Senators see better ways to curb farm subsidies

WASHINGTON (Reuters) - There are better ways to control U.S. farm subsidy costs than President Barack Obama’s proposal to limit access to so-called direct payments, two senators said on Tuesday, suggesting alternative ways.

Senate Agriculture Committee chairman Tom Harkin said the better approach would be shut off direct payments to grain, cotton and soybean growers on the basis of adjusted gross income, perhaps $200,000 or $250,000 a year.

“That really tells you what people make,” the Iowa Democrat told reporters.

By contrast, Obama has proposed a three-year phase-out of the direct-payment subsidy to growers with more than $500,000 a year in sales with the goal of aiming payments at farmers who need them most. The plan would reduce direct-payment outlays by one-fifth, or $9.8 billion over 10 years.

Critics say the idea fails to consider expenses, so is not a gauge of a farm’s income, They say the $500,000 sales trigger is so low, it will snare some medium-size farms, not just the big operators.

Obama’s proposal has few vocal supporters.

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North Dakota Sen Byron Dorgan, a Democrat, said the first step to rein in farm spending should be a limit on all payments to growers. There effectively is no limit now. Dorgan is a longtime supporter of a $250,000 a year cap. Obama proposed a $250,000 payment limit too but it has gotten little attention.

Direct payments, which total $5.2 billion a year, are one of the three subsidies in the farm program. The others are support prices, which effectively guarantee a minimum prices to growers, and counter-cyclical payments, made automatically when returns are below targets set by law.

“It makes sense to me to begin limiting the multimillion dollar payments that go to some of the largest corporate farms in the country,” said Dorgan in a statement.

He said Obama’s proposal on direct payments will be unnecessary if the $250,000 payment cap included a reasonable limit on direct payments.

The 2008 farm law set a $40,000 a year limit on direct payments and $65,000 a year for counter-cyclical payments but no limit on price supports. The limits on direct payments and counter-cyclicals can be doubled by a farm family because spouses are eligible for payments too.

There are about 126,000 farms with sales above $500,000 out of 2.2 million U.S. farms, according to the Agriculture Department. Some 1.2 million farms have less than $10,000 a year in sales and probably are part-time operations.

Reporting by Charles Abbott; Editing by Marguerita Choy