Bloomberg News

USDA Budget Would Rise 2.5% Before Subsidy Cuts Begin

February 21, 2012

(Updates with Vilsack comment in third paragraph. For further information on the budget, see BUDG <GO>)

Feb. 13 (Bloomberg) -- U.S. Department of Agriculture spending would rise 2.5 percent to $154.5 billion in the year starting Oct. 1 before crop-subsidy cuts kick in, beginning long-term reductions farmer aid, according to the budget President Barack Obama sent to Congress today.

Ending so-called direct payments, paid to growers of major crops regardless of commodity prices, would save $22.7 billion through 2022. Total farm subsidies, including crop insurance and conservation, would fall $32 billion over the next decade, although spending by the agency that administers subsidies would rise 20 percent to $12.1 billion in fiscal 2013.

Direct payments will end “because fiscal reality necessitates it,” Agriculture Secretary Tom Vilsack told reporters today in Washington after the budget was released. “We need a safety net, but that safety net’s going to change.”

U.S. farm profits reached a record $98.1 billion in calendar year 2011, lowering the need for crop subsidies, the USDA said today, revising an earlier estimate. Land prices also reached their highest levels last year, the department said. In 2012, net farm income will fall 6.5 percent to $91.7 billion, the second-highest ever, as feed, fuel and fertilizer costs rise.

Food Stamps

The Supplemental Nutrition Assistance Program, or food stamps, will pay out $69.9 billion in benefits in 2013, the USDA said. A record 46.3 million people, more than one of every six Americans, received assistance in November, the department said earlier this month. Expenditures for SNAP and related programs, the department’s biggest budgetary item, would fall 0.9 percent to $87.4 billion in fiscal 2013, as the economy improves and the number of recipients declines, Vilsack said.

Spending on the Food Safety and Inspection Service, responsible for sanitary conditions in about 6,200 slaughter, food-processing and import establishments throughout the country, will fall to $996 million from just over $1 billion in the current fiscal year.

Cuts will be concentrated in administrative personnel and won’t affect meatpacking-plant visits required under federal law, Vilsack said last month.

The USDA spending proposal is part of a $3 trillion budget plan that calls for the 2013 deficit to fall to $901 billion from an estimated $1.3 trillion this year. Vilsack has already announced that some USDA offices are closing to cut agency costs and that department employment will decline.

10-Year Plan

Obama last year proposed $33 billion in cuts to farm programs over 10 years as part of his plan to reduce federal spending. Some components of that plan are outlined in today’s budget proposal, including cuts to direct payments and a reduction in funding for the Conservation Reservation Program, which pays farmers and ranchers for setting aside environmentally sensitive land.

Spending for the CRP, the USDA’s biggest environmental initiative, would fall by $977 million in the next decade by capping enrollment at 30 million acres. Total enrollment declined 15 percent to 31.1 million acres in 2011 from a peak in 2007 as higher crop prices drew more land into production

“High commodity prices have lowered demand,” according to the administration spending plan.

--Editors: Daniel Enoch, Steve Geimann

To contact the reporters on this story: Alan Bjerga in Washington at abjerga@bloomberg.net.

To contact the editor responsible for this story: Jon Morgan at jmorgan97@bloomberg.net.


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