September 20, 2011
USDA Secretary Tom Vilsack at Growth Energy Conference
Growth Energy Legislative Conference
Hyatt Regency Washington—Capitol Hill
Sept. 20, 2011
TOM VILSACK
I appreciate this. It means a lot. Just as a personal side note, this morning I was at a breakfast meeting with some folks and the last question that was asked of me was something like “do you mind talking about corn-based ethanol?” I said no. Fella said “based on my research, it’s an energy user, and it’s driving up food costs. Would you like to comment?” And, it’s like “how many times do you have to answer those questions?” So I answered them and I think after I answered him I think he understood that there was a lot of misinformation, a lot of old information, out there and in the blogosphere and in the atmosphere that we need to continue to focus on. So I appreciate it very much this award and I appreciate the opportunity to speak to this group. And I told Tom Buis I was going to say this, and so this was before I got this award so I genuinely mean this.
No one—no group—has done more for this industry, the biofuels industry generally, than the people associated with Growth Energy. Were it not for your advocacy and your work—and I will say personally for the work of Tom Buis—this industry would be in far worse shape politically than it is today. You all have done a fabulous job pushing back on some very powerful forces that are at play here that make what we are trying to do a significant challenge. And I want to thank you for the tremendous advocacy that you’ve had for the biofuels industry. And for what you all do for this country.
We have been challenged by the President to reduce our reliance on foreign oil. He has suggested that we need to reduce our reliance by a third within the next 10 years. And there are really only a couple of strategies for doing that. One is to be more efficient with the fuel and energy we use, and we should be doing that. That’s why we’ve been promoting mileage standards and more efficiency standards in terms of appliances and retrofitting buildings and homes. But also the second strategy is to create alternatives. And alternatives that are home grown. Alternatives that help to create jobs here in America. Alternatives that provide a better bottom line for farmers and producers around the country. And that’s what your industry, that’s what you all are doing. That’s what you’re advocating for.
And were we to get to 36 billion gallons of renewable fuel which is the standard that we’ve set and the challenge that Congress has set for us, we would essentially reduce our reliance on foreign oil by 18 percent, which is roughly equivalent to the amount that we currently import from the Middle East. And I think if the American public fully understood this, which is that we have a choice, we’re not compelled to import. We have a choice in this country. We can either create opportunity here or fuel opportunity elsewhere.
And there is no better opportunity in my mind to help revitalize a rural economy that is in need of revitalization than this industry. Which is why I’ve been so emphatic about my support for it. It is about jobs and it is about improving the bottom line. It’s about revitalizing small towns. It’s about creating alternative income opportunities for farmers and producers in this country.
Let me tell you a little something about the farm economy. This will be the best year from a farming, from a nominal standpoint that we’ve had ever. If you adjust the numbers for inflation, it’s the best numbers we’ve seen from farm country since the early 70s. Part of the reason is that there are alternative markets. And you all are helping to create those alternative markets. The result of that is that farmers feel more comfortable about going out and producing and purchasing large ticket items for their operations. Which has helped, in part, a company like John Deere to have record earnings. This is the power of this industry. And we at USDA have made every effort to be supportive. We have tried to aggressively promote and advance the energy title of the Farm Bill, the 2008 Farm Bill. We’ve announced assistance of roughly $450 million for biorefineries across the country. We have put in play the BCAP program identifying producers of alternative feedstocks, to take some of the pressure off of the corn issue. And we have used our REAP program in a creative way to begin trying to build out the infrastructure that’s so vital and important for this industry to take hold. Not just in the Mid West, but across the country.
Now our efforts in REAP are small to begin with, but we have an ambitious goal. Our goal is to have 10,000 blender pumps out across the country in the next five years. We’ve made announcements as of today of 194. We intend and expect by the end of the fiscal year, which ends Oct. 1, to make additional amounts to add to that number. And that pace will accelerate but only if we continue to have funding for REAP. So my first request of this group is as you talk to members of Congress, is to point out the importance of the REAP program in helping to build out the infrastructure.
Now the reason I point this out is that in the House budget that recently passed for our department, the funding for REAP was minimal. It’s a couple million dollars. Not anywhere near the amount of money is currently in the REAP program. Not anywhere near the amount of money we need to accelerate significantly the infrastructure build out. So we need your help in making sure that folks understand that REAP is helpful to this industry and that this industry is helpful to rural America.
Secondly we also need your help and assistance in making sure that as the House and Senate begin deliberations on budget constraints and restrictions, and as that helps to drive a conversation about the 2012 Farm Bill, that we don’t forget the importance of BCAP and the ability of our farmers and producers to be able to produce alternative feedstocks and be able to have some assistance in reducing the risk of introducing new opportunities into their operations through the BCAP program.
Absent your advocacy it is possible that REAP doesn’t get funded adequately and that BCAP goes away. You just need to know that.
The President has laid out the formula for this country to get itself back on track. Clearly we need jobs now. There’s no question about that. And the President has laid out a fairly aggressive effort to try to put resources into the economy to help small businesses by cutting taxes, by helping families be able to consume more by cutting taxes, and by making it easier for businesses to purchase items by allowing 100 percent expensing. He’s also suggested that this country needs to get back in the business of rebuilding its infrastructure which all of you as producers and business owners understand the importance of that to your bottom line. If the rail system is antiquated, if the port systems don’t work well, if locks and dams are not what they need to be, if roads are not what they need to be, that impacts and effects our capacity to be successful. So the President is proposing and suggesting substantial investments in infrastructure. That’s the first thing that needs to be done.
The second thing that needs to be done is that there needs to be a platform, a foundation built for long and sustainable growth in this economy. We’ve got to get back into the business of creating and innovating things that the rest of the world wants and needs. Your industry is a great example of American ingenuity and American opportunity. And it is important and necessary that this industry be allowed to progress. We all know the challenges politically. We all know the messaging challenges, but at the end of the day, you’re producing something that the rest of the world is very interested in. And as we perfect the process, as we create alternative ways to produce energy from waste products and from a wide variety of feedstocks, you’re going to establish and set the table for the rest of the world. And those technologies and those opportunities can be exported as well. And that helps to create wealth here in the United States.
And the third thing we need to do is we need to get our fiscal house in order. And that’s going to require shared sacrifice. It’s requiring us at USDA to take a look at our budget, to take a look at the way in which we deliver services, trying to figure out if there’s a more efficient way to deliver them. If there’s a way in which we can partner and leverage our resources more effectively, and the way in which we can simplify our programs so that they’re more effective. There’s significant change taking place within the USDA. And that will have to occur in every department of government. It will not be easy. But it is necessary.
And so if we create jobs now. If we build that foundation for a more sustainable economic future and if we get our fiscal house in order, what we will have is essentially a government that spends less. But I believe we’ll invest those resources wisely, more wisely, we will help to create with your help and assistance in the private sector’s work, an economy that once again is focused on making and creating and innovating products and services that the rest of the world needs and wants and we will become a nation once again that exports. And with that we will see a rebuilding of the middle class and greater prosperity in rural areas. Why do I know that? Because agriculture is doing that right now. Agriculture is sort of the tip of the front on the change in revitalization of the economy of the United States. Think about what farmers, ranchers and producers have done. During the 1980s many were faced with serious, serious economic challenges. So what did they do? They hunkered down, they got their fiscal house in order. American agriculture is relying far less on debt than it ever has. You take a look at debt to asset ratios and essentially it’s about 10.8 percent of assets in the country today, agriculture assets are encumbered substantially lower debt. What did farmers do with that additional income when they got their fiscal house in order, they invested in new technologies. They invested in more productivity, better seed technology, better equipment, more precision agriculture and new opportunities to use agricultural products, including this industry. And what was the result of that? Enormous productivity. In my lifetime, corn production’s increased 300 percent. Wheat production 200 percent. Soybeans: 200 percent. Livestock far more efficiently produced.
And what has that allowed us to do? It has allowed us to meet the domestic needs for food. It has allowed us to have a robust commitment to new industries like the ethanol industry and it has also allowed us to continue to export. So that today we enjoy a record year in exports in agriculture. We have shattered the record. We’ll do $135 billion of ag exports. That’s roughly $20b more than we did last year. We have a trade surplus in agriculture. So often you hear about the trade deficit in our economy, and the concern that we have about that. Not in agriculture. For 50 consecutive years agriculture has traded more than we have imported. But never at the extent we have today.
Five years ago our export surplus was $4.8b. Today it’s $42b. And there are a lot of people to thank for that. Including American farmers and producers. So I’m here today to thank you for what you’re doing. I’m here today to encourage you to help us allow this industry that is so important to the national security of this country. We have to be far less reliant on other sources for our energy than we are today. It’s so important to the revitalization of our rural communities. And so important to continuing the progress that we’ve seen recently in agriculture.
In only 10 of 60 years have we seen real commodity price increases in agriculture. And one of the reasons we’re seeing it today is because of what you all do. So there is a lot to be proud of. There’s a lot to be supportive of. But there are some powerful forces allied against us. Not the least of which are folks who don’t want us to have flex pumps in gas stations. That don’t want us to have resources to be able to build out the infrastructure that makes supply more convenient. That don’t recognize the importance of supporting an industry in its infancy.
You’ve all been around for a while, but you haven’t been around for as long as, say, the oil industry, for example, just to choose one industry.
(Laughter)
Yet we still continue to subsidize and support some of those mature industries. In a fairly extensive way.
So when you go to the Hill today and you talk to your members of Congress, you point out we’re having a record year in agriculture in part because of Growth Energy, we’re being able to export record amounts of agricultural products in part because of Growth Energy. We’ve reduced our reliance on foreign oil from 60 percent we imported when the President took office to 52 percent today. So we’re less reliant on foreign oil because of Growth Energy. We’re creating jobs by some estimates as many as 400,000 direct and indirect jobs connected to this industry at a time when we need jobs. And if we get to 36 billion gallons—when we get to that number—you’re looking at hundreds of biorefineries across the country. A hundred billion dollars of investment in our rural communities. And as many as a million jobs. So you want to solve the job problem? You want to reduce your reliance on foreign oil? You want to create a revitalized rural economy? You want to strengthen America? You want to be a national that once again exports and creates and innovates? You better be a supporter of biofuels. That’s my view.
(Applause)
So with that I know it’s probably even better for me to respond to as many questions as I possibly can in the time that we have so let me open it up to questions.
QUESTION
Secretary, as an individual who has a plant in your hometown, and there are flex fuel pumps on the East edge of your town, I don’t have a question so much that I have a statement that I certainly appreciate your remarks here today. They’re very supportive of our industry and I want to thank you for your support.
TOM VILSACK
Well, thanks. Is there any way we can encourage that local football team to do any better than the last couple of weeks.
(Laughter)
Just keeping an eye on them. They won last week but they got smoked the week before.
QUESTION
Mr. Secretary I want to thank you for coming. Appreciate all the work you do for us. I’m a farmer/rancher and I can no longer belong to the national cattleman’s association because of their thoughts. What’s your suggestion on how we educate them and turn that around for us?
TOM VILSACK
That’s a really great question and let me elevate it to a point initially in trying to respond to it by suggesting that agriculture, if you take all the producers that produce the bulk of what we consume in this country, it would be a mid-size city in the United States. It would be less than one percent, in fact less than one-tenth of one percent of the population. And so it is very important in my estimation, in my view, for agriculture to the extent possible, to speak with a single voice about agriculture and what agriculture contributes to the rest of the 99.9 percent of the country that doesn’t farm, and doesn’t ranch and doesn’t produce, but consumes. Here’s why that’s important. People do not understand in this country what they have. They do not reflect on the fact that we have something that most countries in the world would love to have but will never have: food security. The capacity of our nation and our producers, if push came to shove, to produce enough for our citizens to feed themselves. There’s all this conversation about the Chinese having all of our debt. Well, we have their soybeans. Last time I checked, you can’t eat a debt instrument very well. Not particularly tasty to eat a debenture. But you can figure out how to make soybeans into food.
We have food security. And that is a national security advantage that very, very few countries in the world have. Why? Because we have extraordinary producers. The second thing we have an nobody appreciates this either, when they walk into a grocery store and they walk out of it, they’ve got more in their pocket as a percentage of their paycheck than hardly anybody else in the world. We spend, six, seven percent of our paychecks for food. Most other folks probably spend a minimum of 20 percent and in some cases 50 percent. So that means we have enormous flexibility with our paychecks that allows us to go out and buy cars and live in homes and rent apartments and take vacations and put money aside for kids’ education. It’s an enormous advantage. Once again brought to us, in part, by American farmers and ranchers and producers. Two enormous benefits. If you went out there on the street today and you surveyed people walking up and down the street here in Washington, DC, I’m not sure you would get too many people that understand either one of those advantages. Now why is that? It’s because we spend a lot of time in agriculture talking to each other, and fussin with each other, instead of talking to the other 99.9 percent about what a great deal they have. And if we did that perhaps it would be a little bit easier to get support for the programs that are important to agriculture and agricultural producers.
And you look at putting together a farm, rural development and food bill like we’re going to do in 2012 like we’ve done for the last, you know, 100 years, how easy is it? It’s hard? Why is that? Because people don’t fully appreciate and understand what goes on out there in the rural areas. So my first point of this is to point out to the cattlemen and everyone in the pork producers “hey guys, when you’re fussin with your corn-grower friends, or you’re fussin with your bioenergy friends, you’re talking to one another. You’re spending a wasted opportunity to talk to the rest of the country. And you need to talk to them far more than you need to fuss with each other.” That’s the first point.
The second point is this: You all have invested in technology that has allowed you substantially expand your productivity. It’s not like agriculture’s been static. It’s an amazing story, in fact I would suggest it’s probably one of the great stories—again untold and unappreciated—about how extraordinarily innovative and productive agriculture has been in my lifetime, the first 50 years of my life—I’m told—that the American economy in terms of innovation and productivity grew generally by 50 percent. Enormous productivity. Agriculture at the same period of time: 200 percent. Two hundred percent, which means that there ought to be ways in which we can do it all.
When was America a country that basically said, “well, we can only do part of it.” You know, that’s not what made this country great. This country has always been great when it says “you know what? We can do it all. We can provide it all. It may not be easy, it may require sacrifice, it may be difficult, there may be hard times that we have to work through, but we can do it all.” And that’s the message that’s missed in this conversation. Instead of fussin with each other, figure out how you do it all. Part of it involves a commitment to research.
Little known issue here, which is that we put a lot of money into the NIH and the NSF, Science Foundation, National Health Institute, they’re doing wonderful things, great things, they’re going to cure cancer. So we pour billions of dollars, billions more into those programs. Agricultural research flatlined, and declined a little bit. The risk in that is that you risk further productivity gains at a time when we’re not only confronted with meeting our needs here at home, but also helping the rest of the world figure out how we’re going to feed seven, eight, nine, ten billion people. We don’t have the luxury, that’s what it is. In my view we don’t have the luxury of fussing with each other. We have got to have a concerted effort to speak to the other 99.9 percent about what a hell of a deal they’ve got. They need to keep it. They need to support it. They need to appreciate it. And they need to invest in it.
So that would be my response. And to be honest with you I have given that speech to the various ag groups, including the cattlemen and most recently the pork producers. I’ve conveyed that to them. And you know they’ve got charts and graphs about corn productivity and I say “look guys, we’re working on alternative ways, alternative feedstocks. We’re putting money in biorefineries, they’re starting to be built.” And my sense of this is we’re now at a tipping point and we’re going to begin to see a lot of these biorefineries pop up like mushrooms and people are going to say “where did this all come from?” Well it all came from Growth Energy and the investments that you all are making. So that would be my response, sir and I think that if people took that to heart, we’d get a far better recognition, appreciation for agriculture and rural America, the contribution it makes to this country.
(Applause)
QUESTION
Mr. Secretary, certainly appreciate your understanding of our industry and the benefits thereof. And the fact that you have placed a sense of urgency on your staff I and others have had the opportunity to work directly with them on the flex pumps and I can tell you that when we meet with them they display a sense of urgency like you do of accomplishing the goals. So we really want to applaud you for not only walking the walk and talking the talk yourself but having your staff do the same, we really appreciate that.
TOM VILSACK
Well I appreciate that. There is a reluctance on the part of our partners in this, which is the convenience store and petroleum marketers to understand the significance of this and we have to work through that. That’s why we have to continue to create economic reasons why they need to listen to us. They’re not going to do it on their own but at the same time if we’re going to expand this market and grow this market, we not only have to produce more but now we have to generate the demand for more. And we are looking for creative ways in addition to this to try to promote the whole concept of biofuels. So knowing that we were constrained from a resource situation in terms of budgets and future budgets we sat down with the Energy Department and the Department of the Navy, for example, and we said “what can we do with existing resources and existing capacities to help create new industries?” And we decide that one thing that we could do is figure out ways in which we could help the aviation and marine fuel industry embrace biofuels and using the defense production act in an innovative and creative way. We will constantly look for things like that because the more this industry roots, the more it grows and the more its various aspects are able to reach out into other parts of the country, the more political support there will be for it. I think it’s really, really important in the future that we have not just this extraordinary presence that we do have in the midwest, which is wonderful, but that we have it in all four corners of the country. And I think if we have that it will make it a lot easier in future meetings, we’ll be able to lobby for various things that the industry may need.
So we’re continually looking for creative ways to promote the industry generally.
QUESTION
Just a comment on what you said. From my perspective, there’s never been a better rural development program than what ethanol has done for me as a farmer. Since the history of farm programs and the case in point is that I called my father yesterday and I had a new combine delivered that I was not expecting to get. I was worried I would not get it for the season. There’s a year wait on some combine productions. That means jobs for people who are not farmers. And we’re talking about the whole trickle down job market for production of tires and parts and etc. And so I was happy that they delivered the combine to my farm yesterday and when I get home on Wednesday I plan to use it. So thank you very much for your stand on renewable fuels. I think that it’s a story that, it’s an amazing story from a farmer’s standpoint.
TOM VILSACK
It is. And there’s still work to be done. You know obviously we’re continuing to work on the blend rate, making sure that we get the infrastructure and the approvals on the pumping system to get that done. We’re looking, as I said, for creative ways. The other reason why this is important, in addition to jobs in urban and suburban plants that make combines and other farm implements, is when you understand the fact that we have a large number of our producers who are mid-size operators. They sell less than $250,000 in sales and they make up about 600,000 or so farmers in the country. Good people. Hard working folks. They just simply do not make enough from their farming operation at the present time with a commodity based structure to be able just to work on the farm. They also have to have off-farm income. So one of the beauties of this industry is that it offers A) opportunities for farmers to be owners, potentially, of processing facilities, so they are benefiting not only from the production but also the processing of their plant. B) It offers them off-farm income opportunities with the jobs in town and these biorefineries. And C) it begins the conversion of the farm economy from one that is primarily commodity based to one that will eventually be ingredient based.
It’s my view that over time, way down the road, but it’s gonna happen, in my view. You’re going to go from a situation where a kernel of a corn is a kernel of corn is a kernel of corn and basically not much difference to a place where you’re going to be purchasing corn that is specifically designed for the production facility that you’ve got in your hometown. Your neighbor may be producing corn that is specifically designed as a feed additive for livestock or feed for livestock. The neighbor down the road may be producing corn for a bio-based product that is reducing our reliance on petroleum based plastics. We’re getting to that day.
I was in Ohio State last Friday, you know it’s not corn-based, but you know they’re basically taking the stems of dandelions and they’re producing a product that will essentially become a rubber that can be produced domestically in the United States. Because we import our rubber. I saw a chunk of asphalt. I thought well, it’s nice. What’s so special about this chunk of asphalt. They said, well the adhesive material that’s holding it together, its foundation is hog manure. Think about the capacity of this. Of the opportunity to use what has been a waste product and an problem in may areas of my homestate, now becomes a vital ingredient, therefore more valuable, than a waste product. Just a small factoid: Phil I see you’re here, you can put this in your column in the Des Moines Register. There’s as much hog waste in Iowa, he’s taking notes, that’s good. There’s enough hog waste in Iowa that exceeds the amount of human waste produced in a year in China. That’s a lot of asphalt we can make.
(Laughter)
But this is, I’m excited about this future. And I think farmers and producers ought to be not just extraordinarily proud of what they have done, but this brave new world that they’re going to help create. And you guys are on the cutting edge of it. You’re the fellas who basically said, and made people think about, well what else could we do, besides what we’ve always done, and how can we make sure that we use what we produced in the most efficient and effective and holistic and comprehensive way? And so you’ve got people thinking about agricultural products. You have them thinking about corn cobs and corn husks in a way they haven’t thought about before. You have them thinking about any bio-based product that can be grown or raised in this country. You’ve got grasses and woody biomass, you’ve got people thinking creatively. It is the secret of success of this country. We’ve always been one innovation ahead of the rest of the world.
So I’m excited about this future. We just simply need to make sure that our policymakers create the atmosphere and the opportunity and the foundation to allow this innovation to really take hold. And not to basically shut it off. Because it is about better incomes for farmers and ranchers for the first time in a while. It is about employment opportunities in rural communities that helps retain or bring back a lot of the young folks who have left. It is about creating new opportunities for young people to get into the farming business and to make agriculture cool and interesting. It is about creating the advocacy for research that will allow us to continue to be productive. It is about creating export opportunities and expanding export opportunities than it is about creating jobs everywhere in the United States while maintaining the capacity of this country to feed itself and to do so in the most affordable way possible.
That is a tremendous legacy. And you folks are part of it. And you ought to be proud of it. And you ought to make sure those Congressional folks you deal with today fully understand it.
Thank you very much.
