The Farm Bill process began recently with hearings by the U.S. House of Representatives Agriculture Committee. Two hearings were within the peanut producing belt and offered producers an opportunity to testify.
Armond Morris, a producer from Irwin County, Ga., and chairman of the Georgia Peanut Commission, represented the Southern Peanut Farmers Federation at the hearing located in Morrow, Ga.
Jimbo Grissom, a farmer from Seminole, Texas, and president of the Western Peanut Growers Association, testified at the hearing in Lubbock on behalf of the peanut growers of West Texas.
Program Supported, Changes Needed
Morris began his testimony by saying the Southern Peanut Farmers Federation had three primary points: producers support the marketing loan program; the current program prices are set too low to be a true safety net for producers; and farm programs should be developed for farmers, not for absentee baseholders.
“As you are aware, peanut program prices were reduced in the 2002 Farm Bill when we changed from a supply-management program to a marketing loan peanut program,” Morris said.
“The 2008 Farm Bill maintained the same prices as the 2002 Farm Bill. The market prices for this year should hold above the marketing loan price, but this is no guarantee and is certainly not a guarantee for the future.
“Since the 2002 Farm Bill, peanut variable costs for National Center for Peanut Competitiveness representative farms have increased 52 percent per acre. In addition to the increased costs associated with producing a crop of peanuts, we are competing with other countries like Argentina, China and India, where the environmental costs, other regulations and labor rates are much less than U. S. input costs.”
Current Price Not Real Safety Net
Morris continued, “The number one goal for our producer organization is to obtain a legitimate safety net for our growers. We do not believe the current $355 per ton marketing loan is sufficient to be a real safety net for producers.
“The peanut loan repayment rate guidelines were established in the 2002 Farm Bill. The loan repayment rate has not functioned appropriately since the 2002 bill. Congress directed the U. S. Department of Agriculture to consider the following when determining loan repayment rates:
• Minimize potential loan forfeitures;
• Minimize the accumulation of stocks of peanuts by the federal government;
• Minimize the cost by the federal government in storing peanuts;
• Allow peanuts produced in the United States to be marketed freely and competitively, both domestically and internationally.”
Morris said, “It is this last variable the committee included in the 2008 Farm Bill and similar language in the 2002 Farm Bill that has not been adhered to. In setting the loan repayment rate, USDA has not taken into account world market prices. Thus, the USDA posted price, set every Tuesday afternoon, is too high.
“We ask the Committee to include language in the next Farm Bill that will assure that the prices our competitors in the world marketplace are selling peanuts will be considered in establishing the posted price.
“We have trade agreements that were negotiated using the U.S. International Trade Commission formula converting shelled peanuts back to farmers’ stock. This ITC formula should be considered in determining the posted price. USDA uses a different formula for the posted price. In addition to low prices, this has been a serious problem since we left the supply management program in 2002.”
Other points made by Morris include the following:
• The ACRE program, as included in the 2008 Farm Bill, is not a viable option for peanut producers.
• We must maintain a separate payment limit for peanuts. This was agreed to when producers worked with the House and Senate Agriculture Committees in the 2002 Farm Bill establishing a marketing loan program for peanuts. The current program will not work without the separate payment limit.
• The Conservation Stewardship Program included provisions for a crop rotation program. We believe this program will enhance the environment and improve crop yields. The department was slow to initiate regulations, but the peanut industry is working with the Natural Resources Conservation Service to increase grower sign-up.
• The feeding programs at the USDA are very important to producers. Peanut butter is a long-time participant in the school lunch program. Peanut butter also qualifies for the breakfast program and afterschool snack program. We need the USDA to partner with our industry in outreach programs to schools and their nutritionists.
• Our congressional delegations and industry leaders struggled to get the attention of those preparing food assistance for Haiti relief. USDA has the experience and resources to help facilitate communications between the peanut industry and major relief organizations. The peanut butter products available for Ready-to-Use Therapeutic Food (RUTF) alone are a sufficient example of how helpful our products can be in impoverished parts of the world or countries in crisis.
• Peanut butter does not qualify for the Fresh Fruit and Vegetable Snack program. We believe that all school feeding programs should allow for the purchase of peanut butter.
• We are hopeful Congress will pass the agricultural disaster relief legislation similar to the bill approved in the Senate.
• The current SURE program has not been effective for peanut producers. In fact, peanut producers were turned away until recently because local offices had not been given sufficient instructions to receive applications for peanut losses. Even today, local offices are not consistent as to how they will handle producers from multiple counties.
Senate Begins Farm Bill Hearings
The Senate Committee on Agriculture, Nutrition and Forestry began hearings on the reauthorization of the Food, Conservation and Energy Act of 2008 Farm Bill on Wed, June 30, 2010, in Washington, D.C.
Chairperson Blanche Lincoln, who recently won a close runoff election for the renomination to the democratic ticket in Arkansas for Senate, said, “The Farm Bill is one of the most important pieces of legislation Congress considers on behalf of rural America and our nation’s farmers and ranchers.
“As we look toward the upcoming Farm Bill, I will use these hearings to gather feedback on how the current bill is working and lay the ground work for the future of our nation’s farm, nutrition, conservation, rural development, research, forestry and energy priorities.”
The hearings were broken out by the following subjects: Hearing 1: Maintaining Our Domestic Food Supply through a Strong U.S. Farm Policy - Washington, D.C.; Hearing 2: Revitalizing the Rural Economy through Robust Rural Development - To Be Announced; Hearing 3: Promoting Conservation Practices that Preserve Our Natural Resources and Wildlife Habitat for Future Generations - To Be Announced; Hearing 4: Ensuring Agriculture is Part of Our Nation’s Energy Future - To Be Announced.
Editor’s Note: At this time, it is not known if peanut producers will be included in any of these hearings.
Difficult Time In Texas
Grissom began his testimony by thanking the Ag Committee leadership for getting the 2008 Farm Bill enacted into law and by recognizing that, in this time of budgetary pressure, crafting the next commodity program legislation would be a great challenge.
“We are now in our third year of operating under the 2008 Farm Bill, and this has been a particularly difficult period for peanut growers in West Texas.”
Grissom went on to explain the situation West Texas producers have faced in the last three years. “These repeated income shortfalls and production cost increases are taking their toll on our producers. One young farmer I know well was told this year by his banker that he simply couldn’t get financing for another year. He now has a job in town and is cash leasing his farm to meet the land payment. Most of the older farmers, like me, are using the equity on their farms to secure operating loans.”
As for the peanut program, Grissom said his producers favor the preservation of the marketing loan.
“The commodity loan remains the foundation of all program structure for our producers. It is the only program element that applies to all of our harvest, it is essential for the marketing of our crop, and it provides the absolute floor below which the value of the crop cannot fall.”
Stability Needed For A Few More Years
“Our next concern is to protect the direct payment, which represents guaranteed income regardless of the price or size of the crop. It is a dependable security for our lenders, and it is the only part of our program that can be reliably protected from World Trade Organization sanctions. Since many Texas peanut producers are also cotton producers, we fully appreciate the importance of that fact.
“Finally, the counter-cyclical payment is a valuable tool to provide at least part of our crop with a somewhat higher price floor. This was helpful in 2009 when we suffered a fairly steep price drop, although its utility is mitigated by fixed yield and acre determinations and the effect of strict payment limitation requirements.
When all three of these components are combined, it makes a valuable tool to set a much needed “floor” price for our commodity and our lenders.
Grissom’s other points included:
• Crop insurance has been a growing factor in managing the risks of farming in West Texas. Multi-peril insurance is the only semi-viable tool available for peanuts. One problem associated with multi-peril insurance is the pricing mechanism. Unless farmers contract their peanuts by the acreage reporting date, the mechanism used to set the coverage price is, many times, unrealistically low. This results in a policy that does not relate to our costs or reflect the actual price situation.
• We believe a good crop revenue coverage (CRC) policy for peanuts would be a more viable option for a risk management tool. We urgently need USDA’s Risk Management Agency’s assistance to develop an affordable and viable CRC policy for peanuts that would protect farmers against price as well as yield risks.
• On the subject of payment limitations, we urge the Committee to avoid further changes in eligibility standards. We are still trying to adjust to the significant changes in this area from the 2008 Farm Bill. Constantly moving the markers on eligibility makes it very difficult for full-time farmers, who are under pressure to grow their operations, to make a decent living as costs drive down the per-acre profit possibilities. Major changes have been made, and now farmers need stability for at least the next several years.
• The financial condition of West Texas peanut producers is too fragile and perilous for us to advocate abandoning that which is known. The history of new programs, including our own venture away from our traditional program in 2002, is full of examples of unexpected and often unfortunate consequences. PG
Editor’s Note: This is just the beginning of the Farm Bill process, and all producers are encouraged to get involved by contacting their producer leadership and, certainly, their congressional leadership.