November 14, 2011 / 10:35 PM / in 7 years

US farm law overhaul would boost some crop subsidy rates

* Different supports for cotton vs corn, soy, wheat

* Concern if some supports will prompt over-production

* Farm bill may allow unlimited subsidy payments

WASHINGTON, Nov 14 (Reuters) - The U.S. farm law being written by agricultural leaders in Congress would boost support rates for some crops and may remove caps on how much money growers collect in subsidies.

Three agricultural sources said that crops grown in the Midwest and Plains — corn, soybeans and wheat — would be covered by one subsidy plan, while cotton and rice, grown in the South, each would have a separate program.

This three-track plan is designed to shore up support from a broader number of farm-state lawmakers for a new approach to farm policy.

Leaders of the House and Senate Agriculture committees, who could unveil the package as soon as Tuesday, hope to piggyback it onto a government-wide deficit bill in exchange for a $23 billion cut in their programs. It would bar any change in their plan and enact it a year ahead of schedule.

Critics say the farm bill is being written in secret and the new initiatives could prove very costly.

“There’s nothing good about any of this,” said agricultural economist Vince Smith of Montana State University after reviewing the expected crop subsidy changes.

Higher supports could encourage growers to over-produce, said Smith, and they could breach world trade rules against production-distorting subsidies.

Agricultural leaders would end the $5 billion direct payment subsidy —a target for reformers — make more land available for crops and make modest cuts to public nutrition funds.

Under their plan, corn, soybean and wheat growers would get federal payments when revenue from a crop was more than 15 percent below average, said a farm lobbyist. Crop insurance would cover deep losses. So-called marketing loans would put a floor on prices.

Cotton growers would operate with a higher marketing loan and revenue insurance policies. Target prices for rice and peanuts would be raised, an effective guarantee of revenue.

The package also could remove caps on subsidy payments.

Revenue protection is promoted by corn, soybean and cotton groups as the best policy for the volatile prices and high production costs facing growers nowadays. Traditional subsidies are out of touch with near-record market prices.

Critics say revenue protection will be hugely expensive if market prices fall steeply and will drive up the costs of federally subsidized crop insurance, which already costs more than crop subsidies. (Reporting by Charles Abbott; editing by Andrea Evans)

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