Farm cuts may be smaller than expected: Lawmaker

Reuters News
Posted: Jul 27, 2011 4:33 PM
Farm cuts may be smaller than expected: Lawmaker

WASHINGTON (Reuters) - U.S. agricultural programs face cuts of $10-$11 billion over the next decade as Congress slashes federal spending to reduce the budget deficit, said a senior farm-state Democrat on Wednesday.

While such reductions would be on the lower end of suggestions of as high as $35 billion over 10 years, there would still be less money available when the House and Senate Agriculture committees begin overhauling the U.S. farm policy next year.

I think we're winning the war on cuts," Collin Peterson, the Democratic leader on the House Agriculture Committee, told reporters.

The so-called direct payment of roughly $5 billion a year to grain, soybean and cotton growers is commonly cited as a target for cuts. There also could be cuts in land stewardship programs and in crop insurance supports. Some lawmakers would look at food stamps as an area for cuts.

A plan offered by Senate Democrats proposes $10 billion-$15 billion "in agricultural reforms," including a 30 percent cut in the direct payment. It would be achieved by reducing the amount of land eligible for the payments.

A plan unveiled by House Speaker John Boehner called for cuts in mandatory spending but did not set a figure for agriculture.

At a hearing on crop subsidies, Agriculture Committee chairman Frank Lucas said a farm safety net was essential and that crop subsidies were so small a part of the federal budget -- "50 cents out of every 100 dollars" -- that large savings are impossible.

"We are going to be left working hard for every penny of program money," said Lucas, so USDA funding must be spent prudently. He said a stand-by disaster fund known as SURE did not work well and a revenue assurance program created in 2008 may need refinements.

Mike Conaway of Texas, a senior Republican on the committee, said his top priority for the 2012 farm law was a strong crop insurance system and a farm program that helps growers secure capital when they need it -- "In other words, does the policy mean anything to the lender?"

Outside the hearing, a farm lobbyist said the dominant issue for farmers was how to assure lenders that they can repay the loans they need each year to produce a crop. Bankers routinely ask farmers if they have crop insurance coverage and how much they get in direct payments, said the lobbyist who spoke on condition of anonymity.

Created in 1996, the direct payment is made annually and is based on past production of cotton, grain or soybeans.

A University of Missouri think tank says growers probably would shift to the Average Crop Revenue Election (ACRE), a revenue assurance program, if direct payments are eliminated.

The direct payment is most popular in the cotton and rice-growing U.S. South while ACRE and crop insurance are favored by corn and soybean growers in the Midwest.

(Reporting by Charles Abbott; Editing by Alden Bentley)