**The 2007 Farm Bill:**

**A Market-Based Approach**

*Remarks by Bruce I. Knight, Under Secretary for*

*Marketing and Regulatory Programs*

*Urner Barry Executive Conference and*

*Marketing Seminar*

*Las Vegas, NV*

*April 23, 2007*

Thank you, Russ (Whitman). I am delighted to join you this morning to
talk for a few minutes about some important agricultural issues along
with the proposal USDA has developed for the next farm bill.

Over the years, USDA has had a positive and mutually beneficial
relationship with Urner Barry as we seek to provide market information.
Customers can compare pricing information from AMS and from Urner Barry
and draw greater confidence in the accuracy of reporting from both our
services.

**[Egg Board]{.underline}**

Another service that our Agricultural Marketing Service provides is
oversight of 17 commodity research and promotion programs, including the
American Egg Board.

Peer-reviewed, scientific research funded by the American Egg Board has
demonstrated that saturated fat, not dietary cholesterol, is primarily
responsible for blood cholesterol levels and that eggs do not
significantly increase coronary heart disease risk. And promotion
programs have been successful in convincing Americans of this fact.

In addition, the Board has sponsored studies on the nutritional benefits
of consuming eggs---especially for pregnant women and their developing
babies.

The Board has also produced award-winning advertising for its "Nature's
Miracle Food" campaign. A study by Cornell University showed that
producers receive a six-dollar return for every dollar spent on Board
advertising.

**[Avian Influenza]{.underline}**

Let me turn now to touch just briefly on what we're doing on avian
influenza. USDA has a four-pronged effort to combat AI:

1.  **Keeping the threat offshore** by aiding affected nations through
    the International Partnership on Avian and Pandemic Influenza. We're
    also working through the United Nations' Food and Agriculture
    Organization and the World Organization for Animal Health (OIE).

2.  **Conducting a pro-active messaging campaign---**"Biosecurity for
    the Birds" to educate the public and poultry owners about AI.

3.  **Partnering with states and other federal agencies**---to conduct
    an aggressive surveillance program focusing on wild birds, the live
    bird marketing system, backyard flocks and commercial poultry
    operations, and

4.  **Executing AI response plans**---when necessary.

Specifically, we're continuing our efforts to keep AI from entering the
U.S. through trade by:

-   restricting imports of poultry, unprocessed poultry products and
    hatching eggs from AI-affected countries;

-   stressing the importance of inspection of passenger baggage with the
    Department of Homeland Security; and

-   monitoring domestic commercial markets for illegally smuggled
    poultry and poultry products.

We'd like to eliminate the virulent strain of AI at its source---in
poultry abroad---and we're working with other countries to do this.
We've also bolstered our efforts to reduce the risk of mutation when low
pathogenic avian influenza is identified here in the U.S.

Last September APHIS expanded the National Poultry Improvement Program
to provide 100 percent indemnity for commercial poultry operations---not
just breeders---when H5 and H7 low pathogenic avian influenza are
found---provided the operations participate in the active surveillance
part of NPIP. This expansion supports our goal of eradicating these AI
subtypes because they can potentially mutate into highly pathogenic AI.
Further, international animal health standards now require countries to
report all H5 and H7 detections, and this change helps us do that.

Already the new policy is paying off. On March 31, we confirmed that
turkeys in West Virginia had been exposed to an H5N2 AI virus. We
depopulated the flock, paying the producer 100 percent of the value of
the turkeys. We're continuing to monitor all poultry operations within a
six-mile radius of the affected farm.

In addition, APHIS is studying alternate methods for mass depopulations
of flocks to better address efficiency, worker safety and animal
welfare.

**[High Corn Prices]{.underline}**

Another issue that concerns many of you, whether you are processors,
distributors or producers, is high corn prices. Some folks who see corn
prices approaching \$4.00 per bushel are blaming ethanol for driving up
the price of feed.

Let me say first that the real issue here is the spiraling cost of oil.
And anyone who's watched the price at the pump click relentlessly upward
over the past couple of months understands that only too well.

High prices for nonrenewable energy makes renewable energy sources more
attractive. It's the greater demands for petroleum and the run up to a
new price plateau for gas, diesel and fertilizer that's fueling the
switch to renewable, bio-based energy sources.

With corn prices today near \$4.00 per bushel and near record prices
predicted for the 2006/07 season, we're experiencing growing pains as
the market adjusts. There are several developments, however, that will
mitigate the situation.

First, USDA is projecting the number of acres planted to corn to
increase by 11 percent this spring and corn production to increase by 16
percent this fall. In addition, we expect corn exports to fall by 14
percent during the next marketing year. All of that indicates we should
have more corn available.

**[Energy Independence]{.underline}**

For the longer term, cellulosic ethanol research will move us in the
right direction. It just makes sense to produce ethanol from lower value
crops and agricultural and forest waste products---as envisioned in the
research proposals President Bush outlined in his State of the Union
speech, which are included in USDA's farm bill proposal.

Over the past 18 months, in listening to farmers and many others
involved in U.S. agriculture, it's been clear that the foundation for
the next farm bill must be a balanced approach. We must respond to the
concerns and challenges of every sector of American agriculture. We
can't help one sector at the expense of another.

**[2007 Farm Bill Overview]{.underline}**

As we look toward the next farm bill, we must first look back. We've
seen incredible changes in American agriculture in recent years. Yet
some of our farm programs date back to the 1930's, making them older
than most of us in this room.

But agriculture---at least in this country---has come a long way since
then.

During the Depression days, farming was one man, one mule and one plow.
Today, it's a man---or a woman---running a tractor that costs more than
a farm house. Further, that tractor is linked to a satellite beaming
down streams of data to a high-level computer. Animal agriculture is
equally sophisticated.

Over the past 7 decades, we've downshifted from 6 million to 2 million
farms---all the while upshifting production to feed an ever-growing
population---here and abroad. Even more amazing, today the bulk of our
food and fiber comes from about 150,000 farms and ranches. Efficiency,
productivity and yields have increased exponentially.

As a third-generation farmer and rancher with roots---and farm and
ranchland---in South Dakota, I've observed many of these changes
firsthand. I know the importance of adapting and innovating to not only
survive, but prosper.

It's time to adapt our farm programs to the new realities of agriculture
in America in 2007. The farm proposal that Secretary Johanns has offered
does that.

Secretary Johanns has described it as "forward-leaning" and
"forward-thinking." It's a far-reaching, integrated and balanced
approach to agricultural policies.

Now let's keep it in perspective. The Administration can propose things,
but it is Congress that writes and passes the legislation.

The farm bill proposal would improve current farm programs and reduce
price and production distortions while maintaining a safety net for
America's farmers and ranchers. This proposal also fulfills the
Secretary's commitment to develop a farm policy that is "equitable,
predictable and beyond challenge by our trading partners."

The USDA 2007 farm bill proposal would increase equity by improving
distribution of income support and expanding market opportunities.
Especially exciting to me are the provisions that open doors for
beginning and socially disadvantaged farmers, expanding opportunities
for those who want to get into farming and help for those who want to
stay in it.

I am also pleased that the new proposal includes an unprecedented
commitment to conservation and the environment by creating one enhanced
cost-share program for conservation with total funds of \$21.5 billion
over the next 10 years.

In addition, as I mentioned earlier, this farm bill policy includes a
focus on energy independence by increasing reliance on alternative
fuels, including ethanol, biodiesel and methane. The Secretary's
proposal specifically recognizes that energy independence and livestock
and poultry production must co-exist and thrive.

The farm bill proposal includes \$1.6 billion in new research funding
focusing specifically on cellulosic energy research. This is a positive
strategy to move us in the right direction. I'm sure we can all agree
that making ethanol from switchgrass or corn stubble or low-value wood
chips or forest undergrowth is preferable to using high-value corn. And
making biodiesel from waste grease or chicken fat is better than soybean
use.

But perhaps most importantly, this new proposal offers the most
market-oriented approach I've seen since 1985. It allocates additional
resources to exports and additional effort to reducing trade barriers.
It will meet U.S. WTO obligations today---and tomorrow.

**[Conclusion]{.underline}**

Over the next couple of days, you're going to be looking together at
consumer trends for those who produce and process animal protein. You're
going to consider supply chain needs and how exports figure into your
market.

As you're looking at these topics, I want you to think about how the
future of your industry ties into farm policies. How can the farm policy
we establish for the coming years meet both consumer needs and industry
needs for today, tomorrow and 20 years from now?

I've been with Marketing and Regulatory Programs now for about 9 months.
I've traveled all over the country talking with folks involved in every
aspect of American agriculture. It's exciting and humbling to spend time
with the people who feed America---and increasingly, the world.

That reminds me of a bit of wisdom from President Teddy Roosevelt. He
said, "Far and away the best prize that life offers is the chance to
work hard at work worth doing."

In that regard, all of us here today are highly privileged. What can be
more important than our Nation's first and most vital industry? What can
be of greater value than producing the food that sustains us all?

Clearly we face challenges in 2007---and in the years ahead. But we can
never let those challenges blind us to the importance of the work we do
and the value we bring to all Americans.