April 26 (Bloomberg) -- The Senate Agriculture Committee approved a farm bill that would save $24.7 billion over 10 years and which represents one of the biggest policy changes in generations.
The plan, based on income protection ideas six decades in the making, would replace a direct-payment program for major crops with a revenue guarantee, while reducing conservation and food-assistance spending. The bill, approved in a 12-4 vote, includes the first broad subsidy cuts in 16 years.
“The era of direct payments is over,” Chairwoman Debbie Stabenow said, referring to a subsidy that is paid to farmers regardless of crop prices. “We have put together a bipartisan farm bill that’s focused on farmers,” the Michigan Democrat said at a committee meeting before the vote.
Record U.S. farm profits, along with the highest-ever expenditures on food stamps, are making the five-year reauthorization of Department of Agriculture programs a target for budget cutters. House Republicans voted for a $33 billion cut in farm programs over 10 years last month, and President Barack Obama proposed a $32 billion reduction in his fiscal year 2013 budget.
Net farm income reached an all-time high of $98.1 billion in 2011 and this year will be $91.7 billion, the second-highest level, the USDA said in February.
The notion of establishing an income floor for farmers, the centerpiece of the Senate committee plan, was first proposed by President Harry Truman in the 1940s. Critics say the move will effectively lock in farm subsidies at levels tied to today’s record income and could trigger higher costs when crop prices fall.
The committee’s consideration of the farm bill had been delayed by one day after organizations mostly representing growers in the U.S. South and West raised concerns about the fairness of program changes in the original 900-plus-page draft. The approved bill backtracks from that proposal by continuing price supports for rice and peanuts grown mostly in the South.
Senator Pat Roberts of Kansas, the committee’s top Republican, said panel members aren’t “picking winners and losers” in the revised measure.
“Money is shifting among commodities because farmers are farming differently,” with varying crop patterns and assistance needs, said Roberts, who in the 1996 farm bill created the direct-payment program that’s now being eliminated.
Sugar Program Extended
The bill also would extend the U.S. sugar-support program, which includes domestic marketing quotas and import restrictions. Critics including the Coalition for Sugar Reform say the measures artificially inflate costs for U.S. consumers and companies that use the sweetener.
The legislation approved today will advance to the full Senate. Meanwhile, the House Agriculture Committee is drafting its own version of the legislation in a series of hearings that will extend into May.
Senate passage is possible while House approval may not happen this year, said Senator Jerry Moran, a first-term Republican from Kansas who served on the House Agriculture Committee during reauthorizations of USDA programs, in 2002 and 2008.
“I do not see a path by which the House of Representatives takes it up before November,” he said. “I know everyone uses the elections as an excuse, but there are policy differences as well” on spending amounts and the shape of farm programs, Moran said. Many rural lawmakers would like to see direct payments at least phased out rather than eliminated, he said.
The current farm bill is scheduled to expire Sept. 30, making an extension probable, Moran said.
Representative Collin Peterson, the senior Democrat on the House Agriculture Committee, said that may not be necessary. “The strong bipartisan tone” set by the Senate panel “makes me more confident that we can get past some of the recent partisanship and get a farm bill done this year,” Peterson, of Minnesota, said in an e-mailed statement.
Farm subsidies, which may reach $11 billion this year, aid agribusinesses such as Archer Daniels Midland Co. and Cargill Inc. by lowering the costs of their raw materials. Farm groups including the National Corn Growers Association and the American Soybean Association support the Senate panel’s plan, saying it helps farmers while lowering the federal budget deficit.
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