USDA says subsidy too high, leaves decision to Congress

Associated Press/Claudio Cruz

A man baked tortillas in Mexico City in this Dec. 4 file photo. Mexico has a genetic warehouse of over 60 corn varieties, a wealth that enriches staple crops across the world, and includes wild varieties that have yet to even be catalogued.By Philip Brasher ~ The Associated Press

WASHINGTON -- The Bush administration says subsidies for soybean farmers are too high, but decided Friday to put off a politically risky decision to cut the payments, leaving the issue up to Congress for now.

Lawmakers are working on an overhaul of farm programs that's likely to include changes in the way soybean farms are subsidized. Agriculture Secretary Ann Veneman said she will wait to see whether Congress finishes work on the legislation in time for it to take effect for this year's crops.

Delaying the subsidy decision would "avoid confusion for farmers," she said. The president of the American Soybean Association, however, said the delay makes it difficult for farmers to decide what to plant.

Economists believe the current subsidy rate encourages overproduction of soybeans because it is excessive in relation to corn and other crops. Reducing the soybean rate could save taxpayers $1 billion or more but would risk a political backlash in states with key Senate races this year. USDA officials won't say what they think the soybean rate should be.

"It's causing disparities in planting decisions and disparities in the markets," said J.B. Penn, USDA's undersecretary for farm and foreign agricultural services.

Last year, farmers harvested 74 million acres of soybeans, 11 million more than in 1996, when the subsidy rate, or "loan rate," was raised to $5.26 per bushel. It has not been changed since. Farmers receive a government payment that makes up the difference between the market price, currently running as low as $4, and the subsidy rate.

Under the 1996 farm law, USDA could cut the rate as low as $4.92 per bushel.

$2.7 billion for soybeans

The department has paid about $4.5 billion in subsidies on all 2001 crops, with $2.7 billion of that going to soybeans.

Representatives of soybean growers and lawmakers from both parties have been urging Veneman not to cut the soybean payments.

Her delay in making a decision "continues the uncertainty as producers make their cropping plans and lending arrangements. It would have been far easier to make those plans if we knew what the loan rate would be," said Nebraska grower Bart Ruth, president of the American Soybean Association.

Senate Agriculture Committee Chairman Tom Harkin, D-Iowa, said a cut in the subsidy rate "would have been devastating" for farmers and that Veneman was right to put off the decision.

Soybeans are a major crop in several states likely to have close Senate elections this year, including Arkansas, Minnesota, South Dakota and Iowa, where Harkin is seeking another term. Those races could decide which party controls the Senate in 2003.