Obama to cut payments to farms making over $500,000

WASHINGTON (Reuters) - President Barack Obama will phase out government payments to crop producers making more than $500,000 a year and eliminate subsidies for cotton storage to help trim the U.S. budget deficit, a senior administration official said.

Obama, who lays out his budget proposals later on Thursday, targets agriculture, tax procedures, and defense procurement in his efforts to cut spending and rein in a deficit the White House projects will reach $1.75 trillion this year.

"Roughly a third of farmers receive direct payments, which they receive regardless of whether they are producing anything or not," the official, speaking on condition of anonymity, said while explaining elements of the budget ahead of its release.

"We would propose that for farms with revenue above $500,000 a year that we phase out those direct payments over time."

Those cuts would save $9.8 billion over 10 years, he said. Stopping payments to cotton producers who get money for storing cotton while it is under a "marketing loan" would save $570 million over the same period, he said.

(Reporting by Jeff Mason and Caren Bohan)