The Senate Agriculture Committee narrowly approved a budget reconciliation plan that trims commodity program payments by 2.5 percent from 2006 through 2010 and extends the controversial Milk Income Loss Contract or MILC program for two more years.

The plan, which passed by a vote of 11-9, also would allow the U.S. cotton industry to keep Step 2 through next July 31, reduces the amount of an advance direct payment a producer can request and cuts spending for the Conservation Reserve, Conservation Security, and Environmental Quality Incentives Programs by $1.05 billion.

The conservation spending proposals prompted acrimonious debate during a two-hour mark-up session on the reconciliation package Oct. 19, but the MILC or National Dairy Market Loss Payments program almost proved to be its undoing.

After Committee Chairman Saxby Chambliss asked for a roll call vote on the legislation, the Agricultural Reconciliation Act of 2005, the tally was nine for and nine against with Sen. Pat Roberts, R-Kan., passing.

Chambliss told Roberts, who had co-sponsored an amendment offered by Sen. Mike Crapo, R-Idaho, to block the extension of the MILC program, that he had the deciding vote.

Roberts, hesitating, said, “I don't want the Budget Committee to write this bill,” before casting his vote with Chambliss for the proposal. (The Crapo amendment was one of four offered to the reconciliation bill; all were defeated.)

The committee was working against a deadline of Oct. 19 to send its proposal for cutting agricultural spending by $3 billion over the next five years to the Senate Budget Committee. If it missed the deadline, Chambliss said, the Budget Committee would make the cuts.

“I assure you that those changes would most likely not be in the best interests of American agriculture,” Chambliss said in his opening statement at the mark-up session.

Chambliss had scheduled a mark-up session for the reconciliation passage on Oct. 5, but ran into strong opposition from committee members to a provision in his chairman's mark that would have reduced food stamp spending by $574 million.

He postponed the session until the Oct. 19, saying several senators had expressed concerns about the food stamp reductions and about shifting funding from commodity and conservation programs to the MILC program.

The proposal Chambliss offered on Oct. 19 contained no reductions in spending for food stamps.

“My view is that the food stamp program supports poor families trying to put food on the table and helps farmers by increasing the food purchasing power of those families,” he said. “It is a win-win program for American agriculture.”

The expected fireworks over new, stricter payment limits did not materialize, but Sen. Charles Grassley, R-Iowa, the perennial proponent of such legislation, promised the committee the issue was not going away.

Grassley told the committee that he would not offer his payment limits amendment during the mark-up session, but would bring it up when the budget reconciliation legislation reaches the Senate floor.

“I anticipate I will receive 66 votes just like I did before,” he said, referring to a 66-31 vote in favor of an amendment limiting payments to $250,000 per farmer during the Senate vote on the 2002 farm bill. (The provision was removed during the House-Senate conference on the farm bill.)

The Senate ag committee's proposal would contribute $182 million in fiscal 2006 and $3.01 billion over the next five years toward meeting the goal of reducing mandatory federal spending by $34.7 billion that was included in the House-Senate budget resolution passed last spring.

House Agriculture Committee members reportedly favor deeper cuts in spending than those passed by the Senate ag committee, and Senate Majority Leader Bill Frist of Tennessee has said he will push for cuts in excess of the $34.7 billion.

Democrats lashed out at the deficit reduction targets passed by the Republican-controlled Congress during the mark-up sessions, saying the budget resolution would increase, not reduce the deficit because it also contains tax cuts of $70 billion.

“These spending cuts couldn't come at a worse time for agriculture,” said Sen. Tom Harkin, D-Iowa, ranking member on the Agriculture Committee. “We're already looking at a $5 billion drop in farm income because of rising energy costs, and then we put this on top of it.”

Kansas' Roberts, who argued against spending an estimated $998 million for extending the MILC program for two years, said farmers are facing a “Category 5 hurricane with fuel and fertilizer prices next year.”

“I haven't seen lenders this concerned about farmers' financial situations in a long time,” said Roberts, noting that he had talked with a number of Kansas ag lenders who expressed serious doubts about being able to finance a number of growers in 2006.

Harkin also complained that cuts in conservation programs would mean that the farming sector would lose $400 million in baseline spending going into the debate on the new farm bill.

The Sustainable Agriculture Coalition, an umbrella group for 23 environmental organizations including the Sierra Club and the Wilderness Society, also took a shot at the committee vote, saying it was “just act one of a multi-act play.”

“We applaud Sen. Grassley for making clear this morning that act two will come when all senators cast a vote in November on farm program payment limit reform when the budget reconciliation bill goes to the floor of the Senate,” the Coalition said in a statement released after the ag committee vote.

“Passage of the Grassley-Dorgan payment limit reform amendment at that time will allow the Senate to restore many of the most egregious cuts contained in the farm and conservation sections of the reconciliation package that was narrowly approved today.”

The spending reductions in the reconciliation package passed Oct. 19 include:

  • 2.5 percent for all payments producers receive for the 2006 through 2010 crop years for wheat, corn, grain sorghum, cotton, rice, soybeans, other oilseeds and peanuts. The secretary of agriculture will calculate the amount a producer is eligible to receive in direct payments, counter-cyclical payments, marketing loan gains and loan deficiency payments and reduce the amount by 2.5 percent. MILC payments will also be reduced by 2.5 percent. Total savings: $1.3 billion.

  • A forfeiture penalty on nonrecourse sugar loans. The penalty will be equal to 1.2 percent of the applicable loan rate for sugarcane and sugar beets and applies to the 2006 through 2010 crop. Total savings: $65 million.

  • A reduction in the amount of the advance direct payment a producer may request from 50 percent to 40 percent in 2006 and to 29 percent for each of the 2007 through 2011 crop years. The producer will continue to receive the full direct payment (minus the 2.5 percent annual reduction) because the amount not advanced will be paid in the final direct payment. Total savings: $1.09 billion.

  • A reduction in the acreage cap for the Conservation Reserve Program from 39.2 million to 36.4 million acres through 2010. In 2011, the acreage cap will increase to 38.3 million acres. Current contracts would continue to be honored. Total savings: $129 million.

  • A limit on Conservation Security Program expenditures to $1.95 billion for fiscal 2006 through 2010. The plan increases the expenditure cap to $5.2 billion for fiscal 2006 through 2015. Total savings: $821 million.

  • A limit on Environmental Quality Incentives Program spending of $1.19 billion in fiscal 2006 and $1.27 billion in each of the fiscal years 2007 through 2010. Total savings: $104 million.

  • A limit on funding for the Initiative for Future Agriculture and Food Systems to $104 million in fiscal 2006 and $130 million each for fiscal years 2007 through 2010. Total savings: $227 million.

The Congressional Budget Office scores the savings for terminating cotton's Step 2 program on Aug. 1, 2006, at $282 million.


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