The government peanut program “is absolutely necessary” to U.S. producers “who are dependent on the program,” a National Peanut Growers Group representative told a congressional subcommittee conducting hearings on the new farm bill.
Also dependent on the program, said Elba, Ala., Farmer Dykes Adkison, are “hundreds of rural communities that are supported by peanut growing families and the support industries that are associated with peanut production and marketing.”
And, he told the House Agriculture Committee's Subcommittee on Specialty Crops and Foreign Agriculture Programs, “consumers and manufacturers are also dependent on a program that provides a safe, economical supply of peanuts.”
All sectors of the peanut industry, including producers, shellers, manufacturers, as well as two members of Congress, appeared before the subcommittee to discuss issues and potential changes to the current program.
“My goal for a peanut program is simple,” said subcommittee chairman Terry Everett, R-Ala., “and that is to keep the domestic peanut industry viable and for producers to be profitable for years to come.”
The “number one problem” the industry faces, he said, is imports, noting that starting in 2008 “peanuts and peanut butter imports from Mexico will be able to come into the U.S. in unlimited amounts.”
Industry leaders noted that the peanut sector has been affected by the passage of trade agreements such as NAFTA and GATT, with additional impact expected in years ahead from the Free Trade of the Americas agreement, which creates a huge trade zone stretching from Canada through South America.
During the hearing, three proposed changes to the current peanut program were presented.
The first, by Reps. Christopher Shays, R-Conn., and Paul Kanjorski, D-Pa., would phase out the current program over the next three years, replacing it in 2004 with a non-recourse loan program similar to those in place for cotton and other commodities.
The second called for a two-pronged plan that would establish market transition payments based on the historic quota and a marketing loan program.
The third, addressing both short term and long term concerns within the industry, calls for market loss payments to be provided to peanut farmers short term, with a market competitiveness option for the long term. Under that option, producers would be offered a price support level that would allow them to keep up with the cost of production.
Farmer Dykes Adkison told the subcommittee that U.S. peanut marketing is “dominated by very big business,” with six multi-national, billion dollar corporations purchasing 75 percent to 80 percent of all peanuts used domestically.
“How much marketing ability does a small family farmer have in this situation?” he asked. “The clear answer is: very little, without the peanut program. We are deeply dependent on this program.”
There are also “strong benefits” to consumers, Adkison noted, “because to receive benefits producers must provide a consistent supply of peanuts and comply with one of the strictest quality programs in agriculture. This steady supply has held prices in check and has avoided the boom and bust cycle that has plagued other commodities.”
The current farm program “has not been kind to peanuts,” he said, costing producers 10 percent of the support price they received previously — “a loss of millions of dollars in income,” and a support prices that has been frozen since 1996.
Even so, Adkison pointed out, there has been “essentially no benefit to the consumer” since peanut prices have risen since 1996.
He recommended, short term, that peanut producers receive market loss payments, as has been done for the past two years, and that consideration be given to doubling those payments this year. “It is only in this manner that economic losses faced by peanut farmers by current policy can be offset.”
Long term, Adkison said, peanut producers “realize the political realities in Washington, and he said the National Peanut Growers group had voted to favor a marketing competitiveness option that would make U.S. peanuts competitive with imports and at the same time offer consumers a product with no domestic price disadvantage.
“Since the world market for edible peanuts is primarily in the U.S., it is important that we work to keep domestic peanuts in our home market,” he said.
Such a program would also contain costs to the government, Adkison said, by limiting domestic support to domestic average consumption.
“In addition to providing the farmer a cost of production-adjusted support rate, the processor would be buying on quality and delivery. There would then be no price incentive to purchase foreign peanuts, and it would reduce the need for tariffs.”