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Proposed Budget Shouldn't Kill Big Ag's Profits

Proposed reductions need to be sized against total farm income.

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As part of President Barack Obama's promise to "review the budget line-by-line for waste," the administration's budget proposal calls for a reduction in agricultural subsidies. The blueprint phases out direct payments to farmers with annual sales revenue of more than $500,000, and sets a $250,000 commodity program payment limit. In addition, the plan would reduce crop insurance premium subsidies, eliminate cotton storage credits, and reform the Market Access Program.

If enacted, how might these changes affect the agriculture sector? Let's start by outlining current farm policies.

Elizabeth Collins does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.