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Obama budget would axe pay to $500K farms

By KEVIN WALKER
Michigan Correspondent

WASHINGTON, D.C. — Agriculture groups and some in Congress are unhappy with President Obama’s request to eliminate direct payments to farmers with gross sales of over $500,000.

Obama tried to get this provision included in the federal budget early this year, but Congress removed it, according to a senior staff member from the House Agriculture Committee. The provision reappeared, however, in the president’s actual budget request submitted to Congress.

In a letter sent to Agriculture Secretary Tom Vilsack last March, Sen. Max Baucus (D-Mont.) complained: “Unfortunately, the President’s proposal to eliminate direct payments to farmers with gross sales above $500,000 does not successfully distinguish between struggling farmers and wealthy landowners.

“For example, this proposal would eliminate payments to a farmer who loses money if the farmer sells his wheat for $500,000 but has already spent $600,000 on expenses such as fertilizer, seed, and fuel.”

Darrin Ihnen, first vice president of the National Corn Growers Assoc. (NCGA), said it’s not at all unusual for a producer to have $500,000 in expenses and still lose money.

“If you sold 500 head of fat cattle, you’d be over that $500,000 limit and still lose $100 per head,” Ihnen said. “It’s very unfair, because it doesn’t say anything about what your actual income is. In ag, gross sales doesn’t give any indication of profitability.”
Ihnen said the NCGA is pretty confident that the new proposed limits on direct payments will not make it into law. “Congress has said it’s dead on arrival. We do not think Congress will pass (the budget) with that in there,” he said.

Ihnen said most likely, the president was just looking for ways to cut the budget deficit and that $500,000 seems to be an arbitrary figure. Right now the limit on income for direct payments is $500,000 a year in non-farm adjusted gross income averaged over three years or $750,000 in farm adjusted gross income, also averaged over three years. Adjusted gross income isn’t the same thing as gross sales, however.

Ryan Findley, national legislative counsel for the Michigan Farm Bureau, said the direct payments question is a big issue.
“The farmers that averaged $500,000 in sales nationally had an average adjusted gross income of $37,000,” he said. “It’s going to impact quite a few people in Michigan.”

Findley said the provision, if it becomes law, would affect nearly 2,500 farmers in Michigan. The budget also contains cuts to the crop insurance program. Ihnen said the NCGA is against the proposed cuts.

“They are targeting some crop insurance,” he said. “Crop insurance is a very important part of our safety net and our ability to protect ourselves against the volatility in commodity prices and the weather.”

According to National Crop Insurance Services, an industry association, the 2008 farm bill cut the crop insurance program by $6.5 billion over a period of 10 years. Ihnen said he’s not so sure the new cuts to the crop insurance program won’t make it into law.

5/27/2009