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Direct Payments Likely to Be Cut One Way or Another

The agriculture industry has been a target for the bipartisan budget talks aimed at reaching a deal to cut spending and raise the debt ceiling. American Soybean Association President Alan Kemper says the current mood of Congress is cut now, ask questions later. The current farm bill's budget, which expires soon, has already been cut. The most vulnerable area is that of direct cash subsidies. In fact, Representative Jeff Flake, R-Ariz., will introduce legislation next week to end direct payments to farmers completely.

Ag subsidies will almost certainly be part of whatever budget deal comes from the now-stalled Biden talks, possibly totaling $34 billion worth of cuts to commodity and crop insurance payments over 10 years. While negotiators could simply cap subsidies overall, leaving it up to the Congressional Ag Committees to work on, there is concern the talks could spell out specific subsidy cuts and ultimately begin the process of the farm bill rewrite. American Farm Bureau Federation Senior Director of Congressional Relations Mary Kay Thatcher says AFBF has real concerns with a group like that determining the legislation.

Either way, the people who write the farm bill will have less money to work with as the House already approved a fiscal 2012 ag appropriations bill in mid-June that cut mandatory funding by nearly $2 billion.

President Obama had a series of phone calls planned with congressional leaders of both parties Thursday and again Friday aimed at moving forward with budget talks. Senate Democrats apparently have an agreement on their own deficit reduction plan. They won't make it a formal budget resolution, however until there's a debt-hike-for-deficit-cut deal. Budget Chairman Kent Conrad, D-N.D., has said he won't settle for anything less than $4 trillion over 10 years for a package he would advance.