Changing the current peanut quota and support system into a loan rate that mirrors other crop programs could put Oklahoma peanut farmers out of business, according to a Caddo County, Okla., farmer.
“A $450 per ton loan rate would cause economic disaster for our farmers,” says Carlos Squires, president of the Southwestern Peanut Growers' Association.
“If the escalator clause is not reinstated, the program is doomed to fail, along with the farmers it is supposed to benefit.”
Squires says Caddo County is the largest peanut quota-holding county in the nation. He says under the current program, the $610 per ton support barely covers production expenses.
“But costs continue to increase. In 1999, production expenses were estimated at $664.91 per acre, a $104 per acre jump form 1998. At that rate, growers have to produce 2,180 pounds of peanuts per acre to break even.”
He says costs for the 2001 crop will be even higher because of increased natural gas prices, which affect irrigation, fertilizer and equipment operation expenses.
Knocking support rates down to $450 per ton would put profitable production out of reach of most growers, he says.
He prefers to maintain the current program, with some revisions to reflect increasing production costs.
“We need to reinstate the escalator clause that would allow the average quota price to decline as well as increase, based on production costs. If the escalator clause is not reinstated, the program is doomed to fail, along with the farmers it is supposed to benefit.”
Squires says the loan program and significantly lower support level would benefit “only the large corporations who want cheaper peanuts so they can make more money at the expense of the farmer who is just trying to survive.”
Squires says a loan program also likely would include a loan deficiency payment (LDP), which “creates more physical labor and paperwork for county offices and producers. And they (LDPs) are only as good as the county loan rate.”
Squires says when rates are set too high the government eventually owns the entire commodity because producers forfeit the crop to the Commodity Credit Corp. (CCC). “Then the government has to figure out how to market it.”
All that would be unnecessary, he says, if the current program remains intact.
Squires also says a loan program would require that crop insurance provide policies to protect farmers against price as well as production and quality losses, also unnecessary under the current system.
“In fact, farmers need less help under the current program because they can lease quota on or off a farm to offset losses,” he says.
Squires points to other advantages to maintaining the peanut support program as is:
The program provides accurate acreage and production data that would be lost under a loan program.
The program helps control supply and demand. Under the loan proposal, large fluctuations in production and prices would occur.
With an escalator clause, the current program would provide incentives for farmers to stay on the farm and for young people to come back to family operations.
Smaller farms and less consolidation will be more likely with continuation of the current program.
The program is a no net cost to the government system. Under a loan program, the government would face huge expenditures in years with depressed prices.
Even with current program shortfalls, peanut farmers fare better than those who rely on other commodities.
Some growers recently invested thousands of dollars to purchase quota. They would face severe monetary losses if the program were scrapped.
Squires says the peanut program is “the best program FSA administers and has the best chance of providing a stable income to farmers. More commodity groups should be moving toward this kind of program instead of the other way around.”