White House warns farm law needs "real reforms"

By Charles Abbott

WASHINGTON (Reuters) - Congress should cut the cost of its $610 billion farm bill and adopt "real reform" to avoid a veto, a senior Bush administration official said as House and Senate negotiators near a final decision on crop subsidy limits.

The group of six dozen lawmakers planned to meet early next week for final discussions before sending the bill, seven months overdue, to a floor vote.

It would boost nutrition spending by $10.3 billion over 10 years. Ethanol tax credits would be cut by 12 percent, to 45 cents a gallon, and a new credit of $1.01 a gallon would encourage development of cellulose as an ethanol feedstock.

With increasing force, the administration has called for farm program reform in the bill. President George W. Bush said on Tuesday it is incongruous to subsidize multimillionaire farmers when Americans feel the pinch of rising food prices.

"We encourage the conferees to produce a bill which will gain his (Bush's) signature by reducing the cost and implementing real reform," said Deputy Agriculture Secretary Chuck Conner in a statement late on Thursday. "If sent to him without meeting his criteria, he would be forced to veto the bill."

Senior negotiators decided earlier this week to allow big farmers to collect up to $50,000 a year in "direct" payments, a $10,000 increase. Because market prices are high, direct payments are the only subsidies most grain, cotton and soybean farmers receive nowadays.

"That is absolutely, totally off limits," said House Agriculture Committee chairman Collin Peterson, Minnesota Democrat, on Friday when asked if the cap would be reduced.

Still in flux, said Peterson, were the terms of a cap on "direct" payments, which total $5.2 billion a year and are guaranteed to grain, cotton and soybean growers.