Producers are finding a cotton-on-the-one-hand and peanuts-on-the-other-hand scenario as they head to the local Farm Service Agency offices and consider updating bases. On one hand, there's the potential value of cotton and peanut base. On the other hand is the question of how to benefit from one without eliminating the other.
It should come as little surprise that maximum direct and counter-cyclical payments for peanuts and cotton have the most potential for Southeast producers over the life of the new farm bill. Producers can receive as much as $110 per acre for cotton; for peanuts, the number is as much as $149 per acre.
It comes down to, “how can I protect two potentially valuable bases without eliminating the other?”
Already a market for peanut base has developed.
In North Carolina, the talk has shifted to economics of choosing between two equally profitable options.
At a meeting in Martin County in late January, Blake Brown and Gary Bullen, North Carolina State University Extension ag economists, reviewed the new farm bill and talked about how to take advantage of peanut base without eliminating cotton base.
Brown encouraged the growers in Williamston, N.C., to think of updating base like applying for a loan over the next five years.
For example, if the national market price for peanuts is $355 per ton at a 3,000-pound yield over the next 10 years at a 20-percent discount, then peanut base would be worth $498 per ton, or 25 cents per pound of base. Cotton at 58 cents per pound would be worth $321.26 per acre of base, figured on a 20-percent discount. “Under this scenario, I could afford to take 13.5 cents for peanut base in order not to have to eliminate cotton base,” Brown says. In order to have base on a farm, you have to have the land available, he points out.
In his presentation to farmers, he plugs in different numbers to emphasize, “We don't know what prices will do over the life of the farm bill,” Brown says. If cotton were 65 cents per pound, you would need at least 20 cents for peanut base.
“The decision here is to try to avoid deleting cotton base,” Brown says. “What you're doing is you're trying to capitalize a stream of income just like a loan payment.
“We can run these numbers and put in all kinds of ‘reasonable’ guesses, but the value for peanut base will fall from 15 cents to 25 cents per pound,” Brown says.
“If you can get 15 cents or 20 cents for peanut base, that's better than deleting cotton base,” Brown says.
He's encouraging producers to “be creative when it comes to peanuts. This is your one-time opportunity to get something out of the peanut program besides quota compensation.” Some farmers are willing to assign their peanut base to someone else's farm in return for a favorable rental arrangement. He points out that rental agreements should be in writing if you decide to assign peanut base to another landowner.
“If you've got cropland to put peanuts on without deleting cotton, do it,” Brown says. “The tricky part comes if you have to delete cotton to have room for peanuts.”