Disputed goober quotas keep peanut farmers smiling
Dooly County, Ga.
''Peanuts,'' says Georgia farmer Ray De Laigle. His debts are too high. His soybeans are scorched. The cotton looks great, but prices are near rock bottom.
Of all the crops he grows, Mr. De Laigle says, the peanuts are his best moneymaker.
This year looks especially bright for peanut growers in the United States. They have harvested their biggest crop ever - 4.4 billion pounds, according to an estimate released Nov. 9 by the US Agriculture Department. And they have in place a program that, unlike other commodity programs, keeps prices for most peanuts from falling, even during bumper crops.
To some, this controversial program provides stability for farmers, and might be used for a few other crops. Others argue that it spells disaster because it limits the use of peanuts in the long run. This debate between farmer stability and farmer opportunity extends throughout agriculture. It is certain to surface next year, when Congress attempts to set farm policy for the following four years.
For peanut farmer Billy Griggs, stability is most important.
''I came (to farming) when things got real good,'' he says, sitting at the kitchen table of his comfortable home in Dooly County, Ga. ''I did things in those years (the early '70s) I never thought I'd be able to do. . . . I built a home. The future looked bright.''
But the outlook began to sour in 1976, when Mr. Griggs was hit by the first of three droughts. By the late '70s, interest rates were climbing. In 1980 came the worst drought of all.
One farmer ''lost a flat half a million (dollars) just like that,'' he says, snapping his fingers. ''And you can't survive that. You can't.''
Peanuts are one of the most tightly controlled commodities in US agriculture. Some peanuts, called ''quota peanuts,'' receive a high guaranteed support price ($550 a ton). Many farmers with peanut quotas - like Griggs - are happy with the program.
''Farmers in Georgia and other peanut-producing areas depend on peanuts and the peanut program . . . as the stabilizing factor in their farming operation,'' he says. ''We can generally come out with a profit on quota peanuts. That's not set in concrete now. But with cotton, soybeans, corn, or anything else, your risks are much higher.''
''It's a workable program,'' agrees M. L. Miller Jr., a grower who is chairman of the peanut commission of Georgia, the leading peanut-producing state. ''It gives consumers a high-quality product at a reasonable cost.''
These quota peanuts eventually end up on US grocery shelves in a variety of forms, such as dry-roasted peanuts or peanut butter. By law, additional peanuts not under the quota are sold on the open market, and receive a much lower support price ($185 a ton). Farmers can contract to grow these additional peanuts, but the peanuts either have to be crushed into oil and meal or, more likely, sold abroad.
This two-price system keeps peanut prices high at home, but allows farmers to compete on the open market abroad. And at least one agricultural economist, Luther Tweeten of Oklahoma State University, says he thinks a version of this two-price system could be used to get rid of America's wheat glut.
But other economists criticize such a plan.
''That is not a good model for the rest of agriculture,'' says Ross Korves, a research economist with the American Farm Bureau Federation. It would raise the cost of wheat at home while subsidizing the price to foreign consumers. It would also weaken the US case for freer world trade. The United States has criticized the European Community for doing the same thing - keeping food priced high domestically while dumping it abroad. More specifically, these critics add, such supply-control systems like the peanut program lack opportunity.
In 1930, for example, the US was harvesting 1.1 million acres of both soybeans and peanuts, said William Lesher, assistant secretary for economics at the US Department of Agriculture (USDA), in a speech earlier this year. By 1980, peanut acreage had reached only about 1.4 million acres under rigid controls; but soybeans, with a much more free-market approach, had expanded to some 68 million acres.
Even some growers say they think they could do better with a free-market approach.
''I'm just basically against any type of government controls,'' says Thomas Miller, a Georgia peanut farmer and general manager of an auto dealership. The system is especially biased against young farmers, he says, who find it almost impossible to start growing peanuts profitably without renting or buying an expensive quota. Mr. Miller, who does both, says he pays from $100 to $150 in annual rent just for the privilege of growing a ton of peanuts that will get the high quota price.
''It's a government-anointed monopoly, giving some of the citizens - a tiny fraction of citizens - a privilege it denies all other citizens,'' says James Mack, managing director of the Peanut Butter and Nut Processors Association. But ''the worst thing is the uncertainty of supply.''
To keep domestic prices high, imports of peanuts are virtually prohibited. In 1980, a particularly tough drought cut into US production severely, and prices skyrocketed. A pound of wholesale shelled peanuts that cost 45 cents a pound in August had zoomed up to $1.75 by December, he says. It took four more months before the restrictions on imports were loosened, and foreign peanuts began to come in.
Gradually, the quotas are being reduced. USDA says this year's quota peanuts won't meet domestic demands - which means the cost of the peanut program to taxpayers will be minimal. This shortfall will be made up through a third marketing system, where nonquota peanuts are pooled and sold, and the profits, after administrative costs, are returned to the farmers.
But the prices are kept at least as high as the quota peanuts themselves. The USDA estimates US consumers paid about $140 more for each ton of peanuts than foreign countries did between the 1981-82 and 1983-84 marketing years.
US growers have been aggressive with exports. Although the US produces only 10 percent of the world's peanuts, it has about 50 percent of the export market. The growers are hoping for more gains. The National Peanut Commission recently opened an office in Rotterdam to encourage foreign use of US peanuts.