The Southwest Council of Agribusiness is encouraging Senators to SUPPORT the Senate Committee Pay Limits Reform and OPPOSE the Grassley-Dorgan Amendment.

The following rationale has been compiled to assist in understanding the Senate Committee Bill Reforms:

· Senate Bill Saves Nearly a Half Billion Dollars. The Senate Committee Bill pay limits save nearly a half billion dollars, according to the Congressional Budget Office, and the savings would rise if crop prices fall.

· Senate Bill Provides 100% Benefit Transparency. The Senate Committee Bill provides for 100% transparency in all Farm Bill benefits, requiring direct attribution of benefits to each person by Social Security Number.

· Senate Bill Shuts Down Loophole. The Senate Committee Bill pay limits close down the "three entity rule" that has allowed producers to effectively double their benefits when they are part of numerous entities. Combined with the direct attribution requirements, no person/no SSN will receive any more than the prescribed limits, period.

· Direct Payments. For those who now use the triple entity rule to double payments, Direct Payments will be cut in half. Farmers not using this loophole will not be punished, retaining the current $40,000 limit. This is $20,000 less than the House provided.

· Countercyclical Payments. For those who now use the triple entity rule, Countercyclical Payments will be cut in half. Farmers not using this loophole will also receive a 5,000 per year cut in these benefits in order to meet other Farm Bill funding needs. The $60,000 limit is $5,000 less than the House limit.

· Marketing Assistance Loans. The marketing assistance loan program would continue the fundamental principle of U.S. farm policy that the government may only seize the crop pledged as collateral on a loan when a farm family is unable to repay that loan. The government may not go beyond the collateral pledged by foreclosing on a farm or seizing equipment or other real or personal property of a farm family. This is absolutely critical to farm families and commercial lenders, especially in times of depressed prices. This is the same as the House Bill.

· Adjusted Gross Income Means Test. Over the first three years of the Farm Bill, the Senate Bill would lower the current Adjusted Gross Income means test limit from $2.5 million per year to $750,000 - a 70% cut. This ensures that millionaire non-farmers do not receive Farm Bill benefits, while ensuring that farm families receive the safety net they need, subject to the pay limits above. The House provides a $1 million cap.

· Targets Benefits to Farm Families. Requires any person that receives a Farm Bill benefit to be actively involved in the farming or ranching operation. Importantly, however, this requirement will not force the person performing all the labor to also bear all of the price and production risks on the farm or ranch (e.g., a retired farm couple living on the farm who agree to share the price and production risks with a beginning farmer can also share in Farm Bill benefits without having to drive a tractor or repair fences, etc. This is especially crucial to the young farmer).

The Grassley-Dorgan Amendment Takes a Different Approach...

· Perpetuates the Loophole, Creating Perverse Results. Rather than creating transparency in the system and eliminating the loophole that allows producers to double benefits, the Grassley-Dorgan amendment would effectively maintain the loopholeŠwith perverse results.

· Direct Payments. Producers who double their benefits through the Grassley-Dorgan loophole would be limited to $40,000 in Direct Payments, the same as the Senate Committee Bill. Producers that do not use the loophole would see their limit cut in half, to $20,000.

· Countercyclical Payments. Producers who double their benefits through the Grassley-Dorgan loophole would be limited to $60,000 in Countercyclical Payments, the same as the Senate Committee Bill. Producers that do not use the loophole would see their limit cut in half, to $30,000.

· Marketing Assistance Loans. Provides unprecedented authority to allow the government to not only take the crop pledged as collateral on a loan in a case where a farm family cannot repay the loan, but to foreclose on the farm or seize equipment or other real and personal property as well. Because crop prices fluctuate between the origination date of the loan and the maturity date, neither the farm family nor the lender can know at what point of production the farm could be subject to legal action, including foreclosure.

· Adjusted Gross Income Means Test. While not contained in S. 1486, there has been discussion among the proponents of dramatically lower pay limits of the desire to cut the Adjusted Gross Income test by 90%, from $2.5 million to $250,000, disqualifying thousands of real farm families from receiving a safety net. Put in perspective, this AGI limit is half the amount that an average full-time Midwest corn and soybean farm can borrow in a single year to plant and harvest a crop and pay equipment expenses - not including land rents or loans.

It's our conclusion that the Senate Bill makes real reforms while the Grassley-Dorgan Amendment simply goes too far.

· The Senate Committee Bill makes real - historic - reforms in payment limitations. But the Committee Bill does this in a way that acknowledges the reality of farming and ranching today. $26,000 insurance bills. $28,000 diesel bills. $73,000 fertilizer bills. $66,000 feed bills. Operating and equipment loans of $540,000. All this in just one year for one average sized Midwest corn, bean, and hog farm. The Grassley-Dorgan amendment, while no doubt very well-intentioned, simply goes too far and ultimately hurts the same farm families they intend to help.

· Nutrition, Conservation, and Rural Development Are Benefiting From Large, and Even Record-Setting, Funding Increases, While the Farm Safety Net Faces Big Cuts. All of us support nutrition, conservation, and rural development. Conservation receives a $3.715 billion increase in funding in the Senate Committee Bill, a third straight record funding increase in a row for conservation. Nutrition receives a $5.291 billion increase in the Senate Committee Bill. Rural Development also receives a $475 million increase. The conservation and rural development increases are in addition to that provided by the Senate Finance Committee package. Meanwhile, the Commodity Title, including Crop Insurance, receives a $6.892 billion cut in the Senate Committee Bill. Cutting the farm safety net again to pay for other needs disrupts what balance the Committee Bill provides.