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Deadline nears for assigning peanut base

Peanut producers are reminded that they have until March 31 to assign new peanut base and yields to cropland. The designation is required if farmers are to be included in the 2003 direct/counter-cyclical payments as outlined in the new farm bill.

You can assign the base to your own farm or to another farm in the same state or in a contiguous state. You must be a historical producer in the state or a producer in the state on March 31, 2003. This is a one-time assignment.

The base doesn’t have to go back to the land it was generated upon, although it can, says Marshall Lamb, economist with the National Peanut Research Laboratory in Dawson, Ga. The sum of all crop bases, including peanuts, cotton and grains, cannot exceed the actual cropland acres.

"Basically, the direct payment is the base acreage multiplied by 85 percent multiplied by the program yield multiplied by the $36 payment rate. It’s very simple. From 2003-2007, the direct payment goes to the producer on a farm on which the peanut yield and base are assigned," says Lamb.

If the land already has 100 percent bases, there will have to be a release of other bases in order to put peanut base on that land, as bases are capped at 100 percent.

The payment yield is equal to the producer’s 1998-2001 total production divided by the 1998-2001 total acreage. A producer may choose to substitute the 1990-1997 county average yield for up to three years of the 1998-2001 base period farm yields.

The base payments are totally decoupled from the production of peanuts on a farm. Base payments for peanuts can be made on farms planted in other eligible commodities or practices. Exceptions include CRP or other paid conservation programs, newly established vegetable enterprises or wild rice.

The 2002 farm bill changed the peanut program by replacing the quota system established in the 1930s with direct and counter-cyclical payments for eligible producers. The direct and counter-cyclical program provides payments to producers on farms having bases for peanut and other commodities for 2002 through 2007 crop years. Direct payments are issued regardless of market prices. Counter-cyclical payments, however, are made only when a commodity’s effective price is below its target price.

Major provisions of the farm bill’s peanut title are as follows:

o Target Price — A target price of $495 has been set for the purposes of calculating the counter-cyclical payment.

o Counter-Cyclical Payment — A counter-cyclical payment will be made to the producer when market prices fail to achieve the target price of $495. Counter-cyclical payments were made to the historic peanut producer for 2002 and will be made to the producers on a farm with peanut base in subsequent years. To calculate the counter-cyclical payment for a farm, multiply the base by 85 percent. You will take that result and multiply it by the difference between the target price and the sum of the higher of the following: either the average season price plus the direct payment or the marketing loan rate plus the direct payment. The formula is as follows: Counter-cyclical payment = $495 - $36 per ton — (Average season price or national loan rate, whichever is higher) x base acreage x 85 percent x payment yield.

o Marketing Loan — A marketing loan is established with a $355 loan rate. This is the only support on the actual production of the commodity and is available on all tons of peanuts produced. A producer can forfeit his peanuts under the loan. Or, if the market moves higher, he may choose to redeem his peanuts and sell them in the commercial market. Also, the Secretary of Agriculture can choose to lower the repayment rate to avoid the chance of paying storage on forfeited peanuts.

o Loan Deficiency Payment — LDP’s will be paid to producers who opt to forego participating in the loan program. LDP’s will be paid based on world market pricing factors. The producer must maintain beneficial interest in the crop prior to receiving a loan deficiency payment.

o Storage and Handling — The law provides for the Secretary of Agriculture to cover all storage and handling charges on loan peanuts to insure that the loan rate provides the desired level of support with no hidden charges.

o Payment Limitations — The farm bill established separate set of payment limits for peanuts that is equal to the limits set on other commodity payments. The limits are $40,000 on the fixed decoupled payments, $65,000 on the counter-cyclical payment, and $75,000 on gains from the marketing loan and LDP’s. The three-entity rule and the spousal rule were maintained, but payments are capped at $360,000. There are no limits on the quota buyout.

o Origin Labeling — The farm bill requires country-of-origin labeling on peanuts beginning in two years.

o Term of the Bill — The farm bill runs from 2002 through 2007, so it is a six-year bill. Two provisions of the peanut program expire after the fifth year of the bill - the quota buyout and storage fees on loan peanuts.

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