UPDATE 3-Obama wants to end wealthy farmers’ crop subsidies

* Income eligible for subsidies would drop by $250,000

* Roughly 30,000 people affected by lower ceiling on income

* “No one is interested in making cuts” – House ag chairman

* Senate ag chair Lincoln says she opposes farm cuts

* Obama plan may not mean a doubling of farm exports

(Adds USDA says no link in farm cuts, nutrition growth; new
throughout)

By Charles Abbott

WASHINGTON, Feb 1 (BestGrowthStock) – President Barack Obama asked
Congress on Monday to slash crop subsidies to “wealthy farmers”
and to pare federal support for crop insurance, moves estimated
to save $10 billion over 10 years.

Obama targeted those areas for large cuts last year without
success. Another fight is likely this year. Agriculture
Secretary Tom Vilsack offered to work with Congress to concoct
a palatable package.

In his proposed budget for fiscal 2011, Obama suggested a
sharply lower cut-off in income that qualifies for crop
supports, implemented over a three-year period. It would save
$2.26 billion over 10 years.

The administration plan would end crop subsidies to people
with more than $250,000 adjusted gross income (AGI) from
off-farm sources or more than $500,000 on-farm AGI. The caps
now are $500,000 off-farm AGI and $750,000 on-farm AGI.

AGI is calculated by subtracting expenses from income.

But the cuts will be a tough sell for Congress with mid-term
elections looming. Senate Agriculture Committee chairman
Blanche Lincoln, Arkansas Democrat, said she will oppose “cuts
that will harm farmers, ranchers and rural communities.”

“It is Congress’s job to write the annual budget, and based
on my conversations with House Leadership, no one is interested
in making cuts to the Farm Bill after the battle we just fought
to pass it a year and a half ago,” said House Agriculture
Committee chairman Collin Peterson, Minnesota Democrat.

Roughly 30,000 people would be affected by the lower AGI
ceiling, equal to 2 percent of the 1.4 million recipients of
crop subsidies, said an Agriculture Department spokesman.

Some $8 billion would be saved over 10 years by reforming
administration of the federally subsidized crop insurance
system to end “huge windfall profits.” USDA is negotiating a
new master agreement with insurers to reduce overhead
payments.

Vilsack told reporters it would be “an improper conclusion”
to link the $10 billion in farm subsidies and crop insurance to
a proposed $10 billion increase in school lunch and other child
nutrition programs. The budget is filled with cuts and
increases at the line-item level, he said.

The USDA budget would increase spending on export promotion
and technical help for exporters. [ID:nN01206235]

While Obama has set a goal to double U.S. exports in five
years, he “wasn’t suggesting, by referring to agriculture, that
there was going to be doubling of ag exports,” said Vilsack.

The White House was expected to release details of the
export initiative later this week.

Obama suggested crop subsidy cuts as Congress nears an
overhaul of the farm program. Last year, lawmakers said any
change in subsidy rules should wait until the 2012 farm bill.

A lower AGI ceiling would aim crop supports at
smaller-scale farmers while retaining a safety net against from
low prices and natural disasters, said the administration.
There are 2.2 million U.S. farms, mostly small operations.

The administration also would cap the direct-payment
subsidy at $30,000 a year, down from the current $40,000.

“It’s just loopholes waiting to happen,” said Ferd Hoefner
of the National Sustainable Agriculture Coalition, referring to
the AGI proposal. The coalition, a small-farm group, said USDA
should write a stricter definition of who is a farmer so
investors and “paper” farmers do not collect subsidies.

Stock Basics

(Reporting by Charles Abbott and Roberta Rampton; Editing by
Marguerita Choy)

UPDATE 3-Obama wants to end wealthy farmers’ crop subsidies