Sunday, February 19, 2012

Peanut Rights. Seriously

In the post-buyout environment, growers had to determine whether peanut or tobacco farming could be profitable in a new, lower priced market and whether they could manage price and production risk. For producers who primarily owned quota, rather than rented, the buyout payments provided a financial cushion. 

However, prices immediately declined, and decisions on whether to continue production were based on whether production would be profitable at the new prices. Although farmers who rented quota received no buyout payments in the case of peanuts, and lower payments than quota owners in the case of tobacco, the impact of lower prices on farmers who had previously rented quota was softened by a reduction in expenses because they no longer needed to pay quota rental fees.

Many producers decided to quit growing peanuts and tobacco, and a substantial share of peanut and tobacco producers left farming entirely. According to data from USDA’s Agricultural Resource Management Survey (ARMS), the number of producers growing the two main tobacco types—burley and flue-cured—fell by nearly 60 percent in the year after the buyout was enacted. This trend continued, but more slowly, in subsequent years, bringing the total number of burley and flue-cured tobacco farms from about 50,000 in 2004 to about 15,500 in 2007. The decline in the number of peanut farms was not as rapid or extreme as for tobacco, but even so, the number of peanut farms declined by about 3,000 (roughly a third) between 2002 and 2007.

The marketing quota systems for peanuts and tobacco kept prices artificially high, which undermined the competitiveness of U.S. producers relative to foreign producers and reduced incentives to lower costs and improve efficiency. But there were other aspects of the quota programs that made it difficult for producers to improve productivity by lowering average costs and/or raising yields.

One drag on productivity was the fragmented nature of quota ownership. In the years preceding the buyouts, the number of quota owners far exceeded the number of active peanut or tobacco farmers since retired farmers typically retained their quota and rented it to others. In 2002, approximately 75,000 people owned some peanut quota, compared with 8,000 farms growing peanuts. There were more than 350,000 tobacco quota owners in 2004, but only 57,000 tobacco farms.

Most peanut and tobacco growers owned some quota, but about 60 percent of quota production for each crop was from rented quota. Producers wanting to expand the scale of their operations had to rent quota rights from quota owners, which added to their cash expenses and management time. The small size of plots also discouraged investment in specialized equipment that was economically justified only if used over a larger area. This was particularly true for tobacco farms, which typically had low tobacco acreage and relied heavily on manual labor.

In addition, administrative rules generally restricted the ability to transfer (sell or rent) quota to other States, and in some cases, counties, where more efficient production was possible due to better climate or soil conditions. Limitations on peanut production were less binding than for tobacco because a 1981 rule change allowed nonquota holders to produce peanuts wherever they chose as long as the peanuts were exported, or used for nonfood purposes (e.g., crushed to extract high-protein animal feed and vegetable oil). Nevertheless, a large share of peanut and tobacco production was confined to areas that may not have been best suited to these crops due to disease pressures or reduced soil fertility.

Working for Peanuts
The Georgia Agricultural Commodity Commission for Peanuts was established in 1961 under the Commodities Promotion Act. The Commission conducts programs in the areas of promotion, research and education. Funding is derived from a $2 per ton assessment on all producers. Governing the Commission is a five man elected board of peanut farmers. It is best known in the State House by its little red bags of Georgia Peanuts.

Peanuts are a $2.0 billion industry in Georgia.

Georgia produces 49% of the United States’ peanuts. About 70 counties in Georgia produced 1,782,650,000 lbs. of peanuts in 2009. Georgia has 14,000 farms with peanuts and about 4,500 active farmers. Georgia has approximately 200 peanut related businesses. The peanut industry contributes more than 50,000 jobs in Georgia.

Production Will Go South
The latest forecast from the U.S. Department of Agriculture predicts nationwide production will be down roughly 17 percent this year, said Scott Sanford of the U.S. Farm Service Agency.

One problem is a continuing drought across the state. University of Georgia agronomist John Beasley met with beleaguered peanut farmers in Baker County last season. They have not received enough rainfall, despite some rain showers. Extreme heat combined with insect and other diseases also hurt the crop.

Further reducing the peanut crop was a decision by many farmers to plant fewer peanuts and more corn and cotton since those commodities were fetching better prices.

Those factors could increase the price for products that use peanuts, such as peanut butter. The maker of Jif, the biggest-selling peanut butter raised prices 30 percent because of "significantly higher peanut costs."

The peanut was first known to exist in South America, as far back as 950 B.C., most likely in Brazil. The Incas were known to have made peanuts into a paste during this time, as well as to have peanut crops. Peanuts were actually said to have been found in the tombs of mummies in Peru.

The peanut had to get to the United States somehow from Peru. So how did this happen? It is believed that the peanut made it to Africa from Peru by early explorers of South America. Then, the peanut was traded to Spain, and from Spain to the American colonies.

Once in America, peanuts were grown commercially in North Carolina as early as 1818 and in Virginia as early as the 1840's. In the 1890's, George Washington Carver, who worked at the Alabama Tuskegee Institute, started to use the peanut as a replacement crop for the whipped out cotton crops destroyed by weevils.

In the 1400's, peanut crops were growing in Africa. Africans are said to have put peanuts into stew once they were ground up. In China, peanuts were actually made into creamy sauces. During the civil war, it is said that peanuts were made into a peanut porridge.

In the early 1900's, an Italian immigrant by the name of Amedo Obici started roasting peanuts in oil. He and Mario Peruzzi began selling these peanuts under the label of "Planters" peanuts. Washington Carver in 1903 went on to find about 300 uses for the peanut with his research at Alabama Tuskegee Institute, such as in soups and desserts. He is said to be the father of the peanut industry, for his work with peanuts and their horticulture.

The United States happens to be the biggest supplier of peanut butter, and the biggest consumer. Argentina and Chile also export large amounts of peanut butter. Other countries harvest peanut crops, but the peanuts aren't generally used for peanut butter. They're used for animal feed and peanut oil for cooking.

Peanut butter is made with peanuts roasted in an oven. The peanuts used have to be inspected first. Most of the peanuts used come from Florida, Georgia, and good ol' Alabama. Once a peanut is roasted, it then goes through a process to rapidly cool it with air so it doesn't cook further. The outer skin is removed with belts or brushes. The peanuts are then split, cleaned and sorted.

The Destruction of American Liberty (Free Enterprise) 

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