Federal dairy subsidies may shrink
WASHINGTON — President Obama's budget for the next fiscal year rekindles a debate about subsidies paid to farmers, just as dairy farms face their lowest milk prices in years.
In his budget, Mr. Obama proposes to cut off farm program payments to farmers with more than $500,000 in annual sales, less than the $750,000 limit set in the five-year farm bill enacted just last year. The new limit, if enacted, would affect the Milk Income Loss Contract program, which pays dairy farmers when milk prices fall below a federal target of $16.94 per 100 pounds.
The proposal sparked a range of reactions. While the chairman of the Senate Agriculture Committee, Sen. Tom Harkin, D-Iowa, was generally positive, the top Republican on the House Agriculture Committee said the president is "out of touch" with agriculture.
Mr. Harkin praised much of the agriculture budget, which also increases nutrition programs, but of the proposal on farm payments, said only, "I welcome his engagement" on the issue.
Sen. Kirsten E. Gillibrand, D-N.Y., supports limits on farm program payments based on farmers' gross income, her office said, but she neither endorsed nor rejected the limit proposed by Mr. Obama; Mrs. Gillibrand is on the Senate Agriculture Committee and helped draft the farm bill on the House Agriculture Committee.
A spokeswoman for Mrs. Gillibrand, Bethany Lesser, said the senator is "focused on making sure the farm bill is implemented properly," and the new limit is not in the farm bill.
Rep. Frank Lucas, R-Okla., the ranking Republican on the House Agriculture Committee, said in a statement, "This proposal attacks family-run farms all across rural America. The people who provide us with the safest, most abundant food supply in the world are being asked to shoulder the burden of our economic crisis."
The proposal returns to an issue that tied up negotiations on the farm bill last year. Lawmakers considered limits as low as $250,000 for the income cap, a level Mr. Obama supported in the Senate.
In addition, his budget proposal would cap payments to any farm at $250,000 a year.
While it is not clear how much dairy farmers can expect to see this year in subsidies, the MILC program is expected to make payments for much of 2009 because of low milk prices. Payments are already limited to 2.9 million pounds of milk a year, and the program is subject to the income limits in the farm bill.
In proposing to scale back farm payments, the White House said, "Large farmers are well positioned to replace those payments with alternate sources of income from emerging markets for environmental services, such as carbon sequestration, renewable energy production, and providing clean air, clean water and wildlife habitat."
Farm groups are somewhat divided on the issue. The American Farm Bureau Federation warned that cutting payments any more would "have drastic impacts at the farm level and would certainly curtail much-needed economic activity without yielding deficit reduction of any significant degree."
The National Milk Producers Federation, representing dairy farmer cooperatives, had no immediate reaction on the proposal.
Sen. Saxby Chambliss, ranking Republican on the Senate Agriculture Committee, criticized the idea of further limits on farm program payments.
"Efforts to cut direct payments and make other sweeping changes to current farm policy will only inject additional uncertainty into the farm economy and will be met with my strong opposition," Mr. Chambliss said. "Our focus should be on offering producers the certainty they expect and work with the agriculture community at the appropriate time to make any changes in the current farm safety net."
