It is clear from growers attending the annual Southern Peanut Growers Conference in Panama City Beach, Fla., that contract pricing, lower loan guarantee rates, assignment of crop base to growers not land owners, and status of handling and storage fees will determine whether some long-time peanut producers will grow peanuts in 2007.
The outcome of the 2007 farm bill, currently under debate, will answer a lot of questions for peanut growers from Texas to Carolina. Whether the answers will allow many of these growers to stay in business is hanging in the balance.
As was the case during debate of the 2002 farm bill, peanut growers find themselves in the crosshairs, caught in situation where there are too many peanuts and not enough dollars. Unlike 2002, the U.S. government is in a budget deficit, rather than a surplus. In fact, dollars are so short current farm bill programs may have to be cut before the new legislation is passed and financed.
Critical to many growers is continued support for storage and handling. Whether the 2007 farm bill with provide a long-term continuation of these payments is uncertain. Whether payments will continue under the current program is not a guarantee.
Florida grower Michael Davis says, if farmers are required to pick up the cost of storage and handling, it will push prices to $300 or less, and under such conditions, he would not grow peanuts next year. Other members of a Grower Panel, which presented their input for the 2007 farm bill, offered similar dire predictions for peanut growers.
John Harrell has grown peanuts on his farm in Whigham, Ga., since 1974. He says, “in 2002, we had just come off several consecutive years of drought-plagued poor crops, we were about to lose the peanut program and things looked bleak. We had to change and we did. Now, we are a hiccup away from a different farm crisis that will take many farmers out of business,” Harrell states.
U.S. Congressman Terry Everett, (R-Ala.) stressed to growers, shellers, buyers and all involved in the peanut industry to stick together. He stresses that current budget deficits will make it tougher to maintain current funding than in the past and very unlikely there will be any increase in government spending for any agricultural programs.
Everett points out that since the 2002 farm bill was enacted peanut production has gone up across the Peanut Belt. Losses in acreage in traditional peanut producing areas like southern Virginia and part of the Wiregrass area in Alabama have been more than offset by increases in areas in which peanuts have never been grown.
Despite negative media attention related to peanut allergies, there has been an increase in domestic peanut use by 32 percent over the past five years. In that same time frame, U.S. imports of peanuts dropped from 72 metric tons to just over 12,000 metric tons.
While some are pushing for a continuation of the 2002 farm bill because of the ongoing WTO negotiations. Congressman Everett disagrees with that direction for two reasons: “I think conclusion of the DOHA round of the WTO and finalizing a comprehensive trade agreement is highly, highly unlikely anytime soon. Secondly, the chairman of the Ag Committee is planning to push the 2007 farm bill to the White House by late 2007,” Everett says.
When asked whether there was support among farmers to continue the present farm bill, Alabama grower Myron Johnson, sided with Congressmen Everett. “Stay the course was probably a popular phrase on the Titanic, it didn't work for the people on that ship and it won't work for peanut growers,” Johnson says.
Congressman Everett points out that when the 2002 farm bill was passed the Federal government had a budget surplus. When, the 2007 farm bill comes up for consideration the budget deficit will likely be more than $300 billion.
Unless the situation is corrected, the Congressman says current budget shortfalls will force peanut growers to pay handling and storage fees. For farmers like Davis and Myron Johnson, who farms near Dothan, Ala., that may be the kiss of death for peanuts.
Johnson says after the 2005 crop, he looked at the Katrina aftermath and other factors that convinced him that 2006 would be a turning point in peanut production. He sold about two-thirds of his peanut equipment. “The government and the American public have to step up to re-establish pride in farming. Agriculture is one of the principles on which America stands and farmers should be in a position to make a living, instead of standing in line for a hand-out in the form of subsidies and price support.” Johnson says.
Tracy Welch, who grows peanuts in west Texas, says another critical issue for the 2007 farm bill is whether cotton and peanut loan values are combined. In Texas, he points out, most peanut growers are large cotton farmers. If cotton and peanuts are thrown in together, it will kill peanuts, Welch says.
Ted Higginbottom, who represents west Texas peanut growers, says his farmers would like to see a continuation of the 2002 farm bill as it is being administered in 2006, with the understanding that storage and handling cost continue to be paid.
“In 2005, we saw what a small blip on the pricing situation can do to peanut acreage. The 55,000 acre drop in peanut plantings in Texas in 2006 was due almost entirely to price, not to dry weather,” Higginbottom says.
For peanut growers to stay in business beyond the 2006 season, Higginbottom contends, the current or next farm bill must address the repayment rate and storage and handling costs. Without a positive, permanent solution to those issues, there may not be a peanut industry in this country, he says. To avoid destroying the peanut industry, he says, all the different segments must speak with one voice — unity is the answer.
Bob Redding, whose law firm represents the Georgia Peanut Growers Association and Southern Peanut Farmers Federation, says the sugar industry is a good model to copy. All the different components of the sugar industry, from sugar beet to sugar cane growers to buyers and processors work together. Different factions of the peanut industry have not always done that, Redding says.
Larry Cunningham, who represents the National Peanut Buying Points Association, says there are five critical issues which must be addressed in the 2007 farm bill for the peanut industry to survive:
Storage and handling cost must be set in law.
Repayment rate must be set at a level to allow U.S. peanuts to be competitive in a world market.
Buying points must be identified and defined as a part of the peanut industry.
New grading procedures and other technologies must be allowed to be implemented without waiting for a new farm bill.
A fuel cost surcharge must be implemented to protect quality of a peanut crop.
Jimmy Dorcette, who represents the American Peanut Shellers Association says peanuts must be more competitive, not just with other countries, but also with other U.S. grown commodities. He contends the peanut industry lags behind other commodities in developing new varieties, biogenetics, and other areas in the technology of growing peanuts.
The dilemma the peanut industry faces today is different than when the 2002 farm bill was being debated, but in some ways conditions are more dire now.
Georgia grower John Harrell says with this country's cheap food policy and without payments he is receiving from the government, he would not be farming. As long as lending agencies will finance crops, we can stay in business, but that's based on land equity, but the land is becoming so valuable, it's hard for a farmer to own it and farm it, he says.
“We have to have some policy that places a value on the crop grown on the land, not just the land value. Otherwise, we will all become landlords first and farmers second. And, many of us won't be able to stay in farming,” Harrell contends.
With a total drop in acreage in peanuts planted from 2005 to 2006 of 357,000 acres, peanut production is clearly on a downward slide. With the potential increase in production due to loss of critical herbicides to weed resistance, increasing fuel and fertilizer costs, and urbanization pushing land prices to record levels, the 2007 farm bill will be a determining factor on how the peanut industry survives.