July 13, 2005

Big crops seen boosting farm subsidies $12 bln

WASHINGTON (Reuters) - U.S. farm subsidies will cost $12
billion more than expected over the next three years, a stiff
increase from an earlier estimate due to mammoth crops at home
and abroad, the White House forecast on Wednesday.

In its mid-year review of federal programs, the White House
budget office said lower market prices were in store "for many
major commodities" after this fall's harvest.

"When commodity prices are lower than the legislated target
rate, payments to farmers for price and income support programs
are increased," said the administration.

Farm subsidies would cost an additional $1.9 billion in
fiscal 2006, $4.7 billion in fiscal 2007 and $5.3 billion in
fiscal 2008, it said, for a total of $12 billion. Fiscal years
begin each Oct. 1.

"It means counter-cyclical (payments) work," said a
spokesman for the Senate Agriculture Committee, referring to
provisions in farm law that send more money to growers when
prices are low.

Forecasters project "record or near record crop supplies
for corn both in the United States and overseas and higher
production for other commodities, resulting in lower prices for
many major commodities in the near future," the White House

At the House Agriculture Committee, there was caution about
the estimates since Congress relies on its own budget office,
which employs somewhat different formulas to estimate expenses.

While the White House said farm subsidy outlays would rise
for fiscal 2006-08, it said this year's costs would be $4.6
billion less than thought in February, because corn and soybean
prices were higher than expected.

In February, outlays for crop supports, land stewardship,
dairy subsidies, disaster aid and export programs were
estimated for $24.1 billion. Payments for fiscal 2006-08 were
expected to total $45.6 billion.

The forecast of higher farm spending was issued two months
before the committees must report on how to cut Agriculture
Department programs by $3 billion over five years. The
committees will begin work in the next year on updating farm
subsidy law while staying within spending limits.