Tasks for Obama's ag sec: School food, subsidy cap

WASHINGTON (Reuters) - President-elect Barack Obama's nominee for U.S. agriculture secretary will face daunting tasks ranging from tightening farm subsidy rules to improving school meals, lawmakers and farm groups said on Friday.

During his campaign, Obama backed a $250,000 a year "hard" cap on subsidies to replace the current, porous limits. He also supported speedy development of new-generation biofuels to supplement corn-based ethanol, blamed for higher food prices.

Also looming are questions of how to shelter the farm sector from the financial turmoil slowing the U.S. economy and whether to expand school meal programs.

Tom Vilsack, a former two-term governor of Iowa, appeared to be the front-runner for the job, analysts said. Pennsylvania Agriculture Secretary Dennis Wolff has had discussions with Obama officials, according to published reports. Neither man was immediately available for comment on Friday.

House Agriculture Committee chairman Collin Peterson, Minnesota Democrat, wants to reorganize the Agriculture Department to consolidate and modernize the sprawling department next year, a time-consuming challenge.

Peterson said USDA's computer systems are glaringly outdated. In an era of e-mail and online shopping, farmers still have to visit local USDA offices for most transactions.

"With a downturn in the economy, USDA must meet the challenge of helping American families put food on the table and support their diets and nutrition," said Senate Agriculture Committee chairman Tom Harkin, Iowa Democrat.

Child nutrition programs, including school lunch and breakfast, are due for reauthorization in 2009. Harkin said revisions should put healthier and fresher foods into school meals. He also supported a temporary increase in food stamp benefits as a response to the economic slowdown.

Jim Weill of the Food Research and Action center, an anti-hunger group, said child nutrition and the food stamp programs should be expanded "to keep hunger from skyrocketing in this ugly recession."

Top issues, according to analysts and farm groups:

--Tighter limits on farm subsidies. USDA could set stricter eligibility rules on its own authority but legislation is needed for a $250,000 cap with no loopholes. Savings would be $100 million-$200 million a year.

The White House budget office is reviewing new subsidy rules based on 2008 farm law which cuts off payments to the wealthiest Americans. USDA declined to discuss details.

--Encourage more output of renewable fuels. The presidents of the American Farm Bureau Federation and the National Farmers Union put renewables among the top three issues.

"Get real about biofuels," said skeptic Ken Cook of the Environmental Working Group. He said corn-based ethanol takes up too much land and new feedstocks "may be a pipe dream."

--Improve food safety. Action is needed, said private consultant John Schnittker, on "day-to-day food issues and security from terrorist actions." Consultant Charles Stenholm said a USDA reorganization could spur food-safety reforms.

--Rural economic development. Small-town and rural America lag cities in wage levels, health care and telecommunications. USDA operates loan and grant programs for rural housing, business development, and water and sewer service.

--Agricultural research to boost yields and food output. "The world, sooner than most think, will need to double food production and only the next "green revolution" ... will get us there," said private consultant Ed Barron.

(Reporting by Charles Abbott; Editing by Marguerita Choy)