By Charles Abbott

WASHINGTON, March 26 (Reuters) - The Senate Finance Committee wants control of a disaster fund of up to $5 billion that would be included in the new U.S. farm law, Sen. Charles Grassley said on Wednesday.

Disaster funding is a major issue in farm law negotiations between the House and Senate Agriculture committees. Leaders of the panels have suggested $2.2 billion for a stand-by aid program for farmers and ranchers.

Grassley, an Iowa Republican who serves on the Finance and Agriculture committees, told reporters that "nothing that I've heard would be acceptable" on farm-bill allocations. He said lawmakers were beginning to recognize the Finance chairman Max Baucus, Montana Democrat, wanted his committee to control the disaster fund.

"I think they're awakening to that reality," Grassley said during a telephone news conference.

Sen. Kent Conrad, who also serves on Finance and Agriculture, said in a statement the disaster fund should be a priority and that $2.2 billion would be insufficient.

"We are close to reaching agreement on a better number for the disaster aid programs," the North Dakota Democrat said.

Senior Agriculture Committee members say other vital programs, such as public nutrition and land stewardship, would be pinched if $5 billion goes to disaster relief. Farm-state lawmakers aim for an overall increase of $10 billion from the $280 billion allocated for the new farm law over five years.

A short-term extension of some agricultural programs expires on April 18, creating an informal deadline for agreement on the new law. President George W. Bush says if there is no agreement by then, Congress should extend the 2002 farm law for at least one year. (Reporting by Charles Abbott; Editing by David Gregorio)