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GILFILLAN ESTATE - Minnesota can't have a strong economy without a strong agricultural economy, Gov. Tim Pawlenty said Thursday at Farmfest at the Gilfillan Estate in rural Redwood Falls.

"We've got some real challenges," Pawlenty said as he spoke of falling prices for dairy and hog producers.

Phil Olson of Zumbrota is aware of the challenges producers face. Olson was one of several attendees who asked Pawlenty questions after the formal address Thursday.

"What advice can you give my dairy farmers? I'm being told we could lose 40 percent of our dairy farmers in the next 18 months," Olson said. Olson said the revenue dairy farmers receive for their product is not enough to cover the feed and other costs.

Pawlenty said one way to help is to increase the demand.

Pawlenty cited some points he made a few minutes earlier in his address where he said the state needs to support the expansion of the export market.

"We need to be aggressive in exporting around the world," Pawlenty said.

Producers can't rely on domestic consumers but must sell products to world markets in countries such as China and India, Pawlenty said.

Minnesota has led the nation in ag exports in the past five years but "more needs to be done," Pawlenty said.

Minnesota Agriculture Commissioner Gene Hugoson will continue to visit countries such as China so the ag export market can be increased, Pawlenty said.

Pawlenty shared a familiar message Thursday when he said the expansion of human service program and expenses are out of control in Minnesota.

But Thursday, he said the growth in human services threatens the help the state can provide to agriculture.

"We need to do everything we can in the state to make sure we keep cost competitive," Pawlenty said of the climate for agriculture production.

"Minnesota as a state is going to have to decide how to allocate its resources," Pawlenty said.

Fertilizer, feed cost, capital equipment costs all related to the market, insurance costs, taxes and similar costs, Pawlenty said.

If the state continues to increase the human services or welfare portion of the budget, it will force an increase in taxes, create an uncompetitive environment for agribusiness and slow any expansion or production of jobs, Pawlenty said.

Annette Riestenberg of Perham took issue with some of Pawlenty's descriptions of waste in human services. Riestenberg works at a nursing home and lives on a farm with her family. Riestenberg's name tag said her family and farm were one of the honored farms at Farmfest this year.

Riestenberg told Pawlenty nursing homes need to be funded by the state at least at the level of cost of services. In an interview later, Riestenberg said while Pawlenty wants to keep a balanced budget, it can't be done at the expense of nursing homes that aren't fully funded in reimbursement rates.

While Pawlenty talked of long term solutions such as keeping taxes low, increasing exports and encouraging research and investment in alternative energy such as switch grass in fuel production, he also announced a program to help farmers now in crisis.

The state department of agriculture will launch a network soon to help farmers in crisis find resources in a one-stop site, Pawlenty said.

The network is designed to help farmers connect with lending institutions and other services, Hugoson told the media after Pawlenty's address.

Olson said the crisis resource is a good idea but "it's a Band Aid. You haven't solved anything."