The outmoded U.S. crop subsidy system should be replaced by a farm safety net that pays farmers and ranchers for land stewardship and protects their income through crop insurance and similar devices, an activist group said on Monday.

The federal government spends about $20 billion a year on farm subsidies under a law due for overhaul by Congress in 2007. Mainline farm groups support a continuation of the 2002 law, which boosted crop supports sharply.

A farm in Whitman county, Washington is seen in an undated photo from the Department of Agriculture. Congress should rewrite U.S. farm subsidy law dramatically to encourage land stewardship and protect farm income by 'revenue-based risk management systems' that would replace an automatic spigot into the U.S. Treasury, a coalition of environmentalists and others proposed on Monday. (Handout/Reuters)

Congress would be wiser if they scrapped a crop subsidy system that dates from the Depression era, said the American Farmland Trust. But whether lawmakers will listen is unclear.

"The first thing you need to do is put the best ideas on the table," said AFT president Ralph Grossi when asked about the chances for success.

"It is going to be tough," said Dan Glickman, agriculture secretary in the Clinton era, who supports the AFT plan. Another former farm policymaker, Clayton Yeutter, agriculture secretary in the late 1980s, said U.S. farm policy must transform to meet modern-day needs.

By focusing on stewardship, the AFT plan will "justify a flow of federal dollars to rural America for years to come," said Yeutter.

AFT proposed a two-part safety net. Some $5 billion a year would be paid to farmers and ranchers who practice land, water and wildlife conservation on their land. The second part of the net would be programs to assure farm income, such as crop and revenue insurance.

The "green" payments would replace the annual payments now guaranteed to grain, cotton and soybean farmers. The risk management programs would replace the income supports now provided by marketing loans and counter-cyclical payments, totaling about $9 billion this year.

There also would be larger spending in cost-sharing land and water conservation programs and a new $1 billion grant program for more healthful diets, rural economic development and more biofuels.

AID FOR ALL FARMERS

Grossi said the plan would spend as much as the current farm program but aid would be offered to all farmers and ranchers, not just the grain, cotton and soybean farmers who now collect the bulk of the money. And the plan would satisfy world trade rules, he said.

But some growers would receive less money under the new approach. Cotton and rice growers would be most at risk.

"It is difficult to design a program that would make those growers whole," said Grossi.

By coincidence, AFT unveiled its plan on the same day Agriculture Secretary Mike Johanns released an Agriculture Department analysis of risk management issues for farmers. Risk management is a broad category that ranges from forward-contracting of sales and use of futures markets to crop insurance and tax-deferred "rainy day" accounts.

While the analysis included some policy options, USDA did not make recommendations for the upcoming debate in Congress on farm policy.

The House and Senate Agriculture committees are holding a series of hearings to gather thoughts from producers about the farm program, which dates from the 1930s. Hearings will be devoted later this year to farm-group proposals. Drafting of the new farm law was expected to begin in early 2007.

The House Agriculture Committee said producers could register their views by a form that could be accessed at http://www.agriculture.house.gov or directly at http://www.agriculture.house.gov/inside/feedbackform.html.

AFT said its proposal was available at http://www.farmland.org.

USDA said its risk management paper was available at http://www.usda.gov.

Copyright © 2006 Reuters Limited

###