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Corn+Soybean Digest

Budget Cuts Loom For Ag

In President Bush's proposed budget cuts of $2.5 trillion for fiscal year 2006, agriculture could get hit hard. The budget proposes farm programs would be cut approximately $5.7 billion over a 10-year period, with $586 million in fiscal year 2006.

The cuts and savings include lowering the payment limit cap for individuals to $250,000 (currently $360,000) for commodity payments, including all types of marketing loan gains, as well as eliminating the three-entity rule, basing marketing loans on historical production, says Scott Shearer, Washington correspondent.

There's also a worry that subsidy cuts could shift crop acres between crops if Congress approves the budget. Keith Collins, chief economist for USDA, predicts, “There will be some substitution from one crop to another as a result of some of these changes.”

The National Corn Growers Association is concerned a lower cap on subsidy payments would push cotton farmers to plant corn, possibly lowering corn prices. Cotton producers are among the heaviest users of the generic certificate program, which allows them to get around current subsidy caps, says economist Rick Brock of The Brock Report.

More than 100 ag, nutrition and conservation groups have written Secretary of Agriculture Mike Johanns stating their concerns with the fiscal year 2006 proposed budget.

Brock adds that with the opposition to the cuts, the administration will have a difficult budget time in Congress. However, the plan does essentially set the opening tone for debate on the 2007 Farm Bill.

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