The new peanut program proposal, as contained in the U.S. House-approved Farm Security Act of 2001 — would benefit both farmers and consumers, according to a recent report from the government's General Accounting Office (GAO). The GAO report was requested by U.S. Representatives Christopher Shays (R-Conn.) and Paul Kanjorski (D-Pa.), both critics of the current peanut program.
The new plan, which eliminates quotas, drops the price support from $610 per ton to a guaranteed $350 per ton market loan. With a target price of $480 per ton, the difference would be paid by the government if growers are unable to sell their peanuts for more. The proposal also would pay growers 10 cents per pound per year for the years 2002-2006 for the lost value of the quota.
All farmers could benefit from the proposed program, reports the GAO, with quota holders receiving an increase of $41,063, additional growers receiving an increase of $41,063 and new producers receiving an increase of $27,250 over the current program.
Shellers, manufacturers and the general public would pay less for domestically produced peanuts because the proposed legislation would eliminate the $610 per ton quota price, which is substantially higher than the estimated $321 to $462 per-ton world price over the past 15 years.
The GAO report finds that producers of additional peanuts with base production on 100 acres would be guaranteed $16,500 per year under the existing program compared with $57,563 under the proposed bill. Additionally, quota producers with base production on 100 acres would be guaranteed $76,250 per year under the existing program compared with $82,563 under the proposed bill.
But while consumers and farmers benefit from the proposed program, government costs would increase, according to the report. The House proposal would provide direct government support payments to U.S. peanut producers. The Congressional Budget Office estimates that these direct support payments would cost $3.5 billion over the next 10 years. The cost estimate includes counter-cyclical and fixed, decoupled payments, marketing assistance loans and the buy-out payments for the lost asset value of the quota.
“I am pleased that the GAO report is favorable toward the House version of the 2002 peanut program,” says Armond Morris, chairman of the Georgia Peanut Commission. “I believe the marketing concept program will be beneficial to more farmers, and the GAO concludes that belief.”
Shays told reporters, “The GAO report confirms that we're getting rid of a system that was truly restrictive and contrary to a market philosophy. It's going to cost the government money, but you're going to reduce the price of peanuts.”