SCENARIOS: Vilsack to face food subsidy issues in top ag job

Tue Dec 16, 2008 9:40pm EST

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(Reuters) - Tom Vilsack, a former governor of the top corn and soybean-producing state of Iowa, was set to be named next agriculture secretary by U.S. President-elect Barack Obama, Democratic officials said on Tuesday.

Vilsack, a lawyer, will oversee one of the largest federal departments with 100,000 employees and a $95 billion annual budget, the bulk of it spent on nutrition programs like food stamps and school lunches.

The Agriculture Department also runs the vast national forests, runs a renowned agricultural research network, promotes U.S. farm exports and encourages land stewardship.

As secretary, Vilsack will play a role in determining the future of biofuels and improving food safety.

Here are details on Vilsack's background and the top farm and food issues he will face.

HIS BACKGROUND

Vilsack, 58, served two terms as Iowa's governor from 1998 to 2006. His top issues were education funding, renewable fuels, and attracting high-tech agribusiness to the state.

Vilsack was an early candidate in the race to become Democratic nominee for president, but quickly withdrew and co-chaired Hillary Clinton's campaign before backing Obama.

He was an early consensus front-runner for the USDA job but by late November said he was not under consideration. In the past few days, his name surfaced anew.

CAP ON FARM SUBSIDIES

Obama recently spoke out against payments going to "millionaire farmers" and backs a $250,000 per year "hard" cap on subsidies to replace current, porous limits.

Legislation would be needed for the cap, but USDA could set stricter eligibility rules on its own authority. Savings would be $100 million-$200 million a year.

The 2008 farm law included the first-ever bar on farm subsidies to the wealthiest Americans. Regulations to implement the ban and to track farm payments to individuals were under review by the White House budget office on Tuesday.

Vilsack also will oversee the implementation of a new revenue guarantee program for farmers. A major argument is how high a price benchmark will be selected by USDA.

BIOFUELS

Vilsack will find himself in the middle of the "food vs. fuel" debate over using corn to make ethanol, and the future of renewable fuels. Obama has said he is interested in the "next generation" of biofuels made from nonfood sources.

Ethanol is popular in Vilsack's home state of Iowa, one of the leading states for ethanol production. The fuel additive created a new market for farmers' corn and was credited for helping boost prices to record highs last year.

The ethanol industry wants a higher blend rate for biofuels in gasoline, which would use more corn. Livestock producers, environmental groups and food manufacturers have mounted a spirited lobby against ethanol.

FALTERING ECONOMY

One in 10 Americans rely on food stamps -- a program administered by the USDA -- and there are calls from anti-hunger groups to include an increase in benefits as part of an economic stimulus package Obama wants to pass early in the new year.

Child nutrition programs, including school lunch and breakfast, are due for reauthorization in 2009, and experts want to update nutritional standards for the programs.

Vilsack also will face the question of making sure farmers have access to credit as the U.S. economy drags.

FOOD SAFETY

Consumer confidence in food safety has been shaken by melamine found in Chinese dairy products and pet food ingredients, spinach tainted by E. coli bacteria, and suspected salmonella in tomatoes.

The USDA plays a major role in meat safety and Vilsack will be under pressure to ensure USDA works with other departments and agencies to improve food safety.

(Editing by Eric Walsh)

(Washington commodities desk, 202 898 8376)

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