May 2, 2008 / 4:27 AM / 9 years ago

White House warns farm law needs "real reforms"

<p>Farm workers of the Ocean Mists Farms harvest artichokes outside Castroville in Salinas Valley, often called the 'Salad Bowl of the World', in the central coast region of California April 4, 2008.Darrin Zammit Lupi</p>

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.

People earning more than $500,000 a year in adjusted gross income from non-farm sources would be ineligible for crop subsidies and land stewardship payments. Farmers with more than $950,000 a year AGI would lose 10 percent of their direct payment for each $100,000 a year in income.

Two-thirds of the money in the farm bill would be spent on nutrition programs such as food stamps, the major U.S. anti-hunger program. Stewardship programs would gain $4 billion, specialty crops, $1.35 billion and biofuel development $900 million.

"These are steps that will help 10 million people," said Rep. Rosa DeLauro, Connecticut Democrat, who described changes in the food stamp program allowed by the new funding.

The changes include a larger standard income deduction for food stamp recipients, raised to $144, a $10 increase, and indexed to inflation. The minimum food stamp benefit would be $14 a month, up $4, and indexed for inflation.

Donations to food pantries would be raised to $240 million a year, up $100 million, and indexed to inflation.

During a six-hour session, negotiators rejected proposals by two Kansas lawmakers to cut other programs rather than reduce direct payments by $315 million.

In other action, the negotiators:

--voted to suspend crop subsidy payments to farmers with less than 10 acres of eligible land. North Carolina Democrat Bob Etheridge said it would hurt many Eastern farmers.

--deleted a Senate proposal to ban meatpackers from raising livestock in competition with farmers and ranchers.

--adopted a "sodsaver" provision that bars crop insurance on virgin prairie converted to cropland.

The administration says the farm bill includes $18 billion in new spending, including $8 billion in budget gimmicks.

Editing by Ben Tan

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