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For peanuts: 2002 Program changes could alter production, marketing

EDITOR'S NOTE — With the elimination of the decades-old peanut quota system, U.S. producers are facing unprecedented changes in the months and years ahead. The Farm Press Peanuts, Policy & Profits special report will look at how these changes are affecting growers and other stakeholders from throughout the U.S. Peanut Belt. We'll also be taking a look at the history of the quota program, and the implications of the federal government's new proposal for supporting peanut production.

Even if Congress passes a farm bill in time for the 2002 planting season, peanut farmers expect a lot of unanswered questions to linger well into summer.

The proof is in the pudding; the devil is in the details; choose any appropriate cliché, but before growers can work into a new peanut program, USDA will have to devise a comprehensive policy to administer it.

“We may get a basic framework with a farm bill,” says Andy Timmons, a Brownfield, Texas, peanut and cotton farmer. “But the rules and regulations will determine if this is a good program or a bad one.”

Timmons, a board member with both the Texas and the Western Texas Peanut Growers' Associations, says his views do not necessarily reflect those of either organization.

“It's hard to make decisions on the 2002 crop until we get the details of a new program,” he says. “We face a lot of uncertainty as we go into planting season.”

He expects extra costs for producers, for instance. “In the past, we contracted a price for additional peanuts and someone else paid the freight and handling charges. Now, I'm pretty sure growers will pay hauling and handling fees. So it will be tough to make a profit on $350 per ton peanuts. We'll need $375 a ton to come out.”

Timmons says storage also may pose some hardships. “If a sheller doesn't buy peanuts and growers put them in the loan, where will we store them? Shellers will not want to if they don't own them. So where will they go?”

He says storage costs could add to producer's expenses.

He hopes seed costs will come down. “We bought seed last year for about 95 cents per pound. With a lower loan rate, that cost should be lower and could help offset some of the costs that are being shifted to growers.”

Timmons says losing the quota system after decades of reliable price and production management will be difficult.

“I see the issue from both sides,” he says. “I produce only about 25 percent quota peanuts; the rest have been additionals. Also, we custom harvest about 3,500 acres and 90 percent of that is non-quota production.”

He says farmers will need to change the way they produce and market peanuts. “I think we'll need marketing associations of growers who produce a specific type of peanut for a specific buyer. For example, some manufacturers want high oleic peanuts.

A band of growers could contract with a company to produce a certain variety and grow them under specified conditions, with the same water, fertility and harvest requirements. They could schedule planting to guarantee timely harvest and delivery.”

Timmons also says growers could provide traceability, to permit a manufacture to follow the end product all the way back to the seed. “They want that and if we can provide it, we may be able to demand a premium. Setting up these associations will require a lot of organization.”

Timmons doesn't believe changes in the peanut program will affect Texas acreage substantially.

“I don't see acreage exploding, although some think it will. With a loan at $350 per ton, plus the additional charges we face, acreage probably will stay pretty constant, with perhaps a gradual increase.”

Timmons also notes that peanut acreage is limited. “I'm not certain where new areas would be,” he says. “We've tried peanuts in virtually all the places where they are adapted. Peanuts need a specific day length, number of growing days and the right kind of soil to thrive. Expensive harvest equipment also keeps farmers from jumping in and out of peanut production.

“And water continues to be the limiting factor in West Texas. Peanuts need a lot of water. Basically, West Texas farmers sell water and we've been selling it too cheap.”

The number of peanuts farmers in the Southeast grow, however, could affect acreage in the Southwest, Timmons says. “If the Southeast cuts back to just irrigated acreage, we could see more acreage here, possibly with premiums to grow them.”

If lower prices have any advantage, new uses may be the most telling, Timmons says. “As manufacturers obtain cheaper peanuts, they may develop new products and that could favor more tons. That could happen if lower costs pass on to manufacturers and consumers.”

Timmons says failure to pass a farm bill in time for the 2002 season would be bad for peanut farmers, although some growers prefer to hold off.

“That's our worst case scenario,” he says. “We'll revert back to the 1996 FAIR Act and shellers will buy no more peanuts than they absolutely have to.” They'll wait a year for the lower prices, he says, and will offer fewer contracts for additional peanuts.

“That will be a strain on everyone. A lot of farmers have used peanuts to prop up their entire farm operations, and if we don't get additional contracts, we may not be able to cash flow this year.”

He's concerned that Congress will pass the farm bill and the USDA will implement some sections but wait until 2003 for peanuts.

“It's hard to make decisions without knowing what the program will be like,” he says.

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