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Texas Agriculture Archive

March 15, 2002

Peanuts:
Quotas could be thing of the past

By Lana Robinson
Field Editor

The quota system for peanuts is likely to go by the wayside with the new farm bill, which proposes to replace the quotas with a new system of price support for peanut growers, much like programs for corn, cotton, and other commodity crops. Under the House-passed farm bill buyout plan, quota holders would receive 50 cents per pound in payments spread over the next five years. The Senate version provides 55 cents a pound.

According to George Caldwell, Texas Farm Bureau associate director of Commodities and Regulatory Activities, feelings are mixed because of the uncertainties of how it will work. Payments will be tied to the producer, not the landlord, so many quota holders are worried about the impacts, especially retired peanut farmers who rely on rents for income. On the other hand, most of those who are actually producing the peanuts like the idea of payments coming directly to them.

"The discussion of the April recess as being kind of a cut off date to make the farm bill timely for the 2002 crop is fast approaching, and unlike the other crops, which would retain similar programs structured with planting flexibility and loan rates—although the loan rates could be different—what's being proposed for peanuts is a dramatic departure from the past. The industry itself is divided. Some are wanting to move forward with a new program, and many in Congress are already wanting to do away with the quota program. This gives them the opportunity to do it, and it's going to happen," said Caldwell.

Critics of the peanut quota system say it's not fair for quota farmers to receive $610 a ton for peanuts while others have to settle for about $150.

Caldwell said the American Farm Bureau Federation peanut advisory committee met several times last year, and there was a divided vote regarding the issue.

"There was such a division even on our committee, that we did not take a position either to stay with the current system or have the buyout," Caldwell recalled. "The biggest division in Texas is that a lot of new peanut growing areas don't have much quota. Far West Texas, for example, has limited participation because they don't have enough quota. But yet, a lot of the older growing areas spent money over the years to accumulate it, or to own it. Also, a lot of these areas need the quota price to make the peanut price profitable in their areas that were in peanuts in times past. There is some concern it will lower their return on peanuts and make growing them unfeasible."

Caldwell pointed out that tariffs on imported peanuts are declining, as a provision of both NAFTA (North American Free Trade Agreement) and GATT (General Agreement on Trade and Tariffs), and headed toward total phaseout, which is already hurting the price of domestic peanuts due to oversupply.

James Neal, Jr., Frio County producer who serves as both chairman of the AFBF and TFB peanut advisory committees, agreed.

"It's real controversial. Some people are for it, and some against it. It's hard to say what our position ought to be. I've seen some figures, but I just don't know. The first five years, the way they are proposing, is not that bad because they are proposing to pay out on quota, too. But after that, it's gone. The other people present when we had the AFBF committee meeting last fall, from Georgia, North Carolina, Florida, New Mexico and Lousiana, which is a minor state, were of the opinion that the way the government wants to do it is going to put a lot of people out of business. They felt it would hurt too many elderly people because this is their only source of income. Their senator, Zell Miller, who serves on the agriculture committee, told producers that a change was coming and that's why he worked hard to get a quota buyout," said Neal, noting that the discussion at that meeting, as well as the TFB committee meeting in January, occurred prior to the Senate plan's release and was centered around the House proposal. "A lot of the people I've asked here in Frio County are satisfied with the program the way it was, but it appears Congress has made up its mind it's going to change it."

Neal said quite a few people around Pearsall, including some family members, still own quota and are leasing it out, but there are only six or seven producers still farming peanuts there, all irrigated. With the recurring droughts, he said no one can farm farm dryland peanuts anymore in Frio County.

"We're more fortunate than growers in some states. In Pearsall, we have three buying points still operating—Birdsong, Wilco Peanuts, from Pleasanton, and the other one, Golden Peanuts. In a lot of the counties, they've shut down all the buying points. Producers have to haul their peanuts 60 to 100 miles and have to pay the freight," Neal reported March 4.

In early March, Alton Billings, who grows peanuts near Seagraves, said Gaines County peanut growers seemed to be in favor of the program change.

"It sounds good on paper, and it will be helping those of us like me who grow lockout peanuts, or additionals.

I want it to go ahead and pass. It will be helpful to me. And I think the buyout is good. I've got some quota. I plant several circles and then some additionals on several hundred acres, and I also grow cotton," said Billings. "Actually, I haven't heard any opposition out here. The way we understand it, we may get some allotted acres out of the deal. We're hearing if you have planted 120 acres in the last four years on a farm, you could wind up with acreage base."

TFB's Caldwell said a big concern is how the base will be divided.

"People that have had quota may have leased it out or rotated to other farms for management purposes. As a result, they may lose part of the potential for base under the new program. There is supposed to be an adjustment period, but there are still a lot of question marks, and it's not real clear," he said.

Bob Whitney, Comanche County Extension agent, said growers in his region strongly support the buyout, and said so at a peanut growers meeting held in DeLeon, Feb.19, which drew 100 or more producers from as far as four counties away.

"Certainly, everybody here is for it. It's very much a win-win situation. In cotton, they did not buy them out at all. Congressman Charlie Stenholm was here for the meeting, and someone asked what they were going to do at the end of five years. He told them, `We're giving you 50 cents for your quota to help you find something else,'" said Whitney. " The only difference would be if we kept the quota system, the farmers are paying 50 cents up front, if you could sell it. This buyout is spread over 5 years. If they get a payment, how they treat it income taxwise is important. Guys with pretty good quota could excede the payment limitations."

At the meeting, Stenholm told peanut growers he was "90 percent sure" they would be operating under the same farm bill this year.

"The only things that's got bankers skittish is trying to tie up leases. The problem with leases, and tying up those leases and rents, has everybody shaking," said Whitney.