Farmers will be making a mistake if they shorten rotations and plant more peanuts just to try and get a government payment next season, says Marshall Lamb, research director for the National Peanut Research Laboratory in Dawson, Ga.
“This is going to come down to a farm-level decision,” said Lamb at the recent Southern Peanut Growers Conference in Panama City, Fla. “Shortening rotation sequences may provide short-term benefits by receiving payments, but your negative consequences are going to be long-term, and it’ll take years to fix.”
Peanut producers are in “good times now” considering production advances and improved yields, and now is not the time to create avoidable problems by shortening rotation sequences, he says.
“Genetics and new technology are part of it, but rotation plays a major factor as well,” says Lamb. “That’s something we don’t want to give up. The market conditions might come into play that’ll make this worth doing, but we’re not in that position right now, especially as over-supplied as we are, that we want to expand our peanut production just to chase the generic payments from the government.”
The subject of rotation received renewed interest this year with the passage of the Farm Bill, he says.
“The generic base on cotton is what started all of this, so we began having meetings earlier this year on the influence of rotation. Some growers didn’t fully understand all of this because they didn’t yet know all of the regulations. But they were looking at going out and planting a lot more peanuts just for the payments from the generic base. Personally, I think that would be a huge mistake,” says Lamb.
The rules and regulations for the new farm bill are forthcoming, and no one knows exactly what they’ll be for awhile, he says. In addition, crop prices inevitably will change, and that will factor into any decisions made about rotations, he adds.
But for now, Lamb says he is looking at the cost benefits of changing rotation sequences within the generalities of the Farm Bill.
“Usually, we rotate peanuts and cotton. It’s normally two to three years out of peanuts. From a yield standpoint, we generally want a three-year-out rotation. But, we’ve seen times in the past when rotations should be shortened from an economic standpoint. If the economics are there, and it’s a matter of you surviving in the long-run, shortening rotations is not always a bad decision for the farm, but it has to be done at the right time or you.”
Data from 12 years at the Shellman Irrigation Research Farm in southwest Georgia has proven the value of rotation, says Lamb.
“If you look at continuous peanuts under irrigated production over 12 years, we’ve averaged about 3,400 pounds of peanuts per acre. Good fungicide programs and other factors have allowed us to do that. One year out of peanuts in either corn or cotton adds 1,000 pounds per acre per yield. Two years out and we’re averaging about 5,300 pounds per acre, and a three-years-out rotation has us averaging about 5,800 pounds per acre. Rotation matters and it is significant.”
Another way of looking at it, he says, is yield reduction versus rotation.
“If you go from one year out to no rotation, you lose more than 1,000 pounds per acre. From two years out to a one-year rotation, and you lose about 940 pounds. And, if you go from a three-year to a two-year rotation, you give up about 450 pounds.
“On non-irrigated production at the same farm, we’re averaging about 2,500 pounds per acre with continuous peanuts. If you go from continuous peanuts to a one-year-out rotation, you add about 460 pounds per acre. With two years out, it’s 3,300 pounds, and with a three-years-out rotation, we averaged 3,500 pounds per acre over this 12-year study. If you go from one-year-out to continuous peanuts, you’ll lose 450 pounds per acre on non-irrigated production. If you go from two-years-out to one-year-out, you’ll give up about 350 pounds per acre, and from three-years-out to two-years-out, you give up another 230 pounds per acre.”
It makes sense, he says, that as you widen the rotation, the benefits become marginally smaller. “We’re trying to find out where the balance is from an economic standpoint.”
If you look at crop base allocations from the 2002 period, says Lamb, it shows that almost every county differs.
“When the decisions on this are made, once the Farm Bill goes into effect and we have all of the rules and regulations, it’ll come down to an individual farm level as to what’s best. If you look at Alabama, Florida and Georgia, in Alabama cotton had a base of about 720,000 acres and peanuts about 190,000 base acres for a ratio of cotton to peanuts of about 3.75.
“In Florida, there was a ratio of about 1.3, cotton to peanuts, and in Georgia, there was a ratio of almost exactly 3. In other words, in Georgia, there were 3 acres of cotton base to every 1 acre of peanut base in the 2002 allocations. But it varies so much within states. In Henry County, Ala., the ratio of cotton to peanuts was .76. In Jackson County, it was about even at 1.1. But if you go up to one of Georgia’s premier cotton counties, in Dooley County, it was about 4 to 1, cotton to peanuts base.”
Not worth doing
Earlier in the year, Lamb and other researchers put together some case farms assuming certain prices, including $425 peanuts, 75-cent cotton, $4.50 corn and assuming the farmer’s price was equal to the marketing-year average.
“These assumptions were made back in February when prices were higher. We pulled in the rotation data, we incorporated the base acres at 85 percent and the program yields, and also some loose provisions about the actual Farm Bill.”
With these prices for wheat, soybeans and cotton, there are no payments available right now, says Lamb.
“Of course, cotton doesn’t apply with the new program they’ve got. But with peanuts at an average of $425 per ton, there’s a payment potential. You’ll never get the full payment, but it’s roughly $110 per ton. It’s the only crop that if you planted it, you might get a payment off of the generic base, and that’s what producers were looking at, unfortunately.”
The case farms showed, says Lamb, that in a very short period of time you can collapse your rotation from something really good to something that is marginal at best by shortening peanut rotations.
“The generic base is not the same as the traditional base. Your traditional base is going to be there if you go in to get payments and the market conditions exist, whether you plant or not. On generic base, you have to plant more of the program crops beyond your historic base in order to receive the generic base payments. That is the major difference.
“If peanut prices are low, then you might max out your generic payment. But with what it costs to farm peanuts these days, you’re going to be losing money on producing those peanuts. You can’t grow peanuts profitably at $355 per ton, but you’d be maxed out if you increased on your generic base. It’s a trade-off.”
If peanut prices are high, says Lamb, you won’t get the generic payments, but you’ll be making money through production and through the markets.
“With lower prices, you are losing money with production, but you are getting the government payments. With higher prices, you might start making more with production, but payments are approaching zero. It’s not worth doing – it’s throwing good money after bad. You’re losing money producing cheap peanuts in order to get a government payment, and it’s not worth doing.
The rules and regulations for the new Farm Bill are forthcoming and evolving. Until we get the final regulations, we can only speculate on what might happen.”