Key lawmakers agree on nutrition aid boost

WASHINGTON (Reuters) - Negotiators writing the new U.S. farm law agreed to a $10 billion increase for nutrition programs including food stamps, up $500 million from the earlier target, said the Senate and House Agriculture Committee chairmen on Thursday.

At the same time, the Bush administration threatened to veto the omnibus $600 billion farm bill because of one of its funding mechanisms. Lawmakers said they would drop the idea, a broker reporting requirement aimed at better tax collection.

"They've been at it for a year ... I'm not real optimistic we're going to get a new farm bill," said Agriculture Secretary Ed Schafer while in Kansas City, Missouri. The White House says Congress should give up and pass a one-year extension of the 2002 farm law, popular with farmers and ranchers.

Leaders of the tax and agriculture committees in the House and Senate said, after weeks of deadlock, they are close to agreement on the offsetting revenues that will allow a $10 billion spending increase for the farm bill and a package of at least $1.4 billion in tax breaks.

The tax package was likely to include tax credits for cellulosic ethanol and a smaller excise tax break for corn-based ethanol. A 6-cent-a-gallon reduction was proposed earlier.

Senate Agriculture chairman Tom Harkin disclosed the $10 billion increase for nutrition just before the Senate voted to keep agricultural programs running until May 2 while the new farm law is finalized. House chairman Collin Peterson, Minnesota Democrat, confirmed the nutrition figure later.

The House passed the one-week extension a couple of hours later and sent it to the White House. A spokesman said President George W. Bush would sign the extension.

While the tax chairmen declined to comment, Harkin said the so-called brokerage basis reporting plan would be dropped from the bill. Instead, customs user fees would be tapped for the $10 billion increase, rather than $4 billion of it.

"I know it's difficult to find the money to pay for these things," said Charles Rangel, New York Democrat, chairman of the House Ways and Means Committee. "Now, all the problems we have are on the ag side."

Among the issues to be decided on farm policy were whether to tighten crop subsidy rules and proposals to deny crop subsidies to the wealthiest Americans. Negotiators said an additional $730 million was to be cut from crop supports.

There were suggestions among negotiators to take the money from "direct" payments of $5.2 billion a year guaranteed to farmers.

Congressional negotiators are in accord on a farm-bill framework to put more money into nutrition, land stewardship, specialty crops and biofuel development while cutting crop insurance, crop subsidies and agricultural research.

At midday, Senate Finance Committee chairman Max Baucus, Montana Democrat, mentioned half a dozen issues still at play on the tax package. They included a disaster relief fund for agriculture, faster tax write-offs for owners of race horses and tax incentives for timber companies.

Two of the negotiators said there was agreement on at least $1.4 billion in tax breaks. "There are things that have been bucked to the leadership level," said Senate Budget Committee Chairman Kent Conrad, a North Dakota Democrat, so the total may grow.

(Additional reporting by Carey Gillam in Kansas City)

(Reporting by Charles Abbott; Editing by Marguerita Choy)