US Congress reaches deal on farm bill

Congressional negotiators on Friday reached a tentative agreement on the farm bill, potentially ending months of deadlock over US agricultural policy amid record profits by farmers and mounting concerns over rising food prices.

The proposed legislation, whose final details will be unveiled next week and still face the possibility of a White House veto, will cost $280bn over five years and largely preserves an extensive programme of subsidies to US farmers.

Under the terms of the deal reached by House and Senate negotiators, a key ethanol tax credit is expected to be reduced from 51 cents per gallon to 45 and the tariff on ethanol imports from outside the US is also expected to be scaled back.

In addition, negotiators broadly agreed on an additional $10bn in funding for national food aid programmes, designed to tackle the threat posed by rising food prices in the US and address fears that millions of poor Americans risk going hungry.

“Today the principal farm bill negotiators came together on a bipartisan level to reach a tentative agreement on the agriculture policy that will make the final farm bill a strong one,” said Tom Harkin, the Iowa Democrat who chairs the Senate committee on agriculture, nutrition and forestry.

The House and the Senate had been trying to reconcile their differences for months, but growing concerns about food prices gave added urgency to their efforts. US food inflation rose 4.7 per cent last year and is expected to record a similar jump in 2008.

The Bush administration has threatened on several occasions to block passage of the bill on the grounds that some of the measures amount to tax increases. Its position on the agreement reached on Friday is unlikely to be known until final details are unveiled next week.

A new farm bill is negotiated every five years in Washington, amid massive lobbying efforts by crop growers, environmentalists and food stamp campaigners. In addition, the terms of this year’s bill are being closely tracked by international trade negotiators concerned that they may undercut multilateral efforts in the struggling Doha round to slash agricultural subsidies around the world.

The negotiations in Congress have coincided with a fight between the White House and Democratic lawmakers over the fate of a controversial free trade agreement between the US and Colombia. This week, Hank Paulson, Treasury secretary, appeared relatively optimistic however that a deal might be struck with Nancy Pelosi, House speaker, unlocking the agreement.

“I look forward to...talking to her,” Mr Paulson said in a Reuters interview. “She said she was going to call me back with some ideas. I’m always willing to listen and I would very much like to see Colombia get done.’’