Borg: Food ... fiber ... and politics. A conversation with Iowa Secretary of Agriculture Bill Northey ... on this edition of Iowa Press.
Funding for Iowa Press was provided by Friends, the Iowa Public Television Foundation. The Iowa Bankers Association ... for personal, business and commercial needs Iowa banks help Iowans reach their financial goals. By Iowa's Private Colleges and Universities ... enrolling 25% of the total Iowa higher education enrollment and conferring 44% of the baccalaureate and 40% of the graduate degrees in the state. More information is available at www.thinkindependently.com. The Iowa Hospital Association ... supporting the missions and visions of Iowa's 117 community hospitals. The Iowa Hospital Association ... we care about Iowa's health.
On statewide Iowa Public Television, this is the Friday, January 23rd edition of Iowa Press. Here is Dean Borg.
Borg: Iowa's agricultural economy is a cornerstone in keeping the state's fiscal house in order. It generally cushions volatility but agriculture itself is experiencing volatility -- corn prices soaring in mid-2008 -- then skidding a few months later. Livestock farms -- especially pork producers -- are especially stressed right now. And beyond monetary considerations of producing food and fiber is the politics governing agriculture. And then there's the looming state budget deficits while the state is trying to fix the damage done by the floods of 2008 ... where 83 of 99 counties went under disaster declarations. That's the world of Iowa's first term Secretary of Agriculture Bill Northey. He is our guest today. Welcome back to Iowa Press.
Northey: Good to be back, Dean.
Borg: And across the table Des Moines Register Political Columnist David Yepsen and Associated Press Senior Political Writer Mike Glover.
Glover: Secretary Northey, let's start with the basics, you were elected two years ago in what turned out to be a pretty good democratic year. Republicans took it in short again in this last election. What is your party doing wrong and how do you fix it?
Northey: Well, I think folks thought the bottom was two years ago. We saw certainly some additional losses this last year. And I think there were some races, if you look especially at the legislative races, there were some races that we won as well as the republicans whether it was against incumbents or open seats. So, I think there's some hope here going forward. Some of this is personality, certainly we saw a national election that was very strong towards change. I think Senator Obama did a wonderful job of running the campaign and George Bush certainly pulled some of the attitude down within the republican circles and outside of those circles as well. So, I think we need to do a better job of messaging. I think we need to do a better job of managing when we're there as well. I think we had some real challenges in spending money and keeping our budget deficits down these last couple of years whether it's on the federal level but even prior to that on the state level.
Glover: What do you do to fix it? Is the Republican Party message wrong? Is the way you're delivering it wrong? Is your messenger wrong? How do you fix it?
Northey: Well, I think in general the message is right. I think we have to do a better job of getting it out but we also have to demonstrate it. We have to go out there and show folks what we mean. We've got to show some transparency in state government, federal government, I think we have to do a better job of talking about spending for the right things but also not spending in some cases as well and the impact that this additional spending will have.
Yepsen: Mr. Secretary, you won election in 2006 which we've noted wasn't the greatest year for republicans. What is it going to take to get you to run for Governor in 2010?
Northey: Well, right now I'm very happy being Secretary of Ag, I see myself very possibly running for re-election again as Secretary of Ag. I haven't decided yet on running for governor. I think there's plenty of time to make that decision. I think several criteria -- it does depend where the state's at, it depends who else is running, it depends the dynamics of politics within the state. It is important to win if you're going to do a race like that. So, I think the list of folks that I hear -- there's all kinds of folks on that list of possible candidates -- I think there's many that could do a great job of running. I do like what I'm doing and I'm keeping the door open to running but I'm very happy what I'm doing as Secretary of Ag.
Yepsen: What is your timeline for making a decision? You said the door is open. What is your timeline in making a decision about running for governor? Don't you have to make that fairly soon?
Northey: I think you certainly wait until after a session, after this session to see where things go. I think it's six months out or so for me to be able to make that decision, end of summer.
Glover: You mentioned the names you're hearing of people who want to run for the republican nomination. Give us some of those names.
Northey: I think you guys are best at giving the names. I'll leave somebody out that will be very offended and I'll get a phone call on my way out of here. But there's a lot of good folks. I'm sure some will say no and I'm sure there's some surprises. We haven't heard some of the names and maybe even the nominee -- if you look back to Barack Obama two years before the election -- some of these would be surprises and I think that we could have a good republican year in 2010.
Glover: Given the state's electoral history Bob Ray was governor for a long time, Terry Branstad was governor for a long time, Tom Vilsack was governor for a long time -- can you realistically challenge an incumbent governor?
Northey: I think it's very tough in this state to be able to do that. I think we haven't seen a history of being able to do that successfully. So, that has to be part of the analysis for anybody thinking about running for governor. But I do think we're going through very challenging times and to provide an alternative to some of the spending that we've seen, maybe some of the additional spending that's out there, the economic times that we're going through right now and the management that the governor has may be a ticket to be able to provide an alternative.
Glover: Well, history would say that 2010 ought to be a pretty good republican year, it will be the first mid-term election of a sitting democratic president, the party out of power usually does pretty well. Does that work in your favor?
Northey: I think it does, I think it works in all republican's favor but, again, I think history has said this last year would have potentially been a better year than two years ago and personalities matter, a lot of things can happen in the next two years. It's certainly no given that it's a republican year. I think we have to make it that way.
Borg: But what I did hear you say was, I don't know in exact words, that it is a possibility that you would consider running for governor.
Northey: It is -- I think it takes several different pieces to be able to happen for me to look at that. I certainly will talk to a lot of folks and find out who they are interested in supporting, what they want as a republican candidate. It does depend who else is out there. There's a lot of pieces to put together to run a successful campaign and we have to do the analysis of that to decide whether that's something that we can do or not or whether I'd be very happy running for Secretary of Ag again.
Borg: You said you didn’t want to mention any names but I will in another aspect here. We have Tom Vilsack now in Washington, Secretary of U.S. Agriculture. We have Tom Harkin, Chair of the Senate Agriculture Committee and other influential committees in the Congress. We have Chuck Grassley in the same role as one of the ranking republicans in a very powerful position. How are you as Secretary of Agriculture leveraging all that Washington power?
Northey: It's a wonderful thing to have Governor Vilsack as now Secretary of Agriculture Vilsack. I think there's pieces where you use up pieces that you don't. He needs to be Secretary of Agriculture for the United States, not just Iowa. And so he'll have to be careful in making sure that he does the things that he needs to do nationally. If I look back at a time like this last summer where we had weather issues, we had issues around certainly agricultural production, crop insurance, other kinds of things, when there are times that you really need to get in contact with the Secretary he's certainly going to answer the phone call, John Norris is Chief of Staff and is very in tune with things here in agriculture and we're friends from working on the Power Fund board together and I think it will be beneficial when we need it. I think there as well will be some conversations around what do we do on these infrastructure pieces, what do we do in rural economic development and I think the governor was a leader in that, certainly Tom Dorr who was undersecretary for that raised the visibility of that over the last eight years and I think he has an opportunity to be able to do some things that help rural Iowa.
Borg: Are there some special things, though, that you as Secretary of Iowa Agriculture would like to use this power for?
Northey: I think we'll see as we go along one of those things that we have made some contact with both with him and with some of the staff that was there as well as some of the EPA staff is we've got a project we've been doing in Iowa, it actually started when Patty Judge was Secretary of Agriculture and it's a program called CREP, it's a water quality wetlands program. We'd love to be able to expand that. What that does is it takes water in this state that is coming from under our fields, in tile lines, goes through a wetland and we take the nitrogen and phosphorous out of that water before it leaves that wetland. And these are wetland programs that are really not done in other places, it's something that could expand, it's time to do that. We've made contact with his office about being able to do that and take kind of the next step. It not only impacts the water quality in Iowa but it impacts the water quality as the water leaves Iowa as well.
Glover: Mr. Secretary, I'd like you to step back and take a look at your job as Iowa's Secretary of Agriculture. Is it your role to be a promoter, a booster of agriculture? Is it your role to be a regulator of agriculture? How do you view your role?
Northey: I guess it's probably yes on both of those and certainly a communicator of agriculture I think and we spend a lot of time on the road talking to ag groups and non-ag groups about what's going on in agriculture and understanding the value that agriculture has in this state. We take that for granted a lot. We have regulatory aspects as well. We have a dairy bureau, a meat and poultry division that we go out and make sure that the food is safe and the milk is safe and weights and measures and other kinds of pieces. So, we have both of those responsibilities and I think if you look at this changing time that we've been through we've had so many things change whether it's the ethanol industry, whether it's the weather, whether it's the prices that are bouncing around. I think it's very important ...
Glover: We'll get to all of those things. But the second question is, should the secretary of agriculture be an elected position?
Northey: We certainly had that discussion, there are a lot of folks that have talked about that through the years and I see real advantages. Of course, maybe I would see real advantages to electing the secretary of ag. As I look at about two-thirds of the states have an appointed secretary of ag and that changes the dynamic of that secretary of ag's power within that state. They are certainly subservient to the governor because that's who appoints them and in some cases they have actually even talked, there's a couple of states, talked about getting rid of department of agriculture or many of those roles. That secretary of ag has to go along with that. I think it's important to be able to have a separate voice. The concern has always been does the secretary of ag work with the governor when they need to and I think over these last couple of years we have certainly proved that we can work very well with a governor across the aisle and they have done a wonderful job of working with us as well.
Yepsen: Isn't it a conflict, though, for you to promote an industry that you're also trying to regulate?
Northey: I think there are different roles. I think it's promoting and it's discussing and it's communicating what's going on in that industry. I don't think it's defending unnecessarily but it is regulating and making sure the right things are done but it's also talking about what's going on in ag. We were just talking before here we spent $300 million this last year on new grain bins, farmers and non-farmers, and expanding the grain storage in this state. At the same time we talk about $700 million in new spending in the state to help in infrastructure. Agriculture is doing that and I don't think if an ag secretary is out there talking about it ...
Yepsen: Excuse me, Mr. Secretary, that's the standard that agriculture is important. Why don't we have an elected insurance commissioner because financial services are more important to this state's economy than agriculture? You might not like hearing that but there's more of our gross state product that comes from them than comes from agriculture. I want to know why if we're going to elect a secretary of agriculture we don't elect an insurance commissioner because that's important or financial services commissioner or banking superintendent or how about superintendent of public instruction the way we used to, education is important.
Northey: Obviously there's lot of pieces out there. I do think agriculture is special in this state, it's part of our heritage, it's in every county, it affects tens of thousands of folks out there, it affects a lot of folks outside of agriculture. This has been our history and certainly I assume there will be discussion in the future whether we ought to elect or appoint -- I think there's benefits to it electing.
Yepsen: This next week the Governor is going to announce some pretty horrific budget cuts and adjustments to the state budget. Would it save the state any money to get rid of your department, break it in two, give the regulatory functions to the Department of Inspections and Appeals and give the promotion stuff to the Department of Economic Development and just get rid of your position which they could do because it's a statutory position?
Northey: I think you'd probably save one position, you'd probably save the secretary of ag position or maybe a deputy secretary position but outside of that we need all those folks in the field and we need the folks that manage those bureaus. And let me also mention what we have done in the last two years. When we came into the Department of Agriculture we had four divisions, four division directors, we cut that to two so we cut upper management two positions. We had an ag innovations bureau that was there that made a lot of sense at a time -- we ended up deciding that that was not necessary now and we saved five positions there. We are now looking at a bureau that can be run by -- two bureaus run by one bureau manager and so we got a lot of pieces where we are trying to save money within the department itself.
Yepsen: But the politics of this is I just heard you say that you're thinking about running for governor. Now, with Governor Chet Culver watching that and a democratic legislature watching they're going to say why don't we get rid of this guy and his position because we want to eliminate a rival here.
Northey: I'm not sure they would have thought of that without you mentioning it. We'll see what's in the hopper next Monday.
Glover: Mr. Secretary, as David mentioned the Governor is going to be offering some pretty terrible budget cuts next week and the argument that we're hearing from his office is it's time to start thinking outside of the box. You mentioned that we've got a secretary of agriculture, agriculture has traditionally been -- you talk about the tradition of having the department, isn't it time to start looking beyond that here in the economic times we're in?
Northey: I think the Department of Agriculture is very important to have. I think it's important to this state. I think if you look at the activities that we do in that department whether it's milk inspection, dairy inspection, weights and measures, all kinds of activities those are necessary. I think it's important to have an agricultural voice out there as well. Now, I think it is important for us to continue to look at management and figure out are there ways we can be more physically ...
Glover: The choices they are being asked to make are can we have this promotional facility or do we take care of poor kids who don't have healthcare and are hungry. Given those choices why don't you choose poor kids?
Northey: As opposed to?
Glover: As opposed to promoting agriculture?
Northey: Well, actually our department does very little promotion. Most of that marketing effort went over to the Department of Economic Development years ago. I certainly get out on the road and talk about agriculture. But most of our functions are conservation oriented, they are regulatory oriented so the functions of the department are things that I think we'd miss a lot if wasn't there. Now, we're going through the same kind of budget crunches, we had a 1.5% across-the-board for the Department of Agriculture, that is $332,000. We have twelve open positions so we don't plan on filling those. Some of those are easier than others to do without. And if another round comes we'll do what we need to do to be able to save those dollars.
Yepsen: Mr. Secretary, we've got way too many questions and not enough time. Switch gears here. What is the condition of the rural economy?
Northey: I think generally good. We had generally a good year this last year although certainly we had a lot of volatility. In fact, in some ways it was almost like the first six months of the year was the 1970s where we had markets going up and we have a new agriculture in the last half of last year -- it was the 1980s we had prices going down, we had challenges in the livestock industry, we had input prices going up. It is tough.
Yepsen: Given that it is tough can the current land prices that we're seeing in this state which are at some record highs can that be sustained? Do you think we're on the verge of a collapse in land prices in the state because we've seen the collapse in commodity prices?
Northey: Certainly land prices are a function of the profitability of that farm. So, you decide what you can spend on rent, you decide what you can spend to buy the next farm based on your profitability. Last summer the expectations was the profitability was going to be high, we were going to have $5 or $6 corn forever. Now those expectations are much lower. That certainly I think will have some pressure on it but no one knows what it is going forward. Just like we were in the late 1980s we didn't know what the 90s were going to bring and so we would have seen some of the costs come down, certainly fuel costs and fertilizer costs are coming down. But no one knows whether we're looking at $5 corn or $3 corn.
Yepsen: My question, and that is based on an old model of Iowa's economy which we just described, what about the flip side of this, that land prices in the state are being propped up artificially by investors from out of state who are buying up farmland as a reliable place to park their money in these volatile times? Aren't they keeping up the price of land in Iowa?
Northey: Still as I understand it most of the farms that are being sold out there are sold to the farmers and so they are still the driving force and even though you get blips of investment from time to time, in time that land has to pay for itself and in time those settle out. We're in a market right now that's probably pretty thin, there's not a lot of land moving so it's hard to figure out what that price is. It's the same as homes in Des Moines or any other small town in this state, it's hard to figure out where that price is going.
Glover: Let's turn to another aspect of agriculture that I know you're very heavily involved in and that is alternative fuels starting with ethanol. Give us your assessment of the health of the ethanol industry in this state right now.
Northey: It's struggling right now, it's going through a tough time just like a lot of businesses across the country. They're struggling right now and I don't think anybody foresaw that we'd have oil back under $40 a barrel again and so there's struggles out there. We've got a couple that are in bankruptcy. They may or may not be owned by the same folks down the road. I still think most of those plants that are operating out there will continue to be operated, some of them by new folks because they'll come in and buy some of those plants.
Glover: Most ethanol blended fuels are a 10% blend of ethanol. There have been suggestions that that could be increased to 15%. Do you support that? And how do you get that enacted if you do support it? And what would that effect be on the ethanol industry?
Northey: It would be very positive and certainly I do support it. I think there are numbers out there that show that that's the right thing to do for the fuel mix, it's certainly the right thing for the ethanol industry. We'll have enough ethanol to be able to provide for that. The other thing is we have a renewable fuels standard, a national standard that says we have to use a certain amount of the stuff and we've got to find a way to get it in the supply. Obviously if we went to 15% that would be a 50% increase in demand from where we are right now.
Yepsen: You say it's good for the farmers and I agree with that. But is it good for the engine of my car?
Northey: I think it is. I think we've seen plenty of studies that says that it is. I know DOE, U.S. Department of Energy is going through some studies right now and I think their preliminary results as well have shown it is very positive.
Yepsen: If ethanol is a great thing -- let's have a little talk about ethanol. If it's such a great thing for renewable fuels and environment and everything else why aren't we opening the state up and this country up to Brazilian ethanol? Why don't we get rid of the tariff? Why can't ethanol stand on its own?
Northey: I think ethanol is. Now, you know how the tariff works, certainly we have a tariff for Brazilian ethanol that comes in the United States. When that Brazilian ethanol comes in it pays a tariff. When it's used in gasoline supply in the United States, when it's blended it gets a blender's tax credit just like American ethanol does. And when it does then those counter balance each other. If we did not have that tariff we'd have ethanol coming in from other countries from Brazil and it would come in and still get taxpayer money benefiting that production in other places. So, I think that tariff is important to have, it should be probably at the same ...
Yepsen: Can we ever have a viable future for ethanol in the United States given that sugarcane is just a better way to produce ethanol, it's just more efficient, you get more out of it?
Northey: I'd challenge the premise, there's certainly benefits to sugarcane especially the way they grow it in Brazil and there are some practices there that we wouldn't accept in this country but I think corn based ethanol right now is very important economically, I think it's important for the fuel supply and I believe it's what leads us to that next generation of cellulose ethanol, other kinds of pieces. Without corn based I don't think we get there.
Glover: We've talked about the blend of ethanol in gasoline. Give me a status report on the health of the E-85 industry. How widely available is that? What slice of the market is that? How do you promote it? What is its future?
Northey: We have a little over 100 pumps in the state of Iowa that are E-85 and right now with low priced gasoline it makes it tough for E-85 to be competitive. In fact, it's about the same cost as 10% blend in lots of places and it will get less mileage per gallon. So, these kinds of times if we were to forever believe that we're going to be at $40 oil or $35 oil and $1.70 gasoline then it would be a challenge to ever have that ...
Glover: So, that's not going to be competitive in the current environment. You need $100 a barrel oil?
Northey: Well, certainly I believe over time we'll see higher prices of oil. I think ethanol is going to be very, very competitive. It's a challenging environment right now. It's still in the market, it's still being sold but it's not being sold as heavily as it was even just six months ago when there was $1 difference between E-85 and gasoline.
Yepsen: Secretary, there's a lot of controversy in rural American between the role of the current big agriculture, production agriculture and smaller farms, niche agriculture and organics. We heard some of this come up when Tom Vilsack was up for his confirmation. How do you balance the two? Is there a future for organic agriculture, small farm agriculture? Or are you guys just out promoting the big boys?
Northey: We have lots of diversity in agriculture, certainly the big dollars in agriculture in this state are around the major commodities. You look at that $300 million investment in grain bins, that is around those big commodities of corn and soybeans. But we're seeing growth in dairy goats, in farmers markets, in wineries in the state. We now have 200 dairy goat farms, production farms in this state, 25,000 dairy goats. And I think part of this is giving everyone an opportunity to be able to do what they want to do. We're seeing some growth still in organics. They need to be able to do that. Others that want to do something else need to be able to do what they want to do.
Glover: When we talk about corporate farming one of the things that comes up is confinement hog operations. Are you satisfied with the current state of regulation of confinement hog operations or do we need changes?
Northey: I think I am satisfied with where we're at generally there and I think we are not seeing new legislation likely coming from the legislature around that, around citing of facilities. I really would have loved to see a study that we brought out last year looking at odor and trying to solve some of the odor issues in rural Iowa by technology. There's some companies out there that have some new technology that decrease odor in facilities, I've been through some of those. We need to be able to accelerate that and make sure that folks know about that and can apply it on their own farm.
Borg: We're nearly out of time. Are you satisfied that flood damaged farms are not being overlooked in the rush to help Cedar Rapids, Oakville, Pelo?
Northey: I'm satisfied that in the end they won't be. So far the first legislation that has come through has looked at some of the things, the very necessary activities that need to happen to get folks back in homes and businesses. But we had a lot of damage in our conservation practices out there, terraces, other kinds of pieces and part of what we'll bring to the Rebuild Iowa Committee is some dollars or some requests for one-time dollars to help repair some of those facilities.
Borg: Thank you. Thanks for spending time with us today. On our next edition of Iowa Press we're continuing statehouse politics focusing on the legislature's transportation committees. We'll be questioning Democratic Senator Tom Rielly of Oskaloosa, he chairs the senate's transportation committee and then the ranking republican in the house transportation committee Dave Tjepkes of Gowrie. That's next weekend at the usual Iowa Press airtimes, 7:30 Friday night and 11:30 Sunday morning. I'm Dean Borg. Thanks for joining us today.
Funding for Iowa Press was provided by Friends, the Iowa Public Television Foundation. The Iowa Bankers Association ... for personal, business and commercial needs Iowa banks help Iowans reach their financial goals. By Iowa's Private Colleges and Universities ... employing over 10,000 Iowans and enrolling 25% of the total Iowa higher education enrollment. More information is available at www.thinkindependently.com. The Iowa Hospital Association ... supporting the missions and visions of Iowa's 117 community hospitals. The Iowa Hospital Association ... we care about Iowa's health.