Position Paper for FPF 2018 Farm Bill – FPF supports the following provisions for peanuts
- Continue the marketing loan program with the $355/ton loan rate for peanuts.
- Continue the separate payment limit for peanuts.
- Continue storage and handling payment for forfeited peanuts.
- Eliminate the 2014 Farm Bill provision that allows former cotton base (generic base) to qualify for a peanut PLC or ARC payment.
- Make the PLC or ARC payment available for all active peanut producers based on a $535 reference price with a base update using crop years 2009-2012.
- The peanut marketing loan program has worked effectively since its inception in 2002. Growers have a marketing window of 9 months to sell their crop after receiving a marketing loan. The loan rate of $355 does not encourage over-production but it does provide enough liquidity to allow producers to wait for the best marketing opportunity. The marketing loan also allows for shellers to purchase the crop as they have sales for the shelled peanuts. The marketing loan is repaid with interest thus minimizing costs to the treasury.
- Peanuts are a unique crop requiring specialized equipment. To harvest the 1.6 million acres of peanuts grown annually in the U.S., farmers must have diggers and pickers that are very crop specific, thus making equipment investment cost very expensive. Peanuts have only a small fraction of the acres planted to all crops. Without separate payment limits, many peanut farmers would not benefit from the safety net established by the Price Loss Coverage (PLC).
- Peanut storage is another unique feature of this industry. Large barns utilizing belt conveyors store the crop while awaiting sale and delivery to the sheller. Peanut storage is too expensive for most farmers to build on their individual farms, so usually storage is provided by the buying point and charges accrue to the grower. When the grower sells his crop, the buyer pays those accrued storage costs. If the peanuts are forfeited, storage and handling charges are then paid by the Commodity Credit Corporation (CCC). If these costs were not covered, the grower would face economic pressure to sell his crop as his loan neared maturity. The small number of forfeitures throughout the fourteen years of this program has resulted in very low costs to the CCC for storage and handling, yet the backstop support for storage and handling costs has resulted in millions of dollars to the growers as a result of their ability to negotiate price without duress.
- As of 2014, there were 1.97 million acres of peanut base in the United States. In the crop years 2014-2016 the U.S. averaged planting 1,536,000 acres per year or 434,000 less acres than base. Approximately 56% of these plantings have been on generic base acres. On average, approximately 2/3 of the peanut base acres have not been planted since the inception of the 2014 Farm Bill. Since the unplanted peanut base acres are also eligible for program payments, the number of acres eligible for peanut program payments has increased from the peanut base level of around 1.96 million acres to over 2.6 million in 2014 and more than 2.9 million in 2016. In 2014 and 2015 combined, over $1 billion in PLC and ARC program payments went to producers with peanut base acreage and generic acres attributed to peanuts.
- To maintain stability in the marketplace, FPF supports a peanut program with a support payment (PLC or ARC) when the market price falls below the cost of production. FPF supports, for all active producers, a reference price of $535/ton with a base update using crop years 2009-2012.
1 University of Illinois FarmDoc Daily (4-20-17) farmdoc daily (7):73, Department of Agricultural and Consumer Economics, University of Illinois at Urbana-Champaign, April 20, 2017 http://farmdocdaily.illinois.edu/2017/04/have-generic-acres-impacted-planting-decisions.html AND National Ag Statistics Service (NASS), USDA. Planted Acres and Average Price Received (MYA) for Peanuts. https://quickstats.nass.usda.gov/