Editors Note: Agriculture Secretary Tom Vilsack briefed the national media today about the drought situation facing the vast majority of the corn and soybean belts. What follows is a transcript of the briefing. Notice several of the questions were related to food prices, ethanol and the RFS, exports, livestock, the drought of 1988, and climate change. It's actually kind of interesting.......
SECRETARY VILSACK: 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.
Below are questions that were asked by media in attendance...
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.
Q 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?
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