SEC. ED SCHAFER: (in progress) -- for the conference and the Fuel Summit. I think the Farm to Fuel idea is a great idea, and I'm pleased to be here with you this morning.

I got up early and got some exercise outside today. And as I was going around the grounds I noticed the beautiful landscaping that is in this area. You know, I'm from North Dakota, so it's always nice to see trees and things like that.

[Laughter]

But you'd notice that it was kind of waking up around here. You know, employees were coming in and buzzing as they walked into the building. And the trucks were rolling in. I noticed that the food truck came in and the flowers, and the important beer truck you know came to fill up the coffers here. And I was out beyond the golf course, and there was this nifty little machine that kind of, you know, it cuts the grass but it went forward and backward and sideways. And I thought, you know, that's a great innovation and probably something that came from somebody's imagination in America.

The sun came up over the east, and I thought, this is a great day in America. And it's really a great day here in Orlando as well. And I appreciate the opportunity to be with you because this is the theme park capital of the world. And it is a city of dreams and the power of imagination.

And of course imagination is important to farming as well. You know, there's a story about the dean of students at an agriculture college who was interviewing a prospective student one day. And the dean asked the student, "Why did you choose this career?" And the student said, "You know, I dream of making a million dollars in farming, just like my dad," the students concept. The dean was kind of incredulous. He said, "You mean to tell me your dad made a million dollars in farming?" And the student said, "No, but he always dreamed of it."

[Laughter]

But you know, I say that this morning because the direction and the opportunity, the efforts in agriculture today are really taking people where they could only dream of in the past. The dynamics of the agriculture marketplace are opening up new opportunities for farmers and ranchers that would have been hard to imagine even just a few years ago.

The fact is that we today are seeing very good times in the farm economy. This year we expect agriculture exports to reach a record level of $109 billion. That's up $26 billion over 2007's record-breaking performance, and it represents a phenomenal jump of $40 billion in export sales over the past two years. We expect net cash farm income to reach $96 billion this year as well, and that's driven by the strong prices for agriculture commodity crops.

And of course agriculture is never without its challenges, but as farmers and ranches are seeing these high prices they are also having to cope with higher costs of fuel and feed and fertilizer. The roughly 60 percent increase in the world price for oil over the last 12 months that we've seen has had a particularly strong impact on farm operations and retail food prices. Higher costs for gasoline and diesel fuel directly affect production work on the farm, but they also feed into all of the intermediate steps after the farm gate before that food gets to the store. Those high energy prices affect our packaging, transportation, our distribution, all of which ends up with a product on the retail shelf.

And the increases that we've seen recently in the food prices are creating some interesting conversations. Some have used that opportunity to blame ethanol and biodiesel for those rising food prices. They argue that if we just took them out of the picture that we'd be just fine on that food price increase front.

But you know, facts just don't bear that out. Taking biofuels out of the energy portfolio would do nothing to blunt the impact of higher oil prices on our agriculture or any other sector of our economy. In fact it really would mean higher energy prices for everyone. The Department of Energy calculates that blending ethanol into gasoline reduces the price of a gallon of gas by 20 to 35 cents a gallon. For the nation as a whole, those savings amount to between $30 billion and $50 billion a year.

Biofuels are an important part of the solution of our nation's energy challenges. And they are an important part of the economic future of rural America as well. And there's just simply no turning back from a future in which more of our energy resources are grown and harvested in a sensible way. That means that agriculture is going to be right in the middle of the game.

We don't know whether we'll be relying on sugar cane or switch grass or algae or citrus peel, woody biomass, or all of them. We will see wind farms and solar panels and hydrogen generators all on farmland too. Those mixes are going to create our renewable energy needs in the future. But here in Florida the sheer variety of agriculture, the mix of forests and citrus groves of sugar cane farms and grazing lands that you have here really make you a state that is a great laboratory for the future. When breakthroughs come, I'm really counting on Florida to lead the way.

I commend Governor Crist and the Florida Legislature, Commissioner Bronson for all of the efforts to stimulate innovation at the state level with the Farm to Fuel grants program. The commercialization and research projects that this program funds truly cover the waterfront on renewable fuels and technologies, and should deliver benefits really not only for Florida but for our nation as a whole.

Back in Washington, thank you for the invitation to get out of there by the way, back in Washington, you know we finally wrapped up the farm bill last month. But before we got to that point, the administration and Congress were often pretty far apart on agriculture issues and on farm policy. We had our disagreements. But on one area that there was broad agreement right from the start of the legislative process; it was on the need for further investments in renewable energy.

The final version of the bill includes more than $600 million in new mandatory funding for renewable energy programs over the next five years. And that's on top of the $35 million that we're spending today for woody biomass research and renewable energies. That new $600 funding creates a new biomass crop assistance program to help producers who want to grow biomass crops and also to develop conversion facilities.

This farm bill did another very good thing. For the first time it gives specialty crops, those specialty crops that are so important to a state like Florida, the bill gives special attention to those crops that they really deserve. With sales now accounting for nearly one third—specialty crops—one third of all the U.S. cash crop receipts and a fifth of our agriculture exports—this recognition is long overdue.

The farm bill provides $230 million for new specialty crop research programs. It also increases funding by $476 million for the Fresh Fruit and Vegetable Program that targets schools in low income areas, and it dedicates $1 billion in Section 32 funds for the purchase of fruits and vegetables for all domestic nutrition programs.

Taken together, these provisions should go a long way to help support domestic producers of fruits and vegetables and to improve the diets and the nutrition of our most vulnerable Americans.

With the farm bill now the law of the land, and once the bill got through the colossal blunder of Congress in sending up a portion of the bill, getting it vetoed and overridden, and then discovered that we didn't have the right bill—that process was done again and we went through and the bill was overridden again. And it landed on the doorstep of USDA. And now its our job is to implement that legislation.

I told our USDA employees when that bill came to us that, "It's now time to put down the political differences, to set those aside, the policymaking is over, and now it's time for us to get down to work and implement this bill as soon as possible." The overall goal is to do as much as we can by the end of this year, by the end of this administration.

We put together our Implementation Committee. We stacked it with both career and political folks so that it will see its way through into the conversion to the next administration. But we're making good progress, and we're going to get as much done as we can while there's time, knowing it's short.

But just two weeks after the bill was finalized, we announced the sign-up for the direct and countercyclical payment program, and we've already now started to distribute over $1 billion in advance payments for those payments just here in the month of July. So the efforts are going well, and we're pleased with the progress and the opportunity that we at USDA have to implement the 2008 farm bill.

But along with implementing the farm bill, trade is at the top of the agenda at USDA for the rest of this year as well. The break-down a couple days ago in the Doha talks was certainly disappointing. You know, especially the final agreement I think had been pretty close. We were looking at making some concessions. Other countries were coming to the table.

We were understanding our differences after a seven-year negotiation battle that had been taking place. But it was moving in the right direction, and so it was disappointing for all of us to see an impasse declared on Tuesday.

But you know, Ambassador Schwab, our USTR representative, made it clear that the final U.S. offer which included concessions on our agriculture subsidy programs, remains on the table awaiting an appropriate response. We're waiting. We've I think moved forward, and as the president said on Tuesday, It's not over yet. These are important works, and we must work to get them done.

But that success with Doha Round must be fair to all parties. If the U.S. and other developed nations are going to make concessions, they have to win a greater market access to developing nations in return. I know there were a lot of people in the agriculture community that were worried about this negotiation.

They were worried that we were going to throw agriculture in the river maybe for concessions with industrial goods, or that we would give up our right to subsidies without gaining the appropriate new access to developing countries. And while we are disappointed in the results of the negotiations this last week, we certainly are pleased that the United States stood firm to our position and to our ideals.

The United States showed leadership in the positions that we took, and we'll have to wait and see now if other nations are going to do the same. We also have to recognize that while this multilateral agreement may be the best way to increase global trade at a single stroke, we can't just stop with that. The bilateral and regional free trade agreements can also now accomplish a great deal and become increasingly important if we can't get the multilaterals done.

The experience that we've had with regional trade and bilateral trade agreements really have shown they work. The NAFTA and the Central American Free Trade Agreement gives us ample proof of that. Both have led to dynamic growth in trade, particularly in agriculture goods.

You know, if you look at the NAFTA agreement today, Canada and Mexico, our two partners in that agreement, account for 28 cents out of every dollar in worldwide U.S. agriculture exports. I know you in Florida here had some problems in the beginning of that agreement. There were some produce and specialty crop issues here. It was a concern as things got adjusted and balanced out. But, you know, 10 years later on the whole we know there were some individual and specific problems—on the whole it's proved that these trade agreements work. And we've seen the increased trade outbound from our country to theirs.

Free trade agreements work, and that's just the long and short of it. And that's why winning the passage of the pending free trade agreements in Congress of agreements with Colombia and Panama and Korea is one of President Bush's top priorities this year. We're going to continue to work with Congress to try to make that happen. And you know this is very important legislation.

A couple of weeks ago I led a congressional delegation to Colombia to see firsthand how that nation's economy and political structure are evolving. And I saw a nation that is making huge strides in putting aside its violent past and building a vibrant economy in which agriculture plays a key role.

And I have to tell you this story, the best message we received down there. We were visiting with some palm tree farmers that harvest palm fruits for palm oil. And years ago these people were driven off their land by the drug lords and the people who want to grow cocoa for cocaine. And they got pushed out in the jungle, and grew enough food to eat and harvested and picked and foraged for hand-to-mouth delivery for themselves and their families. Four years ago 500 of these small little local farmers got together and formed an alliance so that they could put together the growing operation of palm oil. An investor came in and built the palm oil facility there. The farmers own 49 percent of it.

We were talking with one farmer who's about 60 years old, he had 18 children. He had 12 from his first marriage, and now he's starting a second family. And he was very optimistic and positive about the future. But he said, "You know, four years ago I wasn't even on my land, and today I'm growing these palm trees, I'm part of an ownership of half of a palm oil factory, I've paid off my debts, I'm buying some more land, and you know I have three kids in college in the United States of America." He said, "That is what uplifts a country."

And these are what our trade agreements do is, they support the people there as well. And while we get increased production and increased exports and increased income, we are helping change the face of these countries and their economies and their social structure. And it's important to stand with them.

Beyond that, it's important to put us on a fair playing field. This agreement, the Colombian agreement, really should be supported on common sense grounds. Right now more than all the Colombian agriculture products come in to the United States duty free, no tariffs. They come in through the Andean Free Trade Agreement. U.S. exports to Colombia on the other hand have racked up a total tab of more than $1 billion since this agreement was signed.

This agreement would take those tariffs away. It drops 70 percent of the tariffs immediately; the rest start disappearing over time. So a few months ago Congress ratified the agreement for the Andean path and said, "Yeah, bring your products in here duty free; that's a great deal."

But they won't even need to vote on the Colombian Free Trade Agreement so that we can ship our products down there duty free. What's wrong with that picture? That doesn't make a lot of sense. Go to USDA.gov, our website. We've got a tariff ticker on there, and it's rolling out the dollars that producers in the United States today are paying unnecessarily for tariffs and duties that would not be there if this agreement was signed.

Now I as a cabinet official, I have to deal with all the laws of lobbying and what I can say and I can't say, I have to be really careful about intermixing politics and business and all that. So I have a simple message for you today. Call your Congressmen! Call them and tell them: "We need these trade agreements, they're important for us, they're important for the nation, and they're important for agriculture, and they're important for our producers."

Exports drove 40 percent of the increase in the gross domestic product last year, and they are increasing every day. Our producers deserve that level playing field in foreign markets, and these agreements help deliver that.

You know, earlier I talked about this being the land of imagination and dreams, and that it is. And you know, I've been at USDA now just for a short period of time. And you know I came in as a short-timer. I'll be leaving at the end of the administration. But really it couldn't have been a better time to be the Secretary of Agriculture, head of USDA. As I mentioned, the activity, the dynamics are beyond imagination just a few years ago that we see in agriculture today.

But you know, what's really important is that we in agriculture get involved in that arena. And that's why this Farm to Fuel Summit is so important for us: it's the coming together, it's the commitment to see the future.

You know, the renewable fuels standard that was put in place by Congress last year dictates an amount of renewable fuels that we need to have in our marketplace by the year 2020. What that is translated to is one billion barrels of energy annually. We import 4-plus billion barrels a year. We could convert over these next years up until 2020 a billion barrels into renewable fuels that are generated by agriculture, it would make a significant difference, such a significant difference in fact that it would double farm income in this country.

And if we double farm income in this country through renewable fuels, think of not only the domestic security, the opportunity to improve the environment, but also the economic activity that takes place on small farms and ranches and landowners and small communities and counties across this nation, it changes the face of how we operate.

You know, Tuesday we heard the Energy Department say that consumption of gasoline is down 20 million gallons. That translates to about 600,000 barrels of oil a day. Now that doesn't mean a whole lot to us. It's a big number; we throw it out there. But what it means is that we are sending $75 million per day less overseas. We're exporting $75 million less of our dollars. Instead we can be looking at agriculture and the opportunities that lie ahead to export our agriculture products. And how important that is.

We at USDA are proud to spend the $35 million on biomass research. And the new farm bill and the new appropriations are going to get us moved up to $50 million a year in USDA laboratories alone that is focused on agriculture, on biomass, on renewable energies that are so important for the future.

So as we sit here in the land of imagination and dreams, it really is up to you. It's up to all of us to be working together to meet these needs of the future through renewable fuels and in doing that we indeed can change from not just wild imagination but to realizable dreams in the farm, in agriculture.

So we're ready to go. Thank you. It's a pleasure to be here today. And I think we have some time for some questions. There are some mikes here, and if anybody has any quick and easy questions this morning, we'd be glad to answer those.