The passage of a new government program for peanuts leads to a couple of major decisions for farmers, says Nathan Smith, University of Georgia Extension economist. The first decision, he says, is related to the establishment of a peanut base, and the other decision is concerned with what to grow.
The new farm bill replaces the quota system with a marketing loan system of production. “In addition, peanut producers will receive an annual direct payment and a counter-cyclical payment in years of low prices. These two payments will be calculated from a newly established peanut base,” says Smith.
The seven major program crops — corn, cotton, barley, grain sorghum, oats, rice and wheat — currently have payment bases (base acreage times program yield) from which transition (AMTA) payments are calculated through production flexibility contracts, he explains.
“The AMTA payments are ‘decoupled’ from current production, meaning what a producer grows each year under the 1996 farm bill doesn't affect the amount of payment received by the producer. The provision is commonly known as planting flexibility.
“For example, the base acreage does not have to be grown in corn to receive the corn AMTA payment. In most cases, any commodity can be grown on base acreage with the exception of fruits and vegetables, in which there are special rules,” says Smith.
Peanuts, he adds, will have similar rules and payments with the establishment of a peanut base. Producers with a history of producing peanuts from 1998-2001 will be able to establish base acreage and a program yield for peanuts. Unique to peanuts, the producer with peanut base can assign it to a farm on his or on another landowner's land after which it become tied to the land.
The new farm bill, notes Smith, gives producers the option to update base acreage on the major program crops according to 1998-2001 planting history or retain current AMTA bases. Producers also can update program yields to be used in calculating counter-cyclical payments.
Thus, one of the first major decisions for Georgia producers, says the economist, is whether to update base production for major program crops or retain their current AMTA base production.
“Several farms have fewer base acres than acres farmed, thus updating to recent history likely is the best choice for these operations. However, a farm cannot have more base acres than owned acres. With the establishment of a new peanut base, it's possible some Georgia producers could end up with more total base acres on their farm than tillable land they own.