Congressional hearings held recently on the government's peanut program only served to highlight the deep division between two major groups of grower representatives — one proposing a marketing competitiveness program and the other espousing a marketing loan concept.
Also on hand for the hearings were two congressmen — Rep. Paul Kanjorski (D-Penn.) and Rep. Christopher Shays (R-Conn.) — who advocated phasing down the support level for quota peanuts over three years and eliminating it completely in 2004.
The hearings, held before the House Agriculture Committee's subcommittee that oversees the peanut program, could have a profound effect on the future of U.S. peanut production. The goal of committee Chairman Larry Combest (R-Texas) is to have a complete agriculture bill to the full House by August.
The peanut program began about 60 years ago, and the latest version was part of the 1996 farm bill. Under the current system, the government determines the annual national demand and sets production limits for farmers in the program. Farmers who hold quota basically are guaranteed $610 per ton for their peanuts.
The various grower groups agree that imports pose a threat to U.S. peanut production, and they agree that some type of government support or protection is needed. They disagree, however, on how a new peanut program should be structured.
Quick action urged
Subcommittee Chairman Terry Everett (R-Ala.), a part-time peanut producer, urged the two grower coalitions to come together quickly. Everett said he was disappointed that growers were unable to reach a compromise, and he encouraged producers to continue working to negotiate one program.
“The government peanut program is absolutely necessary to U.S. producers,” testified Dykes Adkison, an Elba, Ala., farmer representing the National Peanut Growers Group (NPGG). “U.S. producers are dependent on the program and, in turn, so are the hundreds of rural communities that are supported by peanut growing families and support industries associated with peanut production and marketing.”
The NPGG is made up of the following organizations: Alabama Peanut Producers Association, Georgia Agricultural Commodity Commission for Peanuts, GFA Peanut Association, Georgia Peanut Producers Association, Texas Peanut Growers Association, Southwestern Peanut Growers Association, Oklahoma Peanut Growers Association, Virginia Peanut Growers Association, North Carolina Peanut Growers Association, Peanut Growers Cooperative Marketing Association, New Mexico Peanut Growers Association, South Carolina Peanut Board and the Florida Peanut Producers Association.
All of these groups, however, have not endorsed the NPGG's marketing competitiveness proposal. Representatives of the Georgia Peanut Commission, the Georgia Peanut Producers Association, the Florida Peanut Producers Association, the Western Peanut Growers Association and the Panhandle Peanut Producers have endorsed a marketing loan concept.
Reliable supply needed
Adkison also told the House Agriculture Committee's Subcommittee on Specialty Crops and Foreign Agriculture Programs, “Consumers and manufacturers also are dependent on a program that provides a safe, economical supply of peanuts.”
U.S. peanut marketing is dominated by “very big business,” said Adkison, with six multi-national, billion dollar corporations purchasing 75 to 80 percent of all peanuts used domestically.
“How much marketing ability does a small family farmer have in this situation?” he asked. “The clear answer is: very little, without the peanut program. We are deeply dependent on this program.”
There also are “strong benefits” to consumers, Adkison noted. “Because to receive benefits, producers must provide a consistent supply of peanuts and comply with one of the strictest quality programs in agriculture. This steady supply has held prices in check and has avoided the ‘boom and bust’ cycle that has plagued other commodities.”
The current farm program has not been kind to peanuts, he said, costing producers 10 percent of the support price they received previously, a loss of millions of dollars in income, and a support price that has been frozen since 1996.
And, Adkison pointed out, there has been essentially no benefit to the consumer, since the price of peanut products has risen since 1996.
Market loss payments
He recommended, short-term, that peanut producers receive market loss payments, as has been done for the past two years, and that consideration be given to doubling those payments this year. “It is only in this manner that economic losses faced by peanut farmers by current policy can be offset.”
Long-term, Adkison said, peanut producers realize the political realities in Washington, “and the National Peanut Growers Group has voted to favor a marketing competitiveness option that would make U.S. peanuts competitive with imports, and at the same time offer consumers a product with no domestic price disadvantage.”
Under the NPGG proposal, the support rate for the producer would be 39 cents per pound or $780 per farmer stock ton. Handlers would buy daily from a determined world price of about $500 per farmer stock ton or 25 cents per pound. The government would pay the difference or about $336 million per year.
“In addition to providing the farmer a cost of production-adjusted support rate, the processor would be buying on quality and delivery,” said Adkison. “There would then be no price incentive to purchase foreign peanuts, and it would reduce the need for tariffs that currently are being reduced under trade agreements.”
Because of losses growers have suffered since 1995 as a result of government budget cuts and frozen loan rates, Adkison said his groups supports a farmer stock support rate of 39 cent per pound and a cost of production adjustment provision that would be adjusted annually at a rate of not less than two percent, using the Consumer Price Index.
And, he added, peanuts grown for export should be allowed to move into the domestic market if a shortage should occur.
The marketing competitiveness program, said Adkison, would enable producers to stay viable and keep up with the cost of production while maintaining the base structure of the peanut program with more flexibility and competitiveness.
Marketing loan concept
“We recognize the investments in quota over the years and have sought a remedy to protect those investors,” testified Doyle Fincher, president of the Western Peanut Growers Association. “Our highest priority is the future of the industry. We will gain back the consumption lost to imports and at the same time will be more competitive in the peanut market.”
Fincher was speaking for the grower group coalition endorsing a marketing loan concept. It was noted during the hearings that the marketing loan program also was backed by shellers and manufacturers — the first time in the history of the peanut program that growers, shellers and manufacturers all have agreed on one proposal.
According to a statement released earlier by the grower group coalition, “Trade initiatives, beginning with the North American Free Trade Agreement, have begun to erode the traditional protections for the domestic peanut program. NAFTA's provisions have set the stage for the decline of the peanut program's sustainability. Under NAFTA, the buffers of Section 22 were supplanted with tariff rate quotas that gradually are being reduced and will be eliminated entirely in 2008.
“In addition, the ability of third world countries, such as Argentina, to export peanuts and peanut products to the United States has been increased as a result of the Uruguay Round Agreement.
“If the Free Trade Area of the Americas (FTAA) agreement moves forward, it will enhance opportunities for peanut-producing countries to increase markets in the United States. We believe the potential impact of the FTAA goes far beyond past trade agreements in consequences for the U.S. domestic peanut market.”
The marketing loan policy proposal, says the group, invests in the future of the peanut industry and provides for those who have spent a lifetime investing in peanut policies of the past.
“We support a marketing loan program for peanuts similar to the marketing loan program for the major crops. This includes a non-recourse loan at a rate of $500 per ton, which would be available to all peanut producers. This is a substantial reduction from the current support rate for peanuts of $610 per ton, which is effective for the 1996-2002 crops and the 1995 rate of $678 per ton. We believe the marketplace can sustain a price at this new level without a substantial increase in production,” according to the group's statement.
This marketing loan program, states the group, would make U.S. producers competitive in the world marketplace. “Our producers now will have an opportunity to recapture most of the 20 percent of the domestic market lost to foreign competition since agreement was reached on NAFTA, and develop a competitive export market. The increased demand for U.S. peanuts, domestically and in the export market, should effectively offset increased U.S. production.
“Because of the significant decrease in the price of peanuts, we request the Committee to consider an annual escalator based on the cost of production that would be applied to the marketing loan rate. This would be tied to the consumer price index with a maximum increase or decrease of two percent per year of the total loan rate.
“Our organizations discussed, at great length, the importance of limiting government exposure. Although it is important to allow the growth and expansion of the U.S. peanut industry, we recognize the fear of over-production and are willing to discuss options that would alleviate any concerns. The annual program costs established during GATT by USDA were $347 million for the peanut program. The Committee may want to consider giving the Secretary discretion in limiting costs if program costs exceed $350 million annually. If limits are applied, USDA should implement a base system established using a history of peanuts produced and considered produced.”
To accomplish the objectives of the program, according to the group's statement, the marketing loan should not be subject to any payment limitations; or, a commodity certificate program, similar to the program in effect for other commodities, should be made available to peanut producers so as to minimize forfeitures and encourage the orderly marketing of peanuts pledged as security for loans.
“In addition, we support an annual de-coupling payment to quota holders of 14 cents per pound. Since these payments would be decoupled from production, they would not be subject to any WTO constraints. For purposes of the transition payment, the quota should be held at the 2001 level for the life of the bill. There should be no payment limitations that would apply to these payments.”