Three years since the passage of the most recent farm bill — along with a radically transformed peanut program —studies are showing a positive economic impact on Southeastern peanut farms.
The National Center for Peanut Competitiveness has carried out numerous studies to analyze the impacts caused by the change in peanut policy. One such study analyzed the impact on aggregate income and economic activity generated from the change in the peanut program for the years 2002 to 2007 for the Southeastern peanut-producing region and the United States as a whole.
For Alabama, Georgia, Florida, South Carolina and the United States, the change resulted in a positive impact on the aggregate income and the resulting economic activity generated from this increase in income. For the Southeast, increases in aggregate income ranged from $75.4 million to roughly $1.36 billion.
The U.S. increase in aggregate income from the change in the peanut program is $2.96 billion. The economic activity generated from these increases to income ranges from $158.4 million to $2.85 billion for the Southeast states and $6.22 billion for the United States.
Another study conducted by the National Center for Peanut Competitiveness compared the potential income generated from the peanut enterprises of 12 representative Southeastern peanut farms under the 1996 and 2002 farm bills for the years 2002 to 2007. The analysis compared the difference in the annual gross peanut revenue under each of the bills for each of the farms, as well as the composite average of the farms.
Two production scenarios were considered for this study. One was that each farm would see no change in the total peanuts produced. The second scenario was that each farm would increase production by 2 percent for each year after 2002.
The revenue considered in the study under the 2002 farm bill included the value of production at $355 per ton and government payments. The government payments included the annual quota buyout for pounds of quota owned by the representative farm, direct payments of $3 per ton, and counter-cyclical payments of $104 per ton on 85 percent of the peanut base.
Revenue under the 1996 farm bill considered quota and additional peanuts with quota valued at $610 per ton, and half of the additionals valued at the average contracted prices of $325 per ton, and the other half valued at the average payout price of loan additionals that were crushed at $200 per ton.
Quota rent, as well as the potential assessment that would have been imposed on the 2002 crop to cover losses generated by the program in 2001, were included. Quota pounds were reduced by 2 percent for each year after 2002.
Again, two production scenarios were considered, with one assuming a decrease of 2 percent for years after 2002, and the second assuming an increase of 2 percent for each year after 2002.
Results showed that when producers captured 100 percent of the direct and counter-cyclical payments, regardless of whether production remained constant or increased under the 2002 analysis, revenue generated under the 2002 bill was higher than that generated under the 1996 bill for all years for all 12 farms.
When producers captured direct and counter-cyclical payments equal to the portion of cropland owned — and production increased by 2 percent each year — revenue was greater under the 2002 bill for all years for all farms. When production was held constant, revenue was greater under the 2002 bill for all farms for all years except 2007.
In 2007, under this scenario, three farms had slightly lower income than under the 1996 bill.
When the aggregate of the six years is considered, the benefits from the 2002 bill can be seen to a greater extent. When constant production is considered, the benefit ranges from $69,800 to $797,775 when the producer receives benefits equal to the percentage of cropland owned. Benefits ranged from $182,300 to $1,549,100 if the producer received 100 percent of the payments.
Under the changing production scenario, benefits ranged from $95,650 to $972,790 when the producer receives benefits equal to the percentage of cropland owned. Benefits ranged from $220,850 to $1,724,130 if the producer received 100 percent of the payments.
The purpose of this study, according to the National Center for Peanut Competitiveness, wasn’t to consider the economic viability of peanut producers but rather to compare the peanut income generated under the two farm bills. It doesn’t provide information on the sustainability of these farms, but it does point out that given this data base, revenue generated under the 2002 farm bill is substantially greater than what might have been generated under the 1996 bill, when all of the various intricacies of the peanut industry are considered.
One additional study has considered how the traditional peanut areas have been impacted by the change in the peanut program. Results show that peanut acreage has shifted given the change in the program.
Since quotas were eliminated, growers in non-traditional peanut-producing areas now have the opportunity to grow peanuts. Areas in the Southeast, including Georgia, Florida and South Carolina, have seen significant acreage increases and shifts in production areas.
Texas, Oklahoma and Virginia have seen significant acreage decreases while other states have seen shifts within their production areas with no real impact on the total acres planted. States that were considered minor under the prior program are showing an expansion of acreage under the new program.