Farmers, US budget hawks eye $5 billion a year agriculture subsidy

A direct payment subsidy that guarantees US farmers $5 billion a year is the most prominent target in agriculture's complex web of subsidies as budget-cutting Republicans flex their new legislative muscle in the House of Representatives.
Created in 1996, the subsidy is a point of dispute in farm country. Some farm groups want Congress to eliminate direct payments as part of an overhaul of farm policy due next year while others would keep it.
The new Republican majority says it will unveil in coming weeks how it will cut spending by $60 billion this year. House Budget Committee chairman Paul Ryan says cuts of more than $100 billion would be made in 2012.
Farm subsidies, including those propping up the ethanol industry, are usually criticized as lavish, but because of the strong farm lobby, often prove hard to tackle for lawmakers.
A farm lobbyist said cuts in farm supports are a likely demand. Food stamp enrolment is at a record high so it would be hard to cut spending there. Food stamps and farm subsidies are run by the Agriculture Department.
"You can't exclude the possibility agriculture will be asked to make a contribution," said analyst Mark McMinimy of the consultants MF Global. Direct payments could be a target, he said, because the farm sector is booming, thanks to near-record grain, soybean and cotton prices.
The Obama administration revisions to the federally subsidised crop insurance program are expected to provide $4 billion over 10 years for deficit reduction.
"I would suggest that is a fairly significant cut," said Bob Stallman, president of the largest US farm group. "We're getting down to the point where there's not much left to cut" in farm spending.
Farm subsidies, including land stewardship, are forecast for $10 billion this year - half of 2005's total - out of a federal budget of $1.34 trillion. Public nutrition programs, chiefly food stamps and school meals, were projected for $94 billion last year, roughly two-thirds of all USDA spending.
Direct payments account for half of farm supports because they are paid under a formula based on past production of grain, cotton and soybeans and vary little. Spending on other crop subsidies, such as price supports, is down because market prices are far above the federally guaranteed price.
Defenders say direct payments stabilise farmer revenue - important in dealing with lenders. Critics say the money would be better spent on programs that help growers deal with low prices or crop failures.
"Free money is popular," said the Environmental Working Group, which wants more money for land stewardship, in criticising direct payments.
Craig Lang, president of the Iowa Farm Bureau, says funding for direct payments should be used for an insurance-like program to protect farm revenue. The idea is likely to be discussed this week at the annual meeting of the 6 million-member American Farm Bureau Federation, in Atlanta.
"If you don't provide something that makes sense, you're going to be cut," Lang said during an interview. "The sure thing (direct payments) is not a sure thing anymore."