* Payments would equal 3 percent of subsidies in 2010
* Green group says payments should go to farm families
* Senate farm leader says bigger question is budget cuts
WASHINGTON, June 23 (Reuters) - Some 90,000 people living in U.S. cities pocketed $394 million in U.S. farm subsidies last year, an environmental group said on Thursday, questioning why absentee owners and investors deserve the cash.
The Environmental Working Group released the data just before a Senate committee review of Agriculture Department spending and while lawmakers try to rein in federal spending.
"It's simply unjustifiable" to send payments to absentee owners, said Craig Cox of EWG. The group, which favors larger spending on land stewardship, said reforms are needed to assure the farm program is aimed at farm families.
Congress is in the early stages of an overhaul of U.S. farm policy. Senate Agriculture Committee Chairwoman Debbie Stabenow said a determining factor would be any budget cuts that accompany an agreement on the federal debt by Congress and the White House.
Farm subsidies are often listed as an area of agreement for cuts, especially the $5 billion a year guaranteed in the so-called direct payment. The direct payment accounts for the bulk of farm program spending now due to high market prices.
Asked about subsidy reform, Stabenow told reporters, "People don't bring that up to me much." She said, "The bigger question is what comes out of deficit reduction talks."
Subsidy reform is a perennially divisive issue, pitting the corn, wheat and soybean farmers of the U.S. Midwest and Plains against cotton and rice growers in the South, and large operators against small-farm advocates.
EWG said 90,000 people in 350 cites with a population above 100,000, from Anchorage, Alaska, to Yuma, Arizona, got $394 million in subsidies in 2010. It was equal to 3 percent of 2010 payments in an EWG database, which is built on USDA records.
Acting Undersecretary Michael Scuse, who oversees the farm program, said city-dwellers are entitled to crop subsidies if they are active in agriculture. People are eligible for payments if they provide land, equipment or capital, or labor and management.
USDA estimates it saved $200 million due to provisions in the 2008 farm law that deny subsidies to the wealthiest Americans and require payments to be tracked to an individual.
Small-farm activists say the limits are too lax. There is effectively no limit on payments, they say, and it is easy to claim payments even if there is little connection to a farm.
"It all comes back to 'management,'" said Ferd Hoefner of the National Sustainable Agriculture Coalition. He said some farm subsidy recipients participate in a few telephone calls and year and say it amounts to farm management. (Reporting by Charles Abbott; Editing by David Gregorio)