers by creating greater flexibility to programs, providing us some direction in terms of whatever disaster assistance can be provided. Those are the kinds of things we're focused on.
MR. CARNEY: Thank you very much, Mr. Secretary. We appreciate it.