Newspaper article

Farmers Back Senate Plan to Cut Direct Subsidies

Newspaper article

Farmers Back Senate Plan to Cut Direct Subsidies

Article excerpt

WASHINGTON -- Minnesota's commercial farmers are set to lose an average of $13,000 in federal subsidies under a bill currently on the Senate floor, but members of the state's agriculture industry are just fine with that.

The "farm bill," as it's colloquially called, is a nearly $1 trillion package that provides five years worth of funding to farm, conservation and nutritional programs. More than $760 billion of it is earmarked for programs like food stamps, but nearly two-thirds of the bill's total $23.6 billion spending cuts come from eliminating a direct subsidy program to farmers.

Under current law, Minnesota's commercial farmers took in an average of $13,000 in direct payments each year, according to an analysis from University of Minnesota professor Kent Olson. On average, that amounts to about 7-to-10 percent of a farm's annual net income, he said. If the Senate's farm bill is enacted, those would disappear.

Though the bill would end those direct and open-ended subsidies, it would boost federal support for crop insurance, a program that provides subsidies for farmers to buy insurance to stave off losses associated with poor crop yields or sudden price declines. The Senate bill would spend about $94 billion on crop insurance over the next 10 years, a $5 billion boost over current levels.

Congress instituted the current direct-payment system in 1996 as a way to slowly reduce and eventually wean farmers off subsidies entirely, Olson said. But over time, especially during a downturn in the price of crops in the late 1990s and early 2000s, farmers grew dependent on the payments and they stuck around. Today, the subsidies cost about $5 billion a year, and though Congress has often considered ending them in the past, they never really committed to doing so until this session, Olson said.

Industry booming

With the agriculture industry booming (total farm income in 2011 is projected to have topped $98.1 billion, up $19 billion from 2010 and its highest level in at least four years) and Congress increasingly under pressure to cut spending, direct payments were a top target during farm bill deliberations, and the industry knew it was coming.

"We're not surprised that it's coming across this way," said Lance Peterson, a board member of the Minnesota Soybean Growers Association. "We are willing to carry our share of cuts to help with the federal deficit."

By cutting the subsidies, the government will save $15 billion, according to the Senate Agriculture Committee. The White House has backed the Senate bill, citing first and foremost the end of the direct payment system, and 90 senators voted in favor of the bill during a procedural vote last week, including both Minnesotans.

The direct payments-for-crop insurance trade-off is one Olson said farmers are willing to make. …

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