As the USDA continues to reveal details of the new peanut program, commodity groups such as the Georgia Peanut Commission have been quick to criticize certain provisions of the new plan. The government recently announced several features of the new program, including marketing program loan rates, the weekly national posted price and disposition of last year's crop still in storage.
The USDA has set loan rates for the four types of peanuts produced in the United States as follows: Runner peanuts — $355.72; Spanish peanuts — $337.20 per ton; Valencia peanuts — $353.66 per ton; and Virginia peanuts — $353.66 per ton.
The USDA also announced national posted prices applicable immediately to the four types of peanuts. Runner peanuts were valued at $373.72 per ton, Spanish peanuts at $355.20 per ton, Valencia peanuts at $371.66 per ton and Virginia peanuts were valued at $371.66 per ton.
The national posted price will determine loan repayment amounts when the price is below the loan rate. The price for each of the four types will be updated each Tuesday at 3 p.m. EST to reflect new transaction information available from the previous week.
Due to the large quantity of peanuts remaining in storage to be exported, Secretary of Agriculture Ann Veneman, says the USDA will extend the export disposition date to March 28, 2003, when all exports must be completed.
The Georgia Peanut Commission, meanwhile, has criticized the new loan repayment rate and the extension of the export deadline, saying the new provisions will destroy the export market for peanuts.
The loan repayment rate does not take into account peanut prices of U.S. producers' competitors in the world marketplace, according to commission officials.
The farm bill directed the Secretary of Agriculture to set a loan repayment rate that would meet four criteria; to “minimize potential loan forfeitures,” to “minimize the accumulation of stocks” by the government, to “minimize the (Government) cost incurred in storing peanuts,” and to “allow peanuts produced in the United States to be marketed freely and competitively, both domestically and internationally.”
“I am disappointed that provisions calling for a loan repayment rate that will allow peanuts to move freely into the international marketplace have been ignored by the USDA. Under their present direction, they will destroy our ability to compete in the export market. And, once that market is lost it, will not be easily regained,” says Armond Morris, commission chairman.
Exports account for nearly 30 percent of commercial peanut handling. The new farm law was designed to enhance this number as well as reduce the U.S. dependency on imported peanuts. The USDA policy for setting the repayment rate has priced U.S. peanuts at levels that are far above the prices being offered by competitors such as Argentina and China, says Morris.
“The Administration has created two opposing sets of rules for peanut producers. On one hand, they have advocated Trade Promotion Authority, saying that it is necessary for advancing free trade, while now they are telling us that they are going to destroy our export market for peanuts,” adds Morris.
Trade Promotion Authority is a provision which allows the President to negotiate trade treaties and bring them back to the Congress for approval with no opportunity for Congress to amend the treaties.
“This is going to be a disaster because they are going to destroy the export market for us with this new loan repayment rate and by extending the export deadline,” says Don Koehler, executive director of the peanut commission.
“They are also going to glut the domestic market by forcing peanuts that otherwise would have been exported into that market. Prices will fall through the floor, and edible peanuts will end up being forfeited to the government. Those peanuts may end up being crushed for oil instead of being used in candy, peanut butter and roasted nuts,” says Koehler.
Current domestic demand numbers indicate that the consumption of peanuts from domestic production is about 1.2 million tons. Export demand is about 400,000 tons. The loss of the export market would force 400,000 tons of peanuts to try to find a home in the domestic market, which would take a 33 percent increase in consumption, he says. Current peanut consumption trends have been increasing at about 2 to 3 percent annually.
“We have met with USDA and made our case but it appears they are determined to manipulate the market rather than to let it function based on the premise of supply and demand. In the end, farmers and taxpayers will be the big losers. Our fear is that peanuts will move to the loan, costing the American taxpayer versus being sold in the export market as this program was designed to function,” says Koehler.