The Obama administration appears to be having second thoughts about its proposal to phase out direct payments to agribusinesses with sales of more than $500,000 and replace them with “green” payments.

Facing criticism from farm organizations, members of Congress from both sides of the aisle and university professors, Agriculture Secretary Tom Vilsack back-pedaled on the idea when asked about the budget proposal during a press briefing on Monday.

“At the outset, let me say we are absolutely dedicated to preserving the safety net for farmers,” Vilsack said during the briefing, which was held to announce the first wave in USDA’s distribution of its share of the economic stimulus funding. “President Obama has made that clear on many occasions.

The secretary, who has been subjected to some of the strongest criticism received by a secretary in memory for some of his remarks defending the proposal, reiterated the president’s position that farm payments may be going to farmers who don’t deserve them.

“But he has also said we don’t necessarily have all the right answers,” said Vilsack. “There may be different ways to do what we think needs to be done. At the end of the day, I think what we’re interested in is making sure payments are made to farmers who need them and are entitled to them.”

Since the administration unveiled its proposal to phase out direct payments for growers with sales above $500,000 two weeks ago, House members and senators, including Iowa’s Charles Grassley, have been mostly critical of the move. (Grassley, a longtime supporter of reducing payment limits, said he did not think phasing out direct payments was a good idea.)

Farm groups also chided Vilsack and the administration, noting that farms as small as 750 acres could be eliminated from receiving direct payments. They also expressed disappointment the administration was trying to reopen the 2008 farm bill.

The rhetoric became more heated the week of March 2 when Vilsack seemed to be trying to pit farm programs against child nutrition programs, saying he would rather see federal funding go to feed hungry children than to farmers.

The comments prompted a meeting between farm groups and Vilsack’s senior staff to discuss the former’s concerns about the administration’s proposals for eliminating direct payments for some producers and capping all farm program payments at $250,000.

During the meeting, a spokesman for the organizations asked the staff to suggest that the secretary “adjust his message because his comments had deeply offended farmers.”

Besides feeling they are being criticized unfairly, farmers are pointing out they could lose direct payments even though they may have lost money on their operations. (USDA estimates 76,500 farms nationwide, including 9,500 farms in Iowa, could become ineligible for direct payments if the $500,000 gross revenue means test were applied.)

In his comments Monday, Vilsack said he continues to believe farmers could be better served by programs that would allow them to profit from new mechanisms for recognizing farmers’ environmental contributions.

“There are significant income opportunities, in my view, far in excess of what we’re talking about in terms of direct payments,” he said. “And knowing these operators as I do, my guess is if you gave a choice they would rather do that. That’s our goal, that’s our hope. We’re absolutely willing to work with Congress. They may have better ideas, and we’re open to better ideas.”

Vilsack also attempted to spell out what’s involved in the new cap and trade system that he has said could be at the center of the new income opportunities that he has been speaking to farm organizations about.

“I think it’s important for us to pursue an agenda that creates new income opportunities for use of land in a socially beneficial way, as well as making sure that farmers understand these are tough economic times. And as we deal with the fiscal realities of trillion-dollar deficits, all of us are going to have to come up with creative ways to reduce that deficit.”

The secretary also reminded reporters USDA currently is operating without any of its sub-cabinet level positions being filled, which means he does not have the staff that would usually vet such proposals before they are made public.

Meanwhile, Barry Flinchbaugh, who may be the dean of university agricultural economists, says agriculture shouldn’t take too much of what the president and his new agriculture secretary say to heart at the beginning of the term.

Flinchbaugh, a professor at Kansas State University who has been studying and writing about agricultural policies since before Earl Butz, told farmers in Indiana that agriculture needs to work with President Obama.

“When they see him do that (make budget proposals), that’s not the time to panic; that’s not the time to bad mouth the new president. That means we have to work with him,” said Flinchbaugh. “That doesn’t mean he’s anti-agriculture; that doesn’t mean he’s anti-production agriculture; it just means that he thinks that the large commercial farmer is capable of prospering without huge government payments.”

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