Peanut growers adapting to new government program

For peanut farmers, the quota system is a thing of the past. Farmers are now trying to make the transition to a new government marketing program which gives producers the opportunity to contract directly with shellers at the current market price or put their peanuts in a nine-month marketing recourse loan for $355 per ton.

“The new program is very beneficial to farmers in terms of peanut production,” says Randy Griggs, executive director of the Alabama Peanut Producers. “It's healthy for the peanut industry because it rewards producers, gives them more marketing options, and allows them to compete with trade agreements that forced us to make the change to the new program in the first place.”

According to Tim Hewitt, Extension economist and professor at the University of Florida, farmers have adapted well to the new program.

“Nobody was really pleased with it, but overall, the program is the best they could have hoped for.”

Some farmers, like George Jeffcoat of Houston County, Ala., have used the program to their advantage by using both marketing options: contracting some of their crop to shellers at market price and putting some of their crop in the loan.

“I think it's working well compared to the old program. There were some changes I had to get used to, but it was a fairly smooth transition for me,” Jeffcoat says. “It's not as good for farmers who owned all quota, but farmers who rent are just as well off or better with the new program.”

The nine-month marketing recourse loan can buy farmers some extra time if they are not ready to sell their crop at harvest, says Nathan Smith, assistant professor of agriculture and applied economics at the University of Georgia. He warns, though, that playing the marketing game with such a perishable product as peanuts can be costly.

“The thought was that you'd be able to utilize the loan in order to watch prices, but peanuts are different. You can't store them as long as other commodities without a loss.”

One of the benefits of the new program is that farmers can now contract at a price above the support price, Hewitt says.

Some farmers already have taken advantage of the $400 per ton price this year. For those who haven't, Hewitt recommends that farmers follow the market to see what needs to be done. “The biggest thing is to maintain quality because some contracts are offered later on.”

The abundance of contracts offered by shellers this year prompted increased production, Hewitt says. With the current supply, Hewitt says he doesn't see a price increase being offered to farmers. “There's still time to manage correctly,” he says.

Hewitt says proper management is the key to making a successful transition to the program. The new program forced some farmers, who were already in trouble, out of business. But, those who have approached the change with more diverse management practices, such as expanding their acreage and adapting to the trend toward larger equipment, have been successful, Hewitt says.

Some other management changes farmers have made include looking for ways to reduce costs, researching varieties with better disease resistance and realizing the importance of having good crop rotation and tillage practices, Hewitt says. “There's more work on grass-based rotation, using bahia and bermudagrass.”

In order to decrease yield loss, Hewitt urges farmers to closely monitor disease management, make sure adequate moisture is available to the crop, and harvest at the proper stage.

Farmers also can help increase their profits by keeping a close eye on the market, Smith says. “Put a pencil to it, and see if you can cover costs at $355 per ton. Watch the market to see if a better price is offered. Watch for shortages and surpluses in the market and be able to interpret market signals.”

Smith says participating in cooperative marketing associations also can be beneficial to farmers. “You have more marketing power with a larger volume of peanuts than you would if you sold individually.”

One marketing advantage farmers have now is that domestic consumption is up and export supplies are down, according to Griggs “It's a bullish market right now.”

The most important thing for farmers to remember is to be flexible in modifying their production and marketing practices, Hewitt says. “You always hate changes being made, but farmers need to think they can still make money growing peanuts.”

Rebecca Bearden is a senior at Auburn University majoring in agricultural communications. She is completing her internship with Southeast Farm Press.

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