Market dictates peanut law changes

Why change a peanut program that has worked well for more than half a century? The reasons are fairly simple, says Randy Griggs, executive director of the Alabama Peanut Producers Association.

“Increased political opposition and the impact of the GATT and NAFTA trade agreements dictated that existing programs would not work in the future,” says Griggs.

With the promise of more duty-free peanuts coming into this country, U.S. growers could not compete saddled with a program cost of $610 per ton, he adds. “It costs $212 to bring a peanut from Argentina to Savannah, Ga. With a farmer stock price of $300 per ton, we're competing against a $500 peanut,” he says.

The new peanut program, explains Griggs, changes to a target price/marketing loan concept, completely eliminating the quota. The six-year bill takes effect with this year's crop, he says.

“There are three distinct divisions within the new program — the buyout of quota pounds, the marketing loan provisions for those producing peanuts and the peanut base and target price. All of this is similar to the cotton program,” says Griggs.

Turning to the quota buyout, the U.S. government will pay the quota holder of record for the elimination of quota, he says. This will be paid at 11 cents per pound per year for five years or a 55-cent lump sum.

“You can take the buyout as a single payment or spread out over five years, and you can designate the year you wish to receive the payment. A single payment won't be discounted. You'll get 55 cents whether you take it now, over five years or at the end of a five-year period. Whoever was the quota holder of record when the President signed the farm bill is the person who is designated to receive the payment,” he says.

Looking at other provisions of the new program, Griggs says base acres will be established for the historical producer. Then, payment yields will be established for determining the amount of the payments. Growers will have a target price of $495 per ton, and payments will include both fixed or direct payments and counter-cyclical payments.

“The historical producer is the producer who has been the producer for the 1998-01 period and has shared in the risk of producing a crop. Eighty-five percent of your average acres for the 1998-01 period will determine your base acres.

“For average yield, they'll take your four-year average for the 1998-01 period. A lot of details have yet to be worked out on exactly how they'll determine that yield. You can drop three of those four years and substitute your county average for the 1990-97 period to determine your average yield.”

Payment yields will be calculated by the base acres multiplied by the average yield, says Griggs.

The historical producer can assign base acres to cropland of choice either in the state in which he is producing peanuts or in an adjoining state, he says. “However, if you want to assign base to another state, you must have grown peanuts in that state in one of the last four years, or you must be a producer in that state as of March 31, 2003. You'll have until March 31, 2003 to assign that base to cropland, and you must do so permanently at that time.”

As with other bases, the total base acres of all crops can't exceed the total acres on the farm, says Griggs. If it does exceed the total acres, you'll have the option of which bases to reduce.

Direct payments for 2002 will be made to the historical producer, he continues. From 2003 to 2007, payments will be made to the producer on the farm where the base is assigned.

“Basically, whoever produces a crop on the farm where the base is assigned will receive the payments. There will be a direct payment of $36 per ton based on the payment yield, and it will be paid as soon as is practical for 2002, or as soon as the regulations are completed. It will be paid not later than Sept. 30.

“In 2003, producers receive 50 percent of this in advance, in any month of their choosing. You must repay it if you cease to be a producer.”

A counter-cyclical payment would be made if the expected price for peanuts is less than the target price of $495 per ton, he says. “What they refer to as the expected price is the direct payment of $36 plus whichever is higher — the average market price for peanuts over the last 12 months or the national loan rate for peanuts, which will be $355.”

The maximum a grower can receive on the counter-cyclical payment is $104, says Griggs. “You can take the $104 and add the $36 direct payment and that gets you to $140. Take the marketing loan rate of $355 and add $140, and it gets you to $495.”

The counter-cyclical payment, he says, is intended to make up for the difference between $36 and the target price or whatever is above the marketing loan rate.

“The counter-cyclical payment will be made at the end of the 12-month marketing year for the crop. You'll be able to get partial payments. You can get a first payment — up to 30 percent — between Oct. 1 and Oct. 31. In February, you can get up to 70 percent of the total. The final payment is made soon after the marketing year.”

Any peanuts produced, says Griggs, will be eligible for the $355 marketing loan rate. “You don't need a base, and you don't have to plant them on land with a base. You can go out and rent your land, produce a crop and still get $355.”

The Secretary of Agriculture will pay for the storage charges, handling charges and other associated costs, says Griggs, for five years. “By going with five rather than six years, we were able to save $15 million, and that's how we were able to pay for this cost. Maybe by the end of the five years, we can get them to give us that sixth year.”

The loan, he says, will be available through designated marketing associations, such as the GFA or similar organizations in other regions. Loans also may be available through grower marketing cooperatives approved by the Secretary of Agriculture.

“A group of growers can form a marketing cooperative and implement the loan program, or you can go to the Farm Services Agency.”

Federal-state inspection will be mandated in the new program as has in the past, says Griggs. The Peanut Administrative Committee that set grading standards will be abolished and replaced with a standards board, he adds. It will be the responsibility of this board to determine the handling standards for peanuts. It will be composed of nine growers and nine representatives from the shelling and manufacturing industries.

Peanuts, he says, will have separate payment limitations from other crops. For the direct payment, growers can receive up to $40,000. The limit for the counter-cyclical payment is $65,000 and the LDP limit is $75,000. If your adjusted gross income exceeds $2.5 million, you won't be eligible for these benefits, says Griggs.

Country-of-origin labeling also is part of the new farm bill, he says. This legislation requires that peanuts, catfish, beef and a number of other items carry country-of-origin labeling for the benefit of consumers.

“With this new program, we should be able to recapture our import market,” he says. “Argentina and Mexico should be almost automatic. Hopefully, we'll increase our demand. With quota rent out of the picture, we should have a lower cost of production.”

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