U.S. farm subsidy reform may be tied to budget cuts

Reuters News

10/13/2011 6:04:05 PM - Reuters News

By Charles Abbott

WASHINGTON (Reuters) - U.S. farm subsidy cuts of $23 billion would be tied to the creation of a new crop subsidy system under a plan being discussed by Agriculture Committee leaders in Congress, farm lobbyists said on Thursday.

The proposal would end the $5 billion-a-year direct payment subsidy. It would endorse a revenue-assistance program to shield growers from "shallow losses" from poor yields or low market prices as the new basis for the U.S. farm program.

Leaders of the House and Senate agriculture committees aimed to outline the plan in a letter on Friday to the congressional "super committee". That 12-member panel is charged with finding $1.2 trillion in government-wide cuts.

Two lobbyists and a congressional staff worker cited $23 billion as the target for agricultural savings over a decade. Committee aides said discussions were ongoing but cautioned as of Thursday there was no firm agreement.

With cuts all but certain, some farm groups have offered to scrap the direct payment, which is disbursed regardless of need. They would direct part of the $5 billion to deficit reduction and spend the rest on a reformed farm program. Some of the proposals would end all traditional crop subsidies.

The three most frequently cited areas for agricultural cuts are crop subsidies, land stewardship programs and the federally subsidized crop insurance program.

If Agriculture Committee leaders go into specifics, they could say whether revenue assistance should be keyed to state, regional or farm income; if it should be a "whole farm" approach or available crop by crop; if the "base acres" eligible for subsidy should be revised and whether subsidies should be paid on planted or harvested area.

Each of those points could change the cost, and appeal, of the program greatly.

Farm income would drop marginally if the direct payment ended. However, an agricultural boom that began in 2006 has boosted overall farm income to record levels.

Some lawmakers say land stewardship and public nutrition programs, such as food stamps, should be cut alongside farm subsidies since all are part of the Agriculture Department. Cuts in land stewardship could push some farmland out of long-term setasides and back into crop production.

The American Farm Bureau Federation, the largest U.S. farm group, has suggested crop supports, nutrition and stewardship programs share equally in the cuts.

Friday is the deadline to offer ideas to the super committee. In turn, it has a deadline of November 23 to present a package and Congress must adopt the plan by December 23 or automatic spending cuts will come into force.

(Reporting by Charles Abbott; Editing by Dale Hudson)