Obama seeks to trim U.S. farm subsidies

by World Grain Staff
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The fiscal 2010 budget for U.S. agriculture outlined by President Barack Obama on Feb. 26 gives a boost to nutrition and rural development programs managed by the U.S. Department of Agriculture (USDA) while it trims certain farm subsidies and programs.

The emphasis on nutrition programs seemed to have solid support in the Congress given the state of the economy, but the president’s proposal to reduce farm payments to more wealthy producers generated mixed reviews from both Republicans and Democrats.

The budget would phase out over three years direct payments made to producers whose sales revenues exceed $500,000 a year. Under the current farm law, a person or legal entity with adjusted farm gross income of more than $750,000, averaged over the preceding three years, is not eligible to receive direct payments.

The budget summary stated, "Presently, direct payments are made to even large producers, regardless of crop prices, losses or whether the land is still under production. The program was introduced in the 1996 farm bill as a temporary payment scheduled to expire, but was included in the 2002 and 2008 farm bills."

The summary added, "Large farmers are well positioned to replace those payments with alternate sources of income from emerging markets for environmental services, such as carbon sequestration, renewable energy production, and providing clean air, clean water and wildlife habitat. USDA will increase its research and analytical capabilities and conduct government-wide coordination activities to encourage the establishment of markets for these ecosystem services."

The president’s budget also "supports the implementation of a $250,000 commodity program payment limit, which will help ensure that payments are made only to those that most need them."

The budget calls for reducing crop insurance premium subsidies, the elimination of cotton storage credits and a 20% reduction in funding for the Market Access Program (MAP). With regard to the latter program, the budget summary stated, "The budget reforms MAP by reducing program funding for overseas brand promotion and minimizes the benefits that large for-profit entities indirectly gain as members of trade associations who also participate in MAP." The administration proposed future federal spending on MAP to emphasize the promotion of "generic American products overseas."

Senator Tom Harkin of Iowa, chairman of the Senate Committee on Agriculture, Nutrition and Forestry said, "President Obama’s budget outline recognizes that in these trying economic times, we need every federal dollar to go where it can do the most good. In scrubbing the budget, he has focused on reforming large commodity program payments and the direct freedom-to-farm payments. I welcome his engagement on both of these issues, where I have long sought further reforms."

Harkin also supported a proposal for increased nutrition funding but said the elimination of funding for resources conservation and development programs was not a good idea "because they accomplish valuable work in rural communities across Iowa and the nation."

Representative Ron Kind of Wisconsin, who led efforts to reduce farm subsidies during the farm bill debate, said, "I am encouraged that President Obama has held true to his pledge to root out waste in agriculture programs. These common sense reforms will reduce taxpayer subsidies to large agribusinesses and wealthy individuals while still maintaining a vital safety net for farmers during these tough economic times."

Senator John Thune of South Dakota, said, "I agree with President Obama that payment limitations could be tighter and supported legislation during the debate on the 2008 farm bill to do so. However, some of the savings claimed by this administration would come out of the pockets of the hard-working men and women of rural America, almost as though the economic times we are facing have had no impact on our agriculture industry."

Senator Chambliss, ranking member of the Senate agriculture committee, and Representative Collin Peterson of Minnesota, chairman of the House Committee on Agriculture, expressed reservations about reopening the farm bill to make the farm subsidy adjustments sought by the president.

Whether the proposal will be enough to revive the moribund Doha round of the World Trade Organization (WTO) talks remains to be seen. U.S. spending on farmers has been one of many points of contention in the WTO talks, and trading partners want to see more concessions.

Canada’s farm minister Gerry Ritz said Obama’s pledge to cut the direct payments was a step in the right direction to revive the Doha round of the trade talks, which are in their eighth year.

"It’s one of the aspects," Ritz said. "On the top 10 list, it’s one of them."

Gary Blumenthal, analyst with World Perspectives, told Reuters that he didn’t believe the proposal to reduce U.S. farm subsidies would be enough to revive the talks.

"Restarting Doha requires more than just tinkering with U.S. support payments," he said.


The budget provides $250 million in loans and grants to increase the national supply of home-grown renewable fuels, and five rural development programs would receive $61 million in funding. These programs include the rural microentrepreneur program, rural cooperative development grants, value-added producer grants, grants to minority producers and cooperative research agreements.

The administration said it would fund several conservation programs, including the Conservation Stewardship Program, the Conservation Reserve Program and the Environmental Quality Incentives Program, but it called for the elimination of the Resource Conservation and Development Program, a 47-year-old program the administration asserted already accomplished its goals.

The budget provides additional resources to improve food safety inspections and assessment and the ability to determine food safety risks. The president also proposed offsets to his increased spending in priority areas.

The budget would provide a $1 billion annual increase for child nutrition program reforms aimed at improving access, enhancing the nutritional quality of school lunch and breakfasts, expanding nutrition research and evaluation and improving program oversight. Funding also was proposed to support more than 9.8 million participants in the Women, Infants and Children program.

The budget supports the temporary increase in the Supplemental Nutrition Assistance Program and additional resources for food banks and communitybased food providers as provided under the American Recovery and Reinvestment Act, and it funds a pilot initiative to increase SNAP participation among low-income seniors.

Jay Sjerven is senior editor, markets, for Milling & Baking News, sister publication of World Grain.

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