Agriculture Secretary Mike Johanns says he is “optimistic” Congress will pass most of the spending cuts for agriculture that President Bush proposed in his fiscal year 2006 budget.
Speaking at USDA's annual Outlook Forum in Arlington, Johanns said he wasn't surprised that the president's proposals, which include reduced payment limits and a cap on CCC loan eligibility, are drawing intense opposition from farm groups.
“I'm new to Washington, but I'm not new to the process,” said Johanns, who became secretary in January after serving part of two terms as governor of Nebraska. “I expect there will be a lot of discussion and even some consternation. But eventually we will all come to realize that we in agriculture have to be part of the solution.”
Responding to a question following his speech at the opening of the Forum, Johanns said he is optimistic that farmers will look at the long-term, economic prosperity of the nation and say “yes, we have to make changes, and we will be part of the team to make that happen for this great nation.”
President Bush's proposed budget calls for a 5 percent reduction in direct payments to row crop and dairy farmers, changing the limits on farm program payments from $360,000 to $250,000 and limiting eligibility for the CCC loan and loan deficiency payments to 85 percent of a farmer's payment yield.
The administration says the cuts will save $587 million in farm program spending in fiscal year 2006 and contribute a total of $5.7 billion over the next 10 years toward reducing the growing federal deficit.
Johanns said he had to deal with difficult budget situations during the latter part of his term as Nebraska's governor.
“Drawing on my experience, I've seen budgets that were easy from a financial point and budgets that were really tough,” he said. “Wherever you live in the United States, you will agree that in the last two or three years it has really been difficult for state budgets.
“The president has stepped up and said that in the next five years we have to cut this federal deficit in half. Ladies and gentlemen, nothing good will come out of this for agriculture if we don't deal with the deficit. Whatever the short-term gain may be, we will pay a huge price in the long-term if we don't move forward.”
He also repeated comments made when he announced the president's budget proposal earlier and said agriculture must take its share of the deficit-reduction efforts proposed in the 2006 budget.
“We are part of a system-wide effort to halve that federal budget deficit,” he said, “and believe me I could not feel more strongly that it has to be done. The president once again is showing his leadership, and I'm going to do everything I can to help get us over the finish line.”
In his speech, Johanns noted that, net cash farm income is expected to reach a record $78.1 billion in 2005, higher than 2004's “eye-popping” $77.8 billion. USDA is also forecasting record farm equity of $1.25 trillion.
“The president has proposed a budget to build on those successes, one that represents confidence and support for America's farmers and ranchers,” the secretary said. “His budget funds key priorities while producing savings and, most importantly, deficit reduction.”
Johanns said, “America's farmers and ranchers know that a strong and growing economy is absolutely critical to their livelihoods. Reducing the federal deficit keeps interest rates low which helps create new markets, higher disposal income and greater demand for agricultural products.”
The agriculture budget also provides for increases in areas such as conservation, the Food and Agricultural Defense Initiative and research on bovine spongiform encephalothapy or BSE.
On the BSE controversy, which he conceded has claimed much of his attention since he became secretary, Johanns said his objectives in handling the BSE controversy could be summed up easily.
“First, protecting human and animal health must be a top priority,” he said. “Second, our decisions should be founded on a bed-rock of science rather than shifting winds of politics or opinion. And, finally, with science as its basis, I intend to do everything in my power to help restore markets, to support our producers and our processors.”
He also pledged to do “everything in our power” to quickly reopen the Japanese and other Asian markets to American beef. And, he said, USDA will continue to work with the Canadian government toward resuming trade with minimal risk regions.
“The American beef industry has remained strong since the BSE discovery more than a year ago, and the USDA will work to help insure future successes,” he said. “Indeed, looking toward the future is the entire reason we are here today.”
On a less controversial note, Johanns pointed out that the United States now has 81 ethanol plants in operation with another 16 under construction.
“When they're all completed, those plants will have a production capacity of 4.4 billion gallons,” he noted. “Twelve percent of 2004's record corn crop went into ethanol production — double the amount of just three years ago.”
He said the United States is now producing 20 million gallons of biodiesel or 100 times the 200,000 gallons made in 1999. “With the biodiesel tax credit going into effect in 2005, we are expecting biodiesel production to continue to rise,” he said.
But agriculture still has a long way to go to meet the nation's energy needs, Johanns said. “Today agricultural products account for only 2 percent of transportation fuels. Some experts foresee a time when 15 to 20 percent of all transportation fuels will be bio-based.”
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