Albany Herald Archive Story, August 19, 2005

Friday, August 19, 2005

Record peanut crop predicted for this year

Uncertainty over how to manage a record 5.1-billion pound peanut crop has the industry paralyzed.
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Elliot Minor
The Associated Press

ALBANY — U.S. peanut growers are projected to produce a record 5.1 billion pounds of peanuts this year, on top of the 430,000 pounds still left over from last year's large crop, prompting calls for lower export prices to boost foreign sales.

Uncertainty over how the Agriculture Department will manage the peanut commodity program has paralyzed the industry, experts say, and it comes just weeks before farmers begin harvesting the bumper crop.

Exports were supposed to increase under the 2002 farm bill, which eliminated a Depression-era peanut program and replaced it with a more market-oriented commodity program. But instead of exporting more, the country is exporting 400,000 pounds less than the 1 million pounds three years ago, said Don Koehler, executive director of the Georgia Peanut Commission.

The USDA controls the export price when it periodically sets a "national posted price." The current posted price is $337 per ton. The industry has been calling for a lower posted price for months to make U.S. peanuts more competitive with peanuts from Argentina, Brazil and China.

The posted price should be reduced to about $250 to make U.S. peanuts competitive in the world market; otherwise, exports could drop to a mere 200,000 pounds this year, said Jimmy Dorsett, president of Alpharetta-based Golden Peanut Co., which has shelling plants throughout the peanut belt.

"We've got the ability to handle the crop," he said. "We're not concerned about a big crop."

The concern is whether agriculture officials will allow the industry to be competitive, Dorsett said.

"The uncertainty ... has delayed normal purchasing, processing and marketing of the peanut crop," he said. "Maybe they know what they're doing, but if they do, the rest of the industry doesn't know. It's a problem for the whole industry, manufacturers, shellers, buying points and growers."

The USDA's peanut program manager, Solomon Whitfield in Washington, said the posted price is set by high-ranking agricultural officials based on a complicated formula that includes weather, market conditions and information from many sources.

"My bosses are very intelligent people," he said. "They're going to make good decisions."

Under the new farm bill, farmers are guaranteed $355 per ton for their peanuts. If the market price drops below that, the USDA makes up the difference. It's to the government's advantage to keep prices high because that reduces the amount of subsidies paid to peanut farmers.

So far, the peanut commodity program has not exceeded the amount budgeted by Congress, but with the huge crop this year, government costs could skyrocket, making the peanut program less popular with lawmakers who'll draft the next farm bill, said Tyron Spearman, a peanut industry analyst.

"We've been eating them all, but now we've got a heck of a crop coming. I don't think USDA has figured out what to do," said Spearman, who is heading to Washington next week to appeal for a lower posted price.

Industry representatives continue talks on the issue with USDA officials, and Koehler said he believes the posted price eventually will be lowered enough to increase foreign sales.

"We've got the dialogue going on with the USDA," he said. "The USDA is going to get us to the point where we can export peanuts."

The USDA predicts a 2005 crop of 5.1 million pounds, 21 percent higher than last year and 24 percent greater than 2003. Farmers planted nearly 1.7 million acres this year, 15 percent more than in 2004, and they should achieve a record average yield of 3,190 pounds per acre, 133 pounds per acre higher than in 2004, the Agriculture Department says.

With the planting season about to begin in Brazil and Argentina, those farmers may decide to plant even larger crops because of uncertainty over U.S. peanut exports, Spearman said.

"If the U.S. keeps the national posted price high, they're going to plant more and the problem is compounded," he said.