SEC. ED SCHAFER: I appreciate the opportunity to be here in this red hot and blue celebration. I'm looking forward to sampling some of that hot stuff back there shortly. But thank you. It is always a thrill to be here in the patio here at the USDA. We're surrounded by portraits of past secretaries, and it just reminds me what a huge opportunity and honor it is for me to serve as the head of USDA during these very exciting times. It is indeed a great day in America, and it's a great day here in Washington, DC. The sun is shining through, and we're glad to welcome you to USDA today.

First off, I would like to tell you how much I appreciate all that you do for rural America. Farm Co-op plays such a vital role in the development of American agriculture throughout the years. They've helped open new opportunities to help American farmers respond to the always changing marketplace. American agriculture has benefited greatly from the innovation and the efficiency that farm co-ops have brought to agriculture since they really first started forming in the United States after the Civil War. Farm co-ops, by the way, actually were developed in Denmark in late 1700s, and Danish immigrants imported those ideas to America. I say that because I have a proud background of Danish immigration. My grandfather emigrated from Denmark when he was 18 years old.

You know, farmers there in Denmark, like here, found an effective way to respond to the vagaries of weather and sudden and often dramatic changes in agriculture marketplace, and the co-op was the way to respond to those efforts. My grandfather came over and actually was a shipbuilder. I know you're wondering what shipbuilding has to do with farming, but he as a shipbuilder came over. His boat sunk on the way to U.S., and he lost his shipbuilding toolbox, he lost everything he had. When they fished him out of the water, rescued him, they said, "Well, do you want to go back to Denmark or continue on to the U.S.?" He said, "No, I'm heading off to the Promised Land and going forward," and, "Take me to the United States."

He got here with nothing. I mean, he had 7 cents in his pocket and the clothes on his back. And he found his way out through the prairies of North Dakota and homesteaded a quarter section of land out in the southwestern part of the state. And interestingly enough, his shipbuilding skills came to bear. After he built the necessary sod hut to have some shelter for himself and his family, he said, "I have to build a barn. If you're going to be a farmer you have to have a barn." So he built a barn. I have a photo in my office that you can see it clearly looks like an upside down boat.

[Laughter]

So I arrived at USDA via a shipbuilder from Denmark, and I'm so pleased to do so.

Yes. You know, he was determined to become a farmer. He made his way to North Dakota as I mentioned, and really became a part of the land. He learned how to be a productive part of the agriculture arena. I spent a lot of my summers on the farm with my grandfather, and really appreciated the vital role that he learned in America to be a part of that rural community.

I especially appreciate the vital role also that America's farm cooperatives played in farms' and farmers' success. One measure of strength in farm cooperatives is the durability. Like the land itself, the organizations are built to last, many celebrating major milestones. For example, West Central in Ralston, Iowa, is celebrating its 75th anniversary this month. CHS just notched its 75th anniversary last year, and Aurora Cooperative in Nebraska is now turning 100 this year, just to name a few. So congratulations to you all.

I was pleased during my time as governor of North Dakota to work with the effort to help establish farm cooperatives, focusing on value-added acreage. And that happened all over the country. Across America today farmers are riding a crest, I think a crest of a wave in terms of income, crops and livestock, the value-added foods and the goods that are produced.

And the farm co-ops help bring that to market. Total sales for the 3,000 farmers' owned co-ops in the U.S. hit $127 billion in 2006. That's just simply made them a huge part of America's rural economy.

Today I'd like to talk to you about a few things that are going to help shape the future of farmer cooperatives and for actually the entire agriculture economy. Those simple things are the farm bill, renewable energy, and trade.

As you all know, Congress spent a considerable amount of time trying to develop the new farm bill. The final result isn't exactly what the Administration had in mind, but the bill is a formidable piece of legislation nonetheless, calling for $290 billion in new spending on farm and nutrition programs over the next five years. It will touch every mission area and every agency we have at USDA, and we're committed to implementing this farm bill as efficiently and as swiftly as possible. We hope to see the new version of the farm bill sometime this week.

As you know, the President will veto the bill; it will go through an override again. But we're going to get the bill, once the policymakers are done, we at USDA have the opportunity to deliver. We, as always, are going to implement as efficiently and as swiftly as possible. In fact, we're implementing today. We are implementing the Marketing Assistance Loan Program and the Loan Efficiency Payment Programs as well as announcing the new 2008 loan rates. As a matter of fact, it's probably going on as I speak.

So we're gearing up and getting ready to go. We have a working group in place that will coordinate the process and make sure it keeps on track. And we've outlined the priorities of the implementation, and we will get through them as fast and, as I said, as efficiently as possible.

While overall we in the administration are disappointed with the direction of the farm bill, there certainly are some good elements there. For instance, for the first time this bill will focus on specialty crops. They get the special attention that they deserve, and I think it's high time because the sales of specialty crops account for nearly a third of all U.S. crop cash receipts, and it's a fifth of our agriculture exports. The bill adds $230 million for new specialty crop research programs; it reauthorizes the specialty crop block grant program to support market research and promotion efforts at the state level as well as funds that add $224 million over next five years. The farm bill also increases significantly funding for fresh fruits and vegetable programs, which targets schools in low income areas; mandatory funding for that program will grow by $476 million over, again, the next five years.

The new legislation dedicates then $1 billion to Section 32 funds for the purchase of fruits and vegetables for use in all of our domestic nutrition programs. Taken together, these provisions should go a long way to help support our domestic producers of fruits and vegetables that come through many of your cooperative members.

The farm bill also provides more resources for conservation programs, $2.7 billion of new funding over the next five years, including expanding funding for the EQIP program. These programs help protect the environment while it's allowing thousands of farmers and ranchers to realize more value from their land.

And finally, the farm bill also supports renewable energy and creates new energy related programs such as the Biomass Crop Assistance Programs to help producers who want to grow biomass crops and develop conversion facilities. Minimum mandatory spending for agriculture based energy programs will raise by $600 million over the next five years. That's a fifth lower than what the administration was looking for, and it's actually lower than either the House or the Senate originally passed bills. But fortunately the farm bill doesn't have to carry all the weight here. Our national energy policy and priorities are being set in other legislation pieces as well and really even more rapidly by the dynamics of the marketplace.

The Energy Bill that President Bush signed into law last December calls for the production of 9 billion gallons of renewable fuels this year, and it challenges us to boost production to 36 billion gallons over the next 15 years. And that's a very ambitious, long-term goal for our nation. It's going to spur also continued, strong demand for energy crops.

These days, as I mentioned, the market of course is speaking more loudly than any government could ever do. The reality of $4-a-gallon gasoline and $135 per barrel oil is already changing America's driving habits. It's stimulating the demand for alternative energy and renewable fuels. That demand is only going to grow stronger over time.

Along with energy prices, we have seen world food prices jump this year as well. Unfortunately, some people have tried to set up the increased ethanol production to take the blame for the market boom of increased commodity prices. But there is a little problem with that. The evidence just doesn't support that theory. You know, there isn't a simple one-on-one relationship between the higher prices for corn and soybeans and what consumers are paying for food at the retail level. It just isn't there. But we at USDA know that of the anticipated over 40 percent inflation rate in food globally this year, 3 percent of it is generated by ethanol production in the United States. So while we know that ethanol is a factor; it certainly is not the driving factor or even close to the issues that are driving the cost of food.

Last week I represented the United States at a conference in Rome that the United States convened on the challenges of world food security. And I have to tell you I'm glad to announce that I believe common sense prevailed as we worked through that work of talks about the focus on the crisis in food prices across the world. As we worked through the conversations, the ending documents really reflected that biofuels were not found to blame for these price increases on key staples such as rice, wheat and corn. Many nations in the developing world are interested in biofuel production as a way to reduce their own dependency on oil. And they really want it to be this new industry growth and development, especially food into the second generation of technologies of the biomass generation.

Here at home we recognize that the impact higher corn prices are having on feed policy is a major concern for livestock and poultry producers, and we're taking the steps we can wherever possible as we did with our recent move to allow forage and grazing on CRP acres to help ease some of that pressure.

On the trade arena, as we meet today American agriculture is booming. The world is hungry for our agriculture products. Every few weeks it seems that we have to bump up our forecast here on agriculture exports. We did it again just last month, expecting the total amount of U.S. agriculture exports to reach a record of $108 billion in this year, 2008. That's an astounding figure; that's up more than $26 billion just over last year and $40 billion over the last two years. Amazing figures out there. We know that there is more demand, and it's being driven by the top quality, safe, good products that we are able to supply the world.

The demand is there, and we now have opportunities to deliver. You know, there's a billion new middle class customers out there. Today we've talked about them a lot; over the last 15 years I think we've talked about those new customers coming on-line. They are emerging in the developing countries over the next decade. But you know what? They're here, they're out there, and they're making a big difference right now as economies are increasing and people are moving from one meal a day to two, when they're moving from one dollar day for their foodstuffs to two dollars a day, when consumption habits are changing into different products and higher priced products and more processed products, you know we are seeing the effect of that increased demand.

Consumers are making their presence felt in China, in Mexico, in many other markets. They're buying more meat, more prepared foods and more dairy.

Our administration remains strongly committed to free trade. You don't have to look any farther than the experience that we had with our trade agreements to see how they do work. One example is NAFTA and how valuable that has been for our free trade. Now I know, I see some of you here from North Dakota start vibrating when you say NAFTA, but let me give you some numbers.

Really, this is how valuable it can be. In 1994 when NAFTA created a free trade zone coverage for the U.S., Canada and Mexico, our agriculture exports to those countries have grown from about $10 billion then to more than $25 billion a year today. This year we expect it to reach more than $30 billion. Now that's a great increase; and coming from a state like North Dakota where 50 percent of our agriculture crops are exported, these are important agreements for us for sure.

Our two NAFTA partners now account for 28 cents out of every dollar in worldwide U.S. agriculture exports. Free trade agreements do work, and that's just the long and short. That's why the passage of the pending free trade agreements with Colombia and Panama and Korea is one of President Bush's top priorities this year. And I assure you we are going to continue to work with Congress to make that happen.

Last year in December, Congress approved the free trade agreement with Peru. If you take that free trade agreement with Peru and you add to it those pending with Korea, Panama, and Colombia, it opens the door to $3 billion worth of new agriculture export sales each year.

And it's interesting, with Colombia the pending free trade agreement there would immediately lift tariffs on more than 70 percent of our agriculture exports representing more than half of the current trade value. The current tariffs cost us in a big way. I urge you to check on the USDA web page for our Tariff Ticker. We've pointed out on our web page the fact that in the 569 days since the Colombia Free Trade Agreement was signed, and Congress has been unwilling to act on it, our producers in this country have paid more than $1 billion in unnecessary trade tariffs, dues, and fees. And that just rises. I just checked it when I came down here, and it just continues to roll up.

The interesting thing to me is that the Colombian agriculture products coming into our country are duty free. They do so by coming through the Andes Free Trade Agreement, and they are able to do that. Congress just affirmed that a few weeks ago, so Congress is showing a willingness to allow our products (unclear) throughout. Colombian products are coming to the U.S. duty-free, but they will not vote to allow our products to Colombia duty free.

What's wrong with that picture, you know? As Secretary, I'm bound to ensure the rules and regulations about lobbying; there are all kinds of paperwork and things telling me what I can and cannot do in this manner, but since you're all here today and it's a great day, call your congressman, call your members of Congress, call your senators, and tell them we need this free trade agreement passed this year. It's important for agriculture, and I would urge you to do so. A billion dollars is too much money to leave on the table. And that Tariff Ticker just keeps going at USDA.com by the way, if you want to pass it along.

Perhaps the strongest argument for approving these agreements is just plain common sense. American producers really shouldn't be held back with the quality products that they have out there when they want to compete in foreign markets. And they deserve a level playing field, and when we make these trade agreements it gives them the opportunity to do so.

Today in the marketplace the farmer only cooperative remains a powerful and highly adaptive business model for agriculture. You all and your efforts remain vital because you help your members to get better prices for their crops and livestock through joint marketing efforts, help them process their commodities into value added products, and you provide them with farm supplies and services that are essential to their operations.

If history is any guide, I know that you'll keep doing right by your members and keep growing, evolving and leading an industry forward in many years to come.

Again, I want to thank you for the opportunity to be with you today. It is an honor to be among those people out there, all of you, who I really want to thank on behalf of United States Department of Agriculture for the work that you do to promote and to enhance and to support rural America. In my opinion, rural America is the bedrock, it's the backbone of what made this country great. And you all are involved in that process, and I thank you very much for your efforts.

[Applause]