Peanut growers balk at USDA plan to reduce price supports

Published 6:18 pm Friday, June 6, 2008

WASHINGTON (AP) — Southern peanut growers are hoping to block what they consider a backdoor proposal from the Bush administration to cut price supports on their crop.

Just days after Congress passed wide-ranging farm legislation, the Agriculture Department said last week it is planning to adjust the price guarantees that the government gives different types of peanuts, with the goal of bringing the federal supports more into line with market conditions.

Southern growers, who produce the vast majority of U.S. peanuts, say the plan would eat into their profits and create its own market distortions that could end up costing taxpayers. They also are angry that the department proposed the idea just after Congress spent months debating and establishing new farm policy for the next five years.

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“If it ain’t broke, don’t fix it,” Don Koehler, executive director of the Georgia Peanut Commission, said Friday. “We’re dealing with a USDA right now … that is a thousand miles away from Georgia and has no clue what’s going on in the real world.”

Under current farm law, peanut farmers — like wheat or cotton growers — are guaranteed a certain price for their crops when the market drops. The Bush administration has sought to reduce price supports. But in the latest farm bill, lawmakers largely maintained them, including keeping the average rate for peanuts at $355 per ton.

The USDA’s proposal, which industry groups learned of last week, adheres to the average rate set in law but would adjust the “differential” among the four types of peanuts covered under the program.

“Runner” peanuts, which account for about 80 percent of the U.S. crop and nearly all of the crop grown in Georgia, Alabama, Mississippi and Florida, would see a cut of about $7 per ton. Virginia, Spanish and Valencia peanuts, which are less common and more expensive, would see increases in their price guarantees, of $30, $22 and $7, respectively.

USDA officials did not respond to a request for comment Friday. But in a memo, the department said the changes would keep some peanuts from getting too much of a price guarantee and others too little, eliminating imbalances that could distort farmers’ decisions on what to plant.

In addition, with current prices at more than $500 a ton — well above the price threshold — the USDA “expects very little risk to producer returns,” the memo said.

But Koehler argued that any reduction in the price guarantee would hurt farmers because the market price is closely linked with USDA rates. And if the market slows, he said, farmers could switch to growing Virginia or Spanish crops to get a higher guarantee, creating a surplus of those types that would depress their prices, triggering more government bailouts.

Peanut organizations are asking lawmakers from the region to fight the proposal, but it is unclear what Congress can do now that the farm debate has wrapped up.

“I do not understand why a proposal to reduce the loan rate of runner peanuts … was not debated during the farm bill that Congress only recently passed,” said Rep. Sanford Bishop, a Democrat from Albany, Ga., who sits on the Agriculture Committee. “This plan would arbitrarily reduce the loan rate for peanut farmers and hurt growers across the southeast.”