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As Prepared for Delivery
Agriculture 2007: Exciting Opportunities
Bruce I. Knight, Under Secretary for
Marketing and Regulatory Programs
Southern Association of State Departments of Agriculture
Nashville, TN
June 20, 2007
I’ve been looking forward to joining you this morning. I want to add just a little to what Rick (Kirchhoff) said about the 2007 farm bill from the USDA perspective, give you an update on the National Animal Identification System, address trade and some regulatory issues as well as what’s happening with beef trade.
2007 Farm Bill
I am very excited about the next farm bill. We have a great opportunity to rework our farm programs in line with the incredible changes we’ve seen in American agriculture in recent years and the new realities that producers face in the marketplace.
The proposal that Secretary Johanns has offered is the most market-oriented since 1985. It would establish a far-reaching, integrated, balanced approach to agricultural policies.
It would improve current farm programs and reduce price and production distortions while maintaining a safety net for America’s farmers and ranchers. It would move farm programs from the Depression Days, in which some of them were created, into the 21st Century.
This proposal also fulfills Secretary Johann’s commitment to develop a farm policy that is “equitable, predictable and beyond challenge by our trading partners.”
It would achieve equity in a number of ways. It seeks to strike a fair balance among a wide variety of interests:
- beginning and socially disadvantaged farmers,
- traditional program crops,
- conservation,
- animal agriculture and
- specialty crops, to name a few.
It considers the needs of landowners and producers of all sizes. We can’t help one sector at the expense of another.
There’s also an emphasis on energy independence by increasing reliance on alternative fuels, including ethanol, biodiesel and methane. In his State of the Union address, President Bush pledged to support research to find new methods of producing ethanol—“using everything from wood chips to grasses to agricultural wastes.” The farm bill proposal includes $1.6 billion in new research funding focusing specifically on cellulosic energy research.
Yesterday, the House Agriculture Committee was marking up Chairman Peterson’s bill and made some significant changes. Let me share with you some of the concerns that I have about differences between the current bill the House Agriculture Committee is considering and the USDA proposal, particularly regarding specialty crops, conservation and alternative fuels.
Specialty Crops
First, one of the key provisions of the USDA proposal is spending $3.25 billion to purchase fruits and vegetables for the 15 nutrition assistance programs that USDA oversees. These programs touch one in five Americans each year, including more than 30 million children who receive free or reduced-cost school meals. The subcommittee bill would reduce our proposed funding by a third, cutting it to $2 billion. That’s less for fruits and vegetables to meet dietary guidelines and less support for specialty crop growers.
Another concern is that USDA has proposed $1 billion in mandatory funding for research and education benefiting specialty crops. The House bill would make funding discretionary, which makes it unlikely this initiative would actually be funded. Mandatory funding is critical for fundamental research in plant breeding, genetics, genomics, pest management and nutrient management. We need to find science-based solutions to disease and pest pressures that threaten many of our specialty crop industries.
Further, funding this research initiative helps bring balance to farm programs where 93% of subsidies now go to those who raise five crops—corn, wheat, rice, soybeans and cotton. Meanwhile, 60% of farmers—including specialty crop producers—receive no direct cash subsidy.
Conservation
I’m also concerned about provisions of the subcommittee bill covering conservation. Their bill fails to increase overall funding for conservation while USDA proposes an increase of $7.8 billion. The subcommittee bill relies on non-existent funding in the form of a “contingency reserve.”
Let me lay the specifics out for you:
- USDA proposed to consolidate conservation efforts into four easy to access programs. The subcommittee bill retains the current 13 overlapping programs.
- USDA recommended an increase of $2.1 billion and 3.525 million acres for the Wetlands Reserve Program. The subcommittee would cap enrollment at current levels unless nonexistent reserve funds become available.
- USDA proposed expanding the Conservation Security Program from the current 15 million acres to 96 million acres over the next 10 years. The subcommittee says hold the line and don’t add any more acres until 2012.
- USDA wants to focus the Conservation Reserve Program on land that will produce the most effective environmental benefits while permitting some lands to also produce biomass for renewable energy. The subcommittee rejects this idea and allows CRP contracts to terminate after five years.
- USDA recommends streamlining the Environmental Quality Incentives Program and increasing funding by $4.2 billion. The subcommittee said no. It provides $20 million, not $80 million, for innovation in conservation. It offers $115 million LESS each year for large scale water quality/quantity conservation, and it retains regional equity provisions that transfer money to states without regard for nationwide environmental needs or priorities.
- USDA proposed consolidating conservation easement programs and doubling funding. The subcommittee’s approach would reduce protection for grasslands, create inequity in farm and ranchland protection and not take full advantage of opportunities for leveraging private sector funds
Alternative Energy
Another concern is the alternative energy proposals. One innovative provision of the USDA proposal is the cellulosic bioenergy research program, designed to reduce dependence on foreign oil and find effective strategies for creating biofuels from waste streams or less valuable crops than corn. Again, the subcommittee bill would fund this from an uncertain source—a contingency reserve unlikely to be available. The USDA proposal relies on mandatory funding with $2.17 billion in loan guarantees to make sure that we get cellulosic ethanol projects in place in rural areas where they can boost energy independence as well as create jobs and boost local economies.
Other limitations in the energy title of the subcommittee bill including lower levels of funding for renewable energy systems and energy efficiency grants and loans and grants under the Biomass Research and Development Act. In addition, the subcommittee has again opted for an unlikely and unreliable funding stream—reserves rather than mandatory funding. Finally, funding for two other programs—
- a new wood-to-energy program to accelerate development and use of new technologies to better use low-value wood biomass resources and
- a bio-energy and bio-based products research initiative
would be discretionary rather than mandatory, again making it less likely that these initiatives would actually move forward.
Trade
The committee has yet to mark up the trade title, one of the most important in the bill. We have proposed important trade measures that would benefit specialty crop producers, such as:
- Increasing funding for the Market Access Program to $225 million annually, and
- Establishing a number of initiatives to help fight sanitary and phytosanitary trade barriers.
Unfortunately, actions so far have not been pro-trade or trade friendly. I hope as the Committee looks at trade issues, the Members will see the value of strong support for our export programs.
NAIS
Now that we’ve addressed the farm bill, please allow me to turn to a noncontroversial arena—NAIS, the National Animal Identification System.
A voluntary animal ID system is a tool that will help us quickly pinpoint and stop the spread of highly contagious diseases among our Nation’s flocks and herds. The ultimate goal is a 48-hour traceback capability.
Secretary Johanns has made it clear that NAIS is, and will remain, one of his top priorities. As you know, the threat of a foreign animal disease outbreak is real.
Unfortunately, in the 21st Century, we also need to be prepared for possible acts of agroterrorism. That’s a possibility we can’t afford to ignore.
But even without terrorist acts, we face the risk of serious harm from an outbreak of a major animal disease. Let me give you a few examples.
In 2003, there was an outbreak of exotic Newcastle disease in California that began in two backyard poultry flocks. It took 7 months to eradicate END at a cost of nearly $130 million in federal funds alone.
There were 22 commercial premises affected along with 2,400 backyard flocks. Nearly 3.2 million birds had to be euthanized, and more than 1,600 federal and state personnel were involved in the disease-fighting task force. In addition, sanctions from other countries prohibiting imports of U.S. poultry cost up to $1 million per week during the outbreak.
We could talk about other examples—the 80% loss in beef trade in 2004 following the discovery of BSE in one U.S. cow in December 2003. That cost us more than $2 billion—just in 2004.
What about bovine tuberculosis? Since 2002, USDA has spent about $90 million on indemnities alone for diseased or suspect cattle. More than 28,000 cows have been destroyed over the past five years to prevent the spread of bovine TB.
States have also found these outbreaks costly.
We all know the importance of quickly identifying the animals affected so we can cut losses, reduce delays and retain markets for producers.
Our primary focus continues to be getting premises registered. I encourage you to speak to your state veterinarians or your animal ID coordinator when you get home. We can and should do better.
We value your partnership in this effort, and we’re seeking to draw additional partners into the effort. So far, about 400,000 of an estimated 1.4 million U.S. premises have registered.
The first of this year we signed a cooperative agreement with the National Pork Board to promote premises registration. Their goal is to get all commercial pork producers into NAIS—to date about 40,000 of an estimated 67,000 swine premises have registered—about 6,700 since the first of the year.
Two weeks ago we signed an agreement with FFA. Those young people in the blue jackets pledged to do their best to register 50,000 premises. We’ll be signing additional cooperative agreements over the next several months.
In fact, we’re reposting our request for proposals for groups that want to assist APHIS and states and tribes with premises registrations. We’ve set aside up to $6 million for these partnerships to encourage premises registration.
Beef Trade
Another one of Secretary Johanns’ high priorities is normalizing the beef trade. Animal identification is going to be a vital part of regaining our beef export markets.
My deputy, Chuck Lambert, and others at USDA, have been working nearly fulltime on trade issues—and getting results.
We’ve made great progress in bringing Columbia, Peru and Japan back into the market. South Korea has re-opened.
The good news is that beef exports were up 70 percent last year. We’re expecting an increase of about $300 million this year for beef and veal, and projecting an increase in volume of more than 50,000 metric tons.
Restoring beef export markets has required some adjustments. It’s called for flexibility. But it’s made us more resilient and more able to penetrate niche markets in the future.
For example, many in the U.S. meat industry had dismissed the European Union market. The cumbersome restrictions on hormones made it too much trouble to bother with. Now I’m hearing increasing interest in meeting that market as well.
But we all know that times have changed. We’ve realized with the export restrictions we’ve operated under due to the BSE concerns that we can respond to very specific market demands—either international or domestic whether that market driver is Japan or McDonalds.
In addition, with the increased interest in organics here in the U.S., we’ve recognized that for some in the industry, segmentation is not so much a problem as it is an opportunity—to expand the market.
Further, I would argue that exports can contribute more to the bottom line for beef than simply providing an outlet for increased production. Perhaps more importantly, exports also increase the value of our beef.
The prize, of course, lies not with sending swinging sides of beef abroad. It’s all about parts and pieces.
In fact, most of the beef we export is in cuts and parts, offering opportunities for premium prices for the short plate, the short rib and the chuck roll. These cuts that are exported would otherwise end up as lower-valued ground beef if they remained in the domestic market. In addition, tongues, livers and tripe are more highly prized in other parts of the world than here.
We need to continue our efforts to rebuild and expand our export markets. Strong domestic demand and reduced inventories have kept prices strong. But as producers rebuild herds and weight gains continue, U.S. beef production is forecast to increase over the next several years. Combined with high feed costs, that means cattle prices will likely remain below recent high levels—unless we find additional outlets.
Export Verification
Today, we are moving U.S. beef with the help of a variety of export verification programs involving 118 facilities and 25 countries. Over the past 14 months, AMS has reviewed more than 11,800 submissions of export documentation. That’s been the price of admission to the world market since BSE appeared in the U.S. herd in 2003.
I’ve heard that our Export Verification programs need to be simplified. I certainly agree. I’ll go a step further. I’d like to see them eliminated—entirely.
We need to have decisions made in the market rather than at a government desk—whether it’s mine or someone else’s in Seoul or Singapore or Sydney. In place, I want to see science-based standards that align with international standards.
We’re headed there. So I trust eventually we won’t need EV any more. Today’s EV will be replaced with tomorrow’s consumer demand.
But until now, the EV programs have been the key that we have to open the door to markets overseas—and close at hand as well. With the help of EV, we’re shipping about 2 million pounds of beef every week to Japan.
OIE Designation
As you know, there’s been significant concern about BSE around the world. But we’re making progress in reassuring our trading partners that we have the safeguards in place to ensure that the products we sell are safe and healthful to eat.
Last month, the OIE—the World Organization for Animal Health—awarded the U.S. a formal classification of “controlled risk” for BSE. As Secretary Johanns put it, “That classification confirms what we have always contended—that U.S. regulatory controls are effective and that U.S. fresh beef and beef products from cattle of all ages can be safely traded due to our interlocking safeguards.”
The controlled risk classification is essentially an international clean bill of health for our national cattle herd. It’s a determination based on a scientific assessment of risk using internationally agreed upon standards.
Any nation that recognizes the OIE standards now has no scientific reason to block imports of U.S. beef—of any age. Eventually, it should put an end to the need for export verification programs.
The key is for our trading partners to adopt the OIE standards as their own standards for safe trade. And we must do the same.
MRR2
We’ve begun the process of harmonizing U.S. standards with OIE standards with our proposed minimal risk rule. We want to move quickly and expeditiously to get that in place. It will expand the list of allowable imports from countries with minimal risk of BSE—specifically Canada—which also received a controlled risk classification from OIE in May.
Right now we’re evaluating some 400 comments on this issue. The next step is to publish a final rule later this year.
This has been controversial. But we need to keep the focus where it belongs—on the science. We want our trading partners to establish a scientific basis for accepting imports. We need to lead by example—and move as fast as we can.
After this rule is finalized, we will move forward by publishing general rules to bring all U.S. standards in line with international requirements. We want to publish the proposed rule in 12 months.
All the while, we’ll be pushing our traditional trade partners who buy red meat to accept the OIE designation and restore or expand their markets.
COOL
Another issue that I know you’re interested in is Country of Origin Labeling.
Here’s where we stand.
AMS is currently reviewing public comments—we received 185—on labeling experience with fish and shellfish. This will help us determine how best to draft the rule covering the rest of the commodities. As you’re aware, Congress delayed requirements to label other commodities until September 30, 2008.
I want to be clear that the Administration is concerned about the unnecessary burden imposed by COOL. Nevertheless, we will do our best to implement these requirements in a fair and balanced manner with the least possible cost and the lowest possible burden on everyone in the production chain.
Organic/Naturally Raised Definitions
We’re working on other standards as well. As you know, we’re developing several definitions for the beef industry.
The definition of “Grass Fed” beef is nearly ready for publication. It’s in final clearance at USDA.
We’re also creating the first definition of “Naturally Raised” for livestock. AMS is currently reviewing public comments and information received during three public listening sessions on what this definition should include.
Both these definitions should prove helpful to you in meeting the desires of your consumers in these growing market segments.
Mandatory Price Reporting
As you know, we’re also working to complete the new rule for the reauthorized Livestock Mandatory Reporting Act as quickly as possible. The draft mandatory price reporting rule is currently in USDA clearance.
Conclusion
As you can see, there’s a lot going on at USDA—preparing for a new farm bill, getting the NAIS in place and working to expand exports. We value our partnership with State Departments of Agriculture, and look forward to continuing to work with you.
