November 1, 2005

Senators seek $250,000 cap on US farm subsidy pay

By Charles Abbott

WASHINGTON (Reuters) - The Senate should limit farmers to
$250,000 a year in crop subsidies, a 30 percent cut that would
stop big growers from gobbling up most of the money, the Senate
Finance Committee chairman said on Tuesday.

Republican Charles Grassley's proposal could be debated as
early as Wednesday, when the full Senate takes up a federal
budget bill.

Payment limits are one of the most divisive issues in
agriculture. It pits small farmers against big growers, with
Southern cotton and rice farmers likely to be hurt most by a
lower cap on subsidies because of how their businesses are

Grassley's plan to reduce the current $360,000 cap to a
$250,000 limit would eliminate loopholes allowing big operators
to collect millions of dollars a year. The White House also
backed a $250,000 limit.

Some 72 percent of U.S. farm subsidies go to 10 percent of
farmers, the Environmental Working Group said in a new report
examining 10 years of subsidy payments. The environmental group
wants more money for land stewardship work.

"I think we have a chance to get it passed," Grassley, an
Iowa Republican, told reporters.

North Dakota Democrat Byron Dorgan will join Grassley in
offering the amendment to a federal budget-cutting bill that
pares $3 billion from agriculture programs through fiscal 2010.

The Senate bill aims to slash a total of about $35 billion
from federal spending over a five-year period. The U.S. House
is considering a budget bill that would call for even deeper
cuts to help reduce the federal deficit.

With the estimated $1 billion in savings from the lower
limit, Grassley said he would delay a 2.5 percent pro-rating of
farm payments until 2008 and restore $718 million to two
stewardship programs.

Three years ago, the Senate voted for a similar subsidy
cap, but recent proposals to limit farm payments ran aground. A
congressionally created commission said reform in payment
limits should wait until Congress updates farm law in 2007.

"Large farmers get more payments but they have larger
risks," said Mary Kay Thatcher of the American Farm Bureau
Federation, which supports the current $360,000 limit.

Congress set the $360,000 cap in 2002, down $100,000 from
the previous limit, as a compromise. The Senate wanted to lower
the limit while the House wanted to raise it.

Ken Cook, head of Environmental Working Group, said a lower
U.S. payment limit would spur farm subsidy reform overseas and
correct "misplaced spending priorities in Washington."

For example, he said, the House Agriculture Committee voted
last week to deny food stamps to 300,000 people as part of its
budget-cut plan.

In a statement, the White House budget office objected to
parts of $3 billion in cuts proposed by the Senate Agriculture
Committee, such as lower spending limits for land stewardship.
It suggested senators adopt "other provisions from
administration's original proposal," which would include the
$250,000 a year limit on subsidies.

To assure "honest payment limitations," Grassley and Dorgan
said their plan would eliminate the chance to collect money
indirectly and require payments to be tracked to individuals.
It would also require recipients to provide labor or personal
management of a farm and end the use of so-called generic
certificates to evade payment limits.

Farmers would be ineligible to receive crop supports for
five years if the USDA finds they tried to elude the cap.