Peanut Butter for the Hungry

legislationThe 2002 Farm Bill changed the peanut program drastically. A two-tiered price system with quota peanuts (sold in the domestic market) and additionals (sold in the export market) was ended and replaced with a market/loan system. Under the new system there is no distinction between peanuts for the domestic and export market.


A base has been established for historic peanut producers who farmed peanuts at any time between 1998-2001. The base for the historic peanut producer is the payment yield multiplied by the base acreage. The payment yield is equal to the producer’s 1998-2001 total production divided by the 1998-2001 total acreage. The base acreage is equal to the 1998-2001 total acreage divided by four. The base will be with the historic peanut producer for 2002 and then must be assigned to land no later than March 31, 2003.  If the land already has 100% base then there will have to be a release of other bases in order to put peanut base on the land as bases are capped at 100%. A producer may also choose to substitute the 1990-97 county average yield for up to three years of the 1998-2001 base period farm yields. The base payments are totally decoupled from the production of peanuts on the farm. Base payments for peanuts can be made on farms planted in other eligible commodities or practices. Exceptions include Conservation Reserve Program (CRP) or other paid conservation programs, newly established vegetable enterprises, and wild rice.

Direct Payment

A $36 direct payment will be made to the historic peanut producer in 2002 and producers of a farm with a base in subsequent years.  This payment will be calculated by taking the farm base and multiplying it by 85% and then multiplying that result by the $36 per ton.  This is the only guaranteed federal payment.

Target Price

A target price of $495 has been set for the purposes of calculating the counter cyclical payment.

Counter Cyclical Payment

A counter cyclical payment will be made to the producer when the market prices fail to achieve the target price of $495.  Counter cyclical payment will be made to the historic peanut producer for 2002 and to the producers on a farm with peanut base in subsequent years.  To calculate the counter cyclical payment for a farm, take the base and multiply it by 85%.  Take that result and multiply it by the difference between the target price and the sum of the higher of the following, either the average season price plus the direct payment or the marketing loan rate plus the direct payment.   Formula: Counter cyclical payment = $495 - $36/ton (Average Season Price or National Loan Rate, whichever is higher) x Base Acreage X 85% x Payment Yield.

Quota Buyout

Quota is bought out at 11 cents per pound per year for five years, but the quota holder has the option to take a one-time payment of 55 cents.  Several economists have made the case that this buyout is subject to capital gains taxation so there may be no benefit to taking the spread out payments.

Marketing Loan

A marketing loan is established with a loan rate of $355.  This is the only support on the actual production of the commodity and is available on all tons of peanuts produced.  A producer can forfeit his peanuts under the loan or if the market moves higher he may choose to redeem his peanuts and sell them in the commercial market.  Also, the Secretary of Agriculture can choose to lower the repayment rate to avoid the chance of paying storage on forfeited peanuts.

Loan Deficiency Payment

LDPs will be paid to producers who opt to forgo participating in the loan program.  LDP’s will be paid based on world market pricing factors.  The producer must maintain beneficial interest in the crop prior to receiving a loan deficiency payment.

Storage and Handling

Storage and handling costs are paid by the sheller when peanuts are bought out of the government loan program.  The government pays storage and handling fees on peanuts which are forfeited by the grower.