Under a new peanut program, production in North Carolina and Virginia is likely to move east, says a North Carolina State University Extension ag economist. And, it's reasonable to expect a premium for Virginia-type peanuts.
Whether that's 2002 or 2003, the debate rages on at presstime. If the current program stays in place, Virginia-type growers are in good shape because of the small amount of peanuts in the government loan.
Much like the 1996 farm bill pushed production from central to west Texas, peanut farming in the V-C region will move to areas where cost of production is lower and yields are potentially higher, says Blake Brown, North Carolina State University Extension ag economist.
“Overall, it's hard to tell what will happen,” Brown says, “but a number of farmers could exit production since Virginia-type peanuts are more expensive to grow and require more management than runner-type peanuts.” It's equally unclear if production will increase. Those who remain will likely be growing for a premium price.
To gauge where peanut production will move under the new program, look to the east, Brown believes. Price is the wild card in the mix. Because Virginias may fetch a premium, it's likely that production will move to already-productive areas, as well as new production areas farther south and east.
Counties such as Gates, Martin, Bertie and Chowan in the northeastern part of North Carolina could gain acres.
Certain areas of counties east of here, ones traditionally with more quota, but also with higher production costs and lower yields, could lose acres, Brown says. He predicts acreage could move out of some parts of Halifax, Northampton and Edgecombe counties into the “Blacklands” of North Carolina. “Some parts of these counties (Halifax, Northampton and Edgecombe, for example) may not be as competitive out of the current program.
On the other hand, “Pitt County would be a likely candidate to increase acreage,” Brown says. He believes the same movement of acreage could happen in Virginia — from west to east.
To a large degree, cost-per acre will dictate if peanuts stay in an area or leave for less-expensive environs, Brown says. Low production costs tend to fall to the better “peanut land.”
On the average, it costs $450-$500 a ton to grow Virginia-type peanuts in North Carolina. “We have some producers who spend around $500 a ton to grow peanuts — many fall in the range of $450-$500,” Brown says.
Under a new peanut program, peanut farmers who spend above $500 a ton to grow peanuts won't be able to survive, Brown says.
“I don't know how producers can do anything else to reduce production costs,” Brown says. “There's not a lot more they can do to become more competitive.”
Brown also points out that shellers are still trying to figure the role of west Texas in Virginia-type production.
Brown sees more contracts for Virginia coming under the new program. He also believes shellers will have to give some kind of assurance of premiums.
“For runners, like they grow in Georgia, the price will probably be close to or at the new-loan rate of $350 a ton,” Brown figures. “Virginias, on the other hand, will require some type of premium paid above the loan rate. For Virginias, there will have to be more contracting by the shellers, so they can assure themselves of a stable supply.
“Shellers will have to offer enough incentive for growers to raise Virginia-type peanuts,” Brown says.
In the case of runners, Brown isn't sure that a contract will even be offered, because the price could be at or near the loan rate.
“We will have to wait and see in regard to prices,” Brown says.
The Senate and House versions of the new peanut program set the loan rate at $350.
Producers, as well as shellers, in the V-C area “really haven't known what to do this year,” Brown says.
“Now, as it becomes more likely there will not be a new farm bill in 2002, that at least gives producers a starting point — assuming they will operate under the old program one more year,” Brown says.
“This is a huge change,” he says. “It's created an awful lot of uncertainty between shellers and farmers.
“Another year to figure out these changes would be great,” Brown says.
While the pools are no longer needed under the new program, they may have a role to help the government with storage of peanuts, Brown predicts.
When the new program does arrive, it will create structural changes.
The largest change for growers in the V-C area may be a shake out of acreage from higher-production cost counties to counties that have traditionally had higher yields at lower costs.
“Fairly productive peanut land may see an increase,” Brown says. “The main difference in a switch of programs is that the higher-cost producers with lower yields won't be able to survive under the new peanut policy.
“This, and the probable premiums for Virginia-type peanuts will move acres to lower cost counties,” Brown says.