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Peanut Farmers Nuts Over Subsidy Cuts

Aid saves farms, but consumers get costlier tub of peanut butter


A FOOT-LONG wood-chiseled peanut on farmer Wilbur Gamble's desk is a symbol of how much the goober permeates life in Dawson, Ga.

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Leafy green fields of the legume line either side of the four-lane highway leading to this town of 5,000. The town is host to a huge peanut processing plant employing a couple hundred workers, and the National Peanut Research Laboratory is located here.

''The peanut industry is the No. 1 industry in this county,'' says Mr. Gamble, who farms about 1,000 acres of peanuts. ''It's very important to us.''

That's why folks in Dawson - from farmers to bankers to store owners - are closely watching the outcome of the 1995 farm bill, which Congress is reviewing this week. The bill, enacted during Franklin D. Roosevelt's New Deal, has provided crop subsidies to farmers for more than six decades. But the Republican Congress, backed by Democrats, is seeking to cut or eliminate such subsidies. And the federal peanut-subsidy program is one of its main targets.

The outcome could have big implications for Georgia, which produces more peanuts than any other state and employs about 90,000 in the industry. Some residents who live in southwestern counties, such as Dawson, where they grow peanuts, say their rural economies will be devastated if Congress guts the program.

''We just won't know life as we know it today. Rural America would become a wasteland,'' frets Phonso Donaldson, chief executive officer of the Bank of Dawson.

Mr. Donaldson contends that eliminating the program would cause land values to plummet, thus putting banks at risk because of the significant amounts they lend to farmers.

The tax base would then fall, forcing counties to raise taxes significantly, he says. Jobs would also be lost and businesses would suffer. ''We wouldn't need 25 people'' working at the bank as we do now, he says.

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Critics of the peanut program say it was designed for a bygone era, costs consumers, and benefits a small number of farmers who reap big profits.

''It's corporate welfare at its worst,'' says Allen Rosenfeld, senior vice president for programs at Public Voice for Food and Health Policy, a Washington-based consumer group. ''If this program didn't exist and someone proposed it in this Congress, it wouldn't pass the laugh test.''

Like other crop-subsidy programs, the peanut program was started by the federal government in the 1930s when American farmers were struggling to survive the Depression and the Dust Bowl. Although it was supposed to provide only temporary aid, it has helped prop up the incomes of farmers ever since. In the case of peanut farmers, the government also created a system of quotas, which limits imports and restricts the amount of peanuts eligible for the domestic-price support. Farmers can only be eligible for this price support by owning, buying, or renting a quota.

Opponents charge that the system enables only a privileged group of farmers to sell peanuts in the United States and get the best price.

''Farmers will do better off if they are more free,'' says John Frydenlund, director of the agricultural policy project at the Heritage Foundation, a conservative think tank in Washington. ''The present system of subsidies and supply controls is really hamstringing them. If you would free them, you would be allowing them to produce for the marketplace rather than for the government.''

BUT defenders counter that the federal peanut program provides a safety net for farmers who can't control the weather or market conditions. ''All it is is a minimum price which works just like the minimum wage,'' says Mitch Head, executive director of the Peanut Advisory Board, based in Atlanta.

Mr. Head maintains that the peanut program consists mainly of small family farmers who sell their crops to a handful of billion-dollar companies. Government intervention helps prevent these conglomerates from price fixing the market and guarantees consumers high-quality peanuts at stable, economical prices.

But the cost of peanuts and peanut butter is a sticky issue. Consumer groups and food companies say the peanut program costs from $300 million to $500 million a year in higher food prices - a hidden tax that consumers don't know about. Translated, that adds about 33 cents to the cost of each 18-ounce jar of peanut butter, they charge.

Head says that's a misconception: ''Seventy-four percent of the cost of that jar comes after the farmer has sold the peanuts. It comes from packaging and transportation and advertising.

The farmer makes about 52 cents of the jar. The bottom line is corporations want to buy cheaper peanuts.''

Peanut farmers under the program are likely to face an uphill battle, especially in the House where most members of Congress represent urban areas.

Last week, several legislators introduced a bill to abolish the program. Subcommittees will soon consider that and two other bills. One, which peanut growers have recommended, would allow the program to continue with some modifications, including the elimination of all government or taxpayer cost. Over the last decade that amount has averaged $17 million annually but will total $120 million in 1995. Cutting that would reduce farmers' revenues by about 10 to 12 percent. Another bill expected to be introduced would reduce farmers' incomes by 19 to 25 percent, which would be akin to a slow death, Head says.

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