New U.S. Agriculture Secretary Tom Vilsack recently conducted a Q&A session with the newspaper, USA TODAY. Take a minute to read through the interview and get to know Vilsack’s views better.
Excerpts from the interview have been edited for content and clarity.
Q: Can you assess the farm economy? Prices for corn, wheat, dairy and other products have dropped in recent months, while production costs have remained high.
A: In 2008, we saw substantial increases in farm income, exports early in the year, continued strength of the renewable fuels industry. Let’s take it to 2009: Almost all the commodities across the board have seen a decline in pricing, some more severe and more dramatic than others.
We’re dealing with issues in dairy, pork, walnuts; there are invasive species issues in citrus that are impacting, potentially, yields, and there is drought in California and Texas. … There is also concern in the renewable fuel industry, because ethanol production facilities, biofuel facilities are operating on relatively slim margins, if they have any margins at all.
The one saving grace, to the extent that there is a saving grace in these difficult economic times, is that the farm community, generally speaking, is far less leveraged than the general population or other businesses and industries. … For every dollar in debt, farmers and ranchers have $9 of equity or assets. That’s (substantially better) than in the last farm crisis in the ’80s, when we lost a lot of farms.
Q: What is the USDA strategy?
A: We’re buying butter, we’re buying non-fat dry milk … 207 million pounds of (dairy), which is a lot.
(Another focus is) how do you help create markets for products? Our focus here has been on renewable energy, encouraging the (Environmental Protection Agency) to consider an adjustment to (rules on the amount of ethanol that can be blended with gasoline) so that more ethanol is required, therefore, more ethanol will be sold.
Q: What will you do with dairy purchases?
A: What we are going to do … for the most part is to get them into the school lunch program and get them into the food banks.
Q: Are you hearing from farmers concerned about access to credit?
A: The area where there has been a credit issue is the capacity of ethanol production facilities to maintain the necessary cash flow or … the capacity of these new institutions to be funded. We are looking closely at the impact of this (recession) on minority and socially disadvantaged farmers who might be in areas where there could potentially be problems. We are keeping a close look on California because of the drought.
Q: President Obama’s budget plan calls for a $250,000 limit on commodity subsidies and ending direct payments, made regardless of crop prices or whether land is under production, for farmers with more than $500,000 in annual gross sales. The budget also seeks more nutrition aid for children and low-income families. You’ve said the budget is a choice between well-off farmers and hungry children. Lawmakers call the budget dead on arrival. What now?
A: The president is very clear about his priorities. … He is very interested in making sure that we do important work in promoting nutrition and promoting better healthy life choices, particularly for our children. He’s also very clear that we have to be sensitive to the fiscal realities of … deficits. … This is a process in which Congress has the ability to recast those priorities, and we hope over the course of time, they become shared priorities, and I think many are shared priorities. When the president talks about direct payments, he is talking about a relatively small percentage of farmers. … There are a lot of additional tools available. … We’re not proposing to take everything away.
Q: Is there a direct trade-off between farm programs and nutrition aid?
A: There are a multitude of ways in which that could have been phrased, and I probably phrased that inartfully, but budgets are about choices. …. The president has put his priorities on the table, and one of those priorities, but by no means the only priority, is greater nutrition for children.
Q: How do you answer criticisms that corn-based ethanol pushes up food prices and the industry isn’t sustainable without subsidies?
A: If there were a direct correlation, then we would have seen a decline in food prices. The last evidence I saw is that food prices went up, still between 5% and 6% in the last quarter, with ethanol dropping dramatically. Prices are more directly linked to energy costs of a petroleum nature.
This is an industry that this administration is committed to. … We can use our loan guarantee capacity to make lenders a bit more comfortable with giving (ethanol) facilities time to get out of this tough spot. … Maybe (loans) can be restructured, so long as bankers are willing to work to reconfigure, whether from interest rate reductions or principal reductions, or some way … it becomes a little easier for those facilities to remain in business.