By Margaret Chadbourn

WASHINGTON, Aug 7 (Reuters) - The worst drought in half a century is slashing U.S. crop and livestock production, President Obama said on Tuesday as he called on Congress to pass a farm bill that will send disaster aid to more farmers and ranchers.

During a meeting of Obama's rural council at the White House, he said the administration will do all it can to alleviate the impact of the drought.

"It is a historic drought and it is having a profound impact on farmers and ranchers all across many states," Obama said.

More than 60 percent of the continental United States, including prime farm and ranch territory, is suffering moderate to exceptional drought. Analysts expect the drought will bring the smallest corn crop in six years. The government will make its first estimate of the fall harvest on Friday.

With the U.S. election three months away, Obama said Congress needed to complete work on a new five-year farm bill. Republican leaders in the U.S. House of Representatives, unable to pass a bill in the lower chamber, proposed a $383 million disaster package for livestock producers before adjourning for the summer.

The president said he hoped lawmakers get an earful from their constituents during the five-week recess away from Washington and that they reconvene on Sept. 10 prepared to complete work on a farm bill "immediately."

Food stamps for the poor would see their biggest cut, $16 billion, since the 1990s in the House farm bill. Democrats oppose those cuts and fiscal hawks among Republicans say the bill, which raises crop support prices, needs more cuts throughout. The Senate bill would cut food stamps by $4 billion.

"Congress needs to pass a farm bill that will not only provide important disaster relief tools but also make necessary reforms and give farmers the certainty they deserve," said Obama in his first remarks on the farm bill in weeks.

He complimented the Senate for "good bipartisan work," while wading into a squabble between the House and Senate over how to help farmers.

The Democratic-run Senate passed its farm bill in June. It includes funding for disaster aid this year. The Republican majority in the U.S. House of Representatives passed a disaster bill that would cut conservation programs by $639 million, including $256 million to reduce the federal deficit. It allows up to $100,000 in aid per operator.

Cattle and sheep ranchers would get most of the assistance.

Crop insurance will provide a safety net for most row-crop growers but livestock producers have less of a federal cushion. Disaster programs aimed at them expired at the end of 2011.

Farmers could collect $15 billion-$18 billion in crop insurance indemnities this year, nearly double the 2011 pay-out, because of drought losses, say analysts. Insurers made money in recent years but "this will be the first major loss year" since enrollment zoomed and may prompt a shake-out in the industry, said two University of Illinois economists on Tuesday.

The House disaster bill and the Senate farm bill offer similar disaster programs for livestock.

"It's unfortunate that Senate Democrats have blocked this relief package from getting to those in need," Kevin Smith, a spokesman for House Speaker John Boehner, said in a statement.

The current farm law expires on Sept. 30 but many of its provisions, including crop supports and food stamps for the poor can run for a while. Farm lobbyists see a low chance of Congress resolving differences in bills before the post-election "lame duck" session.

Copyright 2012 Thomson Reuters. Click for Restrictions.

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