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MODERATOR: Good morning from Washington. I'm Larry Quinn speaking to you from the Broadcast Center at the U.S. Department of Agriculture. Welcome to today's news conference with Secretary of Agriculture Ed Schafer. Joining the Secretary in the studio today is Deputy Secretary of Agriculture Chuck Conner.

A note to reporters, before we begin if you wish to ask a question please let us know that by pressing *1 on your telephone touchpad.

Now it's my pleasure to introduce Secretary of Agriculture Ed Schafer.

SEC. SCHAFER: Thank you, Larry. Good morning, everyone. Thank you for joining us on what possibly is the last radio bridge from this administration. Thank you for being with us. We do appreciate the opportunity to chat today and hope we will be able to answer some of your questions.

I do have some preliminary comments, and then we'll get to your time as well. I have to say that these last 12 months since I took over as Secretary of Agriculture have passed amazingly fast. Seems like just yesterday we walked in the door here, but now with the new year under way and a new administration about to take office we wanted to share a few thoughts with you about what's been achieved over the past eight years in American agriculture and some of the challenges that we see that lie ahead.

This administration has ushered in a time of remarkable prosperity and growth in the agriculture economy. Strong commodity prices, rising export demand, and the rapid growth of renewable fuels industry in rural America have all played a part in this. The performance of our agriculture exports in particular has been remarkable. This year they set an all-time record of more than $150 billion in sales and accounted for about one-third of all cash receipts generated by U.S. producers.

We've seen a new global marketplace emerge centered on one billion new middle class customers created by the fast-growing economies of what we call the BRIC countries, Brazil, Russia, India and China, and to that we have to add Mexico as well. These folks have been driving up strong demand for grains, but also for our beef and pork and for our chicken and dairy and processed products as well. These are markets America's farmers and ranchers are well-positioned to serve and where they can hold their own against competitors.

But to do that they need fair access to foreign markets and a level playing field to compete, and that's why President Bush has consistently made expanding free trade one of his highest priorities. Over the past eight years this administration has negotiated 17 new free trade agreements including three with Colombia, Korea and Panama that are still awaiting action by Congress. These agreements have been negotiated, they are on the table, and they are good for our country and they are good for our producers. And yet Congress fails to act.

In all, 11 new free trade agreements are now up and running and opening doors for America's farmers and ranchers. They all have brought benefits, and maybe the Central American Free Trade Agreement with Dominican Republic as well stands out as one of the administration's major successes on the trade front. In 2007 our export sales to the five nations that had fully implemented the agreement jumped to $2.3 billion, 67 percent higher than their pre-agreement level, and they are up another 45 percent this year.

Of course concerns about food safety can create trade barriers just as formidable as any tariff schedule. We've learned that lesson from our experience after the first case of BSE appeared within our borders in 2003, and it led to an immediate restriction on our beef exports. We responded by pressing even more strongly for the use of objective scientific evidence in setting sanitary and phytosanitary standards.

Our approach of removing the barriers of emotion, of politics and of competition and of moving to a measurable standard based on science is important for trade, and is one gaining acceptance around the world. It helped the United States win classification as a controlled risk nation last year from the World Organization on Animal Health, and it has helped reopen markets around the world and restore U.S. beef and beef product exports last year to $2.6 billion, which is about two-thirds of the level before the BSE restrictions.

The next president and his secretary of Agriculture will have to decide whether we will continue to see broader opportunities for our producers in global markets or to pull back. Fair access to markets abroad, a strong safety net at home, and a continued federal investment in conservation, rural development and renewable energy are all crucial to the future of rural America.

Throughout his time in office, President Bush has been a strong advocate for conservation and rural development. Over the last eight years the impact of USDA's conservation programs on the land and on the environment has broadened and deepened. The 2002 and 2008 Farm Bills have both been important milestones in the growth of federal support for conservation. Together, they've increased funding for our conservation programs by over $21 billion. As a result, we've been able to protect millions of acres of wetland and help owners and landowners all over the country with thousands of projects that improve air and water quality and also improve sensitive wildlife habitats.

In all, conservation plans and systems have been applied to more than 327 million acres of land over the past eight years. The fact is, good land management and conservation practices benefit both landowners and the wider community. And as important as publicly funded conservation efforts are, we also need to supplement them with strong private markets where environmental benefits can be priced and traded.

To help speed the development of these private markets, we launched a new environmental Services Board and a new Office of Ecosystem Services and Markets last month. Both of these offices will be based at United States Department of Agriculture and will help us set uniform science-based standards for assessing the value of environmental benefits. Once these standards are in place, these markets will be able to grow and support even wider use of sound conservation practices on our lands.

Since 2001 this administration has shown its commitment to rural America by investing an average of $14 billion a year in rural development, 36 percent higher than the level of spending when we took office. Those investments have created 2 million new jobs, they've expanded broadband service, upgraded health care and emergency response services, and supported renewable energy and energy efficient projects.

Looking to the future, we know that economic growth in rural American and energy security for our nation as a whole will both depend on further development of renewable fuels and for biofuels to reach their full potential we must develop new biomass feedstocks and the business models that go with them. The new Farm Bill puts us on the right road by providing $1 billion to help fund this effort, but continued public support will be needed.

In all these areas-trade , conservation, rural development, renewable fuels-the new administration can consolidate the gains that have been made over the last eight years and lead America to even greater success that will also have to confront the continuing challenge of food security at home and abroad.

Since 2001 this administration has worked to make sure that more people who are eligible for the domestic nutrition program can actually enroll and receive benefits. We are proud of the fact that the rate of participation from eligible participants climbed from 54 percent in 2001 to 67 percent in 2006. Yet globally we face the urgent reality of a world population that will grow by more than 70 million people this year, and will continue to grow. We must find ways to feed all these new mouths without utilizing anymore land. For all of us in food and agriculture, this is the challenge of the 21st century.

Our administration has pressed for long-term solutions such as sharing more of our technology and know-how with other nations so that they can reach higher and more stable levels of production. I hope the next president and the next secretary of Agriculture will look at the long line of Bush administration successes in agriculture and find bipartisan ways to build on them to advance the interests of all Americans.

These are the end of my prepared comments, and now Chuck and I will be glad to answer any questions that you might have.

MODERATOR: And reporters, as we prepare to receive your questions we remind you once again to press *1 on your telephone touchpad to indicate that you do have a question.

Our first question today comes from Maureen Groppe of the Indianapolis Star.

Maureen, go ahead, please.

REPORTER: Hi, Chuck. Chuck, I was hoping you could give some personal reflections about what it's been like wrapping things up in the final days here, if you've been reliving memories, if you have any advice for your successor.

DEPUTY SEC. CHUCK CONNER: Thanks for the question, Maureen. Let me just say that, you know, my four years as Deputy Secretary, this is the greatest job you can have. This is a great agency. We've got hard-working employees scattered all over the country serving the interests of farmers and ranchers and people in need of food assistance, really dedicated people. And it's been an honor to serve over them.

You know, my advice to the next Deputy, and certainly the next Secretary is, take advantage of the wisdom that is out there in terms of these employees that are out there to serve. Listen to them, encourage them, help them do their job, and give them the tools to do their job in the best way they can. And they're going to take charge and do what needs to be done.

REPORTER: Have you been getting nostalgic at all in the last few days here?

DEPUTY SEC. CHUCK CONNER: Well, we're packing boxes, Maureen, and getting ready to transition to the new team. It's a very smooth transition here as the President mandated and as you would expect us to do. We're ready to hand off our finished as well as our unfinished business to the new team and really expect continuity to a point where the person that is benefiting from our programs really shouldn't notice much of a difference out there. And that's our goal is to serve the people, and they really shouldn't notice that there's been a transition in leadership here at the department.

REPORTER: Thanks.

MODERATOR: Our next question comes from Jim Berger, and standing by is Mike Hergert.

Jim, go ahead, please.

REPORTER: Thank you, Mr. Secretary. You laid out a very strong case for trade, especially relating to agriculture. Have you met with the incoming agriculture secretary, and do you get a sense that the Obama administration will stress the importance of trade, or step back? Or what are your views?

SEC. SCHAFER: You know, I have not met with the incoming secretary, the nominee, Governor Vilsack. I have offered to do so. Evidently the schedules and things have not allowed that to happen. So I really have not had a personal conversation with Governor Vilsack about his proponency of trade or his willingness to weigh in with his administration how important it is. I have to assume this. I served as governor with Governor Vilsack. He and I were the cofounders of the Biotechnology Partnership, and I believe, having been a governor from an agriculture state, that he understands the importance of trade for the strength of the agriculture economy. And there's no question about that, that agriculture is the only sector of our economy that has a positive balance of trade. We are not only feeding the world with our technology, with our ability, with our seeds and with our equipment, but we also are providing the base of relationships between countries that get developed through the trade of agriculture products.

So you know, the trade relation goes country-to-country, president-to-president, secretary-to-secretary, beyond just the food, foodstuffs and equipment that are shipped across borders. But I think Governor Vilsack is very well-aware of the strength of agriculture in the trade arena. Like I said, I haven't spoken to him, but I am assuming that because of his strong agriculture background in an agriculture state he understands the necessity to drive our economy forward through trade.

MODERATOR: Our next question comes from Mike Hergert, but first I'd like to remind reporters once again, if you have a question you'd like to ask please press *1.

Mike, go ahead with your question.

REPORTER: Thanks, Larry. And thank you, Mr. Secretary. I know you're a smart man. Yesterday I heard that you're planning to come back to North Dakota in the spring.

SEC. SCHAFER: (laughs)

REPORTER: But on a more serious note, I know that Collin Peterson has said that one of the things he wants to do as chairman of the House Ag Committee is try to reorganize USDA. First of all, is that necessary? And do you think he will meet with success?

SEC. SCHAFER: You know, I think those of us that are here would love to reorganize USDA. I mean, when you're in here, when you're working with the folks that are on the street that are delivering the programs, we clearly recognize how we can be more efficient, how we can deliver programs better, how we can invest in our technology today that will allow us to have a better delivery, a better control, and a better investigation on our payments, our subsidies, and our safety net programs that are out there.

But you know, it's important to remember that we get handcuffed in those reorganization efforts by Congress. And I'm excited about Congressman Peterson's public comments saying, "We can make USDA more efficient, we can reorganize and do better." And I'd love to help him in that process because I certainly believe, as we've showed in the ability to operate our state government in North Dakota when I was governor, you can reduce costs, you can spend more money on the important projects, and you can deliver the process better.

So we can do that here. But let me tell you, every time that we get into a situation where we want to do something - for instance there's a situation in one Midwestern state that I won't name but it's probably pretty close to where you're sitting right now, where we'd like to close and merge together two FSA offices that are 17 miles apart. But as soon as of course we start to do that, Congress weighs in and says, "No, no, no, you can't do that." And they write into some piece of legislation that you can't close any offices at FSA unless there are no people there. You know? I don't know how that works.

But you know, Congress is the obstruction here to good reorganization, good efficiency. Every time that we try to do it with the people that are on-line, that are face-to-face with our customers, that understand how we can do it better, we get thwarted in our efforts by Congress. Hopefully, Representative Peterson, who's a good friend of mine and who I think the world of and who has been very influential and beneficial for agriculture policy in this country, I think hopefully that if he's on the inside he can convince some of his own colleagues of the necessity to do so.

MODERATOR: Our next question comes from Luke Engan from Inside U.S. Trade. Standing by should be Kristi Pettis.

Luke, go ahead, please.

REPORTER: Good morning, gentlemen. Thank you for taking my question. I wanted to ask about direct payments. Do you have any advice to the new administration as far as AGI limits? I mean, how far should they ratchet down the limits to payments to individual recipients as well as AGI? And are there any lessons that can be drawn from the efforts during the two farm bills under the Bush administration?

SEC. SCHAFER: Well, you know, we fought hard as an administration to put a $250,000 AGI cap on our subsidy payments. This administration felt strongly about that. We weighed in over and over and over again. We pushed on Congress as hard as we could to put those limits in, and they simply failed to act. We made some minor changes; we pinched down things a little but, but nothing that is going to change any way that we deliver those payments or the way operators use them.

So we think it's important. Hopefully -- the President-elect Obama has made some public statements about the necessity to get the very scarce and important taxpayers' dollars to the people who actually need them and to not give them to those who don't to continue on with their operation. So we encourage the new administration to look at this again.

This was an issue that was fought hard. I think Chuck still has black and blue marks over this quite a bit. But you know, we lost the battle in Congress. Congress is still there; the same people that were in control last year are in control this year. So we'll have to see how that comes out.

And maybe we could ask Chuck to give a couple of his observations here as well.

DEPUTY SEC. CHUCK CONNER: Well, let me just say, add to that, Luke, that we are in the middle of our 2009 crop farm program sign-up. And in that sign-up, farmers are signing up under these new rules that are in effect as a result of the 2008 Farm Bill. Included in that are some new income limits.

As Secretary Schafer has pointed out, we have also put in place some additional limits in terms of "actively engaged in farming." And in order to qualify for a farm program payment, you have to be deemed to be "actively engaged in farming." In the past that definition was very, very loose and virtually anyone could qualify. We've tightened that up a little bit to make sure that if you are getting a farm program payment that you at least have some connection to the farm upon which you are getting that payment.

And this is not a huge change, but it's a modest change, one that is important as producers go in there to sign up knowing that we are trying as a national policy to make sure that our payments are going more to those who need them and certainly more to those real producers out there, not just someone who happens to have some very loose connection to the farm.

MODERATOR: Once again we remind reporters and broadcasters, if you have a question please press *1 on your telephone touchpad. And now we go to Kristi Pettis. Kristi, go ahead.

REPORTER: Good morning, gentlemen, and thank you for your service over this past administration. My question has to do with the National Animal Identification System, its development over the past few years and your expectations or I guess your satisfaction with it thus far and your expectations of NAIS with the incoming administration.

SEC. SCHAFER: Well, you know, this has been a voluntary program. It's gone slower than we wanted it to go. But we have about a third of the premises in the U.S. signed up now. We've developed cooperative agreements with state and producer organizations to try to bring people on-line. I've noticed over the past few days actually there has been some resistance to that National Animal ID System. There have been charges against USDA that we're making it mandatory because we are requiring people with certain operations, certain relationships to ID their premises.

You know, there's a simple reality. In today's world marketplace if we're going to continue to provide an abundant, safe and inexpensive food supply in this country we need to be able to trace where our products come from. If we're going to deliver, for instance, the COOL legislation, we need to be able to trace where our products come from. If we get into outbreaks of diseases and difficulties, we need to be able to trace where our products come from.

And we don't want to be in a situation like Canada with the BSE outbreak up there. In the midst of the crisis they had to develop an animal and premises ID system. And you know it behooves us in this country to do it while we have the time, while we have the capacity and capability to do so. And importantly, on a voluntary basis is much better than having the government come and say, "You have to do this."

But you know, what I fear is because of the necessity of developing this system in today's marketplace if we don't do it on a voluntary basis then we're going to have Congress come in and demand it, to make it mandatory, and you know then who knows what's going to happen and how many forms you're going to have to fill out and all this.

We ask people to come into our FSA offices as the sign-up is easy, it's free, and we make it as painless as possible. And you know, these are important issues as we face our relationships in the global marketplace. And we need to be able to assure our consumers, we need to assure consumers abroad that we take this seriously and that we are able to contain, to trace back and improve any kind of a disease outbreak that we have out there.

So hopefully we'll continue on with that sign-up process.

MODERATOR: Having no further questions, Mr. Secretary, any final thoughts on your part?

SEC. SCHAFER: Well, I certainly want to thank all of you. We've had a great relationship with the press. I would be remiss not to mention that I agreed with most of the things that you wrote. And I find your jobs fascinating because of all the conversation of this to be able to take it down into 30 second sound bytes and a few paragraphs in a story is pretty amazing and a great talent. And we appreciate all that you do out there.

Thank you for supporting agriculture and for spreading the world out there because, you know, our agriculture is the strength and the backbone of this country. And your work and your effort out there to keep people informed, to get the news out, and to allow people to understand what is going on in the agriculture arena is important to the future of this sector of our economy. And we appreciate what you do.

So thank you for the opportunity, for the year to work side by side with you. And best of luck in the future.

MODERATOR: Secretary of Agriculture Ed Schafer.

I'm Larry Quinn bidding you a good morning from Washington.