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For Immediate Release
August 1, 2004

Secretary Veneman Tele-News Conference

Chief Economist Keith Collins, Washington D.C.

MODERATOR: "Good morning from Washington. I'm Larry Quinn speaking to you from the Broadcast Center of the U.S. Department of Agriculture. Welcome to today's news conference. Reporters, I would remind you if you want to ask a question today during our question and answer period please press "1" on your telephone touch pad. That signals us of your question requests and puts you in line for a question.

"It is now my pleasure to introduce Secretary of Agriculture Ann M. Veneman. Good morning, Madam Secretary."

SEC. VENEMAN: "Good morning, Mr. Quinn, and thank you for again hosting us here in the USDA radio studio, and thanks to all of the farm broadcasters around the country who are with us today, and the reporters who are listening on-line.

"I am very pleased today to once again be joined by our Under Secretary for Farm and Foreign Agricultural Services, Dr. J. B. Penn; and our Chief Economist Dr. Keith Collins.

"This morning we will discuss several issues related to the drought and agriculture, before taking your questions. As we have stated before, the U.S. farm economy is in a position of historic strength with record net cash farm income last year, record export projections for this year, and record equity for producers.

"Many factors including a booming U.S. economy and increasing growth around the world point to continued strength. But there are some trouble spots, especially in areas of the country where drought is a persistent concern. Today drought conditions continue across much of the Western United States, particularly in the Southwest and Inner-mountain West Region. One of the most pressing problems is the lack of pasture and forage for livestock producers in the areas hardest hit by several years of persistent drought.

"At my direction, last year USDA established a National Interagency Drought Council to find ways to use our existing programs and develop new initiatives to provide assistance to farmers and ranchers. One of the most innovative programs developed by that council utilized surplus government-owned stocks of nonfat dry milk acquired under the Dairy Price Support Program as feed supplements for livestock foundation herds.

"Foundation herds are the backbone of many local economies, and many of these herds have taken generations of breeding to develop current genetics and bloodlines. That program has proven extremely successful.

"Since its inception a little over a year ago we have provided almost 400 million pounds of nonfat dry milk in ten states and 85 counties to supplement the feed for 2.3 million head of beef cattle, sheep, goats and bison. Based on the results of that initiative, I am pleased to announce today that USDA will again provide surplus stocks of nonfat dry milk to livestock producers in areas that continue to suffer inadequate moisture to support sufficient pasture and forage.

"This effort is intended to provide some timely relief for our livestock producers. We have instituted some additional requirements and safeguards this year to ensure that the nonfat dry milk does not displace other livestock feed products or get diverted to areas outside eligible counties.

"We believe this effort will provide needed assistance for livestock producers through the summer and fall to again ensure their ability to maintain their foundation herds until pastures and forage supplies improve.

"This initiative comes in addition to emergency grazing which I authorized on June 24th on Conservation Reserve Program acres to provide relief for farmers and ranchers in qualifying areas suffering from this year's extreme drought. Under that authorization counties that have suffered at least a 40 percent deviation from normal precipitation or which are at D3 or D4 level for drought as rated by the U.S. Drought Monitor are authorized for emergency grazing until September 30th.

"The Farm Service Agency state committees are required to consult with USDA's Natural Resource Conservation Service State Technical Committees before approving counties for emergency grazing during the primary nesting season. Under this relief measure CRP annual rental payments that are made to participants will be reduced to 10 percent for the areas grazed. This reduction takes into account the extreme conditions that prompted this action, and it's scaled back from the required 25 percent payment reduction that was in place for several years.

"I am pleased to report that 98 counties in eight states have taken advantage of this initiative. In addition USDA has a website for producers to list information concerning the need for hay or the availability of hay for sale. The Haynet website is located at WWW.FSA.USDA.GOV/HAYNET .

"I am also aware that there have been requests from some states to further open up CRP acres outside of the D3 and D4 counties to allow grazing and haying. The 2002 Farm Bill instituted provisions that restrict the use of CRP acreage for grazing, haying or commercial uses except in limited situations. Allowing hay to be harvested during the primary nesting season outside of D3 and D4 counties is dependent on the impact on wildlife and habitats.

"The Farm Bill does allow managed haying and grazing after nesting season and is limited to not more than once every three years unless it is determined that even less frequent use is more appropriate.

"USDA is working within these statutory restrictions to allow as much flexibility as possible to provide emergency haying and grazing on all CRP acres. I want to emphasize that we are continually looking at appropriate avenues of relief for farmers and ranchers who are affected by the drought and ways to utilize all of our existing authority.

"Additional information is available on the USDA website at . There you will find information from various agency websites in one place and the available programs that farmers and ranchers can access. All of these discretionary measures we are taking are just some of the tools that USDA is using to benefit farmers and ranchers, especially those in areas impacted by drought.

"To date we have also paid out nearly $20 billion in program payments under the 2002 Farm Bill providing an effective safety net for producers. Today we are announcing an additional funding source for some drought-affected producers. USDA is allocating $12 million in performance awards to 14 states under the Environmental Quality Incentive Program with priority given to help producers alleviate drought impacts through the application of conservation measures.

"These awards recognize states that have achieved the greatest sufficiency in the program through cost-shared dollars and other management practices.

"The Administration has also been aggressive in enhancing the risk management tools that farmers and ranchers have at their disposal. Last year the Risk Management Agency provided more than $3.2 billion in indemnities and provided coverage for more than 75 percent of total U.S. cropland acreage. The total number of county crop programs available to farmers and the value of products ensured by the Risk Management Agency products have continued to increase dramatically.

"This year we anticipate record growth in both of these measures with nearly 3,800 new county crop programs being added and the value of products insured growing from just over $40 billion to more than $46 billion with a record coverage on an estimated 220 million acres.

"In addition, the President's leadership on the enactment of tax cuts put an additional $4 billion into the pockets of farmers and ranchers last year and another $4 billion this year. And the Administration continues to work hard to benefit rural Americans including the investment of $37 billion into communities through our Rural Development Program.

"We have invested more than $12.5 billion for housing opportunities in rural America, providing more than 2 million rural families with home ownership assistance, $5.4 billion to provide clean water in rural areas through water treatment facilities, more than $2.4 billion to enhance rural education and healthcare, nearly $500 million to help meet rural first-responder needs, and we have made $1.5 billion available to develop rural broadband infrastructure.

"As I indicated earlier, even though drought affects some regions there is cause for optimism in much of rural America. Crop conditions for the 2004 crops continue to be promising. Adequate rainfall continues across most of the major growing areas.

Temperatures remain moderate as the corn crop enters critical pollination and growth periods. USDA's latest estimates are forecasting a record 10.6 billion bushel corn crop as well as a record soybean crop of 2.9 billion bushels, a record rice crop of 223 million hundredweight, and a large cotton crop of 18 million bales.

"And while wheat production is expected to be down, it will be well above the 2002 drought-reduced crop. At the same time demand for these and other products remain strong, which is keeping inventories in close balance. As a result, prospects for most major commodity prices remain encouraging despite large production forecasts. On the export side, we continue to project record agricultural exports of $61.5 billion, which would surpass the previous record of $60 billion, which was set in 1996.

"Overall, these combined factors including high demand spurred by economic growth and strong export projections point to the continued health of the farm economy.

"Finally, on another topic that affects farmers greatly at the local level, we are beginning another election cycle for our Farm Service Agency County Committees. County committees play an important role in the local implementation and oversight of FSA programs, and we want to ensure that they represent America's agricultural mosaic. We have seen a decline in farmers' participation in this process, so we are encouraging all farmers representing a diversity of interests to get involved.

"The last day to submit nomination forms is September 3rd, with ballots being sent to eligible voters on or before November 8th. More information and nomination forms can be found on the Farm Service Agency website or we would encourage people to visit their USDA Service Center.

"Again, while much of the farm economy experiences excellent production and income prospects, we remain vigilant in continuing to find ways to help those farmers and ranchers affected by drought and other disaster conditions. The Livestock Feed Program will continue to provide much-needed feed assistance. Emergency grazing on CRP acres will provide additional forage and feed. Crop insurance is in place offering a strong safety net for producers which was significantly improved by the Crop Insurance Reform Legislation enacted in the year 2000.

"USDA has acted quickly on disaster declaration requests, giving farmers the opportunity for low interest loans. And the 2002 Farm Bill is fully in place to serve as a strong foundation of support.

"Once again, thanks to all of you who are listening for joining us today. We will now be happy to take your questions."

MODERATOR: "Thank you, Madam Secretary. As we begin our questions once again I remind you that reporters, you need to press "1" on your telephone touch pad to be recognized so we'll know you have a question. And our first question today comes from Gary Wergen from WHO Des Moines."

QUESTION: "Question for Agriculture Secretary Veneman or Mr. Penn. Reports out this morning on the Kyodo News Agency saying that the Japanese are backing away from the requirement of blanket testing. What do you know about that? And what are the implications for that reopening our beef market?"

SEC. VENEMAN: "Well, I think it is important to recognize that we've been undergoing a process with the Japanese in these discussions about the beef market over a number of months. As you know, just after the discovery of BSE in the United States we sent a team to Asia including Japan as our largest export market. That happened between Christmas and New Year's. We then had Japanese teams here, and we had a number of discussions that have been led very ably by our Under Secretary J.B. Penn.

"In the spring they agreed upon a process by which there would be technical discussions that would span over a period of about three months, so that process began in May with technical discussions in Tokyo. The Japanese team was here in Colorado in June, the end of June. And we had the opportunity not only to have discussions but they were able to see testing facilities. They were able to see slaughter facilities.

"And then the additional, the final technical meeting is next week in Tokyo, and that will be followed by policy-level discussions in August. We are encouraged with these technical discussions, and we are hopeful that we can make progress to soon open up the Japanese markets.

"I would note that we have succeeded in opening about a third of our export markets since it was closed after the December 23rd find of BSE. As you know we have reached agreement with Mexico to open up about 90 percent of that market in addition to a number of other countries which we've reached market-opening agreements with following BSE."

MODERATOR: "Our next question comes from Bill Tomson. Bill is with Oster Dow Jones. Go ahead, Bill."

QUESTION: "Yeah. You said $61.5 billion -- excuse me. The forecast, is there a new forecast of 61.5? What was the last forecast USDA put out?"

SEC. VENEMAN: "Well, we've had the $61.5 billion export forecast I believe came out in the end of May or early June. So we've been using that forecast for at least a month to six weeks. Keith Collins may be able to locate the exact date. I should note again that this forecast for exports would be, if we do meet that forecast, a record-setting export number for this year. The previous record was set in 1996 when that was just below $60 billion.

"I'll ask Keith to just comment briefly."

DR. KEITH COLLINS: "To answer your question, the forecast was released on May 25th, 2004. So it is fairly current, and we will be updating that again shortly. We update that four times a year."

MODERATOR: "Our next question comes from Sally Schuff from Feedstuffs Magazine. Sally? We'll come back perhaps later. Our next question then comes from Randy Fabi from Reuters. Going on then to Jeff Nalley from Cromwell Radio Network."

QUESTION: "Good morning, Madam Secretary and staff. We appreciate you so much spending time with us this morning. A follow-up to Gary Wergen's question in regard to the Japanese. Mr. Ishihara yesterday suggesting that he would have questions for the U.S. officials of the 680 suspect animals that FY '02 and '04 that were showing symptoms of central nervous system disorder with a majority of those that were not tested. How do you respond to him?

"And then my question would be, in the WTO framework we're running out of time for an end-of-July deadline. What can we do to make that work? Thank you."

SEC. VENEMAN: "If I might just on the suspect animals, what I believe that 680 number that you're referring to is, is a number that was identified by the Inspector General of CNS or central nervous system disorder animals that were deemed to have been in the system over a three-year period.

"Now the reason some of those were not tested is, they were clearly under the age of the requirement for testing. There are a number of diseases that impact particularly younger animals like calves, like ear infections that can make the appearance of a CNS type symptom. And so the FSIS inspector marked that down as CNS.

Now, what we have done since the new surveillance plan or just before the new surveillance plan was implemented was, we have now implemented a policy that all CNS animals regardless of age will be tested. So that that particular note in the IG report has been specifically addressed and corrected in the surveillance plan that we have now implemented.

I might also note as we discussed in the testimony that we had earlier this week that we've seen great success in the number of animals we've been able to test in just a few short weeks since we implemented this plan. As of Tuesday night we had tested over 17,000 animals toward reaching our goal of over 200,000.

"Now just to put that in perspective, in 2001 we tested 5,000 animals. In 2002 we tested 19,000 animals. In 2003 we tested just over 20,000 animals. So I would assume by next week we will have reached what we had done in all of 2003 fiscal year.

"I think that shows that this program is working, the surveillance program is working, that it's not only are we able to ramp it up very quickly in terms of the number of animals tested but we also can see from the preliminary statistics that we are testing the highest risk animals; 70 percent, nearly 70 percent of these animals in the preliminary group, the preliminary amounts that were tested in June, were dead stock animals which would primarily be from farms. And those of course would be among the highest risk and the targeted population.

"With regard to the WTO, as you know meetings have been ongoing in Geneva. We are still hopeful that we can get a framework for the WTO negotiations. It is important that this process move forward so that we can move together with the rest of the world to get reform in the WTO and open up new markets for our farmers and ranchers.

"Ambassador Zoellick has been traveling all over the world recently in an effort to meet with various people to try to get this process on track. And I think we're very fortunate that he has invested the kind of time and energy that's necessary to be able to get this done.

"In addition I might add that just this week the House and Senate have both passed the Australia Free Trade Agreement, and we're very pleased that this again will offer additional opportunities for our exports.

MODERATOR: "Our next question comes from Jeff Wilson from Bloomberg News. Jeff, go ahead, please.

QUESTION: "Thank you very much. The current drought situation we have in the western part of the United States is definitely affecting the cow/calf operator out there. And that's why these emergency CRP grazing rights and the dry milk policies have been put in place. Now if we get the Japanese market reopened for U.S. beef exports, we could run into a major situation of supplies becoming very tight going into 2005 because we just haven't had any heifers held back.

"What's the outlook for the beef industry to get out of its eight-year declining trend in numbers?

DR. KEITH COLLINS: "This is Keith Collins. You're right about the point that the cattle industry has been in an unusually long protracted decline. We've gone from about 102 or 103 million head in 1996 down to about 95 million head currently. What we would expect to happen is what you normally see in a cycle like this. You see prices start to come up as you get three-quarters of the way through the herd liquidation, and that's because we start to have fewer animals going into feedlots. That's exactly what we've been seeing. Last year cattle prices went up fairly sharply. This year we're talking about an average fed cattle price of about $86 per hundred-pounds.

"And we think that that should then signal some heifer retention to start rebuilding the herd. Of course you retain a heifer, then you have to breed the heifer, and it takes a year to two years before you start to see the herd numbers begin to increase. So we're still probably a couple of years away before our January inventory survey will start to show the size of the herd increasing.

"If the market for Japan were to reopen, it is true that we would export more beef products to Japan. That would increase the demand for our domestically produced beef, and that would add some additional price strength, which would of course benefit farmers. It would mean higher beef prices for consumers.

"Now one additional factor in all of that is what we do with respect to Canada. We still have a proposed rule out with regard to importing live animals and beef products, certain beef products from Canada. How that rule is resolved could also augment our domestic beef supplies as well.

"So there are a number of uncertainties in the market in addition to Japan about what would happen with respect to market prices of beef supply."

MODERATOR: "Our next question comes from Ira Dreyfus from Associated Press. Ira?"

QUESTION: "I have two issues. The one on drought, I'm kind of curious to see if anybody can project yet what might be happening to farmers as a result of the drought, whether we're going to be seeing an appreciable number of farmers being forced out of business.

"On the mad cow, I just have two questions. One of them is, are we likely to be talking about 200,000 or around 270,000 animals tested yet? There was that range in there, and I'm kind of curious to see if it can be narrowed.

"And the other issue -- well, I'll tell you, we'll leave it with those for the time being, and I'll come back with the others."

SEC. VENEMAN: "Well, if I might just answer the mad cow, and then I'll ask Keith to comment on your first question.

"But our surveillance plan, this enhanced surveillance plan which we announced in March and went into effect on June 1, anticipated testing at least 268,500 animals over a 12 to 18-month period. So as I indicated, we are ramping that up very quickly. We tested over 17,000 animals as of Tuesday evening of this week. And we believe that we are well on track to meet the projected number of samples that we would anticipate testing in that 12 to 18-month period.

"Again, I would emphasize that we are also finding six weeks into this program that we are getting a very, very strong proportion of these as high-risk samples, high-risk animals that are being tested which is your target population for this surveillance program. So I think thus far the surveillance program has been a good success."

DR. COLLINS: "With respect to the effect of the drought on livestock producers, I think one notable thing that we've observed the first half of 2004 is that beef production is down 7 percent. This is unusually large compared with the last two years. And the reason is, over the last two years there were producers that were liquidating the herd-- looked as if based on the beef production data that the rate of herd liquidation is slowing. But the second point I would make is with respect to the way the weather pattern is holding this year compared with the last couple of years. Of course the drought we have is nothing like the magnitude of the one we had in 2002, which encompassed large areas of the country and affected crops. This one is more focused in the western states, and it's unfolding differently this summer than last summer.

"What we're seeing in the month of July is the drought is receding in the central and western plain states, moving toward the West. So we're getting some spotty rain in some of the areas where we do have pasture and forage currently.

"Last year during the month of July drought intensified tremendously and ultimately even affected some crops such as soybeans. This year that's not been happening in the month of July, and if we look at the seasonal drought outlook released July 15th by the National Weather Service it shows improvement expected, limited improvement expected, pushing into western Nebraska and into Colorado and into New Mexico and into Wyoming-- some of these states where the drought has been a persistent battle over the last couple of years.

"So it is unfolding a little bit differently for livestock for this reason. I believe while I'm -- it's a little more promising while it still does remain a problem."

MODERATOR: "Our next question will be coming from Farm Progress Publications with Jackie Fatca (sp). Jackie, stand by here and go ahead with your question."

QUESTION: "Thanks again for doing this. My question is, earlier this week the Inspector General has said that extrapolating results from the new surveillance plan may not provide an accurate picture of the prevalence of the disease. Mr. Collins, can you maybe address that? And why you do feel that this program does provide a good picture of the prevalence of the disease once it's all done?"

DR. COLLINS: "I'd be happy to. I think we have to be very clear about what is being said about the prevalence of the disease. We are not saying anything definitively about the prevalence of the disease at this point. That is the purpose of the surveillance program. It is to establish more accurately whether the disease exists in the United States, and if it is determined that it does exist then to estimate the prevalence. That is the process we're going through.

"There's been some debate about some assumptions we made to determine the sample size as the Secretary mentioned before. We determined that out of 440,000 high-risk or target animals you wanted to sample 268,500 of them. And to come up with a number like that you are assuming a level of detection. That doesn't mean that that's what you think the prevalence in the herd is going to be. It's an assumption so that we can come up with a level of detection.

"And our level of detection was that we wanted 99 percent confidence. We would find as few as 5 positive animals out of the 446,000 target animals. And that allows us then to take that 268,500-sample size needed to be able to make that statement and begin our sampling program.

"But we're not estimating prevalence. We selected an assumed level of prevalence to establish our sample size. Now we've kicked off the surveillance program, and depending on what happens whether we get positive animals or not then we will estimate the level of prevalence.

"It's only if we find no positives over the entire sampling period is then there a difficulty about estimating prevalence. What can you say statistically about prevalence after the entire 12 months is over and all 268,500 animals have been tested? And that is something that we said that we're going to work on. We're going to work on with the Harvard Center for Risk Analysis and other experts to see what can be said if that then turns out to be the case.

"So I just want to be very clear that we're doing the right thing in our sample program. We are focusing just as we've been advised by the OIE and Harvard Center for Risk Analysis and our International Review Team, to focus on the high-risk animals, take a high proportion of those. We're taking 60 percent of the high-risk animals. We're going to try to test at least 60 percent of the high-risk animals, and that's certainly the right thing to do.

"And then and only then after we've completed that program will we attempt to say something about the prevalence of BSE in the United States."

MODERATOR: "And our final question today will be coming from Stewart Doane of Clear Channel Agriculture Network. Stewart, please go ahead."

QUESTION: "Thank you, Larry. Good morning, Madam Secretary, Mr. Collins, Mr. Penn.

"In the last month, Madam Secretary, the House has passed nearly a $10 billion tobacco quota buy-out without any FDA regulation; just yesterday the Senate adopted a $12 billion buy-out with FDA regulation. I am wondering, ma'am, if the Administration has communicated its position on this issue to the Congress yet. And if not, does it intend to? Thank you."

SEC. VENEMAN: "Well, as you indicate there have been now as of this week House proposals or House bills on tobacco buy-out and Senate bills. They are substantially different, and I will simply say that the President has said that he is open to a tobacco buy-out and that the Administration is ready to work with the Congress on a plan that is fair to farmers and fair to taxpayers."

MODERATOR: "Madam Secretary, do you have any closing comments? As I thank the reporters for participating with us today. Madam Secretary?"

SEC. VENEMAN: "Thank you, Larry, and thank you for hosting us once again, and thanks to all of the reporters who have joined us today and for your excellent questions.

"We wanted the opportunity to visit with you today on a number of issues, but primarily to announce the livestock feed program, which will again this year provide much needed feed assistance. Emergency grazing that was announced previously will provide CRP acres for additional forage and fuel. And we have crop insurance in place, which offers a strong safety net. We're seeing significant amounts of money that have been paid out under crop insurance in the last couple of years, and we now have record acreage covered under crop insurance.

"So we are pleased that we'll be able to look at this entire toolbox that we have of risk management for our farmers and ranchers and utilize it to the maximum extent that is allowable.

"As you know, the 2002 Farm Bill does provide a strong foundation of support, and we are very pleased that we have been able to implement that bill so efficiently.

"As we've continued to say, we've had strong income and strong export numbers, and we're very pleased that the policies that we've been implementing are showing such strength in terms of our market numbers, and we hope to continue to see our exports and our farm numbers continue to be very strong. "Again, I want to thank you all for joining us. And we will look forward to visiting with you in the near future."

MODERATOR: "Secretary of Agriculture, Ann M. Veneman.

"I'm Larry Quinn bidding you a good day from Washington."


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