Farm Commodity Proposals in the President's FY2010 Budget (CRS Report for Congress)
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| Release Date |
March 17, 2009 |
| Report Number |
R40442 |
| Report Type |
Report |
| Authors |
Jim Monke, Specialist in Agricultural Policy |
| Source Agency |
Congressional Research Service |
Summary:
President Obama's budget outline for FY2010âin the context of fiscal disciplineâincludes several proposals to reduce federal spending by $16 billion over 10 years on the farm commodity and crop insurance programs. Reaction to the proposal has been generally negative from groups that are affiliated with or supportive of agriculture. The most vehement reaction has been to a proposal to eliminate direct payments to farms with more than $500,000 of sales.
Any change would require legislative action by Congress; it would not be part of the annual appropriations process. Such action would be viewed as "reopening" the 2008 farm bill, which most in the agriculture community see as a five-year contract with farmers. The agriculture committees are neither obligated nor likely to take up the proposal. If budget reconciliation is ordered by the budget committees, and the agriculture committees are tasked to find savings, then the President's farm proposals may draw more attentionâbut even then, the proposal likely would be modified or a different budget-saving approach could be chosen.
Specifically, the President's FY2010 budget proposes four reductions in the farm subsidies:
Prohibit "direct payments" to farmers with sales exceeding $500,000 per year. This would add a new type of "payment limit." About 76,500 farms in 2007 receiving government payments had sales over $500,000 (11% of farms receiving government payments). They received 47% of government payments. Midwestern farms would be affected in the greatest number. Four states (Iowa, Illinois, Minnesota, and Nebraska) account for one-third of the number of farms affected nationally. But the proportion of cotton and rice farms affected would be greater than for corn, soybean, and wheat farms (36%-43% compared to 17%-21%, respectively). The Administration estimates savings of $9.8 billion over 10 years, a reduction of about 22% of expected direct payments.
Tighten payment limits (the maximum amount of subsidies paid) to $250,000 per person. The proposal is not detailed, but indications suggest it would re-impose limits on the marketing loan program and tighten the limit on direct and counter-cyclical payments. The Administration estimates $126 million of savings over 10 years.
Eliminate storage payments for cotton. Only cotton has a payment program to pay storage costs for crops placed under government loan. The Administration estimates savings of $570 million over 10 years.
Reduce crop insurance subsidies. The proposal is not detailed, but savings could be achieved by reducing the subsidy on premiums that farmers pay, reducing underwriting gains to insurance companies that sell policies, or reducing administrative and operating expense reimbursements. The Administration estimates savings of $5.2 billion over 10 years, about 7.2% of expected outlays.
