President Obama's budget outline for FY2010 includes several proposals to reduce federal spending by $16 billion over 10 years on the farm commodity and crop insurance programs. Reaction to the proposal has been generally negative from groups affiliated with or supportive of agriculture. The most vehement reaction has been to a proposal to eliminate direct payments to farms with more than $500,000 of sales. They would not be part of the annual appropriations process. such action would be viewed as "reopening" the 2008 farm bill, which most in the agriculture community see as a five-year contract with farmers. if budget reconciliation is ordered by the budget committees, and the agriculture committees are tasked to find savings of a certain magnitude, then the President's farm proposals may draw more attention from Congress. Even then, the proposal likely would be modified or a different budget-saving approach chosen, given the reaction by farm groups and agriculture committee members. Specifically, the President's FY2010 budget proposes four reductions in the farm subsidies, including direct payments, payment limits, cotton storage payments, and crop insurance. Prohibit "direct payments" to farmers with sales exceeding $500,000 per year. 7 This would be a new and different type of "payment limit." About 76,500 farms in 2007 receiving government payments had sales over $500,000 (11% of farms receiving government payments, Table 4 ). Midwestern farms would be affected in the greatest number, but the proportion of cotton and rice farms affected would be greater than for corn, soybean, and wheat farms. The Administration estimates savings of $9.8 billion over 10 years. 2. Tighten payment limits (maximum amount of subsidies paid) to $250,000 per person . The proposal is not detailed, but indications suggest it would re-impose limits on marketing loan benefits and tighten the limit on direct and counter-cyclical payments. The Administration estimates $126 million of savings over 10 years. Eliminate storage payments for cotton. Only cotton has a payment program to pay storage costs for crops placed under government loan. The Administration estimates savings of $570 million over 10 years. Reduce crop insurance subsidies. The proposal is not detailed, but savings could be achieved by reducing the subsidy on premiums that farmers pay, reducing underwriting gains received by the insurance companies that sell the policies, or reducing administrative and operating expense reimbursements to the insurance companies. The Administration estimates savings of $5.2 billion over 10 years. About one-third of the 76,500 affected farms in the nation are in these four states.
President Obama's budget outline for FY2010—in the context of fiscal discipline—includes several proposals to reduce federal spending by $16 billion over 10 years on the farm commodity and crop insurance programs. Reaction to the proposal has been generally negative from groups that are affiliated with or supportive of agriculture. The most vehement reaction has been to a proposal to eliminate direct payments to farms with more than $500,000 of sales.
Any change would require legislative action by Congress; it would not be part of the annual appropriations process. Such action would be viewed as "reopening" the 2008 farm bill, which most in the agriculture community see as a five-year contract with farmers. The agriculture committees are neither obligated nor likely to take up the proposal. If budget reconciliation is ordered by the budget committees, and the agriculture committees are tasked to find savings, then the President's farm proposals may draw more attention—but even then, the proposal likely would be modified or a different budget-saving approach could be chosen.
Specifically, the President's FY2010 budget proposes four reductions in the farm subsidies:
Prohibit "direct payments" to farmers with sales exceeding $500,000 per year. This would add a new type of "payment limit." About 76,500 farms in 2007 receiving government payments had sales over $500,000 (11% of farms receiving government payments). They received 47% of government payments. Midwestern farms would be affected in the greatest number. Four states (Iowa, Illinois, Minnesota, and Nebraska) account for one-third of the number of farms affected nationally. But the proportion of cotton and rice farms affected would be greater than for corn, soybean, and wheat farms (36%-43% compared to 17%-21%, respectively). The Administration estimates savings of $9.8 billion over 10 years, a reduction of about 22% of expected direct payments. Tighten payment limits (the maximum amount of subsidies paid) to $250,000 per person. The proposal is not detailed, but indications suggest it would re-impose limits on the marketing loan program and tighten the limit on direct and counter-cyclical payments. The Administration estimates $126 million of savings over 10 years. Eliminate storage payments for cotton. Only cotton has a payment program to pay storage costs for crops placed under government loan. The Administration estimates savings of $570 million over 10 years. Reduce crop insurance subsidies. The proposal is not detailed, but savings could be achieved by reducing the subsidy on premiums that farmers pay, reducing underwriting gains to insurance companies that sell policies, or reducing administrative and operating expense reimbursements. The Administration estimates savings of $5.2 billion over 10 years, about 7.2% of expected outlays.