President Barack Obama called for the elimination of farm subsidies to the wealthiest farmers in his new budget plan on Monday, arguing that the payments distort the farm sector and even pay some farmers that grow no crops.

Lawmakers rejected an identical proposal a year ago, ahead of the mid-term elections, saying any change in farm supports should be delayed until an overhaul in 2012.

Farmers enjoy strong support from lawmakers, including from the Midwest with its strong contingent of Republicans. Despite some pressure from the Tea Party caucus to cut spending, it is unlikely Congress will have an appetite for big changes in farm supports, according to a lobbyist for a large farm group.

Obama said his plan would save $2.5 billion, or 5 percent of the cost of subsidies over 10 years, while preserving a farm safety net to protect against low prices or crop failures.

Perhaps this year ... there will be greater interest in Congress, said Agriculture Secretary Tom Vilsack, pointing to the need to reduce the federal deficit. This is something we can do this year.

It would affect large-size operators and people with high incomes and expand on the 2008 farm law that denied aid to the very largest operators. USDA has estimated the new round of limits would affect 30,000 people out of 1.2 million farm subsidy recipients.

In his proposed budget for fiscal 2012, Obama proposed that farm subsidies go to people with less than $500,000 in adjusted net income, down from $750,000. Also those with income earned off the farm, the cutoff would be halved to $250,000 from 500,000.

MOST USDA MONEY FOR NUTRITION

In addition, Obama said the maximum in so-called direct payment to farmers should be cut to $60,000 per farm from the current $80,000. Some $5 billion a year goes to cotton, grain and soybean farmers through these payments, regardless of need.

They distort production and drive up the value of farm land, said the administration. Direct payments are payments made to farmers based on historical productions, regardless of whether they currently produce crops.

A small-farm advocacy group, the National Sustainable Agriculture Coalition said that with farm income at record highs, Congress should cut subsidies further.

Senator Pat Roberts, from wheat-growing Kansas, said the administration has once again dusted off old proposals aimed at pitting farmers against farmers.

Crop and dairy subsidies were forecast at slightly more than $5 billion in fiscal 2012, compared to $7 billion this year, a reflection of high market prices.

Obama also called for a revision in the crop insurance program to save $1.8 billion over 10 years. It would reduce the amount paid to insurers for policies against catastrophic crop losses. The administration renegotiated its master agreement with insurance companies last year to save $6 billion.

The administration proposed higher spending on programs to protect wetlands and reduce runoff from fields and feedlots.

Republicans in the U.S. House of Representatives have tagged those programs for large cuts in spending this year.

The bulk of USDA funds, more than $106 billion, would go to food stamps, school lunch and other public nutrition programs.

(Reporting by Charles Abbott; Editing by Jackie Frank)

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