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Obama plan cuts off federal payments to thousands of Minnesota farmers

WASHINGTON, D.C. — Under President Obama’s budget, thousands of farmers in Minnesota would lose millions of dollars in federal support.

WASHINGTON, D.C. — Some Minnesota lawmakers are criticizing President Obama’s newly unveiled farm budget, which seeks to slash federal payments to large farms and reduce federal support for crop insurance.

The provisions come as part of the president’s $3.55-trillion budget outline released Thursday, and would eliminate certain federal handouts to farmers who sell more than $500,000 in grain and livestock a year.

If passed by Congress, thousands of farmers in Minnesota would lose millions of dollars in federal support, according to government estimates.

“We just passed a fiscally responsible farm bill that made cuts to farm programs,” said Rep. Collin Peterson, D-Minn., referring to the 2008 farm bill that he helped write as chairman of the House Agriculture Committee.

“So now is not a time to reopen it,” Peterson said Thursday.

The mere mention of curtailing subsidies, however, has already reignited the arguments that flared during last year’s farm bill debate.

Rep. Frank Lucas, R-Okla., who sits on the House Agriculture Committee, chastised Agriculture Secretary Tom Vilsack and Obama Thursday for saying that farmers should be thinking about developing other sources of income rather than direct payments from the federal government.

“I have real concerns about this administration’s position on eliminating direct payments to our producers, which would be detrimental to their livelihoods,” said Lucas.

During the writing of the 2008 farm law, Congress rejected an amendment that would have limited farm program payments to $250,000 per individual per year. Although lawmakers agreed to some modest changes to subsidy rules at the time, they continued to disagree over making any substantial changes to the subsidy system.

Large farms and ‘direct payments’
Obama’s plan aims to wean large farms off of a subsidy known as a “direct payment” over a period of three years. Direct payments have come under criticism because they are based on historical measures of crop production and acreage. Thus, there could be a situation where a farmer had stopped producing, but was still receiving money.

“Presently, direct payments are made to even large producers regardless of crop prices, losses, or whether the land is still under protection,” Obama stated in his budget.

There are about 6,400 farms in Minnesota that sold $500,000 or more in grain, livestock and other products in 2007, according to U.S. Census of Agriculture figures released this month.

Although these farms represent only about 8 percent of the state’s farms, they produced about 65 percent of Minnesota’s agriculture sales in 2007, or about $8.5 billion.

In an interview with MinnPost Thursday, Rep. Tim Walz, D-Minn., who also sits on the Agriculture Committee, said that he liked Obama’s overall budget goals, but was also “not overly pleased that they were talking about re-opening the farm bill.”

In addition to eliminating direct payments for certain farmers, Obama calls for a reduction in federal insurance subsidies for insurers and farmers. “Subsidies for crop insurance companies have grown rapidly without improving program coverage or customer service for farmers,” stated Obama.

Both the insurance and the direct payments, however, are designed to protect farms against catastrophic losses, Walz said.

“You don’t want to see our farms go the way of the banks or the auto industry,” said Walz, adding. “I am not sure that these are the best [provisions] at this precarious time.”

Views from farmers
Kristen Weeks Duncanson farms corn and soybeans, among other crops, in Mapleton, Minn. She would be one of the farmers in Minnesota affected by the proposed cut.

While Duncanson’s farm does not currently need the federal direct payment money to operate, she said that it is “reassuring” to have it just in case.

“Direct payments come in handy when you have these wild circumstances [in the markets],” Duncanson said. “That is what the government is for, providing a safety net.”

Many agriculture groups also oppose the farm portion of the president’s budget.

 

Direct payments are one of the least controversial types of subsidies in the world trade arena because they are not based on annual prices and yields, according to Tara Smith, director of Congressional relations for the American Farm Bureau.

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Smith also pointed to the vast discrepancy between farm sales and actual profit as another problem with the president’s plan. The average soybean farm selling about $500,000 in crops is only making about $36,000 after expenses are taken out, Smith said.

In the budget, Obama calls on large farms to replace lost federal payments with alternative sources of income from things such as carbon sequestration and renewable energy production.

“We are very supportive of the renewable energy and conservation programs,” Smith said. “But a farmer needs to deal in the here and now… and we are just concerned that some of these programs like carbon trading and wind mills pick winners and losers in the agriculture community and aren’t fully developed and realized yet.”

Some Minnesota farmers, however, support Obama’s plan.

“I think it is a good idea,” said Tom Nuessmeier, who rotates corn, soybeans, small grains and alfalfa in Le Sueur. “Any farm with a gross income of $500,000 or more is going to be good enough that they can retool and steer toward a potentially different market… and that might be a good thing.”

Nuessmeier farms organic crops on about 200 acres and is a member of Minnesota’s Land Stewardship Project, a nonprofit organization that promotes sustainable agriculture. He would not be cut out of the direct payment program under Obama’s budget outline. At the same time, many of his crops do not fall under the subsidy program.

“If you are planting corn right now, in many cases your profit is a government payment,” said Nuessmeier. “I want to be able to farm and not rely on government subsidies to make or break my business.”

Klobuchar statement
In Washington, Sen. Amy Klobuchar, D-Minn., indicated today that she might be open to supporting some kind of payment limits depending on the details.

During the farm bill debate, Klobuchar cosponsored an amendment that would have ended government farm payments for full-time farmers with an income of $750,000 or greater. For part-time farmers, the income cap would have been set at $250,000.

“We want to look at it [the president’s new budget proposal] more closely, but the Senator has supported payment reform in the past and she is open to looking at it as long as it does not hurt Minnesota’s family farmers,” said Klobuchar spokesman Linden Zakula.

The president’s budget outline, of course, is simply that — an outline. The detailed version, with greater specificity on all the agriculture provisions, will not come out until later this spring when it will be tossed to Congress for scrutiny and revision.

David Ladd, manager of government relations at St. Paul’s AgriBank, FCB, remained unperturbed.

“The administration has put out their priorities,” said Ladd. “But, this is just the first step of the dance.”

Cynthia Dizikes covers Minnesota’s congressional delegation and reports on issues and developments in Washington, D.C. She can be reached at cdizikes[at]minnpost[dot]com.