Peanut Program
The 2002 Farm Act substantially revamped the peanut program.
Under previous legislation, the peanut program was a two-tier
price support program based on nonrecourse loans. Production
for domestic edible consumption was limited to an annually
established quota designed to uphold prices at the $610 per
ton quota loan rate. Non-quota ("additional") peanut
production was permitted only for export or domestic crush,
and was eligible for an "additionals" loan rate
of $132 per ton (in 2001). Under the 2002 Farm Act, the marketing
quota system is eliminated and peanuts are treated similarly
to "program" crops such as grains and cotton—with
identical marketing loan provisions available to all peanut
producers. Farmers no longer have to own or rent peanut marketing
quota rights to produce for domestic edible consumption. Compensation
(a "buy-out") is provided to quota holders for elimination
of the peanut quota system. All farmers with a history of
peanut production during 1998-2001, whether quota-holders
or not, are eligible for fixed direct payments and for counter-cyclical
payments based on an established target price.
Summary of Provisions
- A marketing assistance loan program is available for peanut
producers—with or without a history of peanut production—for
any quantity of peanuts produced on the farm. The peanut loan
rate is fixed at $355 per ton. Producers can pledge their stored
peanuts as collateral for up to 9 months and then repay the loan
at a rate that is the lesser of 1) $355 per ton plus interest
or 2) a USDA-determined repayment rate designed to minimize loan
forfeiture, government-owned stocks, and storage costs. Alternatively,
the producer may forgo the marketing loan and opt for a loan deficiency
payment (LDP) at a payment rate equal to the difference between
the loan rate and the loan repayment rate.
- For producers with a history of peanut production, a direct
payment of $36 per ton of eligible base-period (1998-2001) production
is available. Eligible production would equal the product of average
or assigned base-period yields (with the option of substituting
average 1990-97 county yields for up to three of the base years)
and 85 percent of base-period acres ("payment acres")
planted to peanuts (with provisions for prevented plantings).
These payments are made regardless of current prices or the actual
crop planted so long as the farm remains in approved agricultural
uses.
- Producers with base acreage are also eligible to receive a counter-cyclical
payment (CCP) when market prices are below an established target
price of $495 per ton minus the $36 per ton direct payment. These
payments are not related to current production, so long as the
farm remains in approved agricultural uses. The payment rate is
the difference between the target price and the "effective
price," calculated as follows:
Payment rate = (target price) - (direct payment rate)
- (higher of peanut market price or loan rate)
The total counter-cyclical payment to each eligible producer
equals the product of the payment acres (85 percent of
base acres), the payment yield, and the payment rate specified
above:
CCP = 0.85 x (base acres) x (payment yield) x (payment
rate).
- Owners of peanut quota under prior legislation will receive
a quota buy-out as compensation for the loss of quota asset value.
Payments may be made in five annual installments of $0.11 per
pound ($220 per short ton) during fiscal years 2002 through 2006,
or the quota owner may opt to take the outstanding payment due
to them in a lump sum. Buy-out payments are based on the quota
owners' 2001 quota, regardless of temporary leases or transfers
of quota, so long as the person owned a farm eligible for the
peanut quota. Continued eligibility for compensatory payments
remain with the established quota owner regardless of their future
interest in the farm or whether the person continues to produce
peanuts.
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