March 9 (Bloomberg) -- President Barack Obama’s plan to cut $1.05 billion a year in farm subsidies won’t work for growers of corn, soybeans and other crops and stands no chance of passing Congress, the head of the House Agriculture Committee said.

“It’s more than dead on arrival,” Representative Collin Peterson, a Minnesota Democrat, told reporters after speaking at the National Farmers Union annual conference in Arlington, Virginia. “They’re going to have to go back to the drawing board.”

Obama’s budget would phase out one type of subsidy to farmers with annual sales exceeding $500,000 and cap all payments to any single farmer at $250,000. Cotton farmers would also have to cover storage costs now subsidized by the government. These savings would be largely offset by $985 million a year in extra spending on child nutrition.

Payments to high-income farmers have been criticized by groups ranging from the National Taxpayers Union to the Environmental Working Group as ineffective government spending. The USDA last month said farm subsidies are expected to fall to $11.4 billion this calendar year, down 8.1 percent from last year and the lowest since 1997. Obama’s plan would phase out direct acreage-based subsidies over three years while keeping wealthy farmers eligible for programs based on crop prices.

Farm Bill Changes

Obama’s plan would require changes to programs passed in the 2008 farm bill, which authorized $289 billion in spending for nutrition and subsidy programs over five years.

The president’s proposals set caps too low for many family farms and would disrupt the agricultural economy, Bob Stallman, president of the American Farm Bureau Federation, said last week at a briefing for reporters. The federation is the largest U.S. farmer group.

Obama’s USDA budget also calls for more than $20 billion in loans and grants to support rural development, including programs that would expand biofuels production and broadband access. Obama also proposed finding savings of $5.2 billion from federal crop- insurance programs and allocating “additional resources” for food safety, without specifying a dollar amount.

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

Last Updated: March 9, 2009 16:47 EDT