With Cuts Looming, U.S. Farm Groups Seek Lower-Cost Crop Subsidies

March 11, 2013 by Charles Abbott

U.S. farm groups are looking for a formula to lower crop subsidy spending dramatically and end regional infighting ahead of new congressional demands for cuts in a farm bill now costing $10 billion more than planned.

Chairman Paul Ryan of the House Budget Committee is expected to call for deep cuts in agricultural programs on Tuesday. The cuts could be larger than the $30 billion from farm subsidies and crop insurance that Ryan proposed last year, lobbyists said.

A star element of 2012 work on the farm bill—an insurance-like plan to shield farmer revenue from poor yields, as well as low prices—might be a prominent victim of fiscal belt-tightening. The direct-payment subsidy, paid regardless of need, also could go.

Soybean farmers suggested a new blueprint on Monday for the farm bill. It calls for higher “target” prices to trigger payments to grain and oilseed growers when marketing returns are low, and a new layer of federally subsidized crop insurance that would give farmers more protection against losses.

“We found a vehicle all crops could use,” said president Danny Murphy of the American Soybean Association.

During a news conference, Murphy and two other soybean leaders said they hoped their plan would heal a rift that divided Southern growers of rice and peanuts from Midwestern corn and soybean farmers.

Murphy said the ASA plan was flexible enough to meet whatever target for savings is set by Congress. As an example, he said target prices should be based on recent history, when market prices were record-high, but lawmakers could set the trigger as a fraction of the average price to avoid excessive costs.

Other farm groups have reviewed their farm bill proposals this year, although none immediately backed the Soybean Association package, which opposed cuts in crop insurance. It would reduce or eliminate the direct payment to pay for the new package.

“No question, crop insurance is the No. 1 priority,” said a National Corn Growers Association official last week following the group’s winter meeting.

NCGA is a leading proponent of the crop revenue plan that headlined the Senate’s farm bill in 2012.

The NCGA official described the federal-run revenue plan as the long-term complement to crop insurance, which covers year-to-year losses.

Delegates to the January meeting of the largest U.S. farm group, the 6 million-member American Farm Bureau Federation, gave their leaders more latitude to work with Congress on a farm bill. The Farm Bureau’s 2012 proposal, revenue protection against catastrophic losses, was a non-starter.

Farm-bill writers will start at a disadvantage this year, despite trying to carve as much as $36 billion from farm bill costs last year. The Congressional Budget Office took a new look at the legislation and said on March 1 the bills passed by the Senate and approved by the House Agriculture Committee save $8 billion-$10 billion less than originally estimated.

“It gets a lot tougher,” said agricultural economist Pat Westhoff of the University of Missouri, to write a bill when large savings are demanded from crop subsidies.

An aide to House Agriculture Chairman Frank Lucas said the committee’s target for savings remained at $36 billion over 10 years, including cuts in food stamps for the poor. The panel’s 2012 bill got half of its savings from food stamps.

A core question for the farm bill, Lucas said last week, is the split in spending between food stamps and money for farmers. Food stamps account for the lion’s share of Agriculture Department spending.

Farm bills are panoramic legislation written every few years that set the terms for crop subsidies, food stamps, agricultural research, farm exports, food aid, soil and water conservation, crop insurance, dairy subsidies and rural economic development.

(Reporting By Charles Abbott. Editing by Andre Grenon)