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Agricultural Technology and Productivity Continue to Make Gains and Ensure U.S. Food Security

A Conversation with Tom Vilsack

Speaker: Tom Vilsack, Secretary, U.S. Department of Agriculture
Presider: Roger C. Altman, Founder and Chairman, Evercore Partners, Inc.
April 10, 2014

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ALTMAN: Good afternoon everybody. It's my pleasure to host this discussion this afternoon. We're quite fortunate to have Secretary Vilsak with us. I'm sure you're all familiar with his background among many, many other things he was a very, very successful governor in the heartland of this country in Iowa. And he has been the Secretary of Agriculture since the beginning of the Obama Administration, which by Washington standards makes him one of the longest serving people in Washington.

And we're going to have a conversation -- the two of us for a little bit. And then we're going to open this up to questions. I think that you're familiar with the ground rules today. This discussion is on the record and I'm sure you've all already followed the wonderful council rules about turning your cell phones off.

And then we're ready to go. And I'm going to start by asking Secretary Vilsack a few questions about the recent Farm Bill. And I'm going to divide my questions into two to three parts. I'm going to -- I'd like to ask you some questions about the -what the bill does in relation to the production side of agriculture. And then I want to talk a little about the SNAP or food stamp side of it. But let's start off by my asking you a very basic question which is -- this Bill which was the object in a lot of hard work I know, including the most particularly on your part.

Ended up being a very bipartisan result. And in Washington which these days is so devoid of bipartisanship, let me just start by asking, how did you achieve that in this case? How did it come about that this ended up being as bipartisan as it was?

VILSACK: Well, historically Farm Bills have been bipartisan. So it helps to have that history. But when you realize that this is more than a Farm Bill -- it's a food bill, it's a jobs bill, it's an energy bill, it's a research bill, it's a conservation bill, it's a trade bill. There's enough into this Bill that just about every member of Congress has somebody back home that has a vested interest in getting this thing done.

And I think that we were faced with the dilemma that if it did not get done, that we would be reverting back to 1940 ag law which would have resulted in chaos in the market. So there was a history of bipartisanship -- the comprehensive nature of this Bill lends itself to support. And there was the threat that dangled out there that we could face a return to agricultural policy that would be disruptive to the market. I think the combination of that made a difference.

And I think we worked very hard to get the -- a place where everyone was comfortable enough to get it passed. But it is -- it's a remarkable Bill. And it's one that most Americans do not understand or appreciate. But every single one of us benefits from this bill. Because we are a food secure nation. And by that, I mean we have the capacity and the capability in the United States of producing virtually everything we need to feed our own people.

Very few countries in the world can do that. And because of the extraordinary productivity and efficiency of American agriculture, it has freed the rest of us to do whatever -- everyone in this audience has done in their life. They don't have to worry about actually producing food to feed their family. They've delegated that responsibility to a really relatively small number of people in this country. So it's -- I really appreciate the opportunity to have this discussion. Because I think it's going to give people an understanding of the breadth of this Bill.

ALTMAN: Well, all right. Let's talk a bit about -- what I might call the state of American agriculture. And I'll start by just saying I don't have any deep history in agriculture. I don't have any scholarly credentials. But I don't think you need them to see that agriculture is one of America's greatest assets and one of its greatest international comparative advantages.

We have the most efficient agriculture sector by a big margin in the world. It's a bastion of export strength. So-but on the other hand, you know, one can read that a lot of acreage has been taken out of agriculture over the past 10 years, even though I understand you might talk about this a little bit that it's slowed down some.

And obviously, the employment, as you just alluded to in agriculture, has fallen to very, very low levels which at one level reflects enormous efficiency. But on the other hand, could be a source of concern about, you know, are young people entering into this sector the way they historically have and so forth. So let's talk-if I could just -- tell us a bit about the outlook for the American agricultural sector which has been such a source of strength for so long.

VILSACK: In the lifetime of people who are still on this Earth. If we go back to 1935, there were 6.8 million farms in the country. The average sized farm was 155 acres. And a significant number of people in the country were directly related to agriculture. Today, the total number of farms in America is about 2.1 million.

But if you look at who actually produces most of what we consume, it's less than 300,000 farming operations. And if you look at those who produce at least half of what we consume, it's 33,000 farming operations; 33,000 farming operations. So it is extraordinarily efficient. And because of this great efficiency, and most recently because of the productivity, the overall health of American agriculture from an economic standpoint is as good as it's ever been.

We've had record farm income. We've had record farm exports. We've had a record enrollment in conservation activities. So if you look at it from that perspective, you would say, "Things are good." But if you go deeper into the numbers, and you take a look at the aging nature of the America's farming population, it is cause for concern.

"Every single one of us benefits from this bill. Because we are a food secure nation. And by that, I mean we have the capacity and the capability in the United States of producing virtually everything we need to feed our own people. Very few countries in the world can do that."

We have significantly greater numbers of people over the age of 75 farming today than we have under the age of 35. And by that I mean there are several hundred thousand over the age of 75 and tens of thousands under the age of 35. So there is a significant issue relative to who's going to be farming in the future that needs to be addressed.

And it is difficult for young people to get in this business because the capital that you have to have to operate a farm of any size is rather significant. This is not a situation where you can go out and buy 1,000 acres easily or buy the machinery to be able to farm 1,000 acres. So we have attempted -- this Administration to try to create a different strategic framework for rural America and for agriculture by focusing not just on production agriculture, as important as that is, remains important, and will be important in exports.

But also introducing an opportunity to have small, local and regional market opportunities that allow the opportunity for small and medium-sized operators to come into the business and stay in the business. High-value added opportunities. Organic production, for example, very small percentage of American agriculture. But a fast growing aspect of it and a very high value added proposition.

And so we have invested in creating the infrastructure that will help create these local and regional markets. We have more to do in that space. We've also looked for ways in which we can expand significantly the economic impact of conservation. This isn't just about better soil and better water and cleaner water.

It's also about creating market opportunities for regulated industries that are looking for certain environmental benefits because of climate change -- whatever it might be. That instead of investing in gray infrastructure, they can now invest in green infrastructure by investing in conservation on the ground, obtain the same conservation benefit, and essentially -- landowners and small producers can have a new income source that they haven't had before.

And then the final piece of this is figuring out more creative ways to use what we grow-- and every aspect of what we grow. We obviously have been producing fuel and energy from bio-based crops. But now it's very easy to also produce chemicals and polymers and other fabrics and fibers that could create a whole new opportunity for manufacturing in rural areas and a new market opportunity for agricultural waste product and crop residues.

So to me, it's an exciting future, but a challenging one. And our challenge is to make sure that the next generation of young people understand that agriculture is an option. Whereas before, I think they were encouraged to look elsewhere. To move off the farm. To go to the city. And now we're trying to make sure that they understand that you don't necessarily have to do that.

Obviously, you can if you wish. But there is real opportunity here in American agriculture.

ALTMAN: Tell us a little bit about the export side of the equation. This has historically been as strong an export sector as America has had. And, you know, the country one would argue has always benefited from greater exports. Although, sometimes there's a debate about that. But tell us about what's going on now in terms of exports, including where most of our exports in the agricultural sector go. And whether there can be further growth in exports.

VILSACK: Well, first of all, our top five agricultural export customers are China, Canada, Mexico, the EU, and Japan. And we do quite a bit of business with China which is in part of the reason I think we have seen rather dramatic increases in both volume and in dollars in terms of exports.

In the time I've been Secretary, I think we have set three or four records for agricultural exports. This year was not supposed to be a record year, but in the first quarter we seen an eight percent increase over last year which was a record. And we've seen a 40 percent increase in volume in terms of some of the commodity crops-corn and soybeans as those prices have moderated.

We set records for beef, poultry, and pork exports. So the export market remains strong so long as we continue to look for market opportunities and in so long the international community understands that we believe and they should believe in a rules-based, science-based system.

We have two significant negotiations taking place today on multilateral trade agreements that could have a profound impact on trade. The TPP-the Trans-Pacific Partnership and then the EU discussions.

ALTMAN: Let's come back to that in a second. Look, let me ask you one more question or two about the Farm Bill. So, the good news is that the American agricultural sector is healthy and doing well. But most people who aren't in agriculture hear the word -- two words, Farm Bill, they think of farm price supports. So tell us what the Bill did in that regard, and most fundamentally why we still need farm price supports. I know that they were reduced. But -

VILSACK: They were reduced. The biggest concern that was expressed leading up to the Farm Bill and during the Farm Bill discussions was the fact that we had a direct payment system. And this system essentially for commodities essentially said to producers, "We're going to provide you support regardless of whether you have a good year or a difficult year."

And so when crop prices were at their highest levels in recent history, farmers were still receiving government support. That philosophy changes with this Farm Bill. No long is it the case that farmers will receive checks in good times. They will continue to receive help and assistance when times are tough. And times could be tough because of natural disasters or times could be tough in the international community that drives prices down.

So we have a system that is primarily functioning and based on crop insurance, a risk-management tool that farmers and the government participate in in providing. And then on top of that, there is additional coverages and additional protections that farmers can access that provide some but not all of the potential loss that they could occur if they lose a crop.

Now why do we have this? It's relatively simple, I think. It's because we like the idea of being a food secure nation and we like the idea that our people are producing food. Agriculture is a very risky business. Mother Nature -- you could be the best farmer in the world. You could make every decision correct. Mother Nature could come along and you would lose your crop.

And so if want to keep people in that business and we want to encourage more people and younger people to get in the business, we have to reduce the risk to a reasonable level. And these crop insurance programs -- these additional safety net programs are a way of reducing the financial risk of farming to the point that it's acceptable enough for people to stay and want to get into it.

ALTMAN: OK. One related question apropos of natural disasters. For someone like me who's not an expert at all, one level you read about -- the drought conditions in the United States which are severe in many parts of the country-some of the worst in many decades. On the other hand, agriculture-as you just said a few minutes ago, it's very healthy and food prices in general have not risen in any unusual way. So in some form or other, the -- there's a lot of science involved here at some level. Because you would have normally thought that our agricultural sector would be taking a beating. How does that work?

VILSACK: Well, it works primarily because in the commodities that would drive and increase food prices most significantly, we had pretty good outcomes even with the drought. And the reason we did was because of the adoption of science -- better farming techniques, better seed technology allowing crops to withstand harsher weather conditions more easily.

"No longer is it the case that farmers will receive checks in good times. They will continue to receive help and assistance when times are tough."

In that drought of 2012 -- which was the worst drought we had seen in 80 years, we had the eight largest corn crop in the history of the country. Well that's science. And that's the productivity and ingenuity of American producers. Now the drought of this year, which impacts probably more fruit and vegetable production in California, could have a more significant impact because it's a little bit different than commodities.

Because farmers are making the choice not to farm -- or not to actually plant crops because they simply don't have the water allocations in California to be able to do so. So that may have some adjustment. But even so, the reason why food prices now go up proportionately is because farmers get so little of the food dollar to begin with.

ALTMAN: Right.

VILSACK: About only 15 cents of every dollar that's spent in a grocery store or a restaurant actually goes to a farmer. The other 85 percent goes to folks who process it and package it and market it and sell it. And so what really drives up food prices more than a drought is often energy costs.

Because if you think about step in processing and packaging food and retailing food, it's a high-energy consumption aspect. So if energy prices go up -- if oil costs go up, that when you see food prices significantly increase.

ALTMAN: One more related question before we move on to trade. If some of the more dire forecasts on climate change ultimately play out, what impact do you think that'll have on the agricultural sector? There are lots of, you know, unexpected potential effects here -- some of them not all negative. But what effect do you think that will have on the agricultural sector?

VILSACK: Well, with changing climates and a global economy, we're seeing more intense weather patterns which challenges the science to continue to be a step ahead of those more intense weather patterns so we can continue to grow crops in very difficult circumstances. There is also an expansion of potential pests and diseases that are even more difficult sometimes to deal with.

And there is the possibility of migration of agriculture north. So what we grow today in some parts of the country, may not be grown 40 years from now or 50 years from now unless we adapt and mitigate which is why the President, pursuant his climate action plan instructed us at USDA to establish climate change hubs so that we can begin the process now of identifying the vulnerabilities of each region of the country and then be able to establish the technologies and steps producers need to be able to adapt and mitigate so that we don't have as much of a disruption as we might have.

And we have identified seven major regional-seven of these climate hubs and then three sub-hubs which are really focused on every part of this country and all the agriculture -- it's extraordinarily diverse agriculture in this country. We are just so blessed. But we are analyzing this and dealing with it. And we're also doing it on a global basis. We are part of a global research alliance we started in this administration with 30 other countries to take a look at how this might impact global production because obviously that would have impacts on markets.

ALTMAN: All right. Let's talk about trade for a moment. You mentioned that there are two very large potential multilateral trade agreements, one with the EU and one called the Trans-Pacific Partnership with a series of Pacific Rim countries. And historically, agriculture has been a very challenging issue in multilateral trade agreements. Both times when I served in government, I can remember the trade agreements and the role that agriculture played was often the biggest single stumbling block.

VILSACK: Right.

ALTMAN: So because it would be a good thing in the broadest sense, if these agreements could occur, tell us the role that the agricultural issues are playing and I know that in the (inaudible) Pacific side-involving Japan, they're playing a big role. But let's just understand a little bit here.

VILSACK: Well let me start from a general perspective and then sort of come down to the specific agreements. Generally speaking, when we're engaged in trade discussions, our economy is so diverse in this country that we have many interests that we have to represent in trade discussions.

"There is the possibility of migration of agriculture north. So what we grow today in some parts of the country, may not be grown forty years from now or fifty years from now unless we adapt and mitigate."

We have a manufacturing interest, we have a services interest, we have, you know, technology, we have entertainment...

(CROSSTALK)

ALTMAN: ... (Inaudible). Right.

VILSACK: Right. Oftentimes when we're negotiating with someone -- another country, agriculture is the top of their list. So it may be one of several priorities for us, but it is the priority for many of our trading partners. So it puts us in a difficult position in terms of being able to complete an agreement.

In Korea, we had autos. And we had pork as two issues that remained. We were able to work the pork to a point where Korea was able to give us greater access on autos. So that makes things complicated. Specifically with reference to these agreements, it's different with each agreement and from our perspective in agriculture.

On the Trans-Pacific Partnership side, it is about access -- market access. And the Japanese have a multitude of lines of tariffs in terms of market access to basic commodities and then products that are made from basic commodities. And they have a very powerful farming and agricultural interest in that country, which every government needs to be concerned about protecting.

So they've taken a very hard line on market access. It makes it very difficult for us to enter into an agreement with the Japanese on all other issues if they continue to take a hard line on market access. The discussion and recent decision they made to have a separate agreement with Australia on beef, for example, suggests how difficult this is going to be because their tariff reduction for Australia was not all that significant, at least from our perspective.

And certainly isn't in the scheme of things would be difficult for us to be able to sell to our producers as being an opening of the market. That's a big issue for Japan and we have the same issues with Canada. Because Canada, particularly in dairy, a very closed system, we have to have them open up if we are going to continue to open up our markets to the rest of the partners in the Trans-Pacific Partnership.

So there is a possibility that we have an agreement. We have a possibility that there's no agreement. There's a possibility that we have an agreement but Japan is not part of it. And only time will tell which of those alternatives ultimately occur. But I would concur with you -- bottom-line, it would be better for us to have a good agreement than no agreement. But it would be better for us to have no agreement than a bad agreement.

ALTMAN: Right. On the EU side -- there's a side point. The political power in Japan of the agricultural sector and particularly rice, must not have diminished very much. Because Japan isn't all that unlike the United States in the sense the percentage of Japanese GDP, correct me, which is represented by agriculture is not that high. And the percentage of Japanese employment that is represented by agriculture is not that high either. But on the other hand, it seems to continue to have enormous political power.

VILSACK: It does and, of course, in the U.S. the same thing is true. You can get a good agreement for every other aspect of the economy and not for agriculture. And some would say, "That's OK." But you might not be able to get it through our Congress because of agriculture's interest in making sure that it's a good agreement for agriculture.

And that's the problem with EU, you know, it's not so much about market access. It's about the barriers that they create to what they perceive to be in open market. So, for example, they're very much focused on this issue of geographic indicators, which is that they would like to be able to maintain protection against certain types of cheeses, for example, based on the region that the cheese was originally created.

Well these terms have been -- have become generic, the rest of the world uses them. And so what the EU is doing ...

(CROSSTALK)

ALTMAN: ... You mean in effect, they want to trademark, parmesan or something like that?...

(CROSSTALK)

VILSACK: ...Right, right. And what they're now doing in order to -- and the United States has been very clear about this. We just don't think that this is right. But now what they're doing is they're beginning to negotiate one-offs with individual countries where countries think, "Well what difference does it make? We don't produce a lot of this anyway. So we'll agree to your geographic indicators."

So it's making it more difficult in these negotiations. And the second issue has to do with our willingness to accept biotechnology after appropriate risk assessment, the EU's belief that there has to be adherence to the precautonary principal, which is essentially, "If there's any potential risk, we're not buying it." Well that's a very difficult standard to meet. And the result is our biotechnology products would receive very little access to a market, even though they would contend that it's open.

So these are very tough -- very tough issues and issues in which the EU, at least early in the negotiations, has taken a very bright line approach and that's unfortunate in my view. I think they need to be more open, especially, on the biotechnology side from the standpoint of the rest of the world's capacity to meet global food needs and from the geographic indicator side, this is a big issue for our dairy issue -- our dairy industry and it should be. And these terms have been generic for years and years and years and I don't think you put that genie back in the bottle.

ALTMAN: So while we're on the international side-well, we were talking beforehand, we touched on Ukraine and Russia. And just educate us a little bit in terms of is Ukraine agriculturally self-sufficient? What is the vulnerability of that country from that point of view? And then we'll talk for a minute about Russia.

VILSACK: Well I think many would perceive that Ukraine as being, in the past, when the Soviet Union was in existence, was somewhat of the breadbasket of the Soviet Union. They are a significant producer of agricultural products and they're an exporter of product. And they are in many respects a major agricultural producer.

We have not seen a great deal of disruption because of the uncertainty of the political circumstances in the Ukraine. We've adjusted our markets a bit and our projections a bit in terms of productivity of wheat, down a little bit. We need for them to import a little bit more corn than they would normally import.

But not to the extent that you would suggest that it's going to be a major, major, major influence on markets at this point, now, that obviously can change depending upon the political circumstances. But it is a major player and one that I think in the past Russia has been reliant upon and depended upon in part to ensure that their people were well fed as well.

ALTMAN: Let's talk about Russia. Russia, historically, has been an importer of food. And tell us a little bit about how much of Russian food consumption is imported, where Russia primarily imports from, how important the U.S. import/export relations with Russia is from Russia's point of view.

VILSACK: Well we have a challenging relationship with Russia in terms of agriculture. We could do -- and should do and ought to do more business with Russia because of their needs. But they have created, in our view, artificial barriers to our imports that are not scientifically defensible.

I'll give you an example. There is a process that we use in terms of treating beef and pork using a product called ractopamine. The international community has taken a look at this. They've determined that there is not a risk associated with the use of this ractopamine. Russia refuses to accept beef or pork that has been treated with ractopamine. And so we are now establishing ractopamine free processing facilities for pork which Russia has at least initially indicated they might be willing to do business with.

There is no scientific basis for that. They ought to open that up because it would be beneficial to their consumers. But I think part of it is this desire to be self-sufficient. And the reality is it's difficult to be self-sufficient if you don't have the extraordinary productivity that we enjoy in the United States.

And I don't think their agricultural science or their agricultural production systems are as mature as ours. And I think that's why they're continually relying on someone else -- the EU, Ukraine -- someone else for ...

(CROSSTALK)

ALTMAN: ... In units, has Russia agricultural production been growing?

VILSACK: You know, Roger, I don't know the specific-I don't know the answer to that question. I would be confident in saying that I strongly doubt that it's been growing at the same rate that we have in the United States just to give you a sense of this. I was born in 1950 so I use that as sort of the benchmark. Since 1950, our corn production has increased 300 percent.

Now when I say that what this means is we've gone from planting 10,000 seeds per acre of corn to 30,000 seeds per acre. Same tract of land, 20,000 more seeds on it and some people we can get to 40,000, 50,000, 60,000 seeds per acre. Soybean production -- 200 percent. Wheat production -- 200 percent (ph)....

(CROSSTALK)

ALTMAN: ... At that rate, you might have corn production in Manhattan.

VILSACK: We could.

(LAUGHTER)

VILSACK: We're all about urban farming. We're excited about that possibility. You know, the dairy cow, there's an extraordinary example of efficiency. When I was born, that average dairy cow was producing 5,500 pounds of milk. Today, that same cow-22,000 pounds of milk. And one poor cow in Wisconsin is producing 72,000 pounds of milk.

So, you know, extraordinary productivity just based on the science. I think we're light years ahead of a lot of folks. And, you know, the interesting thing about American agriculture is the willingness to share. Because we don't see this as necessarily putting us at a competitive disadvantage. If other farmers in other countries become more productive, then I think that creates stronger middle classes.

It creates consumers for some our high-value added agriculture products as well. We will benefit from that. And the world food needs are going to continue to grow as populations grow. And the challenge for agriculture and I think this is a startling statistic. In order for us to meet the needs of 9 billion people which we would expect to see in the next 40 years or so in the world, we have to increase agricultural production by about 70 percent.

To do that, I've been told that work requires as much innovation in the next 40 years as in the preceding 10,000 years in agriculture. So that's why it's important when people look at the Farm Bill -- that's why we put a premium on establishing a strong research title because we need to be investing significant more resources in agricultural research than we've been in the past.

ALTMAN: OK, one more question before I open this up. But one of the biggest -- maybe the biggest programs that USDA administers, of course, is the SNAP program, which most people refer to as food stamps. And the amount that the United States spends on food stamps has gone up a tremendous amount.

And unfortunately, the number of Americans who participate in the food stamp program, the other side of the same coin, has risen tremendously. And I personally think -- and you might correct me, or put me in my place, I think there's a 'Tale of Two Cities' aspect of the whole country which is reflected through the food stamps program in the sense that a very high percentage of Americans receive food stamps.

I read the other day, or actually thinking about this meeting today with you, I read that-and you may agree or may not agree with this because it's, I guess, a judgment -- that for young Americans entering the work stream now -- or are reaching the working age now, one out of two of them during their adult lifetimes will receive food stamps at some point in their adult lives.

So just spending a little bit about what you think the distribution of food stamps or the food stamp program itself really conveys about conditions in the United States today.

VILSACK: Roger, I'll promise to answer that question if you agree to ask me one more question on foreign food aid assistance so that my staff doesn't jump out of their shoes ...

(CROSSTALK)

ALTMAN: ... I promise.

VILSACK: I'm supposed to talk about that today as well.

ALTMAN: That's a promise.

VILSACK: You are absolutely correct about the 'Tale of Two Cities'. Here's a set of statistics that I think -- which underscores the point you just made; 1996, hardly anybody receiving food assistance was actually working. They were primarily on cash welfare, they were senior citizens, or people with disabilities.

ALTMAN: What year was that?

VILSACK: 1996. Just before Welfare Reform.

ALTMAN: So 18 years ago?

VILSACK: Yes.

ALTMAN: Very recently.

VILSACK: Eighteen years ago. Today, 42 percent of the households receiving SNAP have at least one person working. And those that aren't working could very well be senior citizens or people with serious disabilities or children, and therefore, not likely to be able to work. In fact, two-thirds of all recipients are disabilities, senior citizens, or children.

So we've seen a significant change of who it is who receives SNAP, so that today only eight percent of SNAP beneficiaries are receiving cash welfare. On 8 percent-92 percent are not. At the same time, the number of people in the SNAP program today who have no gross income and no net income has doubled.

So you've got a situation where people are requiring SNAP because they are in the workforce and not making a lot. And you've got people that have been looking for work for a long time and don't have any income at all who require help. And that's one of the reasons why you've seen numbers increase.

And the other reason you've seen numbers increase is because there's been a concerted effort to reach out to people who have historically qualified for SNAP, but who have never received the benefits of the program because states have not done as good a job of reaching out to them and making sure that people are aware of the program.

And I will tell you that why I'm deeply concerned about Representative Ryan's idea of block granting SNAP -- the SNAP program to states because I've seen circumstances where you have a program, but you don't really want anyone to use it. So you make it more difficult for people to access the program, so they don't use it.

ALTMAN: So what percentage of Americans were eligible to receive food stamps actually received them?

VILSACK: Today it's roughly, almost 80 percent. When I became Secretary, it was about 72 percent. In 2002, it was just a shade over 50 percent. So there has been an increase in the numbers primarily because we've done a better job of reaching out to people historically of -- always been qualified for the program, but never accessed the program because they didn't know about it.

And three states stand out in particular -- when I became Secretary -- Florida, Texas, and California all were underperforming in terms of participation in the program and we've had major efforts in all three of those states. And that has driven the numbers up. So you're right about the SNAP program.

And I think that just people don't fully appreciate the fact that how many of these people who are getting SNAP are in the workforce and how few of them are actually on cash welfare. That's not what the normal perception is of the SNAP program. Then secondly, people do not appreciate the poverty reduction capacity of the SNAP program.

It's probably one of the most effective anti-poverty programs we have in terms of actually people moving from -- moving out of poverty. And it -- obviously in-during the recession, it was a very quick stimulus to the economy because 30, you know, in 30 days, 95 to 98 percent of SNAP benefits are spent. As soon as people get them, they go to the grocery store and they use them.

So it's an interesting program and I think it's a program that's helped a lot of folks get out of poverty or stay out of poverty or help them through a tough time. And we're also seeing, you know, quite a few people moving out of the program fairly rapidly. It's not like the 80 percent who are currently receiving SNAP of the eligibles stay in SNAP for a long period of time. Many of them get out of the program within six to eight months.

ALTMAN: OK, let's bring the audience in please. Would you kindly identify yourselves -- or yourself before you ask a question and as my old boss Lloyd Benstsen used to say when he would stand up to give a speech, "Remember", he would say, "I'm the only one here today that's supposed to be giving a speech." So -

(LAUGHTER)

ALTMAN: So, let's be sure we ask questions. Yes sir.

QUESTION: Mr. Secretary -- excuse me, you commented on. My name is Dick Huber (ph) and I actually am a farmer in Chile and in Brazil. But you commented upon biotechnology and that's a nice way of saying GMO. And most of us who are in industrial farming today, you can't do it without GMO. And what is the Department of Agriculture doing about such situations as Hawaii that has banned GMO crops with the exception of papaya. And this whole question of the acceptability of GMO modified crops or soybeans or corn in the European market. This is very important for all of us.

VILSACK: Well that's actually two separate questions. What's being done here in the United States? What's being done internationally? In the United States, what we've attempted to do at USDA is to create an atmosphere where no single type of agriculture is judged to be less effective or less beneficial or less important than any other type of agriculture.

In other words, all types of agriculture should be celebrated. It shouldn't be a situation where people believe that one type of agriculture is better than another type of agriculture. And we established a group called, the AC-21 group, which represented conventional farming, organic farming, and GMO production.

We got folks together and we said, "What will it take to create a better dialogue between various forms of agriculture so that agriculture can speak with a single voice about the importance of agriculture generally." And they came up with a series of recommendations and we're in the process of following through those recommendations, assuring that we continue to have seed banks that can allow us to replace and start crops again if something devastating happens to a particular type of production process.

Developing risk management tools for organic producers so that they are not concerned about the possible financial loss that their product gets impacted by drift -- understanding drift better. Encouraging more stewardship opportunities between neighbors when they're using different production processes. So we're trying to create a culture of coexistence-a culture of acceptance, a culture of recognition.

The second thing we're trying to do is to make sure that agriculture speaks more clearly and more distinctly to the rest of America. If 300,000 people are producing 85 percent of what we grow, and 33,000 farming operations are producing 50 percent of what we consume, that's 1/10 of 1 percent of the population or 1/10 of 1 percent of the population. That means the other 99 percent have no idea of what's going on in terms of where their food comes from, the risks that are associated.

They may be several generations removed from agriculture. They may not understand the benefits that the American agriculture provides economically, environmentally, in terms of jobs. One out of every twelve jobs connected in this country, in one form or another to agriculture, food processing. Fourteen percent of all manufacturing jobs -- a million jobs supported by American agricultural exports. They may not understand that totality of the picture. We need to do a better job of explaining it.

There's been a film that was recently produced called, 'Farmland'. It profiles a number of farming operations and farmers -- young farmers. It's very well done. It's done by an academy award and Emmy award winning producer. Does a nice job of conveying all types of agriculture and basically gives you a better understanding of the challenges, the hope, the opportunity, the dreams, the frustrations that people in agriculture suffer and have. So I think messaging is important in this country.

So developing a coexistence capacity within agriculture so that we're not judgmental, educating people in this country about agriculture generally so there's greater acceptance and greater appreciation and having every American understand that they have the freedom to be whatever they want to be because they don't have to -- they delegated the responsibility of growing their food to somebody else. And we should be appreciative of that.

On the international side, it's a different discussion. It really is -- it's a complex discussion because a lot of folks are resistant to this because they want to protect their own farming operation, they want to not have to heavily subsidize their own farmers, they don't want to put their farmers at a competitive disadvantage because American producers are so much more efficient and productive.

So our challenge is to create, again, in essence a single message about biotechnology. I went to Brazil last summer. We spoke to the Brazilians and said, "Look, we should be talking jointly to the Chinese. We should be saying to the Chinese, you need to do a better job of creating a regulatory system that recognizes the importance of this to your producers. Allowing this new technology to be used on your farms."

China has 60 million farmers. Sixty million farmers. They can't anywhere near produce what they need to feed their people. They have 60 million farmers. We have 33,000 farming families and operations producing 50 percent of what we grow. I mean, you know, if you want to transform a country, which is what they're trying to do. You've got to improve the efficiency of your agriculture.

But you have to have a regulatory system that allows you to do that that appropriately analyzes the risk of anything that you put into the ground and that you put out into commercial use. But once that's done, allowing the marketplace to make choices and make decisions. And so we have begun a -- what we refer to as a biotechnology strategy of making sure that we send messages consistently. We have farmers talking to farmers -- our farmers talking to other farmers all over the world.

We have our scientists talking to other scientists all over the world. We have our policymakers talking to other policymakers all over the world. We have Ag ministers talking to me -- the same message which is that this is important. It needs to be embraced. It needs to be analyzed appropriately, but once it is it needs to -- you need to allow access to your market.

And slowly but surely that is happening. Not as fast as some would like. But it is happening. And I think as we deal with changing climate, we deal with more intense weather patterns, we deal with less water, we deal with expanding communities -- expanding cities and suburbs in developing countries, and less land available for agriculture production, and a growing world population, we have got to embrace science. It is the only way that we're going to be able to feed folks. And the only way that we're going to avoid the strife that could come by not having enough food or not being able to produce enough food to feed nine billion people.

So it's a consistent message. And it is also part of -- and this is how I'm going to get my food assistance...

(CROSSTALK)

ALTMAN: ... Oh, you're taking me off the hook. Good. Yes.

VILSACK: It's also why as part of our food assistance program, its' not just about providing emergency food assistance when there's a disaster that strikes Haiti or the Philippines or any other place that's been hit by a natural disaster. It is also about using some of our food assistance resources as part of the feed the future initiative to actually work with farmers, encourage farmers in other countries to embrace these new opportunities.

So we have helped over seven million producers, primarily in Sub-Saharan Africa to basically be more productive on 3.7 million hectares of land. We think that in the long run-that's beneficial. It's also why we have the McGovern-Dole Program that we understand there's a link between food and education. So we're announcing today $185 million of money available for 10 countries to allow them to fund meals at their schools.

And there's -- this is a very powerful tool. We're going to help over 2.6 million kids -- 2.7 million kids go to school -- encourage them to go to school because that's where they will be fed. It's a very powerful tool in terms of building relationships -- and building a trusting relationship between the next generation of kids in Kenya for example and the people in the United States.

ALTMAN: You, Mr. Secretary, your point about educating Americans on where their food comes from, which I think is-you're right, it's important other than government service, I spent most of my career in finance and I can assure you that most people in the financial community -- at least here in New York do know where their food comes from. They know it comes from Whole Foods.

(LAUGHTER)

ALTMAN: Yes, ma'am.

QUESTION: Oh sorry. Paula DeParner (ph), from the MTR Foundation. We know each other from CCX days. Thank you very much. And I know you know everything there is to know about carbon markets. But going back to Roger's question and the former comment you made about climate change, speaking in Wall Street terms now, can you characterize the value inherent in addressing climate change? And the costs and environmental risks in Wall Street terms of not? Because not the IPCCs that are pounding out all the bad news. But what are we missing as terms of opportunity from an agricultural point of view. Presumably biotech is one. But what's the value to some of this -- what's the upside economically to getting ahead of the problem? And also the dollar value of the risk of not?

ALTMAN: Or-if I could just add one thing to your question. It's a great question. Or will agriculture be a sector which is not harmed by climate change?

VILSACK: Well, first of all, I'm not sure I can speak in Wall Street. I'm more of a Main Street kind of guy. So I'll try...

(CROSSTALK)

ALTMAN: ... That line works really well outside of New York.

(LAUGHTER)

VILSACK: We ignore climate change at our peril. And I will tell you that farmers because they deal with their land every day, they understand the personality of their farm. They understand the intricacies, the consistencies or inconsistencies that they see on the farm. And they have a relationship with that land that makes them quite sensitive to change.

And so farmers are very interested in the capacity to have the technologies that will allow them to continue to be productive even if they have less water, even if they have a storm that comes through that's extraordinarily intense. So they're very interested in investing in innovation. So the opportunity side of this is the development of new seed technology and intellectual property and new machinery and new farming systems that will allow them to mitigate the impact of climate.

They also understand that they have not fully utilized the capacity of their land. So you're seeing now a great interest in the part of the farmers to look at double-cropping or cover crops as a way of dealing with the changes that they're seeing. So, for example, there is an effort at Penn State to look at the possibility of growing corn and just as the corn is about to be harvested, planting a cover crop.

That cover crop would allow the carbon to continue to be sequestered. It would allow moisture that's in the soil to continue to remain. It would re-energize and re-nourish the soil so that it could continue to be productive. And it could produce the feedstock for a new chemical or a new energy source or a new fuel source. Now what that does, it creates additional income opportunities for the land owner. It creates new job opportunities primarily in rural areas of manufacturing and processing because of the bulk and nature of bio-mass and it creates jobs.

Now the impact of that is pretty significant. But that's only if we're in the process of analyzing how the world of agriculture will change as climates change, as temperatures increase, it will become more difficult potentially to grow certain things. And we may have to think about adjustments. But those adjustments can lead to extraordinary innovation and can lead to new job opportunities.

So to me, that's what we're focused on is trying to make sure we do the analysis, establish the vulnerabilities, create the new technologies, and create more market opportunities for whatever we can produce on the ground that we have. The other possibility -- and I know there are other questions -- the other possibility is this issue of environmental markets.

I mean agriculture today is a plus eight percent on greenhouse gas emissions. Forestry is a minus seventeen percent. So between agriculture and forestry, we've got a carbon sink thing going on. We will obviously want to continue that. That is not necessarily the case of agriculture internationally.

Internationally, the greenhouse gas emissions of agriculture are significantly greater especially as people take a look at forested land and convert into cultivated land. So we have tremendous opportunity here to not only do this domestically but also to transfer this understanding of this technology and information internationally.

And that creates other export opportunities for us in terms of technology, in terms of concepts and ideas. So there's a lot of upside here. But the downside is if we ignore this, is we get to a day when we can't grow the crops that we grow. We begin becoming less secure as a country because we have to depend on someone else for food.

I will tell you the Chinese are not happy about the fact that they buy as many soybeans as they buy from us. The Russians are not happy about the fact that they can't produce everything they need to feed their people. It is a national security advantage we have. And we ought to hang on to it. Now I don't know if that's Wall Street or not.

QUESTION: (Inaudible).

VILSACK: OK, OK.

ALTMAN: Yes, ma'am.

QUESTION: Thank you so much. Lauren Shiveigh (ph). Your comments about productivity are, of course, hugely appreciated and fascinating. The flip side with actually Roger sort of pointed out is that for many Americans, especially at the upper ends of the financial scale are increasingly going to places like Whole Foods because of very deep concerns about the downsides of our productivity -- animal welfare, you know, overproduction in certain unhealthful food sectors. All of the environmental cost. Can you talk a little bit about given how unbelievably secure our food supply is and the proclivity of this Administration to maybe be thinking differently, especially about the health implications. How are you starting to think about balancing that incredible productivity with some of these other issues around food safety, animal welfare, hormones in meat, all of the stuff that is actually corollary to this incredible productivity?

VILSACK: Well I think that, you know, when you think about agriculture, I think you have to think about it in terms of thirds. There's a third of the issues that you raised -- some of the social issues that involve questions about safety and nutrition. There's the environmental piece of it. And then there's the economic piece of it. And I think it's really about balance.

And that's why this Administration has focused not solely on production agriculture but has spent a good deal of time and a good deal of resource -- a historic amount of resource and time on creating a more welcoming opportunity for other kinds of production processes. Not -- we don't see this as competing. Now some people will see this as a competition. I don't see it as a competition.

There's an interesting article in The Washington Post just yesterday, that took look at organic production -- organic foods and conventionally produced foods with the question, "Is one healthier for you than the other?" And the surprising conclusion of the article was that in every commodity-dairy, meat, vegetables, fruit, there's virtually no difference in terms of health, nutrition.

That's probably not what most people think. But from my perspective, organic is a great opportunity because it's a way in which high-value opportunity can be created when you don't have to buy 1,000 acres of land. You can start with 10 acres of land. So it's a way of get entrepreneurship, innovation, youth, energy, new people into the agricultural world so that this issue of aging producers becomes not as much of a concern as it is today.

And it's obviously a high-value added proposition because we have 18 -- over 18,000 certified organic producers in this country -- a relatively small number. They farm about one percent of America's land and they have about five percent of the sales. So it's pretty high-value added and in some commodity groups, it could be as high as 10 percent of the sales. So, you know, I think there is a balance that can be struck.

And I think the market -- the market is going to address some of the issues that you've raised. The market is going to address the issue of animal welfare in terms of whether people -- how people -- how strongly people feel about it. And major corporations and major entities and purchasers of food begin to establish certain criteria for the food that they purchase. Everybody from Wal-Mart to McDonalds. The market's obviously going to have a say about that and obviously, folks are going to listen to the market.

But our view at USDA is not to pick at winner or losers. Not to say one side is better than the other. It's to create a situation where all types of agriculture are welcome. And people can make the choice for themselves as to which is best for them. But well here's what's interesting. And this is really important. You all have mentioned Whole Foods. The -- one of the co-CEOs of Whole Foods is Walter Robb. And he's a terrific guy.

And I called Walter up one day and I said, "Walter, it's great that you have a store in Georgetown. It's great that I can go to that store. But what are you doing about inner city America?" He said, "What do you mean?" I said, "I just met with a group of African American ministers in inner city Detroit. They're deeply concerned about the welfare of their congregation and they don't have access to a decent grocery store." And I said, "What is Whole Foods doing about that?" And he said, "Well, good question, I'll send a team. I'll meet with them." He met with them and he sent a team to Detroit and they came back and they said, "Our model doesn't work real well in inner city Detroit."

And to his credit, Walter said, "You know what? Create a different model." So they went back, they shrunk the size of the store. They didn't have 5,000 different kinds of fruits and vegetables that quite frankly I don't know how to prepare. They really surveyed the community. They said, "What do you want?"

ALTMAN: You're better than me. I don't know how to pronounce them

VILSACK: Well, I could have gone there. And they opened up a store in inner city Detroit. And you know what's interesting about that story?

ALTMAN: It's doing well.

VILSACK: It's doing really well. And what's also interesting is that they're -- the people with SNAP cards are using that store. It's also the reason why we've said to our SNAP program-if people want to go to a farmer's market, they should have the opportunity to do that. We shouldn't be segregating the SNAP beneficiaries going over here to the discount store. And everyone else going and having the benefit of the community building experience of going to a farmer's markets.

Everybody should have that opportunity. So in 3,000 of the over 8,000 farmer's markets now, SNAP cards can be accepted. And foundations are coming and saying, "You know what? Let's give those folks a little extra break. Double bucks." So we're now creating programs where we're incenting folks on SNAP to be able to have fruits and vegetables. So it's changing. But it's not going to change overnight.

ALTMAN: All right. Let's try to fit in at least a couple of more questions. Yes sir, on my left.

QUESTION: Thank you. Andrew Forgas (ph) with Modern Meadow (ph) --we're a biotech company focused on agriculture innovation around animal products. And first of all, I wanted to say thank you because our -- one of our earliest sources of support was a USDA SBIR grant. So thank you on that. My question for you actually builds on some of the questions that we've had earlier which is 2050 is the date that's put out there as a date by which a lot of things need to happen.

Population is going to exceed nine billion. And some project a near-doubling of animal products that the world is going to consume by then. And if today already livestock is the leading user of land, water, and by some measures the leading contributor to greenhouse gas emissions, how do we square this equation? How do we actually increase animal production to feed the growing demand around the world, but not exacerbate the resource utilization?

VILSACK: Well, the short answer is continued investment in agricultural research and the focusing of the research on that very question. I can tell you that we've started that with the dairy industry. The dairy industry writ large from the producer to the retailer has agreed to reduce their greenhouse gases voluntarily within the supply chain by 25 percent by 2020. And they've come to us and said, "How can you help us do that?"

Well anaerobic digesters is one way of doing it. So we helped to fund on average about one digester a week at USDA. I think we've done 93 of them. I think we've invested $62 million in that effort. And there's research going on now in terms of how livestock is fed to determine whether there's a capacity and capability of reducing the emissions from either end of livestock, right?

How that can be captured. But here's what's really interesting about this. You never thought your question would go into this issue. You know a really big problem isn't so much livestock production. It's how much food we waste. Thirty percent -- thirty percent of all the food that is produced in this country is wasted. Thirty percent. So if you're really interested in reducing greenhouse gases, then we ought to figure out a much better way to reduce, to recycle, and reuse.

And so we've launched a major initiative at USDA to focus on this issue on how we can work with restaurants to reduce portion sizes so that they're manageable and you get a decent meal, but you don't get a bunch of food that isn't used. How we can do that at schools and universities-do a better job. How we can better educate consumers about best by such-and-such date. What that actually means. So you don't have to throw it out the next day. And how we ...

(CROSSTALK)

ALTMAN: ... There's a lot of misunderstanding about it.

VILSACK: A lot of misunderstanding, OK? Internationally, 50 percent of food that is grown -- crops that are grown never get to the plate because our storage facilities are inadequate. And so there are a multitude of things that are important here. The reason I bring up food waste -- it's the single largest source of solid waste in our landfills. And our landfills happen to be a heavy producer of methane.

So you want to reduce methane? Let's do research on livestock for sure. Let's figure out more efficient ways to feed livestock for sure. Let's capture when we can for sure. But let's also not be putting a lot of food in our landfills and creating methane. Let's figure out a way to reduce that.

ALTMAN: OK. I am unfortunately obliged by the venerable council rules which we all embrace to bring the formal part of this meeting to an end. Now there are a series of people who had questions. This gentleman here who were not able to ask them. I don't really know if Secretary Vilsak has a few minutes when the formal part of the meeting ends. I hope he does.

But let's at least thank---

(APPLAUSE)

ALTMAN: Tom for being here today. We really appreciate it, Secretary.

VILSACK: You bet. Thanks.

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Farm Bill

The Farm Bill is a comprehensive agricultural and food bill, passed every five years, which regulates the United States Department of...