Release No. 0077.96 
Remarks

             by Secretary of Agriculture Dan Glickman
                    Agricultural Outlook Forum
                        February 21, 1996 

              "AGRICULTURE POLICY FOR A NEW CENTURY"

     I want to welcome you all to USDA's Agricultural Outlook Forum.

     We'll spend the next 2 days talking about the future of agriculture for
1996 and beyond, and that's more of a challenge than usual. Right now it's
difficultto project an outlook for agriculture for the next week, let alone
the next century.

     We're in the middle of a debate over budget and policy which will have
far-reaching effects on American agriculture.   

     You know how debates go.  It's always easier to find agreement in the
abstract than in the specific.  Take the preacher who was trying to give his
congregation a message about sharing.  He looked at one member and said, "Now
Henry, if you had 3 houses, you wouldn't mind giving up one so some poor
family would have shelter, would you?"   "Of course I wouldn't," said Henry.  
"And if you had 3 Cadillacs, you wouldn't mind giving up one of them...?"  
"Of course not."   "And if you had 3 milk cows..."   "Now hold on," said
Henry.  "I've got 3 milk cows!"

     There has been progress. The Senate has passed a bill and it's a step in
the right direction. It begins to address some of the Administration's
concerns about a safety net for farmers, rural development, agricultural
research, global competitiveness, and the environment. I am pleased the Senate
bill includes a Fund for Rural America -- funding for research and rural
development. I have urged the House to take up the bill as soon as possible
so we can get a final bill enacted and end the uncertainty for American
farmers.

     OPTIMISM AMIDST UNCERTAINTY 

     Despite the uncertainty of the farm bill, despite tight stocks, despite
the complexities of globalization, I'm extremely optimistic about the future
of American agriculture.

     I'm optimistic because I know we have a fundamentally strong farm
economy:

     Farm prices for many commodities are the highest in many years.

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     Cash receipts for farmers are at record highs.

     Our exports continue to grow.

     Government spending on farm price and income support programs is the
lowest since 1981.

          I know we must temper this optimism with a reality check: Not all
commodities and not all producers are benefitting. Livestock producers are
having a particularly difficult time.  I'm well aware that grain and soybean
stocks -- both in the U.S. and throughout the world -- are tight and that
demand continues to increase. And I'm aware of the bad weather in the plains 
states which has affected and continues to affect total crop production. 

     We'll spend a lot of time at this outlook conference talking about tight
global grain and oilseed markets, strong prices, and prospects for 1996 crops.

     But depleted stocks are only part of the story. The fact that demand is
growing is good news for the United States. We're in the business of selling
food and other agricultural goods, and we produce a lot more than we can use
at home. And 96 percent of the world's consumers live in other countries.

     Based on current prices and pre-season conditions, we believe there will
be a surge in world grain production this year. A rebound in yields and more
planted area is expected to raise U.S. grain production and relieve the
abnormally tight stocks.

     Livestock and poultry producers may be squeezed as feed costs rise but
generally they are maintaining inventories. Beef, pork, and broiler output are
expected to increase in 1996, and meat output most likely will continue to
expand in 1997.

     As the rest of the world becomes more prosperous and as population grows,
demand will remain strong, particularly in Asia and Latin America. And U.S.
farm prices should remain strong. 

     Because of higher expected prices, producers would have been looking at
small deficiency payments and no set asides under a continuation of the 1990
farm bill.

     As agriculture continues to move away from restrictive government
programs to more market-oriented ones, what government does outside the
traditional commodity programs will become increasingly important.

     Investment in infrastructure -- research, conservation, rural development
-- will help the transition to a more market-oriented agriculture because it
will ensure that farmers have the solid foundation they need to prosper and
compete in the world.

     Let me amplify this point: We at USDA, in Congress, and in the media
exclusively focus on commodity programs when we talk about the farm bill. The
debate has become almost a fixation on the size of payments to farmers.

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     The farm bill is about commodity programs. But it's also about research,
about conservation, about rural development, about trade, and about new
opportunities. And they all will have a greater impact on agriculture in the
future than any commodity payment.

     H.L. Mencken was asked the difference between the short term and the long
term. The only difference, he said, is that in the long term we're dead. So I
understand that commodity programs are important in the short term. The short
term matters but it's not all that matters - particularly when we are moving
toward an agricultural policy for focused on the long term.. 

     IMPORTANCE OF TRADE

     There is no doubt that, in the long term, trade, not commodity programs, 
will define agriculture's future.

     Today we are releasing our new quarterly forecast for this fiscal year's
exports. We expect U.S. agricultural exports to be $60 billion this fiscal
year -- up by $2 billion from our last forecast and another record. We are
well on track to achieving the long-term agricultural projection for exports
of $66 billion the first year of the 21st century. Beyond the numbers are real
economic benefits, incomes, and jobs.

     I just returned from my second trade mission to Asia -- our largest and
fastest-growing market. I visited both China and India -- the 2 largest
countries in the world where about 40 percent of the world's people live.
There are very good opportunities for us in both countries.

     In China, I saw with my own eyes what I already knew to be true: China is
becoming an extremely important customer for a number of U.S. commodities --
particularly wheat and corn. Recently, in 1 week, we sold 2.1 million tons of
wheat to the Chinese, raising their total purchases to 4 million tons this
marketing year. This year they have bought more than 2.2 million tons of our
corn. Two years ago, China exported 12 million tons of corn and imported none.

     My trip to China was an extremely important visit to me and to the
President. Our agriculture relationship with China is important in itself, but
it can also be a bridge to help resolve other current issues between our
countries.

     I told the Chinese that the U.S. will continue to be a predictable and
reliable supplier of food products to China. But I also strongly suggested
that China be a predictable and reliable customer as well, working with us to
communicate in a timely fashion what their needs will be. I also stressed that
we can't let bad or incomplete science be used as an unfair trade barrier.
We're still very concerned with China's 23-year ban on wheat imports from the
U.S. Pacific Northwest -- a ban we believe is based on bad science.

     My father always said, "Respect Thy Customer." China has bought a lot
from the U.S., but the U.S. buys 4 times as much from China -- over $30
billion more a year -- in products from electronic equipment, shoes, toys, and
clothing. Our desire to see China open its markets and remove unfair or
unscientific trade barriers is not an unreasonable request from China's best
customer. 

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     As important as bulk commodities are to agriculture exports,  high-value,
consumer-ready, and semi-processed agriculture products are the fastest
growing segments of the market.

     In the 1970s, nearly 80 percent of all our exports were bulk commodities.
They now account for less than 50 percent of all exports. Meanwhile,
consumer-ready foods went from less than 10 percent of all exports to nearly
40 percent in the same time period.  

     I saw this first-hand in Asia where demand growth has been concentrated
in high-value products. While China is expected to be the key source of global
growth in bulk trade, it is also a growing market for U.S. consumer-ready
products. Obviously Japan, Korea, Indonesia and the other developing Asian
markets are growing as well. 

     India has a relatively affluent middle class that is about the size of
the entire U.S. population. India is fairly self sufficient now in production
of wheat and rice, but I am hopeful we will see increased demand for U.S.
exports on the value-added side.

     Economies in Latin America also are expanding rapidly. And Mexico,
although working to recover from the peso devaluation, remains an excellent
long-term market for U.S. exports.

     NEED FOR FREE TRADE

     The movement toward freer trade must continue. And the scare tactics of
those who want to build a wall around our country must be rejected. But in
fighting for freer trade, we must understand the response of those who want
the U.S. to withdraw from the world.

     It taps into the very real anxieties of many Americans.

     People have lost good paying jobs, families need 2 full-time incomes,
workers worry that U.S. companies will take advantage of low-paid labor in
other parts of the world.

     But isolationist retreat inevitably leads to a lower standard of living
and fewer jobs for people in this country. It reminds me of another H.L.
Mencken quote that for every complicated problem there is a simple -- and a
wrong -- solution.

     Pat Buchanan has said his first act as President would be to cancel the
GATT and NAFTA agreements. That would be a disaster for agriculture because
export growth is a major factor in increasing income to our farmers and
ranchers.

     But the U.S. demands a fair and level playing field. That is why this
Administration has been aggressively opening up foreign markets and taking
steps against unfair trade practices. One example is the recent announcement
of a reduction in Canadian lumber into the U.S. You will hear more details on
this and other trade issues in a few minutes from our U.S. Trade
Representative Mickey Kantor.

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     Bringing down trade barriers is only part of the battle. As traditional
restrictions -- tariffs, quotas, levies -- are eliminated, there will always
be efforts to replace them with hidden restrictions.

     So we have to be vigilant to ensure that our trading partners live up to
their obligations and that new non-tariff barriers don't take the place of old
tariff barriers.

     Phony barriers come in many forms. One form they take is that of sanitary
or phytosanitary restrictions.

     The Uruguay Round trade negotiations set new rules which require sound
science as the basis for sanitary and phytosanitary trade measures. Those
rules must be followed. 

     We have asked the World Trade Organization to intervene on the European
Union's hormone ban on beef. This issue is a high personal priority for me as
well as for the Administration. We are determined to end this long-standing
unfair trade practice and restore access for U.S. meat exporters to this
important market. The evidence is overwhelming that proper use of these
hormones poses no danger to human health.

     Another example is the recent effort by Russia to cut off our poultry
exports -- again on the basis of unsound science. Let me say it again: using a
non-tariff barrier based on unsound science is simply unacceptable to us. 

     American agriculture is currently twice as reliant on international
markets as the U.S. economy as a whole, and by the year 2000 it will be 2.5
times as reliant. 

     As this trend continues, foreign economic conditions, policies, and the
weather increasingly will affect the economic fortunes of American producers.

     Long-term market trends are favorable to U.S. producers. But markets --
especially agricultural markets -- are volatile.

     In the past, the government could moderate the effects on producers with
safety nets, acreage set asides, and stock management. That moderating
capacity will be much  less in the future.

     BEYOND COMMODITY PROGRAMS

     Let me repeat: How American producers compete in an increasingly
market-driven economy will depend on many factors beyond commodity programs.   
  
     Even if we simply continued current law, USDA analysts estimate
government program payments would account for only 1% of total gross income of
farm operators by the year 2000. 

     The Administration supports making agriculture more reliant on market
forces. We laid that card on the table -- freeing farmers from planting
restrictions -- long before the so-called "Freedom to Farm" plan was talked
about.

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     Our policy priority today is to make sure we put enough resources into
research, trade development, conservation practices, and rural infrastructure
to enable rural areas to participate in the growing global markets.

     That is why we need a comprehensive farm bill.

     American agriculture is the most competitive in the world. We remain
competitive because of our unequaled marketing system, because we have
maintained the productivity of our farms by investing in conserving soil and
water. We remain competitive because of the quality of our research.

     It remains the role of the federal government to keep open access to
world trade; to ensure research for new crops; to keep our soil sound, our
water safe, our wildlife protected; to inspect food before it goes on American
tables, and to make sure no American goes hungry.

     A true transition program away from the farm programs of the past must
protect and maintain these investments. If we do less, we risk eroding the
advantage we have won over the years.

     FUND FOR RURAL AMERICA

     The need for research and rural development is the reason why the Fund
for Rural America is critical -- to bring economic prosperity to every part of
the country.

      The Senate bill authorizes the Secretary of Agriculture to transfer $300
million to this Fund over 3 years -- two-thirds of it to rural development
activities and one-third to research grants. 

     This amount represents an important investment -- yet an investment which
still falls far short of meeting essential needs in rural America today.

     The water needs in rural America alone could eat up the authorized funds.
It's almost the 21st century and millions of Americans don't have clean
drinking water and there are other problems in rural America besides water.
There is currently a backlog close to 50,000 applicants for low-income
single-family housing loans. That equals about a $2 billion need.

     CONSERVATION AND ENVIRONMENT

     Research improves not only the economic quality of rural life, but
environmental quality as well.

     Producing food and fiber to serve our consumers here and around the world
puts tremendous pressure on our natural resource base.

     In my first year as Secretary, I have seen first hand that managing
natural resources is a serious and controversial business.  Decisions we make
today on resource use will have effects on people tomorrow and for decades to
come.  

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     This is a very sobering experience. It is not like what I was used to in
Congress.  If we changed the 0/92 program or the Farmer-Owned Reserve Program
and it didn't work -- no problem, we fixed it and then that's it: no more
problems.  

     But when you make major changes to conservation strategy and lose soil,
you can't change the legislation to get it back because it's gone.  

     The same with water quality -- if Congress guts swampbuster and water
quality suffers for all Americans, can we ever regain the quality? And if so,
at what cost?  

     I don't think many Americans want to test nature this way.

     Under the Conservation Reserve Program, since 1986 more than 36 million
acres of erodible and environmentally fragile cropland have been converted to
grasses and trees. We have to continue a sound CRP program with the authority
to target and enroll new -- environmentally fragile -- acreage. We have to
maintain a strong Wetland Reserve Program that preserves the landowner's
ability to choose the length of easements. And we have to make the
conservation compliance and swampbuster programs more reasonable, effective,
and flexible.

     CONCLUSION

     The House needs to build on the progress the Senate has made. It needs to
think about the long-term needs of agriculture, not just the short-term budget
battle.

     We have always called this legislation a "Farm Bill."  But its actual
title in 1990 was "The Food, Agriculture, Conservation, and Trade Act of
1990."  We should have called it the "Research, International Trade, Forests,
Extension, Nutrition, Rural Development, Conservation, Energy, Food Stamps,
Environment, Credit, Food Safety, and Farm Commodity Act of 1990."

     Or we could just call it the Food Bill. Or the People's Bill.    

     Last year, $6 billion of USDA funds went to commodity programs. This was
only 10% of USDA's $62 billion budget.

     We don't know what the future holds. Crop prices are high now and trade
is booming, but conditions can change fast. We've seen it before, and we'll
see it again. To think otherwise is to ignore the long-term reality for the
short-term fix.

     That is what worries me about Congress locking in farm payments on a
fixed basis for 7 years. Farmers would get payments no matter what happens in
world agriculture, no matter what the price of wheat or corn is, no matter
what changes there are in weather conditions or political conditions, no
matter what the volatility of crop prices.

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     If we go to a system of paying farmers -- even on a transition basis --
without regard to market conditions, then we must recognize that in a period
of increased volatility, our research, conservation, and risk management
programs must pick up the slack that farm programs have provided.  The
taxpayers of this country should also be assured that payment will not be made
to producers who don't use their land for agricultural purposes.

     The Congress that will write the next farm bill is, like the society it
represents, more urban and suburban than ever. The men and women who will make
agriculture policy for the rest of this century generally don't have a rural
or farm orientation. 
     
     So we need to emphasize over and over to Congress and to the public the
connection between economically healthy farms and a safe, abundant food
supply, and the Nation's overall economic health.

     While I will not belabor the point here, at the same time we are
finalizing a farm bill, we must continue our efforts to promote competition
and discourage concentration in American agriculture, particularly in the
livestock industry. This months, I established an Advisory Committee on
Concentration to consider some of the outstanding concerns and I have asked
for their recommendations by June 7.

     Our concerns have to be more than worrying about the "efficiency" of a
market. A monopoly can be very efficient, but offer few avenues for price
competition. Farmers, ranchers, producers, processors, and consumers demand
that those choices be available.

     Americans have one natural resource we should take full advantage of:
we're an optimistic people.

     I heard a story about a kid who gets a baseball and goes outside to
practice hitting his new ball with his bat. He can't wait to become a player
and beat Cal Ripken's record. 

     He throws the ball in the air, swings and misses. He does it a second
time and misses again.

     On his third try, he still doesn't hit the ball.

     But he's not discouraged. Instead, he smiles and says, "Wow, what a
pitcher!"

     Thank you.

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