July 19, 2006

4 Min Read

For peanut producers who blame the burden of a high national posted price for their inability to market their product competitively on international markets, there could be relief in sight.

The American Peanut Shellers Association and Georgia producers Donald Chase and Gerald Isler filed a lawsuit May 30 requesting Secretary of Agriculture Mike Johanns and the Commodity Credit Corporation (CCC) to comply with the provisions passed by Congress in the 2002 farm bill with regards to the peanut Subtitle C.

“We do not believe the Secretary has set the rate to allow peanuts to move competitively in both domestic and international markets,” says Evans Plowden, Jr., general counsel for the plaintiffs. “We anticipate evidence that will prove that point.”

Plowden says a discrepancy exists between the statute passed by Congress and the regulation implemented by the Secretary to the CCC. “While the statute and the regulation include four criteria for determining the alternative repayment rate, it appears that only three of those four are the same.”

“Both the statute and the regulation include minimizing loan forfeitures, minimizing federal government-owned stocks of peanuts and minimizing storage costs as part of the criteria, but the statute passed by Congress states that the rate also should “allow peanuts produced in the United States to be marketed freely and competitively, both domestically and internationally. The fourth criteria of the regulation states that the rate should “minimize discrepancies in marketing loan benefits across state boundaries and county boundaries.”

Because peanuts are not moving through the appropriate channels, growers are being robbed of an attractive market, according to Plowden. “The injury here is to growers and shellers because the market is not as great as it could be with an appropriately set price.”

One producer who believes growers have suffered as a result of the national posted price is Macon County grower Donald Chase. “The high national posted price has hurt farmers by keeping us from getting our loan deficiency payments, and it has hurt the whole industry by slowing peanut movement. We've lost our export market. While European sales are growing, our sales are shrinking because the repayment rate is set too high for shellers to sell to the foreign market.”

The formula the USDA is using to set the repayment rate remains a mystery, according to Plowden. “They don't appear to be using the SEAM, agriculture's largest online commodity market, to determine the national posted price. We believe the SEAM prices to be the most accurate and the most reflective of the market.”

The USDA also appears to be ignoring market prices in other countries when determining the repayment rate, according to Chase. “We'd like for them to acknowledge what peanuts are selling for in Europe and China and have a formula that actually reflects the market price. Though market prices are common knowledge, they seem to be unwilling to factor that in when setting the repayment rate.”

Chase says one instance of the USDA not considering market sales when setting the national posted price occurred this spring when the rate was raised despite few domestic peanut sales and a low world market. “We just want them to use a little common sense and do what they're supposed to be doing.”

If the national posted price continues to be set unreasonably high, farmers will continue to suffer the consequences of lost markets, Chase says. “It took years to gain a good export market. If this continues, we're not going to get it back. The first shoe to fall will be in August when we have a huge amount of loan forfeitures. With all of those peanuts in the loan, it will take high prices to bring them out.”

While the lawsuit was not the most desirable course of action from a grower perspective, Chase says it was the only choice. “None of us like the idea of a lawsuit, but we have our backs against the wall. Marketing issues combined with weather and high fuel prices have made this the toughest year I've ever faced. If we could just get this whole deal resolved, it would go a long way.”

Chase hopes the situation will be rectified early on, without having to go to trial. “The best possible outcome would be for the defendants to admit that they've made a mistake, rectify it and have the suit dropped.”

The defendants have 60 days to respond to the suit issued on May 30. USDA officials declined comment.

Subscribe to receive top agriculture news
Be informed daily with these free e-newsletters

You May Also Like