Labeling the government peanut program "a relic of the Great Depression, with restrictive production quotas, high price supports, and severe import restrictions," two congressmen told a House subcommittee that "the time is right for a change in peanut policy."
Noting that the peanut program cost the USDA $34.4 million a year from 1986-1990, Rep. Paul Kanjorski, D-Pa., said a bill authored by him and Rep. Christopher Shays, R-Conn., would phase down the price support level for quota peanuts over three years and eliminate it completely in 2004.
"The peanut program would be replaced with a non-recourse loan," he told the House Agriculture Committee's Subcommittee on Specialty Crops and Foreign Agriculture Programs.
It would also provide a mechanism for the USDA to purchase lower priced non-quota peanuts for food assistance programs, he said.
Kanjorski said government-mandated quotas for peanuts "keep domestic prices at almost $300 per ton over the world price — nearly double the world price," representing "a de facto transfer from consumers to producers." The government's General Accounting Office estimates, he said, that "this benefit to peanut quota holders is worth over $300 million annually."
More than two-thirds of quota holders "don't even farm the land for which they hold the licenses," he said.
The peanut program hurts both farmers and consumers, Kanjorski said,
Rep. Shays, noting that "I have long opposed the current peanut quota program as bad policy," said drafters of the new farm bill "will have the opportunity to move the peanut program away from strict supply controls to a market-oriented approach that will benefit consumers, employees of the food industry, and ultimately peanut growers.
"I encourage you to seize that opportunity," he said.
Shays said "I have a hard time understanding why the U.S. government would artificially inflate the price of peanut products — or why it favors one group of American peanut farmers — those who own quotas — over others who don't."
Alluding to "some growers who not only want to maintain the current system, but are actually calling for an increase in the peanut price support from $610 per acre to $780 per ton," Shays termed the proposal "laughable," and asked, "Why would Congress even consider such a giveaway to such a privileged group of quota holders?"
He said the peanut program "should be brought into the 21st Century, eliminating what currently amounts to "a two-price system that is likely to be found in violation of World Trade Organization commitments.
"My message is simple," Shays said: "If peanut growers in this country don't bring their prices more in line with world prices, they will be swept away by foreign competition."
When countries such as Argentina gain tariff-free access to U.S. markets under new trade agreements, they can sell peanuts at half the quota price, he said "now is the time to discipline ourselves in order to discourage investment in peanut production abroad.
"If I were a peanut farmer, I would be demanding these reforms, and if I represented a district with peanut farmers, I would say to them: 'You need to get off this program as quickly as possible. We'll get you federal money to buy out quotas, but you can't sustain yourself on these programs once we knock down our trade barriers."
He said the Shays-Kanjorski bill "doesn't pull the rug out from under anyone, but rather phases out the quota program incrementally over the next three years" before replacing it in 2004 with a non-recourse loan program similar to those used by other commodities, such as cotton.
Shays said he and Kanjorski have asked the GAO to "investigate the peanut program," with an emphasis on the impact of world/regional trade agreements on the peanut industry and the impact of the peanut program on U.S. trade objectives for other agricultural commodities.
"It's our goal to reform the peanut program so it can be acceptable to American consumers — and to develop a program consistent with other farm programs that encourage farmers to respond to the forces of supply and demand, rather than to bureaucratic fiats," Shays said.