Several cuts to farm program spending are included in the president’s budget for fiscal 2012 released this week. The administration wants to reduce the cap on direct payments from $40,000 to $30,000 per individual. Under the budget proposal, the income limits for producers to be eligible for farm program payments would be reduced. Farmers would be ineligible for payments if they have adjusted gross income of $250,000 or more from off-farm sources. If their adjusted gross income from farming is $500,000 or more, they would lose government payments. These new limits would be phased in over three years. Currently the limit for off-farm income is $500,000 and the farm income limit is $750,000. However, these changes have been proposed in previous administration budgets and have been rejected by Congress.

Meanwhile, funding cuts in the House won’t spare agriculture either. Members of the House of Representatives are working on plans to fund the government for the rest of the current fiscal year. The continuing resolution currently funding the government expires March 4, so Congress is under pressure to act. Leadership in the House is proposing a plan that would cut spending by about $60 billion in the second half of the year. Of that, about $5.2 billion would come from agriculture. The proposal cuts funding for the Women, Infants and Children program, international food aid, and domestic conservation programs like EQIP and the CSP. The plan will face stiff opposition in the Senate and from the Obama administration, but cuts to agriculture programs are coming. It is just a matter of when, which programs, and how much.

USDA released its annual long-range baseline projections this week in conjunction with the budget for fiscal 2012. The projections put 2011 corn acreage at 92 million acres, soybean acreage at 78 million acres and wheat acreage at 57 million acres. In general, crop stocks stay tight through 2020 and prices remain high. See this week’s Focus report for more details. USDA has also updated its forecast for 2010 farm income and provided its first forecast for 2011. Net cash farm income for 2010 is now forecast at $91.3 billion, almost $1 billion above the record high recorded for 2008. This is about $1 billion lower than projected in November, with the difference in the expense category. For 2011, USDA projects a nearly $25 billion increase in crop cash receipts and $4 billion more for livestock. However, production expenses increase by about $20 billion. Net cash farm income for 2011 soars to $98.6 billion in 2011, up 8% from the 2010 level, with the biggest gains accruing to crop producers.

The U.S.-South Korea Free Trade Agreement will be submitted to Congress for approval within the next month, says U.S. Trade Representative Ron Kirk. The agreement has been in the works for years and late last year the part of the agreement dealing with trade in automobiles and parts was renegotiated. Since the agreement was worked out when the president had Trade Promotion Authority (fast-track), Congress will have 60 days from the time the agreement is submitted to vote to approve or disapprove it. Congress cannot change the agreement itself under “fast-track” rules. (There is no word on when the free trade agreements with Panama and Colombia will be submitted to Congress.)

The U.S. exported a record $115.8 billion worth of farm products during 2010, just exceeding the previous record high of $114.8 billion set in 2008. China was the biggest market for U.S. farm goods for the first time ever, bumping Canada from the top spot. China purchased $17.5 billion worth of U.S. farm products, mostly soybeans. USDA predicts that exports for fiscal 2011, which ends in September, will total $126.5 billion. Strong commodity prices are the key factor in the high export value.

USDA has fully deregulated a strain of genetically modified corn designed primarily for industrial use. The corn contains an enzyme that enhances the breakdown of starch into sugar, making the product better for ethanol production. The corn from the new variety is safe to eat, but it does reduce the quality of several food products. And some worry that the new corn variety will contaminate other varieties and impact both food use and exports.