Paul L. Hollis

January 19, 2007

5 Min Read

Each segment of the U.S. peanut industry — growers, shellers and manufacturers — supported the peanut title of the 2002 farm bill, and probably would support the continuation of the program in a new farm bill. But changes would have to be made in the USDA's administration of the legislation.

That was the message delivered by Alabama peanut producer Mark Kaiser when he testified recently before the U.S. House of Representatives Committee on Agriculture.

Kaiser, who is a board member of the Alabama Peanut Producers Association, grows about 300 acres of peanuts near Alabama's Gulf Coast, in Baldwin County.

He began growing peanuts in 1998, before the new program was enacted, but he believes it generally has been good for growers. “In our area of Alabama, where there has been a lot of expansion of peanut acreage, the program has made it easier to produce peanuts,” says Kaiser.

Despite lower-than-normal average yields across most of Alabama this past season, Kaiser had a fairly good year on his farm, making a decent crop of peanuts. “We had some good, timely rainfall. But other parts of Baldwin County were not so lucky, with growers being hurt this year by drought conditions. Our peanuts are not irrigated, so every year is a challenge,” he says.

Kaiser says the experience of testifying before Congress was an interesting one, and he's hopeful at this point that new farm legislation will be good for peanut producers and for the entire industry. The changes made in the last farm bill allowed the peanut industry to move into the future with a program designed to make U.S. producers competitive in both the domestic and export marketplaces, he says.

In fact, according to the University of Georgia's National Center for Peanut Competitiveness, since 2002, U.S. total peanut domestic consumption has increased by 16.5 percent.

Kaiser told the House committee that the new peanut program has encouraged peanut product manufacturers to develop new products and spend more money on marketing the products.

Despite the fact that NAFTA and the Uruguay Round of GATT trade agreements have allowed peanut imports to increase significantly — reaching a high of 71,782 metric tons in 2001 — the new peanut program has provided U.S. producers with the ability to compete with imports. The 2005 peanut import level was just 12,196 metric tons, which is an 83 percent drop in imports.

And, unlike the old quota program, the new peanut program has also allowed growers to more readily enter peanut production, especially in non-traditional areas, such as the Gulf Coast where Kaiser farms.

In Alabama alone, peanut production expanded from 15 counties in 2002 to 32 counties in 2005, and Alabama is now the second ranking peanut-producing state in the United States.

Georgia also has expanded production to counties that traditionally have been limited in the number of commodity options for producers. The 2005 Georgia peanut crop was valued at approximately $370 million, providing 50,000 jobs to the state's economy.

In addition, South Carolina and Mississippi have now become important peanut states.

It's the USDA's administration of the peanut program that has been lacking, says Kaiser. “While the domestic marketplace has seen a healthy increase in demand from consumers and production growth for producers, this has not been the case for the peanut export market,” he says.

The USDA has continued to set the loan repayment rate for peanuts too high, says Kaiser. And despite language to the contrary in the 2002 farm bill, the department has relied too much on data unrelated to the price other export nations are receiving for peanuts in the world marketplace, he adds.

“U.S. peanut producers have lost a significant portion of their export market notwithstanding the changes invoked by the 2002 farm bill,” he says. “Our present export situation is directly related to the high loan repayment rate set by USDA.

The 2002 farm bill directed the USDA secretary to establish a loan repayment rate that will:

  • Minimize potential loan forfeitures.

  • Minimize the accumulation of stocks of peanuts by the federal government.

  • Minimize the cost by the federal government in storing peanuts.

  • Allow peanuts produced in the United States to be marketed freely and competitively, both domestically and internationally.

It is this last point that is most problematic, said Kaiser when he represented the Southern Peanut Farmers Federation during the recent congressional hearing. The federation, which represents more than 80 percent of the peanuts grown in the United States, believes the USDA is not sufficiently considering the competition in the world marketplace. This lack of response to competition from other origins has critically wounded U.S. export programs.

Peanut producers have met with USDA Farm Service Agency economists, discussing several options to better address this issue, says Kaiser. The following options were discussed for achieving a more accurate posted price:

  • USDA should use the International Trade Commission methodology to convert shelled stock prices to farmers stock. This has been accepted as a suitable method within the U.S. industry and internationally.

  • USDA should ask the Foreign Agricultural Service to collect farmer stock information from U.S. agricultural attaches in peanut-exporting countries such as India, China and Argentina.

  • Another option may be a percentage value difference of shelled goods from the United States versus other peanut origins. Domestic farmers stock prices could be factored to determine the value of other origin farmer stock and those values included in the USDA posted price formula.

The Southern Peanut Farmers Federation, says Kaiser, is scheduling a series of producer hearings to discuss the various components of the peanut program and its effectiveness for the 2006 crop.

About the Author(s)

Paul L. Hollis

Auburn University College of Agriculture

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