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President’s FY11 budget goes after direct payments, income eligibility

February 1, 2010

President Obama’s proposed Fiscal 2011 spending plan once again places a big target on direct payments.

You’ll recall in a speech last year before a joint session of Congress, the President proposed eliminating direct payments for producers with annual gross receipts of more than $500,000.

This year’s budget proposal would cut the maximum direct payment for all producers by 25 percent to $30,000.   The President’s budget document states:

“Direct Payments are payments made to farmers based on historical production, regardless of whether they currently produce crops.  They distort production and drive up the value of farm land. . .The President wants to maintain a strong safety net for farm families and beginning farmers while ensuring fiscal responsibility.”

The Office of Management and Budget is also proposing to tighten the income eligibility guidelines for farm programs.  

Under the plan, a farmer with non-farm income would no longer be able to receive farm program payments if his adjusted gross income topped $250,000.   The current maximum AGI for those with non-farm income is $500,000. 

Full time farmers without non-farm income would only qualify for farm program payments if their adjusted gross income is below $500,000.   The current eligibility threshold is $750,000.

 Under the budget heading “REDUCTION: COMMODITY PAYMENTS TO WEALTHY FARMERS,” OMB predicts the proposed changes would save $860 million over the next five years.  (See page 71 of the document)  

“This proposal will allow the Department of Agriculture (USDA) to target payments to those who need and can benefit from them the most, while at the same time preserving the safety net that protects farmers against low prices and natural disasters.”  — OMB

Both changes would require reopening the 2008 farm bill and will be vigorously opposed by Illinois Farm Bureau and the American Farm Bureau Federation.   Direct payments are an integral part of the farm program, especially at a time of escalating production costs.

The continued assault on the government farm program also includes a proposed reduction funding for the federal crop insurance program (FCIP) and a 25 percent cut in the Market Access Program.

A Washington Post story today said farmers were one of the groups that were “early losers” in the President’s budget.

More later on other areas of the federal budget.

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One Comment leave one →
  1. Jean Hoover permalink
    February 2, 2010 4:24 pm

    Please don’t reopen farm bill. That is often negative for farmers.
    Regarding income eligibility, OMB’s efforts “…. to target payments to those who need and can benefit from them the most, while at the same time preserving the safety net that protects farmers against low prices and natural disasters” will only hurt farmers (big & small). Wealthy landowners will migrate to cash leasing their land. By using a cash lease, the landowner will not have to assume any of the risk of crop production and can avoid OMB’s rules since he will no longer be collecting gov. payments. The farmer will endure higher cash rent due to wealthy landowners adding lost government payments into their rent cost, and cash rent agreements will cause the farmer to assume 100% of the risk in production ag. Agriculture needs much capital, and we (especially small and/or young farmers) need wealthy landowners to help assume some of the risk associated with crop production. Don’t drive them away.

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