The Minneapolis Chamber of Commerce sponsored the 29th annual Farm Forum, bringing together about 2000 Upper Midwest farmers and representatives of agribusiness to participate in panel discussions and hear from a variety of experts on national and international agricultural issues. One of the major addresses heard at that forum was Assistant US Secretary of Agriculture Clayton Yeutter. Secretary Yeutter oversees the Department of Agriculture's International Affairs and Commodity Programs.
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Has been very long ago that people were concerned about that being able to see the world and I suppose if we're still all concerned about feeding the world. We're not out of the woods on that yet and the panel and Dolly will spend some additional time on that this afternoon. I'll spend some time myself if you'd like me to do so, but right now the principal concern of a lot of farmers in this country is a are we have we gone too far in terms of preparing to feed the world. We have a full production policy that's been announced by President Ford secretary, but to myself and a lot of others and Farmers have been seeing a grain prices and livestock prices and dairy product prices go down down down in the last few months and they're very reaction at the moment is that you know, where is the bottom here? Should we really have a policy at full production and that you have so you know, where is our protection? What do I do to get credit from my banker? And what do I do to try to make some money in this very very difficult to time. I can understand the unease of farmers. That's it.That's not hard to comprehend at all when over the past four months prices have just gone like that and they've gone down a long ways very dramatically. So let's let's concentrate on that problem a little bit. First of all, see a full production is the only policy that the government of the United States can take there's no way that this government of the Department of Agriculture can call for any other policy with the relatively low stock levels. Are we having in the United States? And in other countries around the world today? We cannot go into the into crop year 1975 if we have any kind of a Christian commitment to our fellow human beings when I with anything other than identical production policy and that's what it's going to be what we really got to be able to do that. If we go out and all out in the production side in the United States this year is to make sure that there isn't a market there for the farmer at the end of that crop year. That's when he's worried about. He's really not too concerned about producing that providing he can sell it at a decent price and make a decent living and this is whatCancel the uneasiness in the unrest today. Well, what about that and why have prices drop so much in the last 4 months. Well, it's really not all that difficult. They've dropped because I make situation worldwide is very very serious. It's a purely and simply a question of the consumer demand effective Demand by effective demand. I mean the word for people to pay it for food or automobiles or whatever. It happens to be. It's just not there today in the United States and in a whole lot of other countries including the developed countries, not just a developing the poor countries in the world. That's the developed countries the Japan the European countries ourselves and a lot of others is just don't have it. We've been going in this country through a. Of declining gross national product as compared to a year ago for four consecutive quarters. Now, we're about the end of the fifth one and it's probably going to be will not probablyThey going to be in exactly the same category we could have sex then maybe a 7 before we begin to go back the other way that serious. This is probably the most serious economic recession. We've had in the United States since the thirties and and unfortunately it's and there are a lot of other countries that are in exactly the same boat with us and when people don't have money in their pockets disband, they just stop spending eventually and this is why we've seen reverberations throughout the entire economy including through agriculture. Now, it happened first of all the sector and the dairy sector that's understandable. These are these are protein products that are relatively inexpensive relatively expensive to buy as compared to rice or or wheat or a wheat product bread and so on and and consequently people pull back on those more costly items more quickly and that's why we felt it in the livestock and dairy sectors poultry earlier. It's shifted to the grain section now andPrimarily, of course because of the dramatic decline in cattle feeding in the United States a great deal of our grain in this country goes into cattle feeding and we now have cattle in feedlots 37% below a year ago. That's a long ways down the other factor. Of course, it's not only are there a whole lot less cattle on feed but they're being fed different kinds of rations are those of you in the audience cattle feeders not going too. Well what I'm talking about their they're being fed Ansel age and ruffy's yaariyan rations rather than the high concentrate rations that we use two or three or four years ago. So we have fewer cattle on feed eating less grain for animals. And naturally the the demand for grain goes down. Now there's some significant factors other go a lot further Beyond this one is at the demand for grain and soybeans and other products in the rest of the world is much stronger than it is here in my judgment. The market has not been reflecting that very accurately here in recent weeks.Anna and I'm talking about the market for products like corn and soybeans because they come down a long ways just as much as I just as dramatically as sweet, for example, despite the fact that they're still a strong demand around the world for these particular products. The other countries in the world have not reduced their livestock and poultry populations the way we have here in the United States some but not very much and there are a number of reasons for that that I won't go into but the fact remains that by and large the other countries of the world are very dedicated to increasing the animal protein that's in their diets and they're not going to cut back on livestock and poultry populations unless we absolutely have to I just came back from the Far East about 30 days ago after visiting Japan Taiwan Korea and the Philippines and I saw that happening in every one of those countries. They were with great reluctance reducing those populations that all that's important in terms of the long-run demand for us agricultural products.Okay. So what does all this mean? Well the first thing that means of course is that the best thing that can be done for us farmers at any time in the next few weeks or a few months to try to get those markets turned around and coming back. The other way again is to get the economy of the United States ruling and at the same time, of course get some economies elsewhere around the world rolling now, why do they fit together for the simple reason that they are they're interrelated and one of the points that the Japanese made to me in this is very important was it and in some of the others in the far east as well? And I heard the same thing in Europe last fall was We Wish You a Merry Christmas words that aren't pessimistic and the right the prepared tax that I have here is entitled the psychology of recovery and I make the my buddy conomic recovery and I make the point that that we need to switch to a positive psychology in this country. We've been talking ourselves.Into a very severe recession, we're going down down down because we're so down on ourselves in the United States part of this is Watergate part of its inflation there all kinds of reasons in but psychologically we've been going down. I hope we're about ready to come back up and the point that the Europeans in the Japanese and others made to me is like you got troubles with the problem is when you think you've got troubles you just simply convert your troubles into troubles for us because we're so heavily in a related with you and and their point was you think you got an energy problem sure. You have an energy problem, but your energy problem is nothing compared to ours. We import Farm or Petroleum in the United States does and sure you've got a food price problem would have been going up in the United States have been going up a lot faster and the rest of the world when I was in Japan beef steak was selling forAnd I hope every housewife listen to this $30 a pound. In the supermarkets in Tokyo and strawberries. We're selling for 20 or 25 cents per strawberry. In the supermarkets in Tokyo. Well, we don't have a food price problem here. We're the largest producer of food in the world. As a matter of fact, we're very fortunate a lot more fortunate than the rest of the world and we are grateful for that. But psychologically we got to turn ourselves around and we have to take some steps in the government. Do to stimulate the economy in the Federal Reserve System the ring some the interest rates down and loosen up credit somewhat and Indian labor and management to get productivity up higher in this country. We will all of these things have to be done in order to deal not only with inflation recession, but also with the inflation problem that we have here and we're going to do it done but we can't delay any longer because you're all suffering for all of us are in the kind of income diminishment that is occurring because of the economy going in such a severe. So first and foremost, we have got to get the economy moving if and when we get that done that's going to have reverberations through every sector and including agriculture in the price of farm products. All farm products is going to come up because there's going to be some additional demand. They are the four people to buy. Okay, that's first now. At the same time farmers are saying well G we got to do some things on target prices and Loan levels and farm program. We got to make farm program changes. Fine, but let's keep it in perspective. What is done in terms of making this economy move again 6 months or a year down. The road is a hundred times more important then what can or will be done in terms of Target prices and Loan levels. So keep all of this in the property and proper perspective because it's not a good answer for agriculture to somehow become more dependent upon the government for its living that just isn't going to work any longer for a whole lot of reasons Farmers have got to get their income from the market. That's that's just crucial and it's the only way that farmers are ever going to do. Well Farmers have gotten their income from the market over the last several years primarily and they've done excellent excellent successes protect me in 19 73 and 74 not all phases of Agriculture, but but a whole lot of it. We've got to make sure those markets are there in the key, of course is exports in the key after we get additional domestic purchasing power. Here is is the additional purchasing power they will come and they seems like Japan and Germany and France and the Soviet Union and others and we've got to have a very strong aggressive export policy. We're going to do some things and food a to because not everybody around the world can afford to buy the food that we have to sell to them. But by and large, we've got a build strong export markets for u.s. Farm products and if we have a big crop in 1975, when is all the more important that we have those export markets there and that means not only going out and building them in a general way. It means competing effectively with the other countries around the world is shell on OST markets in week. For example, it means being able to compete with the Canadians the Australians in the argentinians and I spent some time when I was in Japan with the representatives of the government. Pantsing we like to see the US share of the Japanese Market began to creep up a little bit higher. We not only want to sell you more week. We want to sell more weight than that. The Canadian cell you are the Australians in the Argentinian what we do already but why I'd like to see that percentage continue to rise. We got to get that kind of job done. If we're going to have an effective export market for us agriculture that's important prices and loan rates. And what are they? Why not raise them? Clearly the most Farmers would be to say, you know, I'll take it. Anyway, I can get it. So let's get our incomes up and then what would be the danger of having Target prices go up substantially are having loan rates go up substantially. Isn't that good? A good thing for Farmers? Well, maybe yes, and maybe no hear the factors that have to be analyzed though on that issue and they're very important. One target prices is the risk of of large deficiency payments being being made to Farmers. That is the risk of a very substantial a subsidy to to us Farmers. Now if one has to have a subsidy in order to survive, okay, we hope that's never going to happen at Target prices and loan rates are going to be irrelevant. But the point is is that Subs if he gets too hard and there's going to be a rebellion of taxpayers and it just isn't going to work the program is going to collapse how the how large is a subsidy is going to be if we go down over the next two or three or four years with a kind of targets that have been programmed in the legislation that's in the Congress right now and then presumably will be passed out of the house committee on agriculture today while the price tag is fairly high and that's a one-year piece of legislation. But if it's past for a year, it'll probably continue on in the future as well and to give you an example of the price tag that we estimate on. It looks like for 1977 to Down the road. It will be about 5 billion dollars. Well, can you sell 5 billion dollars cost to the US taxpayer in terms of subsidies to Farmers. I don't think so. I really don't think so. So in my judgment those Target prices and in that legislation or not viable for that reason and I don't mind having Farmers receive another 5 billion dollars of income from the government, but I like a whole lot of other people will mind and will resist and as a public servant in speaking as a public servant rather than a farmer I have to be concerned about that that too so the price tag of deficiency payments is a major consideration in how high the Target price goes. I love even more concerned not only to taxpayers Consumers and everyone else in the country. But in particular to Farmers themselves is loan levels. And why because the risk we run on higher loan levels is the risk that that we experienced the damage that we experienced back in the 1960s and we have to be very very careful that we don't repeat that experience in the 1970s. And with the loan levels that are under consideration back in Washington DC right. Now, we're clearly going to do that at least in some Commodities we're going to do it immediately and cotton with alone levels that are Incorporated in that legislation. And what we're going to do is price ourselves out of the World Market, that's the risk and high inordinately high loan levels. Why well, it's not the very difficult to comprehend it all their the danger of course is getting the loan levels above the world market price and it if one does that Freddy come out it doesn't make any difference whether it's cotton or corn or wheat, but we have one does that for any commodity then ones export Market is gone. And the prices in negative Lee the price inevitably collapses now it says it's held at a floor obviously by the loan level, but what happens then is that we develop mounds and mounds the surpluses. That's what occurred in the 60s and we think we had Surplus problems in the sixties and costly story. You just wait and see what we do in the seventies if we get loan labels out of line this time around and we're almost heading in that direction in the sixties. You see that's precisely what occurred and we became the residual supplier of grains in the world the Australian Soul all I wanted to sell all they had simply by staying below our loan Levels by a couple of cents. The argentinians did the same thing South Africa did the same thing Canada did the same thing and we ended up selling what was left. In other words after they sold all their grain. Then the importing nations came to us and said we still need a little bit more will buy it from you. That's a terrible economic situation than for USA. To have and we just don't dare go back and repeat that experience. Now that has ramifications in this area food reserves to so what but but let's just solidify that point the point is that we with low levels at get too high and above World Market prices. We price our selves out of That World Market. We become the residual supplier our own domestic Market collapses Farmers sell to the government revenue the market cuz the market isn't there and we develop very very vast quantities or surpluses that not only cost the taxpayer a tremendous sum of money. They were costing a million dollars a day in the sex days and they would be much more than that today if we went into the same situation, but they also serve isn't total overhang on the market Farmers end up paying for it and lower Farm prices. Eventually taxpayers get become very unhappy about subsidies to Farmers and we have grain all over everywhere not knowing what to do with it. Well, that's one way to deal with the world food problem, of course, but it's not a very good way now the other problem Then I just alluded to was the matter of reserves and I understand you had some questions on food reserves this morning. Nobody objects to the food reserves. There'd been some stories that there were differences between secretary but since I could trade Kissinger on food reserves and that's not true and they've been stories that secretary but has opposed the food reserves and that's not true either what one gets down to on this issue is how big is it food Reserve going to be who is going to hold the reserves around the world and who's going to pick up the tab? Those are the tough nitty-gritty issues in and that's where the disagreements begin now the problem once again of having our loan levels too high for u.s. Farm products is that all of those problems disappear overnight? Because the world food Reserve gets held by US the US that's what happened in this in the sixties. And of course, it's not only held by us. It's paid for by us. That's what we did in a sec state is the US taxpayer provided all the food reserves in the world for all practical purposes. Not all because The other exporting Nations like Canada held held a lot too. But by and large we were the world's food Reserve that's exactly what the other countries of the world would like to have happened right now. The Japanese were very candid about it. When I was there. They said we don't really want to hold reserves. We want you to hold the reserves for us and we don't want to pay you for them. We want you to pay for a you did in the sixties. Why don't you do it in the 70s? And I said where we don't intend to do that because we think you would hold your fair share of food reserves, and I talked to them about things like doing some long-term Contracting with us buying some of their supplies in the US and storing them increasing their storage capacity in Japan and another things that they can do to protect themselves against the major food security risk that they had but I can guarantee you. That if we do want one of two things either one, we're going to be back in exactly the same situation. We had 10 to 15 years ago. And that's picking up the entire tab for the bulk of the world's food reserves one that I already mentioned was getting our loan rates too high and the second one is unilaterally establishing our own Reserve now their proposals in the Congress right now, one of them introduced by to one of the senators of Minnesota that would unilaterally establish a food Reserve here in the United States for the us to do this on its own would be tremendously so short-sighted and horrendously damaging to us Farmers. Why because there is no first of all, there's no way to create a governmental held food Reserve which is which kind of plate of here without depressing Farm prices and don't let anybody tell you. Otherwise it cannot be done now people. We can we can do it differently this time from the way we did it in the sixties. What we'll do is we'll put a high resale price on this on the grain that's in the reserves and then and then I won't be priced depressing will isolate this Reserve from the market and will sell at Granite no less than 100% of parity or a hundred and ten or hundred and fifty or something and it won't be any problem. Well, if we have a short supply situation as we did in 1974 when we had a drought out here in the Midwest protectli in my area, Nebraska and Western Iowa. How long do you suppose the US Congress would keep that high resale price probably about 72 hours. They would lower it immediately. The grain would come on the market. It would be priced depressing everybody in the trade knows it would be priced depressing. Everybody knows that that's what would happen in in times of a surety and is a practical matter. There is no way that one's going to isolate a governmental health food Reserve any government States is going to be priced depressing for agriculture know maybe somebody will in act 1 in the law. Anyway, perhaps their benefits elsewhere that would justify that I don't happen to think so but some people do but let's make no mistake about it in so far as the farmer is concerned whether he be a Minnesota farmer or an Iowa farmer or any other kind of farmer. He's going to pay the cost of the US government. Holding food reserves and it's going to cost him his dearly in the 1970s as it did in the 1960s. And if any of you forgotten what the prices were in the 1960s, we can reel at the pages and show what they were they weren't very high. Now. What we should do in the area food reserves obviously is negotiate out an agreement with the other importing and exporting Nations on on this kind of a program Japan out of hold its fair share of such a reserve. So should the Soviet Union so should the European countries so should a nation like India all the major importing Nations on a wholesome food reserves more than I do now and the end of major exporting Nations like the US and Canada have to hold their fair share to or ought to have them available. Hell yes in private hands and our judgment not in government hands and we feel in the studies that we don't understand that we can easily meet 99 + percent of the time any us commitment in such an international program through privately-held reserves and without government only held reserves. But the major point is this is a strategic one in negotiating one for us to go out in and create one right now in the United States would eliminate any chance whatsoever of getting the major importing Nations like Japan or Europe or the Soviet Union to hold reserves if we're at it will establish a reserve and and hold all is grain here at our expense. Why would anyone in his right mind in Japan or the Soviet Union establish a reserve they won't they didn't in the sixties and a woman in the seventies. They've told me they want and yet we eat some of us still persist in trying to establish a reserve here in the United States unilaterally without negotiating this App with other countries. Well, those are some very critical issues before us today. Another one. Of course is this whole issue of food Aid and I'll spend just a minute on that since we're getting there the end of my time and that is Who day does not an easy issued a handle in this country? Because there are competing questions involved. There's not a lot of criticism of of the administration on what he has done in food ate something we do too much something we do to little something what that what we do goes into the wrong countries. I will make a judgemental decision on that now analyze it to a greater extent later, but I just want to enunciate for you what the trade-offs are where the competition comes in this whole area food a who date of course and agricultural terms means PL 480. That's our basic food a program the program start at 19 in the 1950s when we had all the surpluses and we try to move them off in the world markets in some manner now. It's become something less than a surplus removal tool in the last two or three years because we haven't had the surpluses back. We've found it very difficult to meet the food Aid commitments. They were laid out. But food Aid really serves three purposes under po480. And these are a varying importance from time to time 1 courses national security purposes. This is secretary Kissinger's efforts to make peace in the Middle East in Vietnam and elsewhere around the world food is is a contributing mechanism to those efforts. That's one reason why we have po480 programs in countries, like Egypt and India and Vietnam and Cambodia and others chili is another one that falls into that category. There are a number of countries in which we are providing food aid for national security purposes purposes that are related to keeping peace in the world. That's the basic interests of the state department in po480 the more humanitarian anthracite all food a this humanitarian, but but any ideas Pinterest is much more toward the humanitarian side specifically the third one is is aggregate. Is interest which is one of Market development if we're going to have PL 480 we'd like to see the agricultural products go to countries that are potential markets commercial markets for those agricultural products and there been some real successes Through The Years in that regard. And in fact few people understand a few Farmers understand some of these successes Korea Taiwan and Spain are three excellent examples those countries 20 years ago. We're buying essentially zilch from us in the in USA per cultural products today. They're buying a whole lot of USA per cultural products cash on the barrelhead. They become for all practical purposes graduates a PL 480 and Commercial customers. We like to see that happen with PL 480 the Korea but six hundred million dollars worth of us agricultural products last year almost all of it commercially and Taiwan about 500 million that's over a billion dollars of us agricultural exports to two countries that were PL 480 don't he's 15 or 20 years ago. So we like to see Market development come along as a result of po480. We in USDA. Well, these competing interests of course are not always in the same boat at the same time. We're Secretariat. I would like to have the food go is not necessarily the place that ain't ID would like to have it go or that we'd like to have it go. So there's competition among these three different goals as to where food at of the United States is provided that's always going to occur in the priorities may change from time to time. For example, if we have a big crap again in 1975 was it was our interest in agriculture may want to lean much more strongly toward the market development side then has been through in the last two or three years. Well, I could go on and on on many other issues, but it will take time to do a lot more in the questioning later. I do. Hope the wave at least put some of these issues in perspective the matter of being careful about Target prices and loan rates so that we don't March ourselves right out of the World Market the matter of trying to get the economy going again so that we have a strong Market out there for agricultural products the matter of understanding that food ages a part of all this picture that we do have responsibilities for feeding the world and that we can also benefit. Us Agriculture and food Aid programs and and I suppose the final one that was alluded to earlier. Is it we're all interrelated in this whole world wide picture. We no longer have a domestic agriculture. We're just part of a worldwide Agriculture and we have to recognize that in everything. We do and agricultural policy in US Farmers have to have to recognize that in a lot of production and marketing decisions that you make. Thank you.