Obama: End unneeded $5 billion a year farm subsidy payment

Reuters News
Posted: Feb 13, 2012 11:34 AM
Obama: End unneeded $5 billion a year farm subsidy payment

WASHINGTON (Reuters) - With Congress beginning an overhaul of U.S. farm law, President Barack Obama called on Monday for elimination of a $5 billion a year subsidy paid to farmers regardless of need but held steady funding for the department's often-criticized data forecasting arm.

Obama proposed reforms totaling $32 billion over 10 years for farm supports in his new budget. It is far larger than the $23 billion agreed by Agriculture Committee leaders in Congress last fall during deficit-reduction talks.

Budget cuts have squeezed the U.S. Agriculture Department's reporting of crop production over the past couple years. The White House proposed steady funding, $109 million, for agricultural estimates in the coming fiscal year.

Besides eliminating the "direct payment" of $5 billion a year, Obama said the long-term Conservation Reserve, which holds farmland out of production, should be limited to 30 million acres, down 2 million acres, and crop insurance subsidies should be cut by $7.6 billion through fiscal 2022. A disaster relief fund, scheduled to expire this year, would stay in operation.

Direct payments, created as a temporary measure in 1996, are the biggest target for farm reformers this year.

"In a period of severe fiscal restraint, the payments are no longer defensible," said the administration, referring to the direct payments.

Farm groups are divided on the shape of the new farm law. The Senate Agriculture Committee opens the farm bill process with a hearing on Wednesday on renewable energy. Analysts say there is a 50-50 chance, at best, that Congress will enact a farm law this year, given election-year and deficit-reduction pressures.

The White House won little support among farm groups and lawmakers when it proposed a similar package of cuts last fall. Two farm lobbyists said the new package would be ignored too. Agriculture Committee leaders seem set on $23 billion in farm subsidy cuts.

There is broad agreement the direct payment will not be renewed. It is paid to landowners based on historical production of grain, cotton and soybeans. Farm income hit a record high in 2011, making the payments harder to justify.

While the White House suggested a 30 million-acre cap for the Conservation Reserve, some proposals call for a ceiling of 25 million or 26 million acres.

(Reporting By Charles Abbott; editing by Jim Marshall)