President Obama's proposal calling for the elimination of direct payments to large “agribusinesses” is drawing a strong reaction from members of Congress and some of the nation's farm organizations.
In his budget recommendations for fiscal 2010, the president is asking Congress to end direct payments to large farming operations, reduce subsidies for federal crop insurance programs and eliminate storage payments on cotton.
The proposal also calls for phasing out farm program payments to growers with incomes of more than $500,000 over a three-year period, eliminating funding for the Resource Conservation and Development Program and a 20 percent reduction in USDA Market Access Promotion program funding.
“We're very concerned about that statement. We're not sure if he was talking about huge, corporate farms or other parts of our industry,” said National Corn Growers Association President Bob Dickey when asked about the president's proposal during a press briefing at the Commodity Classic in Grapevine, Texas.
“We just need to examine that a little closer,” said Dickey, a corn producer from eastern Nebraska. “I can tell you we will take a strong stand to defend corn producers and defend our policy on that issue.” (The NCGA supports direct payments in the farm bill.)
The National Cotton Council said the proposed program changes included in President Obama's FY10 budget for USDA “fail to recognize the work recently completed by Congress on the Food, Conservation, and Energy Act of 2008.”
In a statement released from its office in Memphis, the NCC said the current farm law, which is still being implemented, introduced significant commodity program changes while maintaining an important safety net for production agriculture, and enhanced conservation and nutrition programs.
“The commodity title of the 2008 law was crafted under pay-as-you-go rules, and took two years of intense debate to complete,” said NCC Chairman Jay Hardwick, a Newellton, La., cotton producer.
“The law includes more restrictive means tests based on adjusted gross income, changes in program eligibility and new payment limit provisions that are just now being implemented by USDA. The eventual full impact on U.S. producers is not yet known.”
The new farm bill includes a new provision directing the agriculture secretary to cover a portion of upland cotton Commodity Credit Corporation loan storage costs during periods of low prices. The new provision simply legislates at a reduced rate an administrative practice that USDA has undertaken for several years.
The cost of the new provision was fully offset by reductions in the target price that is used to calculate counter-cyclical payments for upland cotton producers, Hardwick noted.
“Additionally, the proposal to eliminate upland cotton storage credits ignores crucial differences between commodities. Unlike other commodities, baled cotton lint is an identity-preserved product that requires off-farm storage in CCC-approved facilities.
The Obama administration's call to reduce direct payments to producers is extremely troubling, he said, because direct payments are compliant with efforts by the World Trade Organization to move agricultural support away from trade distorting programs.
“The president's proposed limit penalizes the farms that are responsible for the majority of food, feed, and fiber production in the United States,” Hardwick said. “According to the 2007 Census of Agriculture, farms with sales of $500,000 or more accounted for almost three-fourths of all agricultural products sold.”
Given the current uncertainty in the credit markets, direct payments are critical to a producers' ability to secure financing for the upcoming crop year, noted Hardwick.
Farmers are just getting a feel for the Food, Conservation and Energy Act of 2008,” said Johnny Dodson, a soybean producer from Halls, Tenn., and president of the American Soybean Association, during a press briefing at Commodity Classic.
“We're not sure how the president would apply a new payment limit, whether it would be on adjusted gross income test or off-farm income or what,” said Dodson. “I can tell you we would oppose anything that would be done outside the farm bill.”
House Agriculture Committee Chairman Colin Peterson's response to the president's proposal was blunt. “We just passed a fiscally responsible farm bill that made cuts to farm programs, so now is not the time to reopen it,” said the Minnesota Democrat.
The ranking Republican on the committee, Frank Lucas of Oklahoma, sent a letter to Secretary of Agriculture Tom Vilsack expressing “great concern about the Obama administration's position on eliminating direct payments to producers.”
“It's clear that both Secretary Vilsack and President Obama don't understand the problems facing our agriculture community,” said Lucas. “And they absolutely don't understand how important rural communities are to our economy.”
Lucas noted the president's budget proposal came just days after Vilsack told members of the wheat, rice and cotton groups they should “be thinking about developing other sources of income rather than direct payments.”
The ranking member of the Senate Agriculture Committee also voiced his concerns about the president's budget proposal and its impact and the farm safety net.
“This budget suggests that the current economic downturn has had no impact on our agriculture sector,” said Saxby Chambliss, R-Ga. “Efforts to cut direct payments and make other sweeping changes to current farm policy will only inject additional uncertainty into the farm economy and will be met with my strong opposition.”