Changes in the peanut program, mandated in the Farm Security and Rural Investment Act of 2002, may knock many Oklahoma farmers out of the peanut business.

“The farm bill has just about KO'd peanuts in Oklahoma,” says Carlos Squires, Caddo County farmer and president of the Southwestern Peanut Growers Association.

Caddo County has long been among the leaders in peanut production and, at one time, had more quota peanuts than any county in the country; but shortcomings of the new program will force many farmers in Caddo and other Oklahoma counties to abandon peanuts on much of their acreage and look for alternative crops to take up the slack.

“Under the old program, we planted from 32,000 to 35,000 acres of peanuts a year,” says Squires. Acreage dropped to 26,000 last year, a significant reduction but perhaps not as big as it would have been had farmers known earlier what the new program would offer.

Squires says many farmers already had land prepared and materials ready to plant peanuts before the farm bill became law.

Squires expects a drastic drop this year. “If we don't get a contract of $425 per ton, we'll plant only about 15,000 acres of peanuts in Caddo County.”

He says much of the county's peanut acreage goes on “traditional peanut land,” fields that have produced peanuts for years, perhaps decades. Even with rotation, farmers still have to invest significant amounts in spray programs.

“A 3,000 to 3,200-pound per acre yield is about all we can expect on traditional acres,” he says. “Under the new program, farmers have to make at least two tons to come out.”

He expects farmers with new ground to plant peanuts. “They're about the only ones who can expect two tons per acre.

“We have only a few traditional acres with extremely good soil that can make two tons.”

The old peanut program guaranteed $610 per ton for quota peanuts. Non-quota peanut price guarantees were less than $200 per ton and profit depended on contracts.

Under the new program, peanut farmers have a guarantee of $355 per ton. That's loan value. The program includes a target price of $495 per ton, but producers would get no more than 85 percent of that.

Most growers, Squires says, use $355 per ton as the base to determine viability of planting peanuts.

He says no one knows yet how many farmers will abandon peanuts or cut back on acreage this year. “But we do know that $355 per ton will not cut it. If we get closer to planting time and buyers offer contracts at $425 per acre, acreage may inch back up.”

Squires doesn't anticipate the market making much of a jump, however. “Unless acreage across the peanut belt drops by a third, we don't anticipate higher prices.”

USDA National Agricultural Statistics Service figures released March 31 indicate a drop of 8 percent across the peanut belt.

Squires says farmers may qualify for a loan deficiency payment (LDP) if market prices drop below $355 per ton. “If prices drop to $325 per ton, for example, farmers would get a $35 per ton LDP to make up the difference,” he says.

Farmers may qualify for a counter-cyclical payment, the difference between the target price and market price, and a loan deficiency payment, without planting the crop. Some farmers may opt to take those payments and not plant,” Squires says.

“If farmers don't plant, they hope prices will stay cheap. For each dollar the market improves above $355 per ton the CCP drops a dollar.”

Squires says Oklahoma peanut farmers have to get back to a sound rotation program, at least two years out of peanuts, to improve yield potential.

“With a better rotation, we may get by with fewer in-season fungicide applications,” he says. “Still, we have to commit to making a crop; if we don't, we will not make enough peanuts to justify planting them.”

He figures cost of production at $500 per ton, not counting rent. “We have to make two tons per acre to cover costs and make a little profit. If we stub our toe during the season, we're in trouble.

“We need a higher target price, a price that makes peanuts affordable to grow.”

New Mexico farmers face a similar dilemma, says Floyd McCalister, Extension agent at Portalis.

“We planted 10,000 acres last year and I think we'll plant 7,000 to 8,000 this year. Some farmers around think acreage will be substantially less but growers don't have many options.”

McCalister says changes in the peanut support program hastened an acreage decline that started several years back.

“We have had as many as 14,000 acres of peanuts. Acreage dropped to 12,000 in 2001 and to 10,000 last year. I expect it to slip some more.”

McCalister says New Mexico farmers plant no dryland peanuts and, with increased energy prices, cost of irrigation will be significantly higher this year, which may influence more growers to look to another, less water dependent crop.

“Most farmers who are cutting out peanuts are switching to cotton,” McCalister says.

He says farmers can make cotton with less water but not necessarily less management. “We have to manage cCotton to make a crop,” he says. “We have good tools available, better than we had just a few years ago, but farmers still have to stay on top of things to make profitable cotton.

“Farmers have a lot of ifs with cotton. They have a lot with peanuts, too, but the ifs are not quite as strong. A peanut plant can take some weather stress and come on back. We'll see this fall just how things shake out.”

McCalister says growers, whether they choose cotton or peanuts, may have dry planting conditions.

“We were in good shape with moisture until February, but we haven't had any rain since,” he says. “We've actually been in a drought since 1989. And 2,000 was the worst year we've ever had.

Across the Southwest, acreage adjustments will depend on “where the farms are located,” says Dan Hunter, executive director of The Southwestern Peanut Growers Association. He says farmers who have fresh land, in West Texas, the Panhandle and West Oklahoma, for example, “feel like they can make peanuts work, even at the loan rate.”

Others, he says, may scrutinize their options a bit more.

Overall, he expects acreage across the Southwestern peanut region to hold close to last year.

“But some acreage will shift,” he says. West Texas and the Texas Panhandle will plant about the same as last year. Central Texas acreage will decline, but South Texas may add acreage.

“We also expect to see peanuts in new areas north of Lubbock, around Littlefield.”

Western Oklahoma may hold onto acreage. He agrees with Squires that farmers in the older peanut producing areas, Caddo County, especially, likely will cut back.

Hunter says changes in the peanut program, which dropped support payments from $610 per ton to a $355 per ton loan rate, account for some of the acreage cuts and shifts. He agrees that the two-ton benchmark serves as a good guide for farmers.

“If they consider the land they have available for peanuts and determine they can make no more than 3,000 or 3,500 pounds per acre, they may switch,” he says. “Producers who feel confident of making two tons will try to make the program work.”

Energy costs also will play a crucial role in planting decisions, he says. “Irrigation costs will be higher, as will fertilizer and tillage. Peanut farmers understand they can't cut corners and make 4,000 pounds of peanuts. Many are still looking at budgets and yield potentials to finalize planting decisions.”

Hunter says peanut producers face another new challenge with this crop. “They have to market it,” he says. “In the past, farmers had a guaranteed price for quota peanuts and they generally grew additionals on contract. Now, available contracts are considerably lower than the loan rate, so farmers have no incentive to sign anything.”

Since the farm bill altered the program, Southwestern Peanut Growers Association has offered a marketing pool. “We're trying to get growers the best price we can for their crops,” Hunter says.

“But under this program developing a market strategy will be essential for peanut producers.”

Hunter says growers he has contacted over the past few weeks express concern about base placement and payment limitations. “Payment limits are their biggest worry now,” he says.

He says producers who already had a peanut base have looked at acreage to determine the best place to put it for the 2003 growing season.

“But farmers who have had no peanut base and have been growing cotton, wheat, or corn have had to find a place for the peanut base and may have to rearrange operations a bit.”

In the Southeast, Georgia production may increase as much as 10 percent, but the North Carolina and Virginia acreage will drop significantly.

David Jordan, North Carolina State University Extension peanut specialist, says the number of acres in North Carolina could be 90,000. North Carolina farmers planted 100,000 last year and 122,500 in 2001.

“In Virginia, the numbers are as shaky as a rope bridge over a gorge,” says Southeast Farm Press associate editor Cecil Yancey. “Some say Virginia production could be off 35 percent from last year.”

That means approximately 37,00 acres in Virginia for 2003, compared to 56,997 acres last year and 58,000 in 2001.

Alabama acreage is expected to drop from 190,000 last year to 180,000, according to the National Agricultural Statistics Service (NASS). Alabama farmers planted 200,000 acres in peanuts in 2001. Florida peanut farmers will plant 110,000 acres, up from 96,000 last year and 90,000 in 2001.

NASS pegs Georgia acreage at 500,000 acres, down from 510,000 last year and 515,000 in 2001. Some observers expect Georgia acreage to increase as much as 10 percent.

New Mexico acreage will hold at 18,000, according to NASS, the same as last year but down from 22,000 in 2001.

Oklahoma planting is projected to be, 40,000 acres, down from 60,000 last year and 80,000 in 2001.

Texas projections indicate a 260,000-acre crop, down significantly from 315,000 last year and 425,000 in 2001. Again, state observers project acreage closer to last year.

In South Carolina, NASS estimates an 11,000-acre crop, up from 10,000 last year and equal to 2001.

The estimate for U.S. peanut production is 1,244,000 acres, down from 1,358,000 last year and 1,541,000 in 2001.

rsmith@primediabusiness.com