Thursday, September 22, 2011

Congress will end direct payments to grain and cotton farmers, USDA economist says

Farmers are enjoyng record exports and high prices, but those successes make them more vulnerable to cuts to agriculture subsidies, reports veteran congressional correspondent David Rogers of Politico. Direct cash subsidies from taxpayers total about $5 billion a year, much of it going to households earning more than $100,000 a year, making them an easy target that Congress will eliminate, a Department of Agriculture economist told Rogers.

Last April's 10-year House Republican budget called for agriculture cuts of $30 billion. On Monday, President Obama proposed a 22 percent cut, including an end to direct payments and an $8 billion cut in crop insurance. Rogers says those two proposals mean that change will happen, and agriculture's challenge will be to transition smoothly and maintain a "safety net." The going in Congress may not be so smooth; Rogers notes clashes have already occurred between leaders of the House and Senate agriculture committees on one side and the 12-member deficit "super committee," who Rogers says are not "equipped to write agriculture policy."

Advocates for subsidized crops are showing up at political fundraisers, trying to earn support for their industry. Some, such as the National Cotton Council, have written plans that doen't include direct payments. Corn interests have written a plan relying on insurance-premium subsidies. One thing is sure, USDA economist Keith Collins told Rogers: "The argument for direct payments is their economic neutrality . . . but their downside is the same as their upside: They are unrelated to price and production, and thus income. They get made even in boom times. In this budget environment, they are going to be eliminated." (Read more)

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