Mark Pearson: Welcome Mr. Secretary.
Tom Vilsack: Oh, it is great to be back Mark.
Pearson: Good to have you here. A lot of things on the table these days inWashingtonD.C. All of it is about spending. All of it is about spending reductions. Obviously agriculture is not going to be missed on this whole thing. Let's talk a little bit about Farm Bill 2012. Direct payments I know are an issue. A lot of people concerned about conservation. Where do you see everything headed?
Vilsack: Well Mark I tell you the good news is that we are seeing a pretty good robust farm economy which is helpful. Which makes it a little bit easier to talk about the kinds of things we're going to have to talk about. I don't think there is any question as the Super Committee meets the direct payments or on the table and I think you are going to see significant changes in that safety net. Hopefully it will not compromise the important role the safety net plays in providing protection for folks when prices go down or natural disasters strike. I think you are going to see a combination of a revenue and a disaster program to replace the Direct Payment Program, that would be my guess, and hopefully it will be structured in a way that is - works for everybody. Part of the problem is some of our programs work better for some commodities than others. That has been a criticism. And we frankly have to justify these programs to the other ninety-eight percent of the country that doesn't farm and I think that one of the concerns was the direct payment system. So I think we will get rid of that concern and sort of refocus and restructure the safety net. Crop insurance still going to be very, very important. I think it will be a critical part of the safety net.
Vilsack: On the conservation side I think you are looking at probably reduced dollars but doesn't mean that the need is reduced. In fact it is probably going to increase over time. So we are looking for creative ways to enhance and encourage more conservation investment by the private sector and what I mean by that is if you can quantify or measure and verify the result of conservation on the farm, there maybe a business in the city that needs that result, and would be willing to pay for that result, and let the farmer basically do the work.
Vilsack: We are also working with regulatory agencies to try to see if we can create a new concept called Regulatory Certainty. Farmer does certain conservation practices in exchange for which he gets deemed in compliance with certain regulations, takes some of the risk, and some of the unknowns out of the regulatory structure. We think that might incent more conservation investment. So we're going to look for creative ways, we are going to have to do more with less but I think we are up to it. That's the way folks out on the farm work and that's the way we are going to work at USDA.
Pearson: All right. Now I assume I will see some of our cues will be coming from the Super Committee correct?
Vilsack: I think they set the fiscal framework, if you will. If they actually get their job done and actually do the work of reducing the budget by one and half to two and a half trillion dollars that is obviously going to mean an impact on a lot of programs. Our concern also at USDA is making sure that we continue to provide the services that people expect from us and to do it in a way that is most effective and most efficient. So we are going through a very elaborate process of taking to look at our foot print, taking a look at the way in which we do business internally and externally, try to figure out if there are deficiencies.
Pearson: All right. So we are going to be watching to see what happens with the Farm Bill. I want to talk energy with you for just a moment too. Obviously that has been another thing that has been targeted. We did get the extension of the VTEC for ethanol, for agriculture, but going forward, you know, I think most people in the bio-fuels world realize that one is going to come to an end. What other support, if any, will we see from the federal government for ethanol specifically?
Vilsack: Well, I was happy to see that the Senate turned down Senator McCain's effort to try to restrict our ability to use existing programs to help build out the infrastructure of the renewable fuel industry. We can use existing programs under the 2008 Farm Bill and existing appropriations under some of the other more traditional programs under rural development to build out the infrastructure, to build out the flex pumps or the flexible fuel pumps at convenience stores and gas stations, that can still continue and we are committed to doing that.
Vilsack: I think you are going to continue to see a commitment to the renewable fuel standard which I think really helps to drive the industry to the next level. And we are looking for creative ways to make a difference to create new industries. An exciting opportunity with Navy and the Department of Energy and USDA coming together, putting resources together from existing programs, not new spending, existing programs, redirecting it to help build an aviation bio-fuel industry. A drop-in fuel industry. The Navy is going to purchase the fuel. So it is a good opportunity for new bio-refineries to be built, customer already in place, and the commercial aviation industry is very interested in this because it will provide them greater certainty in terms of pricing and also it will allow them to comply with greenhouse gas regulations in Europe that might make it more difficult for them under existing circumstances. So a lot of great potential there, new job opportunities in rural areas, and a higher incomes for farmers. That's a good thing.
Pearson: You talked a lot about the bio-fuel industry and the challenges we have had going beyond just corn based ethanol. Are we going to have to change that renewable fuel standard to meet that?
Vilsack: Well, I don't know if we are going to change it. I think we have to continue to work on research which is what we are doing on these nonfood feedstock opportunities. What I just referred to, the Navy arrangement, is going to be nonfood. You know, I think frankly it is somewhat of a false argument, but it is out there, and so we have to deal with it and address it. The renewable fuel standard proposes and suggested that we cap corn based ethanol at fifteen billion gallons and that we move for the balance of the renewable fuel standard amount for non-corn and I think we will do that. We need to pick up the pace of the development of that and I think you are going to continue to see in the next year or two new bio-refineries come on line using everything from algae, from agricultural waste, to woody biomass to produce those new fuels. I think it is an exciting opportunity for us. We have reduced our reliance on foreign oil from sixty percent of imported - we imported to fifty-two percent. The reason we did that was a bio-fuel industry and consumers today when they go out, they put that gas in their tank, they are paying ninety cents a gallon less for it than they would otherwise pay for it because we have a robust bio-fuel industry. We have got to continue that.
Pearson: An excellent point. Let's talk about trade. We’ve got some new trade agreements that have just been passed. Some very good news. It has been the lifeblood for growth in agriculture.
Vilsack: No question about it. We're looking at a record export year this year. A hundred and thirty-seven billion dollars of ag exports. Twenty billion dollars above last year. That is going to continue. We have an American brand that is the best in the world. We are going to continue to market and strategically focus on the countries that make a difference. You know I am excited about these free trade agreements because they are going to improve economic opportunities for farmers, 2.3 billion dollars of additional ag trade, that will allow us to continue to have record years. We have got a trade surplus; a lot of people don't realize that across the country in ag. Forty-two billion dollars projected this year. Every billion dollars of ag sales, Mark, generates eighty-four hundred jobs at home. So it is not just incomes for farmers and ranchers. It is also employment which I think is one of the reasons why agriculture is responsible for one out of every twelve jobs in the economy today.
Pearson: Real quick, a lot of discussion about Chinese currency and what should be done inWashington. I know that you have been involved with some of that. What is your outlook for that? The key customer of ours?
Vilsack: Well, on the currency side I will leave that to Tim Geithner and the folks at treasury. That's a - that's sort of at a different field. What we are trying to do is make sure we have a strong relationship with China in the ag area. So we continue to work with them, continue to focus on new opportunities to break down barriers. One opportunity, I think, that the free trade agreements give us is to reopen discussions about beef and see if we can perhaps get them to reopen that market that has been closed for far too long. We have the same opportunity, I think, with Japan. That would be an enormous boost to the cattle industry.
Pearson: I want to talk a little bit about the statement from Commissioner Jackson from EPA last week regarding we are not going to regulate farm dust. The huge relief out here in the countryside. You know that's been an issue. I know you have talked about it a lot since taking over secretary. What about the waterfront? Can you give us any update there? What is the EPA doing?
Vilsack: Well I think it is an indication of their sensitivity and understanding of what is going on in the countryside. I think part of the reason why the administrator made the statement she made was because she has been out here; she has been talking to farmers. You know, to the knowledge of the folks that I talked to the first time they can remember an EPA administrator coming out of the farm. So, you know, I think because of that I think they are more sensitive and I think you are going to continue to see an understanding coming out of EPA on agriculture.
Pearson: Can I ask you about disasters? I meanTexas draught, Oklahoma, Kansas, mess down there, finally getting a little bit of rain down there. A little concerned about draught now moving up through the North Central Plains, Missouri River flooding and I know it is all at a time where we just can't spend more money. What do you so for relief for both those instances?
Vilsack: Well, I think you are going to see a fairly significant crop insurance indemnity pay out this year. Probably significantly higher than it has been in the last couple of years. I don't think - what we have learned from this year is that disasters will happen, they will happen in bunches, and when they do we have to be there with a safety net. So that is why I think it is going to be important, even though the disaster programs have expired under the 2008 Farm Bill on September 30th, I think you are going to see a renewed effort to try reinstitute some form of disaster assistance. Now it has got to be improved. We can't wait two years to make disaster payments. The bankers won't wait. The farmer shouldn't wait. We've got to do a better job of designing and engineering this program so it works quicker and it works for all commodities. I was in upstate New York, who would have ever thought a hurricane would go that far inland? Those fruit and vegetable producers, they are stuck. Those programs don't work. The programs don't work for them. So it is important to understand the diversity of American Agriculture and as we are designing these safety net programs it isn't just about row crops, as important as row crops are, it is about specialty crops, it is about everything that is produced in this country.
Pearson: We have got about a minute. Talk about your priorities. I mean obviously everything seems to be reactive. I know that you have had priorities that really have - I know trade has been a big part of it, bio-fuels have been a big part of it, keeping more/building jobs inAmerica, what do you see for the balance?
Vilsack: Well I will tell you one issue that hasn't been discussed enough is how we get more people into farming? And I think it is important for us to focus on that in terms of the 2012 Farm, Food, and Jobs Bill, is what I am calling it. We need to figure out ways in which we can get younger people into this business and I think it is not just the farm legislation, it is also tax policy, it is also regulatory policy, it is also other programs because we have got an aging farming population. We have got to address that.
Pearson: Very good. Mr. Secretary thanks for being with us. Secretary of Agriculture Tom Vilsack joining us here in this very special segment for Market to Market.