President Barack Obama, in his fiscal 2011 budget, is proposing cuts in farm program payments to the wealthiest farmers.  The proposal revives the Obama administration's attempts last year to cut farm program payments to the largest farmers. That proposal drew more criticism than support from members of Congress and was rejected outright by most farm organizations.

Responding to the latest proposal, House Agriculture Committee Chairman Collin Peterson, D-Minn., issued a brief statement in which he again highlighted that such a budget proposal would be unlikely to move through Congress without a fight.
 
"It is Congress's job to write the annual budget, and based on my conversations with House Leadership, no one is interested in making cuts to the farm bill after the battle we just fought to pass it a year and a half ago," Peterson stated.

The White House federal budget specifically lists savings in "Commodity Payments to Wealthy Farmers" as a reduction line item of $2.263 billion over 10 years, cutting $172 million in payments starting in fiscal year 2012.

The White House proposes reducing the cap on direct payments from $40,000 per person per year to $30,000 and reducing the two adjusted gross income (AGI) calculations that allow farmers to be eligible for direct payments.

In stating its justification for the reductions, USDA describes direct payments as "made to farmers based on historical production, regardless of whether they currently produce crops. They distort production and drive up the value of farm land."
 
Under the plan, the administration wants to cut the average farm-income AGI -- income attributed to farming, ranching or forestry -- from an average of $750,000 or less to $500,000 or less to maintain eligibility for direct payments. The proposal would also reduce allowable non-farm AGI -- income from non-ag related activities -- from $500,000 to $250,000.

If enacted, the farm payment cap would save $2.263 billion between 2011 and 2020, the White House Office of Management and Budget stated.

The proposal also generates as much as $8 billion in savings over 10 years by renegotiating the contract between USDA and the crop-insurance industry, a proposal already getting push back from the industry, Congress and commodity groups.

The White House states, "Crop insurance companies currently benefit from huge windfall profits due to the structure and terms of the government's contract with the companies called the Standard Reinsurance Agreement (SRA). Through the SRA renegotiation process, which will occur in 2010, USDA will pursue reforms in the financial terms in the SRA that will allow the department to offer the same program benefits to farmers and ranchers with significantly reduced costs -- saving $8 billion over 10 years."

USDA projects expenses for crop insurance in FY 2011 will still rise about $600 million over 2010 spending levels.  In its entire budget, the White House projects USDA's mandatory spending, including money from the American Recovery and Reinvestment Act, will be $132.28 billion in FY 2011, up from $129.34 billion in 2010.  The White House also shows a reduction in USDA's total discretionary budget for FY 2011 at about $1.26 billion in savings compared to 2010 spending levels.
Other USDA line-item cuts:

•  Agricultural Research Service buildings and facilities: $147 million. The proposal would provide no new funding for ARS research facilities and would cancel $75.5 million in "unobligated balances for previously appropriated unrequested construction projects." The $71 million allocated for 2010 would go away, and there would be no 2011 budget request, so the administration leads it into a reduction of $147 million in budget authority.
• Capital Improvement and Maintenance: $100 million
• USDA's Market Access Program: $38 million cut in FY 2011 and continuing, saving $366 million over 10 years
• Resource Conservation and Development Program: $51 million
• Watershed Food and Prevention Program: $30 million
• Community Facilities grants: $15 million
• High Energy Cost grants: $18 million
• Public Broadcasting grants: $5 million
• Health Care Services Grant Program: $3 million
• Commodity Storage payments: $2 million. The administration states that USDA does storage payments only for cotton and peanuts and no other commodities.

For a White House overview of the Department of Agriculture budget, visit:
http://www.whitehouse.gov/…

Chris Clayton can be reached at chris.clayton@telventdtn.com
(AG/KM)

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