The House Agriculture Committee has completed work on a farm bill that would bring historic reform to the oft-maligned federal peanut program. The committee's bill terminates the decades-old marketing quota program and makes peanuts similar to other traditional program crops.

The current 60-year-old system of a guaranteed price for growers and the use of quotas to control production would be replaced by what is being described as a more “market-oriented” approach. Peanut growers would be eligible for payments and loans depending on their past production and on market prices.

In addition, quota holders would receive compensation for their loss.

“It's an entirely different concept, obviously, but it's one that we can pass,” says Rep. Saxby Chambliss, R-Ga., a member of the committee. “The quota system as we have known it over the last 60 years we just could not sustain.”

The peanut quota system has come under congressional fire several times in recent years. A new bill to end it was introduced in the House in June.

“We have designed a bill that provides our farmers with planting flexibility, payment predictability and necessary program reforms,” says Chambliss. “This is a well-rounded bill that will benefit farmers…across the country.

“We were given two options. We either take our chances and go on the floor of the House with a vote, and peanut farmers, if we lost, would walk away from there with no compensation. Peanut growers would run the risk of having no peanut program.

“Or we could come up with a good compromise that is market-oriented, directed toward our growers, while at the same time providing some compensation for our quota holders. We chose the second option. We weren't willing to take the risk, because the odds were stacked against us. We were not going to be able to sustain the current program.”

The current peanut program also has little support in the Senate, adds Chambliss. “Our colleagues on the Senate side just shook their heads when we started talking about continuing the program that we have today. They did not have the votes on the Senate side. As a matter of fact, the only senator on the Senate Agriculture Committee who stood up and supported the peanut program was Zell Miller of Georgia.”

But even as a new peanut program moves towards the House floor, various segments of the industry remain deeply divided over which approach they want from the federal government. Some are resigned tpo the change while others remain adamant in their rejection of the House committee's plan.

West Texas farmer James Martin says he would have preferred to keep the old program and the price guarantees that came with it. “But with GATT and NAFTA we knew change was coming,” he said. “This new program is one we can live with, if it stays close to what the House passed.”

Martin said a lot of details remain to be addressed before the program becomes law. “Proponents may run into trouble in the Senate.”

Martin fears that tapering by the Senate will dilute program benefits. “It's barely palatable as it is.”

Martin said scrapping the quota system likely will not encoutrage huge acreage increases in west Texas. “Some observers assume that we grow peanuts very cheaply out here,” he said. “And we don't have to use as many chemicals because of the low humidity, but we pay a big price for water. Moisture is the limiting factor for peanuts. Both cost and availability will limit expansion of peanut acreage.”

He said rotation also plays a key role in successful production. “Most farmers have rotation schedules set and the situation is not conducive to new growers getting into peanuts, especially if cotton prices bounce back.”

“I'm very disappointed in it,” says Wilbur Gamble. “It's a total disaster for my area of the country.” Gamble is a southwest Georgia peanut grower who heads the National Peanut Growers Group, a coalition of organizations that favors keeping the quota system. He also serves on the Georgia Peanut Commission, which has supported the plan passed by the House committee.

A group of Georgia peanut growers, including Gamble, has held rallies and placed advertisements in newspapers and on television in support of the quota system and price support program.

“Our peanut delegation needs to understand that the farmers are not on the same page about eliminating the peanut quota program. They are upset, but no one in leadership seems to be listening. It may be too late, but we've been sold a program that will destroy what few family farms we have and ruin this part of the country,” says Gamble.

Other growers and commodity group representatives view the committee's peanut program as the best possible option considering the current political climate. “Like most other commodities, we would like to have had a blank piece of paper and written new policy ourselves. However, considering political realities and trade policies, we feel we have a very strong program,” says Carl Sanders, a grower and president of the Alabama Peanut Producers Association.

The House committee's version of the peanut program bears little resemblance to the current program. Specific changes include phasing out the current peanut quota system over five years, and providing quota holders with a 10-cent-per-pound buyout for their quota peanuts over the five-year period.

Another major change creates a marketing loan structure for peanuts, whereby the U.S. government guarantees growers a $350-per-ton market loan payment, while setting the domestic peanut target price at $480 per ton. In addition, growers would receive a $36-per-ton fixed decoupled payment.

Counter-cyclical payments are triggered when a crop's price, adjusted for the fixed decoupled payment, is below the target price. The payment rate for a crop would be calculated as the difference between its target price and the sum of the national average loan and the fixed decoupled payment rate.

Payment limits are set at $50,000 for the fixed decoupled payments, $75,000 for counter-cyclical payments, and $150,000 for market loan gains and loan deficiency payments.

Chambliss warns there is no guarantee that quota holders will be compensated for their loss. “This is not a done deal. We are working very hard to ensure this bill does become the final product and that our quota holders are looked after. Right now, we can't guarantee they'll get anything for their quota, but I'm confident we can.”

phollis@primediabusines.com