US farm groups oppose cost-cutting budget plan for USDA

US farm groups were quick to voice opposition to cost-cutting measures proposed in President Barack Obama's US$149 billion budget plan for the USDA in fiscal year 2011.

 

There were concerns about plans to cut farm subsidies, an issue that producer groups had considered settled at least for a few more years, when Congress passed the 2008 farm bill.

 

The USDA budget which was unveiled on Monday (Feb 1), seeks to cut "wealthy farmers" off from its direct payment subsidies, but groups like the National Cotton Council (NCC) complained that such cuts would be painful for producers when they need it the most.

 

"In the midst of a credit crisis, it makes no sense to threaten a vital component of the borrower's cash flow," said NCC chairman Jay Hardwick.

 

Farmers are now excluded from direct payment subsidies if their non-farm-related adjusted gross income exceeds US$500,000 or their farm-related AGI is more than US$750,000. The Obama plan would lower those income ceilings by US$250,000 in each category.

 

The FY 2011 budget proposal would also prohibit any farmer from collecting more than US$30,000 per year in subsidies, down from the current level of US$40,000.

 

National Association of Wheat Growers (NAWG) spokeswoman, Melissa George Kessler said the subsidies have already been established by Congress and wheat farmers are counting on them.

 

The American Soybean Association (ASA) also railed at the idea of altering the 2008 farm bill. ASA President, Rob Joslin insisted: "Cutting the farm safety net to achieve minimal savings would jeopardise an industry that continues to be a key driver for US economic recovery and export growth."

 

The ASA President and National Farmers Union (NFU) President, Roger Johnson, were adamant that the Obama administration went too far with its goal of cutting billions of dollars of spending on subsidies for crop insurance companies.

 

"NFU understands the nation is faced with a difficult financial situation and we commend the (USDA) for increases in important programs in its proposed budget," Johnson said. "However, the cut in crop insurance at US$8 billion over 10 years comes as a disappointment, as crop insurance is part of the vital safety net for farmers and ranchers providing a safe and secure food supply."

 

The USDA is now in negotiations with crop insurance companies to overhaul the Federal Crop Insurance Program as an effort to scale back spending. According to USDA data, government payments to crop insurers have more than doubled in recent years, jumping from US$1.8 billion in 2006 to US$3.8 billion in 2009 while the total number of policies held by farmers has declined.

 

In addition, Joslin added that although there is a need for reform in crop insurance administrative payments to companies, any savings should be re-invested to make the program more widely accepted in parts of the country where farmers do not participate.