What is in this article?:
- Peanut Futures: Peanut program evolution pushes exports to forefront
- Growth opportunities in exports
- The evolution of the federal government’s peanut program has been a game changer as far as exports are concerned.
THE EVOLUTION OF the U.S. government’s peanut program, from quota allotments to more of a market-oriented approach, has increased the importance of exports to the overall health of the industry.
The evolution of the federal government’s peanut program – from a supply-control program that restricted production through quota poundage allotments and a two-tiered pricing system to a more market-oriented program – has been a game changer as far as exports are concerned.
“So the big question is how can we increase exports? Because they are our future,” says Don Koehler, executive director of the Georgia Peanut Commission. “Exports represent the growth that we’ll have in the market, because we have a mature market in the United States.”
Peanut Futures: Marketing for Profitability, an exclusive editorial series sponsored by DuPont Crop Protection, examines recent developments in U.S. and international peanut markets. This is the third story in the series.
Koehler says that “old program” mentality too often destroys opportunity in the U.S. peanut industry, referring to the peanut quota program that was phased out with the 2002 Farm Bill. “As an industry, we’ve still got a lot of that old program mentality, but we’re seeing less and less of it, and that’s good for us,” he says.
The peanut quota allotment program had been in place since the 1930s. Quota assigned to farmers was limited to domestic use only while additional were used for export and crush. The program began as an acreage allotment and then changed to poundage allotments in the late 1970s. Quota was based on historical production, and there was no movement of acreage across states and limited movement across county lines.
The quota program, says Koehler, managed supplies to levels that were tighter than they needed to be.
“There was no opportunity for growth in the old peanut program. We knew what consumption was, and that’s what the quota was – that’s just how it worked. The cost of production escalator actually rewarded inefficiency, because if the cost of production increased, then the support price increased.
“Over time, the quota itself had a value that was greater than the peanuts. There were folks who were renting quota and were not growing peanuts, and they did well with that.”
Koehler says he admits that he was a champion for the peanut program because it seemed to work and it paid a lot of mortgages on the farm. But for any cause, he says, there has to be some effect.
“Quota ended up being a big part of the costs for farmers. We had people paying up to $200-plus for quota just to be able to participate in the program, and the escalator allowed farmers to be a little lax on managing their costs. The domestic market was ‘the’ market – no one was really concerned much about the export market. Exports were an after-thought for additional peanuts (peanuts sold in excess of the quota).”