Two main proposals still on table for peanut program

And then there were two. After months of haggling, cajoling, arguing and a minimum of compromising, there now appear to be two main proposals under consideration for the next federal peanut program.

The fact that there apparently are two proposals rather than one is testament to the inability of the various grower groups to reach a consensus. Only time will tell if this failure to come together in support of one proposal has done irreparable harm to the future of U.S. peanut production.

For now, the focus is on examining the two options that are left standing, and deciding which of the two will best serve peanut producers.

One proposal is referred to as a Step-2-type program which retains a two-price system but makes modifications to the current program. The other proposal — known as the marketing loan concept — is coupled with a transition payment (AMTA) to compensate quota holders. While these two policy options currently are receiving the most attention, they are by no means the final choices. Other proposals and revisions could surface as negotiations over the next farm bill continue.

The Step-2 program, according to University of Georgia Extension Economist Nathan B. Smith, proposes to stimulate the purchase of U.S. peanuts through a reverse loan deficiency payment. Quota peanuts would receive a price support similar to the current program. Processors would purchase domestic peanuts at the world price, and the U.S. government would make up the difference between the domestic price and the world price.

Step-2 program proposals, says Smith, have come from the Southwestern Peanut Growers Association and the GFA Peanut Association. Some of the details in the proposals differ, but the concept essentially is the same, he says. These proposals preserve quota or a base, raise the support price, add a cost escalator, lower the minimum resale and eliminate the no-net cost provision of the current program.

Central Texas and Oklahoma, Virginia and North Carolina support a Step-2 program that preserves the two-price system of supply control, notes Smith.

The marketing loan option, says the economist, proposes a program similar to corn, cotton, wheat and the other seven major program crops. A marketing loan program would provide downside price protection while allowing the market price to go higher or lower. The government would make up the difference between the market price and the loan rate through a marketing loan gain or LDP when market price is below the loan rate.

A transition payment or AMTA would be included in the marketing loan program to compensate quota holders, says Smith. The payment would not be tied to production, thus, it would fit trade policy rules set by GATT. Elimination of payment limitations is proposed to handle the increased level of payments. The Georgia Peanut Commission, Georgia Peanut Producers Association and Georgia Farm Bureau Peanut Committee support the marketing loan concept.

Florida, Western Plains (Texas), Texas Panhandle and Western Oklahoma also support the marketing loan concept. Alabama originally supported the marketing loan concept, but has switched its position to Step-2 in the latest vote.

Some peanut producers, says Smith, don't understand the urgency in changing the current peanut program, more than a year and a half before the current farm bill expires.

“Many issues are at work, but the short answer is U.S. trade policy and Congress. Trade agreements have prompted the removal of non-tariff trade barriers and lowered tariffs in a move towards free trade. The strong belief is that this trend will continue,” he says.

Supply programs like the current peanut quota system are considered “trade distorting support” by the World Trade Organization, he adds. “Unfortunately, U.S. trade agreements such as GATT and NAFTA are at odds with supply control programs such as the peanut program.”

The other reason for the urgency in dealing with the peanut program is that the House Agriculture Committee plans to have farm policy rewritten by mid-summer, says Smith.

“In reality, looking at changes in a program that has been successful and in existence since the 1930s is a very tough subject,” he says. “Arriving at a consensus in a short amount of time is a major task, if it's possible at all. Peanut regions, producer groups and industry segments traditionally have opposed one another on program provisions. Therefore, it's likely that separate proposals will be submitted to the committee from which program spending levels will be derived.”

One day, growers may look back on 2001 as a defining moment for the peanut industry in Georgia and the United States, at least from a policy perspective, says Smith.

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