Tom Vilsack on Dairy and Trade

Jun 23, 2017  | 35 min  | Ep4244

Mike Pearson: We are joined now by former Secretary of Agriculture, former Governor of Iowa, Tom Vilsack, current President and CEO of the Dairy Export Council. Now, Mr. Vilsack, as we look at what has transpired in Washington, D.C. over the past six months, we have seen NAFTA really rise into prominence. Of course that was much talked about during the campaign. Now that we're actually beginning to make steps towards a renegotiation of NAFTA with our trading partners, Canada and Mexico, how does the Dairy Export Council envision these proceedings going?

Vilsack: Well, our hope is that we basically see a preservation of what is working in Mexico because it's our number one market, a market that we've seen actually since my visit in the early spring an uptick in exports. We want to make sure that market is maintained. And we also want to make sure that we visit with the Mexicans about a thing called geographic indications, or indicators. This is an effort by the European Union trying to monopolize certain cheese types based on their ability only to use the name, asiago, gorgonzola, things of that nature.

Pearson: Pretty much every cheese --

Vilsack: Well, not every cheese. It is but they have a list of cheeses that they would like to be able to exclusively market, if you will. And they're shopping this idea around the world and they're aggressively trying to get Mexico to participate in a free trade agreement with the EU that would include a restriction against using certain terms. We obviously think that there is a better way to do this through a trademark system and we're deeply concerned that this is going to cut into the high value proposition that cheese represents. So, as we discuss a modernization and improvement in NAFTA, we'd like to see perhaps the efforts of the Transpacific Partnership in this area, the Transpacific Partnership Agreement, incorporated into a modernized NAFTA agreement, so that would provide greater protections on the GI's and what Europe is trying to do.

Pearson: In your conversations with Mexican officials, have they been receptive to this EU free trade agreement? Is that something you can speculate on for us a little bit?

Vilsack: They are and they are also shrewd negotiators. So they're saying look, we've got a negotiation going with you, U.S., we've got a negotiation ongoing with the EU, who is going to make the best deal? Who is going to get to us first? And so that's why it's important and necessary that we get this modernization effort underway and that we are very clear about preserving what is working and perhaps getting into that agreement some kind of due process by which we would be notified in advance of any GI being awarded so that we could basically say, hey wait a second, that's a common name, you shouldn't provide GI protection. On the north of the border it's a completely different circumstance.

Pearson: And north of the border, last time we had the opportunity to speak with you it was right after you had assumed the role of President and CEO, and in that time we've seen Canada ruffle some feathers in the U.S. dairy industry with their new classification system and the exclusion, for all intents and purposes, of ultra filtered milk from U.S. producers. How does that play into or how does that complicate any sort of NAFTA renegotiation?

Vilsack: Well, it requires I think the administration to take a firm stand on the way in which Canada uses its supply side and supply management program. Essentially what happens is whenever America begins to get a foot hold in that Canadian market, the policy gets changed, a new classification, a new category, new standard, new specifications are developed by the Canadian government and that results in us not being able to export as much into Canada as we would be able to. And it's also detrimental to Canadian consumers. They pay a substantially greater amount for their dairy products than they should because there just isn't competition. So in this last effort, Canada essentially saw us utilize ultra filtered milk to provide a less expensive option for processors in Canada. So they essentially created an incentive, they created an opportunity for Canadian dairy to be undercut the world market, provide a less expensive option than ultra filtered milk from the U.S. and essentially provided an opportunity for Canadian dairy. This creates two problems. One, we don't get the ultra-filtered milk into the Canadian market. And two, it creates a lot of powder, surplus powder, in Canada, which they are now putting on the world market at below world prices so that it impacts not only the ultra-filtered milk sales but also the powder sales around the world. So that has a double impact on our producers. And this is something that absolutely has to be dealt with in any modernization or restructuring of NAFTA in terms of the dairy industry and in terms of agriculture. So we have been very insistent and very persistent in communicating with members of Congress and the administration the importance of getting this issue on the front burner. And I think we have finally gotten the attention of the folks in Canada. They are beginning to respond. They're coming down here, talking to Governors of Wisconsin and New York and trying to suggest that, well what is everybody worried about, exports in Canada are high, they're increasing. And it's a shell game because when we export into Canada often times what happens it gets processed and it get re-exported, if you will, back into the U.S. in a value added proposition.

Pearson: We're shipping bulk milk into Canada, it counts as a dairy export, and then they're shipping processed product into the U.S.

Vilsack: And that’s not the way it's supposed to work. We're supposed to ship it into a country and it's supposed to be used in that country and used by consumers in that country. So I think it's a little disingenuous for them to suggest that their exports are up, our exports to them are up. So I think there's a lot of conversation that has to take place. I appreciate the fact that Secretary Perdue, who recently met with his counterparts in Mexico and Canada, I'm sure there was a frank conversation and exchange of ideas. But at the end of the day, bottom line we want to preserve what's working and we want to correct what isn't.

Pearson: Now, you mentioned the geographic indicators as an issue that we're dealing with in Mexico. In Canada, with their closer ties to Great Britain and then the EU, is geographic indicators also an issue north of the border?

Vilsack: Well, the sad reality is that they have agreed with the EU in a system which is, again, somewhat of a shell game, they have grandfathered in their current processing facilities there able to continue using these terms. But any new processing facility that is developed in Canada will be prohibited from using a certain number of these terms. So they have essentially bought into the EU's system. And, again, as you look at long-term the dairy industry, obviously cheese is a significant issue in terms of opportunities for exports. If we allow the European Union to have an exclusive right to use certain terms, it essentially gives them the ability to dictate price for those types of cheeses. It's just not very appealing if you have asiago from the EU in one part of the counter and then it's sort of like maybe, sort of like, really close to, almost it really is, but we can't say it, next to it. Consumers are going to say, I'll take the real thing not knowing that in fact they have a choice between two real things. And they may end up paying a little bit more for that. And so it ends up creating a tremendous market advantage for the EU across the board and that's what we're concerned about. We don't think it's fair. We think there needs to be a system that allows any country to come in and say, wait a second, that has been in use for so long it is now a common name and it shouldn't be protected.

Pearson: Now, is that a place where the WTO, World Trade Organization, can step in? Or is this a wholly separate issue?

Vilsack: It's a wholly separate issue and it's not something that lends itself because there are certain circumstances throughout agriculture where we have had geographic indicators. Champagne is an example. And so there are certain areas of agriculture where this is already an accepted practice. The key here is having a process by which you can essentially question whether or not something is in fact a geographic indicator or is it a common name. And there is an agreement called the Lisbon agreement, in which a number of countries have agreed to a process. The only problem with it is there's a list that is published but nobody knows when the list is being published, nobody knows where the list is and if you don't respond to it within a certain period of time then it is deemed to be accepted. Well, if you don't know when things are being published and you don't know where they're being published, how do you know when the time starts? So it's really not a very effective system and it's one that has caused our dairy industry deep concern as we become much more of an exporter. I think the key message here is U.S. dairy has finally understood that in the long-term its future rides not just on increasing consumption domestically, but also in exports, and the reason being that our producers continue to be incredible at what they do, they have a safe, secure, sustainably produced product and they've got a lot of it. And the question is, how do we make sure that we maintain stable and secure markets.

Pearson: Now, while we're on the topic of Europe, there was much conversation before the election cycle about TTIP, the Transatlantic Trade and Investment Partnership, a free trade agreement between the U.S. and the EU. Where does that stand today? Is that still in the works? Is it on the back burner? Is it anything you're watching?

Vilsack: I think with Brexit, the UK leaving the EU, others are thinking or contemplating, I'm not sure that's on the front burner. I suspect that if there is anything with reference to Europe and the UK it is probably a free trade agreement negotiation between the U.S. and the UK. I will tell you that TTIP, as hard as the Transpacific Partnership Agreement was to form with a number of countries, the TTIP negotiations will be extremely difficult in agriculture, not the least of which is dairy and then the issue of genetically modified crops, a big, big issue and one where there is a serious division between the U.S. and the EU.

Pearson: Okay. Now let's take a step out, let's look at the other side of the world because I know you have recently done some traveling. You went over to Asia and visited a lot of places in Asia and Southeast Asia. What did you bring back with you? What was your take home for meeting with those Asian markets?

Vilsack: Well, I think first that U.S. dairy, because we have only been in the export market for say two decades, our competitors in New Zealand, the EU, have been in the export market in Asia for 50 years. So we obviously have some catch up. And I think the market still perceives the U.S. dairy industry as one that is primarily domestically focused. So it's important for us and necessary for us to change that image. I think secondly it takes, you've got to be there, you have to have people there working every single day promoting U.S. dairy as we have in Mexico. There's a good example there where in Mexico we created greater demand for dairy products generally, it was beneficial to Mexican producers, but it also created an export market for us. So in order to do that you have to have people in country and constantly looking for ways to promote the market, constantly understanding the nuances. The other thing I picked up from my visit is, every country is slightly different in terms of what their interests are relative to dairy. There's tremendous opportunity here. China, take China, 18 million new Chinese babies born every year, so you start thinking about infant formula, a dairy product, a key dairy product. That's 18 million new consumers every single year in one country. We in the U.S. consume a pizza about once every seven days. In China, it's once every 45 days. Now you start doing the numbers and you can move from once every 45 days to once every 30 days or once every two weeks, you're talking about a whole lot of cheese, a whole lot of cheese. Chinese are I guess tired of drinking tea after several thousand years, they're beginning to convert to coffee. Starbucks has 700, 800 stores. Yum China has 7,500 locations in China today. They want to get to 20,000. Interesting factoid, do you know what the toughest reservation is on New Year's Eve and Christmas Eve in China in terms of dinner reservation?

Pearson: I don't know.

Vilsack: Well, I would have thought it would be a place that was serving exquisite Chinese cuisine. It's actually I'm told Kentucky Fried Chicken. Now, their Kentucky Fried Chicken's are a little different than ours. They've got the tablecloths, you can have a drink, you can have a glass of wine with your Kentucky Fried Chicken. It is the toughest place to get a reservation. So, world's different, different things and different tastes. Well, we want to get, those folks at Yum China don't want to just sell chicken or through their Pizza Hut and Taco Bell enterprises, cheese pizza and so forth, they don't want to just sell that, they want to sell coffee because they look at Starbucks and they realize that Starbucks has one-tenth of the number of stores but it sells seven times more coffee. When you start thinking about coffee drinkers in China, 1.2 billion coffee drinkers and you're talking about a lot of cream and a lot of milk and a lot of Frappuccino and things of that nature. So tremendous market opportunity but a lot of competition and we've got to step up our game and we have to invest more resources in people to better understand the market and to be able to do more promotions and marketing of U.S. dairy.

Pearson: How does that happen? How do you get more people invested and placed in those markets that are emerging as powerhouses for the U.S. dairy industry?

Vilsack: Well, convincing folks back here that it's how we will stabilize the market over time. If you take a look at what the projections are for dairy production and what they are domestically for consuming dairy, you're going to realize that if you want stable prices, exports have to be part of the game. And we saw this in 2009 when exports dipped we had one of the worst years we had seen, in the dairy industry in 2014 when we hit record levels of exports the dairy industry in this country was very solid. So exports, an understanding and appreciation here in the U.S. that farm income, when you look at exports in the last 10, 15 years, it has added about $1.25 per hundredweight of dairy products being produced, milk being produced, that is $36 billion additional revenue dollars that dairy farmers receive and it's not just dairy farmers, it's also plants and jobs. We've got nearly 1,300 processing facilities in this country. Every time you sell a gallon of milk some place it's going to help every processor, every dairy producer. There are nearly 100,000 jobs that are directly connected to ag exports. I think Swiss Valley here in Iowa they were able to expand their plant because of exports, created a few more jobs, all of that has repercussions throughout the country. So, first and foremost, it is explaining to people it's about stable income, it's about jobs and then getting them to commit resources through the checkoff to be able to expand on what we have done in the last 15 years. We've done a great job building up the 15, roughly 15% of volume. We need to get to 20% in order to keep those prices where they need to be, in order to keep nearly 42,000 farming operations in business.

Pearson: Now, in that push to get to 20% there has been a lot of news over the past several weeks about China finally lifting the ban on U.S. beef moving into that country and somewhat overshadowed by that was another announcement that China made concerning U.S. dairy processes. Could you tell us a little bit about what that change was?

Vilsack: It's interesting on the beef side, we're already selling beef into China, we're just selling it in an indirect way, either that or the Vietnamese are eating a tremendous amount of beef per person.

Pearson: The people in Hong Kong sure are eating a lot of beef as well, yes.

Vilsack: But this was, on the milk side, dairy side, a big opportunity for us. And it is complicated because China came out a couple of years ago with a different set of requirements for their certification for exports and it basically requires a processing plant to be able to meet certain specifications that the Chinese have set forth. And then they need to register their plant, they need to be verified that they're meeting those specifications before they can put product into the market. There are probably over 200 facilities, 200 plants in the U.S. that have wanted to do this but have not received permission because they just simply can't get on the registration list. The reason they couldn't get on the list was because there was a lack of clarity, a lack of certainty about precisely what the process was going to be and what the requirements were. Well, this MOU that was signed this month between China and our Food and Drug Administration, the FDA, basically lays out a process by which the FDA and their Chinese counterparts will work collaboratively together to get these over 200 plants the information, the guidance, the process by which they can qualify to get on the list and that is going ot create opportunities for them to sell across the board in terms of everything from fluid milk to cheese, ingredients, whey, all across the board, all the products we can sell and that creates a tremendous opportunity for us in China. But it's not just China. There are tremendous opportunities for us in Southeast Asia as well. I mentioned Yum China. There's also a Yum organization in Singapore that basically does business in Indonesia and Malaysia and Vietnam and Thailand, emerging middle classes in Asia.

Pearson: And all of those countries have drastically different cultures. Indonesia is the world's largest Muslim majority country, Vietnam for a long time a Communist country. How does dairy consumption change as those middle classes are rising?

Vilsack: Well, you've got, in Indonesia you've got to be very concerned about Halal requirements and each country has a slightly different definition of what that actually means. So there has to be, that's why we have an organization like the U.S. Dairy Export Council is that we basically have an export guide, every day we are constantly combing the regulations and rules of these individual countries to give our exporters, to give our processing facilities the up-to-date information on precisely what they need to do to be able to comply and get into that market. Again, it's several levels. In one case you want to be in the food service, you want to be in restaurants, you want to be in those franchise restaurants, but in each country the franchise system is different. For example, in Yum China it's not the head organization that calls the shots, it's every franchisee who calls the shots. Well, that's 7,500 different organizations that you have to reach out to. That's not easy to do. And, again, that's why you need more people, you need a presence, we need to up our game if we're truly interested in expanding exports. And I think at the end of the day we think if we get from 15% to 20% we're talking about another $2 billion, $2.5 billion in additional revenue for dairy farmers. And to give you a sense of that, right now we're exporting somewhere between $4.5 billion to $5 billion. So that $5 billion is supporting 100,000 jobs, you add another $2 billion, you're talking about more jobs and you're obviously talking about continuing the bottom line improvement for dairy in the U.S.

Pearson: Let's look at the low hanging fruit when it comes to dairy exports. As you look towards Asia, Southeast Asia and the immediate area outside North American growth, is it going to be in the form of powder? Is it cheese? Is it butter? Do we sell much fluid milk?

Vilsack: Well, we don't sell a lot of fluid milk and the butter issue, there's such a tremendous demand here in the U.S. for butter fat that we're not competitively priced often times in that market but we are very competitively priced in powder. And what's important about powder is to understand what is happening within that industry. We're becoming better at removing the protein from the dairy, from milk, and being able to put it into a powder that can be used in nutritional drinks, sports drinks and as we become more refined in that area we create a product that before we thought was of very little value, now it becomes very high value. If you see, if you go to any of these fitness places you'll see these large containers of whey, large containers of protein concentrate, pretty expensive. And so there's a tremendous emerging market across Asia and for a multitude of different reasons. In Japan it may be because of an aging population and the fact that they only have 6,250 dairy farmers left in that country. So they're looking for additional supply. In China it may be youth and sports. So it's really understanding each individual country and having an understanding. So when you look at the Asian market I think there are probably four areas. There's South Korea where we have a free trade agreement where we're very competitive. There's Japan where we would have had the benefit of TPP, reduced tariffs, we're still faced with some tariff issues in Japan. That's why negotiations on a bilateral agreement become incredibly important. If those need to happen, they need to happen soon because, again, Japan is also negotiation with the EU, also discussing the issue of geographic indications and the EU is not as much interested in market access as they are in the GI issue. So we have seeded to the EU our market access negotiations, for all intents and purposes, unless we become very aggressive in our efforts in Japan. So Japan, great opportunity but we've got to get going with our negotiations. China, opening up this MOU I think is going to be helpful. And then there's Southeast Asia, through Singapore, accessing all the other Southeast Asian countries and having a better understanding of what the food service industry wants. I think a lot of people when they think of dairy they want us to be in the retail space. You really have to get people conditioned to buying, to liking U.S. dairy products and understanding what U.S. dairy is. You do that by making sure that when they go to the restaurant, when they go to a high end restaurant or even a franchise restaurant that they're experiencing U.S. dairy, you market that in the same way to a certain extent that we're reminding people now in the U.S. with the Undeniably Dairy initiative that was launched June 1 on World Health Day, an opportunity for us to reconnect American consumers with the role that dairy has played in their life, the enjoyment, the taste, the fun that is connected with dairy, but also reminding folks of the nutritional value. As we look at obesity issues it may surprise folks that maybe a glass of milk might be a strategy in keeping your weight down as opposed to adding weight and certainly an option in terms of a sugar drink, for example. So there's just a lot of good work being done, a lot of interesting conversations taking place about dairy. I was in a group not connected with dairy a couple of days ago and I can see that our program here is already working. They were discussing the fact that 7% of Americans believe that chocolate milk came from brown cows.

Pearson: And some of it does. Jerseys are of course brown. But no, I don't think they have much breed differentiation on their minds.

Vilsack: So there’s a little work for us to do, a little work for us to do. But I think it's a fun way of getting people engaged in the conversation and again reminding them that virtually every family opportunity whether it's a celebration or whether it's a tragedy that you're dealing with in your family, dairy is always at the center, dairy is always there to help through a crisis, dairy is always there to celebrate a birthday or a great achievement. And so it's connecting emotionally to a product. And it also gives us an opportunity to remind people of the work that our dairy farmers are doing in terms of sustainable practices, work they do to care for their animals. And so it's an opportunity for us to reinforce the sustainability argument as well.

Pearson: As you look out one, two, five years into the future, what are your top three priorities when it comes to dairy exports?

Vilsack: Well, I think it's about volume and value, making sure that we really aggressively create greater presence in all of these emerging markets, promoting and marketing U.S. dairy, number one. Number two, making sure that we change the image of U.S. dairy in these countries from sort of last resort exporter of commodity to a preferred exporter to a consistent exporter to a high value exporter. And then I would hope that we would see both in volume and in value an increase from 14% to 15% of our milk being produced in this country to 20% of our milk being produced in this country and some way finding its way around the world. Here's the benefit to the country from this and I think it's sometimes often not fully appreciated. When we export U.S. dairy, and for that matter when we export U.S. agriculture products anywhere in the world, we're not just exporting that commodity, we're not just exporting that powder or that cheese, we're exporting the American brand, the American brand of innovation, the American brand of sustainability and concern for the environment and for our animals. And I think that's a positive message for us to be able to reinforce as many times and as often and as many places as we possibly can. So when we talk about these Asia markets we don't want to forget there's also a tremendous market in North Africa and in the Middle East, particularly for some of our high value added products. And so there is a place where it is sort of open for business, it's open for competition, nobody has been there for 50 years, if you will. It's a place where we have I think a chance to really change the image of the U.S. So we'll be focusing on preserving what is working in Mexico, opening up that market in Canada, creating new market opportunities in Asia and creating a real presence in the Middle East and North Africa.

Pearson: Now, as you talk about exporting the American brand, one of the actions that occurred under your past boss, President Obama, was opening up trade into the nation of Cuba. And now here this last week President Trump rescinded most of that. What impact, if any, is that going to have on the dairy export business?

Vilsack: I think it's a lost opportunity and I think, candidly I don't think it had anything to do with anything but politics and it's unfortunate. We've tried squeezing Cuba, we've tried that for 60 plus years to try to do something to the Castro family, the Castro brothers, I don't think it has worked particularly well. And I think that President Obama saw an opportunity to create a dialogue and I think he understood, we've seen this in other places around the world, think about this. The United States has a tremendous capacity to make friends out of enemies. Following World War II, who are some of our strongest allies today? Japan and Germany. We went to war with Mexico, we have a strong relationship with Mexico. We went to war with Vietnam and now the Vietnamese are anxious to do business with America. But for some reason we have carved out this one little island 90 miles off our shore that we ought to be dominating in terms of agricultural sales and we have sort of made it so difficult and so hard that we can't compete. And it's a billion dollar plus market opportunity for American agriculture and we're essentially saying to Europe, to New Zealand, to our competitors, you can control this market 90 miles off our shore. It doesn't make any sense to me. And I think it's a purely political decision on the part of the administration. And I know that I have to be a little bit careful about being too critical, but on this one I think that they made the wrong call.

Pearson: I'd like to take a turn to a different page, look back on your tenure as Secretary of Agriculture. What policies, what programs were you able to implement to increase or to spur the growth of the organic food movement in this country?

Vilsack: Well, since we're talking about exports let's stay on that topic. We had the eight best years in exports in agriculture in the history of the country and part of that was our ability to enter into equivalency agreements for organically produced product here in the U.S., and conversely to be able to allow the import from other countries. And it also ties to Cuba because I think Cuba had the opportunity in agriculture for sort of an exchange where we would sell them basic commodities, they because they haven't done much with their land for 50 years, would be in a great position to be an organic producer of high value ag products. So it could have been a win-win for Cuban producers and for our producers. So on the organic side that was one thing we did was to create equivalency agreements with Japan, with Korea, with the EU. We were in the process of negotiating one with Mexico. It makes it easier for us to have a free flow of organic product in and out of the country. The second thing we did was to elevate its stature within the Department of Agriculture and create a group of people dedicated to looking at ways in which market opportunities could be expanded. We invested in the expansion of farmer's markets, we invested in food hubs that created an aggregation site for organic so it helped create additional market opportunities, we had a food insecurity nutrition initiative that was focused on SNAP families, giving them the opportunities to use their SNAP card to purchase organic but not be overwhelmed by the cost because we partner with private foundations that would essentially for every dollar we spent in SNAP they would match it up to a certain $5, $10. So it gave people an opportunity. We strengthened the brand. We made sure that there were specific rules and regulations impacting and affecting how you get that organic certification. We were very defensive I think of making sure that brand and the value of that brand stayed solid. And I think we also put more research money into organic than had ever been put in before. There was I think $100 million in the 2014 Farm Bill that was dedicated to organic research. And we also had a specific carve out of equip resources for conservation for organic producers. And as I left what we were working on was a transition pricing mechanism. Part of the challenge with converting more acres to organic, despite the fact there's just tremendous demand for this today, is that you have to ask a farmer and landowner to basically go three year and change dramatically what they're doing with their land. That's hard.

Pearson: And during that transition period, farmers have to practice the organic principles, so no pesticides, none of the non-approved for organics, yet at the same time they can't market it as organic so they're not reaping that economic benefit.

Vilsack: Right. They've got a commodity price but they incur significant expense. So what we have suggested was that perhaps there was a way in which you could increase the value of that commodity each year as it is transitioning so it's not organic but it's phase 1, phase 2, phase 3 of organic, could you create some kind of pricing mechanism, some kind of labeling process that would allow people to get some value, some additional value that would provide another incentive for people who are thinking about doing this to be able to do it without necessarily losing the farm.

Pearson: And where did that land?

Vilsack: Well, it was still in the process of being developed and I'm not sure what is currently -- I think Secretary Perdue, I really feel for him because he doesn't have any of his undersecretaries, he doesn't have any of his major, key political appointees in place and won't for a considerable period of time, that really makes it hard.

Pearson: And when you stepped into that role, how long did it take to get all the political appointees, or at least a critical mass of them approved?

Vilsack: I think I had most of my folks in place certainly by now, but perhaps even sooner, in a couple of months. I was fortunate because I got on the job the day after the President was inaugurated. Governor Perdue, now Secretary Perdue, had to wait for a number of months. So that really, that impacts a lot of things. It impacts, just to give you a sense of this, in order to get people approved they have to be vetted by the FBI. And you think well how hard is  that? Well, they literally ask you to identify every place that you have lived, every place that you have worked in your life and they actually go back and talk to people. So in my case, I worked at an Exxon gas station in 1971 for Tommy Fall. Tommy Fall is now retired. In 2009, 2008, Tommy Fall, December of 2008, Tommy Fall is sitting in his recliner watching a Steeler game and the phone rings and it's the FBI. Well, first of all, it's a good thing that Tommy didn't have a heart attack. This is the FBI. They wanted to ask about a kid who had worked in his gas station 40 years ago. Now, fortunately he didn't get me confused with somebody else. So he said, oh he's a great guy, he never said he was going to overthrow the government and all that stuff. So that shows you, okay, but if Secretary Perdue isn't Secretary Perdue from day one and you've got a Secretary of State to appoint, a Secretary of Defense, they're clamoring for their people also. So now you've got a queue. You've got defense, you've got state, you've got commerce, you've got treasury, here's ag back here. So all these people have to go through that process before they even get to our folks. So there's that. Then there's the budget. So when the Secretary is not there with a political eye, essentially the bureaucrats in OMB take over and they go, well ag doesn't need as much money, so they propose a 21% cut in the ag department. I'm pretty sure that if Secretary Perdue had been there that 21% budget would not have been 21% cut. I don't know what it would have been, but I'm pretty sure it wouldn't have been that high.

Pearson: There would have been a voice at the table.

Vilsack: There would have been a voice at the table and he would have been saying, you can't do that or this is a bad idea, which is what I had to do. So he is really, really in a tough spot. And then there's expectations of the new guy, he travels around, he's got to talk to people, he's got this NAFTA renegotiation so there's a lot on his plate and he really does need help.

Pearson: Well, Mr. Vilsack, thank you so much for taking the time to come in and talk to us and fill us in on what all is happening in the world as it relates to dairy. It sounds like there is a lot that American dairy producers should be excited about as we look to the future.

Vilsack: I think so.

Pearson: Thank you so much.

Vilsack: You bet. 

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