Peanut Sector Resilient Despite Policy Challenges
Erik
Dohlman; Janet
Livezey
The end of the decades-old marketing
quota system in 2002 required U.S. peanut growers
to adapt to a more market-oriented policy structure
similar to other major field crops. This development
prompted substantial changes in the peanut sector,
including lower prices for many peanut producers
and major geographical shifts in production. While
the sector appears to have adapted quickly to the
new policy environment, it faces new uncertainties
as Federal budget pressures and the implications
of existing and potential new trade agreements loom
ahead.
Lower prices have fueled exceptionally
strong growth in demand since 2002, and yield gains
over the same period suggest increases in efficiency.
Data from the 2004 USDA
Agricultural Resource Management Survey suggest
U.S. peanut farmers are relatively strong financially.
Peanut farmers have an average household income
about 80 percent greater than the average for all
U.S. households, and they have higher levels of
wealth than other farm and nonfarm households.
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At the same time, the peanut sector
has much at stake as policymakers begin to discuss
potential changes to commodity programs. Government
outlays constitute a comparatively large share
of peanut sector revenues on both a per base acre
and a value-of-production basis. Government payments
to the peanut sector under the three main
commodity programs
(marketing loans, direct payments,
and countercyclical payments), for example, are
projected to average $226 million annually during
the 2002 Farm Act (2002-07). During 2003-05, these
payments represented only about 2 percent of total
payments made to all eligible crops under these
programs, but equalled 29 percent of cash receipts
from peanut production. Continued strong production
growth in 2005 has led to lower peanut prices, which
could push government outlays for income support
even higher, at least in the short run. In the longer
run, international trade agreements, which are gradually
opening the U.S. market to increased peanut imports,
could put additional pressure on prices, but expanding
market access abroad could provide new export opportunities.
This
finding is drawn from . . . |
| Peanut
Backgrounder, by Erik Dohlman and
Janet Livezey, USDA, Economic Research Service,
OCD-05i-01, October 2005. |
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