**Needed: A [Good]{.underline} Farm Bill**

*Bruce I. Knight, Under Secretary for*

*Marketing and Regulatory Programs*

*Idaho Association of Conservation Districts*

*Boise, ID*

*December 4, 2007*

I'm pleased to be with you today. It's good to be back among
conservationists, and I want to address some conservation concerns
today, but I also want to look more broadly at crosscutting agricultural
issues---particularly the next farm bill.

President Bush is eager to sign a farm bill this year---a good farm
bill. Important time has been lost, but it's not too late to pass a good
bill.

We believe if the Senate majority leader will allow a fair and open
debate, it's possible to wrap things up. But the bill must be a good
one.

The Administration will NOT support a Senate bill that fails to reform
programs, makes a mockery of the budget process and increases taxes.
It's time to set aside gimmicks and sleight of hand.

We need a bill that strengthens the safety net for farmers and funds
priorities through honest bookkeeping without increasing taxes. USDA is
committed to continuing to work with the Congress to ensure that the
final bill is one the President can be proud to sign.

**[Administration Proposal]{.underline}**

As you know, Secretary Johanns and USDA leaders met with farmers in
almost every state to listen to their concerns and priorities for the
next farm bill. We received more than 4,000 comments---and we
constructed our proposal based on what farmers said they wanted.

What we heard was that farmers wanted a strong safety net and an
emphasis on agricultural priorities, such as conservation, rural
development and renewable energy. The Administration proposal announced
last January recognized that we need to:

-   Balance the needs of various agricultural segments

-   Provide a more effective safety net for farmers

-   Graduate people who are among the wealthiest 2 percent of all
    Americans from ag subsidies

-   Decrease market distortions and reduce friction with our trading
    partners

-   Provide offsets necessary to increase spending on conservation and
    energy programs

-   Reform and streamline conservation programs to make them more
    accessible to farmers and ranchers

**[What's Wrong with the Senate Committee Farm Bill]{.underline}**

Let me turn now to the Senate Committee farm bill. I want you to
understand why the Administration can't support it---and why you
shouldn't either!

The first problem is that it will cost \$37 billion more than the USDA
proposal.

Further, that cost is covered through \$22 billion in savings gimmicks
and \$15 billion in tax increases on other industries.

Farmers know they have to pay this year's bills this year. They can't
slide bills into later years, nor can they pretend that recurring
expenses will suddenly disappear---and neither should the farm bill

Another problem with the Senate Committee bill is that, except for 2008,
the bill continues the "pick your price" phenomenon. That loophole in
the law lets farmers lock in government payments based on low market
rates not directly linked to actual selling prices. This provision in
the law cost taxpayers an extra \$3 billion in the wake of Hurricane
Katrina, when prices dropped temporarily, and then rose again.

Further, the Senate Committee bill actually increases loan rates for 16
of 27 commodities as well as raising target prices for 18 of 22
commodities, increasing market distortion. Raising loan rates and target
prices in a time of prosperity just paints a bull's eye on the back of
the American farmer in the international arena. It may sound good in
"the coffee shop," but it won't fly in the real world.

At the same time, the bill fails to improve the safety net for farmers.
It creates a revenue-based countercyclical program, but makes it
optional. So we would find ourselves continuing to pay farmers the most
when they need it the least. The real help is needed when crops are lost
due to disaster, and the best way to do that is a counter-cyclical
program. That's what farmers told us they want.

In addition, the bill doesn't establish effective payment limits. We
need to graduate from farm subsidies those who are among the wealthiest
2% of Americans---those whose adjusted gross income---after expenses and
depreciation---is \$200,000 or more.

This provision proposed by the Administration would affect about 38,000
farmers and ranchers and save \$1.5 billion. Instead, the Senate
Committee bill establishes a \$750,000 AGI cap, but removes any limit
for those who derive two-thirds of their income from farming.

**[Specialty Crop Provisions]{.underline}**

At the same time, there's good news in both the Senate Committee and
House bills---particularly for specialty crops. Both bills would

-   Establish a Specialty Crop Research Grants Program as USDA proposed,
    although at lower funding levels than the \$500 million we
    suggested.

-   Increase purchases of specialty crops for feedings programs, again
    at \$523 million less than the USDA proposal.

-   Authorize technical assistance for specialty crops to remove,
    resolve or mitigate sanitary and phytosanitary barriers to trade,
    although the Senate version is nearly \$9 million less than the \$38
    million we proposed.

-   Increase funding for the Market Access Program, with the Senate bill
    requiring 50 percent of funding beyond \$200 million to be used for
    specialty crops, and

-   Continue the Specialty Crops Block Grant Program.

In addition, the House bill, as well as the Administration proposal,
would increase funding for the Environmental Quality Incentives Program
specifically for specialty crops.

Further, both House and Senate bills would establish a National Clean
Plant Network program in USDA, providing \$20 million from Fiscal Year
2008 to 2012.

USDA supports this provision because it would protect the environment
and ensure the global competitiveness of specialty crop producers.
However, we oppose paying for it from Commodity Credit Corporation
funds.

**[Livestock Title]{.underline}**

I want to focus for a few minutes on the livestock title of the Senate
Committee bill. We need to see some changes there as well.

This title would amend the Packers & Stockyards Act to prohibit packers
from owning, controlling or feeding livestock---beyond 7 days before
slaughter, with a few exceptions.

I know some will be sympathetic to this provision. [But the
Administration strongly opposes this packer ownership ban because it
would not discourage unfair practices by the packing
industry]{.underline}.

Instead, it would:

-   Hurt producers/consumers by destabilizing livestock markets

-   Eliminate valuable risk management tools and marketing opportunities

-   Depress market prices

-   Drive production to foreign countries

It would make a lot of lawyers rich, while the packers reorganize---or
worse, move to Canada or Mexico!

**[What Has To Change to Prevent Veto Recommendation]{.underline}**

If the Senate were to pass the Committee bill as it stands now, USDA
would have to recommend that the President veto it. In order for us to
recommend signature, the bill would have to be amended to

-   Eliminate tax increases and unrealistic "savings" gimmicks.

-   Include real program reforms without exceeding spending levels in
    President's 2008 budget submission

-   Reform marketing loan benefits to address "pick your price" issue,
    and

-   Remove trade-distorting provisions.

**[Conservation Title]{.underline}**

I've talked about what's wrong with the Senate Committee bill. Let me
talk about some things that are right with it---and with the House bill.
I also want you to know why we need to get a farm bill out this
year---not just an extension of the 2002 bill.

Let's talk about conservation. We'd definitely prefer to see more reform
of conservation programs. However, both the House and Senate bills would
expand conservation---including significant wildlife benefits for those
who hunt and fish.

But without a new bill we won't see these benefits.

Here's a quick summary. Both House and Senate bills would increase
funding for EQIP. Both would raise the statutory acreage caps for the
Wetlands Reserve Program and the Grasslands Reserve Program. They also
include a "sodsaver" provision that creates disincentives for converting
grassland to cropland.

In addition, the House bill would provide mandatory funding for the
Healthy Forest Reserve Program and includes \$60 million for the
Regional Water Enhancement Program.

On the plus side for the Senate bill are safe harbor provisions
permitting farmers and ranchers to continue farming or ranching
enterprises, even if an endangered species is discovered in wildlife
habitat that they created. This would further encourage landowners to
adopt conservation practices.

Again, the President very much wants to sign a farm bill this year. He
knows that farmers are waiting on it to make decisions about next year.
And we are eager to work with Congress to produce a good bill.

**[Trade---International Standards]{.underline}**

We are also eager to expand markets for U.S. producers. We've been
working particularly hard to promote beef trade, gaining international
recognition for the health of our national herd and encouraging our
trading partners to adopt science-based international standards for safe
trade.

We're moving forward to harmonize U.S. standards with international
standards as well, first with Canada, and then more broadly with all our
trading partners.

**[COOL]{.underline}**

I want to speak briefly now on what's happening with Country of Origin
Labeling for customers in the U.S. The COOL requirements currently on
the books call for implementation of labeling for most commodities on
September 30, 2008. Labeling requirements for fish and shellfish have
been in effect since April 2005.

The Administration is on record as being concerned about the burden
imposed by COOL, but we are also committed to implementing the
requirements in a fair and balanced manner with the least possible cost
and the lowest possible burden on everyone in the production chain.

COOL is a major challenge in our effort to maintain positive
relationships with our trading partners and avoid possible retaliation
from those who might view COOL as protectionist or discriminatory.

Of course, things could change. Both the House and Senate versions of
the next farm bill include a different approach that would label
products as domestic, foreign or may be of mixed or multiple origins. We
need prompt completion of the farm bill to stay on schedule for COOL.

**[NAIS]{.underline}**

As you know, another key program for everyone who raises livestock or
poultry is the National Animal Identification System. We are moving
forward in registering premises---with more than 427,000 signed up---and
in approving animal identification devices and working with states and
private entities on 14 databases that will maintain records of animal
movements.

We need a state-of-the art system for tracing livestock to control
disease. Having a modern, effective system in place will be critical in
maintaining and re-opening markets should a disease outbreak occur.

Registering your premises is your first step, and it's a critical one.
You need to do this to protect your income, protect your herd and be a
good steward.

We recently developed a draft business plan to prioritize our efforts
and help us reach critical mass---getting 70% of animals in each species
identified and traceable to the premises of origin. Our top priority is
the primary food animals---and within that group, beef cattle.

**[Conclusion]{.underline}**

In conclusion, I believe American agriculture stands at a crossroads.
We're looking at record exports both this year and again next year.
We're poised for continuing growth, but we need legislation that reforms
our farm programs to promote market orientation and expansion.

We need an effective safety net for farmers. We need to bolster
conservation and strengthen rural development.

In short, we need a solid, forward-looking farm bill. And we're willing
to work with Congress to get a good bill that the President can sign. I
hope you will lend us your support in this effort.