SEC. MIKE JOHANNS: Thank you very much for that warm welcome, and let me say to Under secretary Keenum how much I appreciate that kind introduction. I hope it has nothing to do with the fact that I'm his boss, but it might.

But it is great to be back in the Midwest. I was in Iowa yesterday. As Mark indicated, that's where I grew up. I grew up on a dairy farm in northern Iowa. I had a chance yesterday to meet with thousands of FFA members whose enthusiasm and their idealism about the future of agriculture was really captivating, if not downright inspiring.

So I'm getting a strong shot of the home country on this trip, and I will tell you that it's a great tonic for me. I should be good now for a few more weeks back in Washington before I need to get back to the Heartland.

Being here in Kansas City, I can't help but think of a great American president, a gentleman by the name of Harry Truman. He spent many of his formative years on a farm. Even though his career took him away from his friends here in Kansas City and his home in Independence, he never really lost his plainspoken, down-to-earth qualities. One day, I am told, he was making a speech at the Washington Garden Club, and he kept referring to that "good old manure" that they used to fertilize their flowers. Now some of the high society women complained to his wife Bess and said, Couldn't you get the president to say "fertilizer," they asked. Mrs. Truman apparently replied, "Well, Heavens no. It took me 25 years to get him to say manure." So.

[Laughter.]

Well, I'm going to visit with you about a number of things today, talk to you a little bit about our Farm Bill proposals and how they would help us meet the world's food needs while supporting a strong agricultural sector in the United States. I want you to know I really feel this is an honor to be here today. I look forward to offering these thoughts and then as I understand the program maybe there will be some time so I can take some of your questions, and I look forward to that opportunity also.

While it's only been about six or seven years since we last had the task of framing a new Farm Bill, I would say that the world has changed a lot in that relatively short period of time. We believe that the proposals that we have put forward respond to those changes and will put American agriculture on a strong, competitive footing for years to come. They will make our support programs for producers more market-oriented; they will bring more nutritious diets to millions of Americans who depend upon our domestic nutrition programs, which incidentally we feed millions every day; and they will put our nation in a stronger posture when it comes to international trade matters. They will also give us new flexibility, delivering international food aid in emergencies by providing the authority to use up to 25 percent of PL480 Title II funds to make cash purchases of food from developing countries near the site of a food crisis.

For more than 50 years, Americans have been the most generous people in the world when it comes to responding to hunger. I tell you that with a sense of pride. We've always been ready to respond to that human need. We still are today. As recently as last year, our contributions still amounted to half the total food aid distributed around the world. The generosity of the American people helped feed 70 million people in more than 50 countries. No other nation does as much. Americans have always believed that good deeds beget good will. I believe one of the key reasons our food aid programs have endured through the years, through different administrations, different political philosophies, is because they involve more than writing a government check.

They require hands-on involvement from so many people. They create a lifeline, if you will, between the farm where the wheat and the corn and the rice and the soybeans are grown, and a corner of the globe where the food is so desperately needed. And keeping that link alive is something that everyone involved can feel good about. But we also want our generous impulses to be effective. We want them to provide the help that's often so desperately needed in the most timely and the most efficient way possible.

Now I want you to know that we take very seriously the analysis of the Government Accountability Office that has just been completed on all federal food aid programs and the questions it's raised about delivery systems. At USDA we are already working on simplifying our procurement process for packaged products, and we are developing an information system to improve our monitoring and evaluating of food aid programs. We look forward to working with the GAO and Congress on further measures to improve and if necessary to restructure programs in the future. After all, this should be about getting better.

In the last five years, the amount of our food aid going to meet emergencies around the world has doubled. It now accounts for 80 percent of the roughly $2 billion that we distribute on an annual basis. That, ladies and gentlemen, is dramatic. The simple fact is that food emergencies, whether caused by famines, political upheavals, natural disasters, or other circumstances have been happening more often around the world. We now confront more than 30 each year on average, compared with a rate of about 15 a year in the 1980s.

The frequency of these emergencies places more stress on the food aid distribution system and makes it even more important for us to respond quickly and with flexibility when there is a crisis. In two recent crises, we have been fortunate. We were able to provide food aid to Lebanon last year after Israel's military intervention there and to the victims of the tsunami that struck Indonesia and other Asian countries in December of '04 because we had supplies close by or already in the pipeline that could be rerouted.

So our food aid made it to the scene while the need was very great. But you know we can't always count on being that fortunate. In future emergencies, the lead times and other logistical requirements of our current system could easily lock us out of a situation where we would be unable to deliver our aid as quickly as we would hope.

Having the flexibility to use cash to meet the emergency need in a small number of these cases could literally make a life or a death difference. The ability to purchase food near the scene of a crisis instead of waiting the additional days, maybe weeks, maybe longer, that it can take to load and ship it from the United States, would almost certainly save lives in some situations.

We do not anticipate opting for local purchases often. That's not what I am suggesting here. Only when we believe that it is essential to deliver aid in the timeframe that is needed. In fact as I mentioned, our proposal would allow us to do no more than 25 percent of the time. U.S. grown food will continue to play the primary role and will be the first choice in meeting global needs. When rapid response is essential, we simply ask for the flexibility to save lives.

Our 2007 Farm Bill proposal more closely defined in this regard than similar proposals that we have tabled in the past which as you know have met opposition. While not without its critics, this proposal is receiving I believe a more favorable reception. To me I have to tell you, that's encouraging. In fact, I'm very encouraged by the level of interest that all of our Farm Bill proposals have generated on Capitol Hill. In the last two months since the roll-out, I have testified three times before congressional committees and other senior officials and the Department has testified another six times. We have also delivered a combined 22 informal briefings to members and to their staffs. We are certainly pleased by the interest our proposals have generated. It shows that our ideas are being taken seriously and given careful consideration. I expressed to Congress my appreciation for that.

In our proposals we are calling for some different ways of doing business when it comes to farm policy. We're asking for $7.8 billion more in new funding for conservation programs, $1.6 billion for renewable energy, $3.25 billion for additional purchases of fruits and vegetables and other specialty crops for our domestic nutrition programs. We also call for expanded funding for market access and research programs, and we do so in a manner that fits within the President's plan to balance the budget in five years.

Because of efficiencies realized elsewhere, our proposals would save more than $10 billion in spending over the next five years compared to the outlays for the 2002 Farm Bill to date. And they would fit within the President's plan, as I indicated, to balance the budget. If you add disaster relief to the equation, our proposals save about $17 billion.

When Congress gets down to grappling with budget realities later this year, I think the mathematics of our proposal will look pretty good. One point that I've been making to Congress is that we have not put forth a hodgepodge of unrelated proposals, but a very, very cohesive plan for farm policy, one that provides a strong safety net for producers yet encourages agriculture to modernize and to enhance its competitiveness. Our proposal to make our food aid more flexible by allowing for cash as well as in-kind contributions is part of the overall plan. So are the more market-oriented support programs for producers.

We believe that the changes that we are recommending will make the programs more efficient and strengthen our position in the international trade arena and under those trade rules. President Bush believes strongly in the power of free trade to improve the economic life of nations. When it is put into action. He has pursued the goal of opening markets to U.S. goods by completing a dozen bilateral free trade agreements, most recently with South Korea. He has also pursued it by creating the Regional Free Trade Zone we now have with Central America, and by participating in the Doha Round of global trade talks sponsored by the WTO.

Ladies and gentlemen, in my judgment the Doha talks we have before us provide us with a once-in-a-generation opportunity to have a profound impact on the world economy to impact world hunger and poverty in developing countries. Two-thirds of the WTO member countries are developing countries; 32 of these are considered least developed countries, truly the poorest of the poor. In these countries, over 70 percent of the poor live in rural areas where agriculture is the employer. Now not based on our study but based upon a World Bank study, roughly half the global economic benefit from free trade would be enjoyed by developing countries, and more than 90 percent of their gains would come from reducing import tariffs.

The International Institute for Economics estimates global free trade could lift as many as 500 million people out of poverty and inject $200 billion annually into the economies of developing countries. Economic growth spurred by trade liberalization can do tremendous things, far more than voluntary aid donations standing alone. Reaching an agreement on agricultural subsidies and tariffs is the key to the overall trade agreement, the Doha Round. We're doing all we can to bring the round to a successful and fair conclusion.

As you know, Ambassador Schwab met last week in New Delhi with her counterparts from India, Brazil, European Union, Japan and Australia, the so-called G6, to discuss the Doha issues. They were able to agree on a timetable for completing the next phase of the talks with the overall goal of reaching an agreement by the end of the year. I think it's a positive sign. And when the day comes that the nations of the world agree on greater trade liberalization, the United States stands to be a good trading partner.

Over the last few years, our agricultural support programs have come under attack. Brazil successfully challenged our export subsidies for cotton despite our strong defense. Canada, the EU, and other nations are now challenging our subsidies for corn. And there of course is the constant threat of a challenge against our rice program.

Now let me be clear. We'll continue to aggressively defend our programs, but I've said so many times across this nation, it just makes no sense to stick with policies that paint a bull's eye on the back of the American farmer. In my judgment, that's not a safety net at all. When we want to set our own farm policies, we need to come together and pass a Farm Bill that makes sense for the future. That is why changing our support programs for commodity crops is one of the major initiatives of our proposals.

I'll touch on just two quick steps we're taking. The $7.8 billion in additional funding for conservation is a dramatic step in the right direction. Along with providing new funding, we also streamline and simplify our existing programs so farmers and ranchers can generate more environmental benefits. They can do it by protecting wetlands or wildlife or with projects that enhance soil or air or water quality on their land. These programs, along with the additional $5.5 billion we are proposing for direct payments, will give them new ways to support their operation under WTO rules that are not tied to price or production and so are not viewed as trade-distorting by our international partners. We think that represents the right path to the future.

There is so much at stake in this round of negotiations. I remain hopeful that the talks will succeed and help us pull the poorest nations of the world through to a better economy, to a brighter future. Until that time, we will continue to deliver aid wraith the same determination to save lives that we have demonstrated for so many years. We believe we could do so more efficiently and effectively under our Farm Bill proposals. We hope you and Congress agree.

One thing is certain. No matter what law governs our aid, our success in delivering it depends largely on the help of volunteer and charitable organizations, some of which are represented in this room today. If I had only one message that I could deliver to you it would be to say two simple words: Thank you. Your commitment to helping the less fortunate is a part of what makes America a great nation. The commitment of our partners in other countries demonstrates that reaching out to the hungry and doing all we can to help them is a noble goal. Your compassion has led you to do the most noble of callings, the call to improve and save the human condition. You literally save lives. To those of you performing this noble work, I say thank you for all you do to contribute to our nation's standing. To those of you who do so on behalf of other countries, let me also say, thank you for ensuring that we collectively always remember that many people in the world are just simply not as fortunate as we are. We want to do everything we can to build our partnership with you. We have an obligation to reach out to populations that are less fortunate, but we do so out of a sense that we are doing something to make their lives better. Very simply, it's the right thing to do. With your continued help, we will build on the efforts of the past to achieve even greater success in becoming a beacon of hope in a time of crisis.

Thank you very much.

[Applause.]

Questions? I do notice that there are some microphones out there and so if I could just open it up and I'll try to recognize you at the microphone and I'll start right here. Good morning. How are you?

Q: Fine, thank you. My name is Ellen Levinson, and I'm speaking on behalf of a group called the Alliance for Food Aid, and it's comprised of the very organizations you just described, private voluntary organizations. So we thank you for your comments, and we want to say first of all we look forward to working with you. We know the administration has come in with just one proposal, the local purchase proposal for the Farm Bill related to food aid, and we think we can work on some of those concepts and we already have put forward some ideas and look forward to working with you on it.

But I think there are two issues, and I want to bring to your attention, and I realize there are going to be barriers to the Department of Agriculture of USAID in trying to do this, but they come up over and over again at these meetings. And that is, how do we get enough resources for these programs early in the fiscal year? We know it's a broken system with continuing resolutions, but it's not just that. It's how much is requested in the regular appropriations process. Right now for regular appropriations for the Title II program, our major donation program, the funding isn't sufficient that is requested upfront at the beginning of the fiscal year. So we rely on supplementals, and that adds so many inefficiencies in the GAO report they were mentioning how 12 to 14 percent perhaps could be saved by better spreading out and planning in advance how we procure the commodities. Bu this is a huge inhibition. It also makes it difficult to respond as you say in a timely manner for emergencies or to maintain our commitments to our development pipelines.

So first I know that's a challenge for you, but we would like to ask you to put that on the top of your list in thinking and discussions and work within the administration.

And the second thing, again an appropriations issue I'm sad to say or it could be actually something that's dealt with with the mandatory funds - and that is the replenishment of the Bill Emerson Humanitarian Trust. You can request that through appropriations to get funding, or it's a part of an automatic system within CCC. So we believe that's critical as a backup for emergencies that occur during a fiscal year when you can't run in and get the money.

So I want to ask for your partnership in that and your thoughts on that. Thank you.

SECRETARY JOHANNS: Okay, great. Boy, two really great comments. I hope you're testifying on the Hill. You know, ladies and gentlemen, I come from being governor of the state of Nebraska, right in this neighborhood, and in our constitution we are required to have a balanced budget, first of all. But then in Nebraska, being the fiscally conservative and responsible people that Nebraskans are, we are limited to having debt of $50,000. So whatever I can figure out how to spend $50,000 on, I guess I can have that much debt. Other than that, you literally have to balance the budget within the revenues that you have.

I came to Washington and found out that sometimes you don't even get a budget. I don't think I would have lasted as governor of Nebraska under those circumstances. I would have had to sneak out of the state. Some of what you raised just simply is the process we deal with. You know, you put in the budget request, and that comes in in a timely way, and then you start working your way through the process and it's just a very, very slow process.

We do look at the Emerson Trust every year to see where the funding is at on that. I looked at it recently to see what is there and what would be available in the event of emergencies, so it is something we try to pay attention to, to make sure that funding is there.

As you know, in the past Congress has been willing to put that funding there. So I will continue to do that. I'm probably going to have to tell you in all candor that I probably have about a year and a half left in this job, and I'm probably not going to get the budget process of United States government reformed in that period of time before I ride off in the sunset.

I find it a very inartful process, surprising to me because like I said I came from the state level. And I don't' want to be critical of anybody. That's a very complex document and its billions and billions and billions of dollars and a lot of committees have jurisdiction and so it just can be a very difficult process. But we'll do the very best we can to try to get through that process.

Last thing I wanted to mention, I was sincere when I said we are going to take a very close look at the recommendations of the GAO report and see if there's things we can be doing to just be better at what we're doing. And I promise you I will do that, because that's something I have control over from the USDA standpoint. And if you have some ideas on that, I would welcome those ideas personally or from the group that you represent.

Yes, sir?

Q: Demand globally for grain is up due to the ethanol boom, does the Department envision freeing up acreage out of the Conservation Reserve in the new Farm Bill?

SEC. JOHANNS: Chuck, that's a really good question. If you didn't hear all of that with the need for grain because of ethanol, do we anticipate freeing up land in the Conservation Reserve Program?

We just recently published at the end of March what's called the planting intentions of the U.S. farmer for this year. Those planting intentions indicate that I don't know if it's a record but certainly the most acres of corn planted in a long, long time is going to occur. Now these are intentions. Farmers can also change their mind or weather can impact those decisions, but at least today farmers are responding to the market and moving acreage from soybeans and cotton into corn production.

You know the thing I'd say about that, you have to kind of look at the whole picture. You may say, well gosh, moving it from soybeans to corn just exacerbates the problem, Does it? Not really. Last year we had the largest soybean harvest on record, the largest soybean carryover on record, so we have some flex there. Cotton, the same way. We are carrying over a big supply of cotton, and so there's some flex there. So moving acreage into corn actually is again responding to the marketplace.

On the day that was released after we studied those intentions, I did announce that I would not be letting any conservation acres out for 2007 without penalty. Now I also said that we'll continue to watch this. I could make a different decision for 2008. We are not going to have a CRP, Conservation Reserve Program, signup this year. But that's not unusual. In the last seven years we've had signups four out of the seven, so it's not something we do every single year. Again, that's something I could take a look at for 2008 and maybe have a different perspective. But it appears at least at the moment that there's a little bit of breathing room here on corn stocks and what is being planted. That can change. We watch it very, very closely. And I'm praying for good weather. We need a bountiful harvest this year, to say the least.

So at the moment, I'm not taking any, proposing any acres to come out of conservation without penalty, which is the decision point you were asking about.

Yes, sir?

Q: Mr. Secretary, I'm Paul Green. I'm with the North American Millers Association. Most of the people in this room when they see me get up to this microphone assumes that I'm going to challenge you on the local purchase and explain why there is going to be continued opposition from agriculture groups, but I'm going to forego that opportunity and ask you something completely different.

I actually want to follow up on what Chuck is saying. On the first page of the GAO report is one of the most dramatic impacts on this program. It is showing a fairly steady funding but a declining tonnage. And our ability to impact the poverty and hunger in the world is really being seriously damaged by the fact that our programs are declining in tonnage as a result of increased freight prices in past years and recently increased agriculture and food prices. Of course as we look at ethanol and as we look at the tight supplies of certain carryover stocks in this country of products, we are putting ourselves in even more danger of volatility of prices.

I wonder if you would comment about the impact of the ethanol and the other biofuel impacts on the future of food aid and whether you are doing contingency planning and have you discussed this with the framers of the Farm Bill because we - obviously this would be one of the most vulnerable programs to any kind of price spikes that would occur in the future as a result of, despite your prayers, if we do not have a bumper crop year after year after year.

SEC. JOHANNS: Great, great questions. How the world changes. You know when I came to this job two years ago I remember every publication I read was, what are we possibly going to do with this huge reserve of corn that we have? I think people were openly worried that in the next harvest the only place we had to put more corn was in the farmer's spare bedroom, and that was every article I read. It was just where can we possibly put all the corn that is being raised? And now we're talking about challenges of food and fuel and that sort of thing, and that literally is in the span of about two years.

Here's a couple of thoughts I would offer. The first thing I would tell you is that the planting intentions report gives us at least the best snapshot I have of what is happening out there in the country today. And planting intentions would indicate that farmers are moving cotton acres, soybean acres into corn acres, and that is helpful in terms of dealing with the supply.

The second thing I would tell you is that the focus of our initiative in renewable fuels for this Farm Bill is not corn-based. We believe corn-based ethanol will be a part of the future, but its' focused on cellulosic ethanol. $1.5 for research and development, $2.1 billion for loan guarantees to build cellulosic ethanol plants. You know if you talk to the companies that are doing the research in the cellulosic area, they appear confident that this technology is right there and that we will be producing efficiently ethanol from cellulose from biomass in the very near future. I'm often asked to peg, well what date? It would be impossible to pick the date. But if you listen to them, the future looks very encouraging.

The other thing I would offer is this in terms of food costs. I think year after year you will see that there's some increase in the price of food. Now let me if I might draw a comparison here. We look at the ramp up of the cost of a bushel of corn over the last year, year and a half, and certainly there has been that ramp up. But I will tell you, $2.00 corn is the problem. About the only way you can raise $2.00 corn is with a government subsidy. That's not economically viable. Now there maybe some very large operations that have squeezed their costs so tight and buy in such bulk for seed and fertilizer and fuel that maybe they can do better than that. But that was always a market that quite honestly I think had some worrisome potential for the future.

How long can you continue to subsidize that was the question being asked?

Now we've moved into a market that corn today is in the $3 to $3.50 range depending upon whether you're looking at the local market or at the board. And actually that is a more realistic price. Now I hope I state this correctly; 20 percent of the retail dollar is for that corn input or for that input that grain input to create the product, the beef or pork or whatever. The rest of the retail dollar is a whole mass of components from transportation to processing to wages to do the processing, etcetera, etcetera, etcetera. There is just a lot added in there.

I just want to put out the notion, in all fairness to the debate that's going on now, I think the ramp up in corn prices is getting blamed for a lot. When you consider that you have this much involved in the cost of that retail product and this much is corn, I'm just saying come on, let's be realistic here. How much of it really is related to that? How much is related to whole host of other factors that are going on out there? After all, the price of diesel fuel to ship that product from farm to whatever has greatly increased, and a whole bunch of factors can influence that bottom line.

So I think it's a complicated picture. I am often asked to offer criticism or comment on how awful this is because the price of corn is now above $3.00 a bushel, and my response is, look, I just think it's very, very risky to blame a single item in the food chain as responsible for all the things that are going on out there. It is a much more complicated picture than that. So I'd offer that.

But I think where we are headed here tells me that the market is finding the balance here, and I think you will see that. The thing about the free enterprise system is that it does work. It can be somewhat slow and it can be painful at times, but it does seem to find a solution to problems. That's kind of a long involved answer for probably a pretty straightforward question, but it's kind of a complicated area.

Yes, sir.

Q: Jim Hersey with the American Soybean Association's Wish Program.

Your innovative approach and the listening sessions that you started very quickly upon achieving this office; we're interested in learning what you might have heard from the American farmers and the agricultural community on the question of food aid.

SEC. JOHANNS: On food aid? I believe there's substantial support for food aid amongst American farmers. I can't say that it was an issue that came a lot at our conferences just simply because there's so many other things I think they wanted to talk to us about, everything from the Title I programs to conservation to rural development, etcetera. Been around agriculture a long time, and I believe there is a substantial amount of support in the country for our food aid programs. I will tell you something just to openly acknowledge it. I think part of that support is the link they see between the food aid and the food grown here. Let's just be candid about it. When you have that very direct link, I think people can see that and it's a program therefore that they can support, their House member can support, their senator can support, their Secretary of Agriculture can support, etcetera.

Here's the other piece of this though. I think farmers are generous people. I grew up with farmers. They were my idols and role models when I was growing up. You know, they are the people that raised the barn together, that if there's a disaster in the neighborhood they put in the neighbor's crop. I saw it, I grew up with it. Nobody thought that was anything special. That's just what we did. It's just taking care of your neighbor; it's just being a good neighbor.

I think when you explain to farmers why we have asked for this cash element to food aid, my personal belief is that they will understand it.

Now here's my responsibility. I've got to be able to make the case that there are some circumstances where in order to save lives this is necessary. I have to be able to make the case that my first preference is going to be to buy here in the United States because that's how you really build the support for the program. I think you create that link. But I think if I can go out there and I can make the case, hey folks there are certain circumstances when the emergency is so dire, so pressing, so critical, if we can get food to these people faster I believe the American farmer will support that. I just really think they have that kind of hearts, and that's kind of my impression.

But I will tell you I think food aid does get a lot of support in the country.

I don't see anyone else standing up unless somebody wants to jump up. Thank you very, very much for the thoughtful questions. Thank you very much for all you do to feed people around the world. God bless you.

[Applause.]