U.S. Senators look to cut farm aid cap to $250,000

WASHINGTON, May 29 (Reuters) - U.S. farmers would see their maximum annual subsidy reduced nearly a third to $250,000 a year under the U.S. farm policy law being written this year by Congress, a senior Midwest lawmaker said on Tuesday.

Iowa Republican Charles Grassley said he expected the $250,000 cap to be part of the multibillion-dollar proposal before it leaves the Senate Agriculture Committee. The new law would also close loopholes that allow some farmers to circumvent the current limit of $360,000 and obtain even higher subsides.

"We think it has good support. I think it will be in the farm bill Senator Harkin lays before the Senate," said Grassley, referring to Iowa Democrat Tom Harkin, the chairman of the Agriculture Committee. Grassley is a committee member.

Grassley and Sen. Byron Dorgan, North Dakota Democrat, filed a bill last week to lower the payment limit to $250,000 a year. They proposed a similar plan in March that was meant to be part of a larger Senate budget plan but the lawmakers withdrew it due to opposition.

"The key to getting it passed (into law) is to get it by the House Agriculture Committee, where there's been strong Republican opposition to it," Grassley said during a telephone news conference.

Senators voted for lower subsidy limits during debate on the 2002 farm law. The $360,000 limit was set during negotiations with the House. Cotton and rice farmers, with higher support rates, say lower limits will hurt them before grain and soybean farmers feel the pinch.

The Grassley-Dorgan plan would set an effective limit of $40,000 a year in "direct payments," $60,000 in counter-cyclical payments and $150,000 from crop supports. Payments would be attributed to each person and growers no longer could use so-called commodity certificates or forfeitures to evade the limits.