M. C. Lamb* and D. A. Sternitzke¹

Aflatoxin in peanut imposes considerable economic
cost to the southeast U.S. peanut industry. A federal
marketing agreement administered by the Peanut Admin-
istrative Committee ensures the consumer that only
edible quality peanuts are allowed entry into edible mar-
kets. The 1993-1996 crop years were analyzed to esti-
mate the net cost due to aflatoxin to the farmer, buying
point, and sheller segments of the southeast peanut indus-
try. Farmer stock peanuts are examined for visible
Aspergillus flavus, the mold primarily responsible for
aflatoxin contamination in peanut. Detected lots with
aflatoxin (Segregation III) are removed from edible chan-
nels because the lot is presumed to be at high risk for
aflatoxin contamination and the value of farmer stock
peanuts is reduced. The farmer segment net cost due to
Segregation III lots averaged $2,595,937 per year. Seg-
regation III lots are generally placed under loan in the
Commodity Credit Corporation (CCC). Buying points
are paid to handle peanuts for CCC, but at a lower rate per
ton than commercial commissions; thus, a loss is incurred
to the buying point segment. Buying point losses from
handling Segregation III lots average $532,585 annually.
The southeast peanut sheller segment incurred the high-
est cost associated with aflatoxin. The majority of the
cost was due to the purchase of Segregation I farmer stock
that required further processing due to the aflatoxin
contamination found via chemical testing. The average
net annual cost to the southeast sheller segment over the
4-yr period was $22,697,737. Segregation III lots and
aflatoxin cost the farmer, buying point, and sheller seg-
ments of the southeast U.S. peanut industry $25,825,259
annually. On a total Segregation I farmer stock basis,
aflatoxin cost the southeast peanut industry an average of
$25.53/Mg and an average $69.34/ha.
                               ——————

Key Words: Arachis hypogaea L., Peanut Administra-
tive Committee, Segregation III.
                               ——————

The potential for aflatoxin contamination in peanuts
(Arachis hypogaea L.) imposes considerable economic
cost annually to the U.S. peanut industry. Aflatoxin
refers to four naturally occurring metabolites designated
B₁, B₂, G₁, and G₂ of Aspergillus flavus (Link) and A.
parasiticus (Speare). Aflatoxin B₁, a metabolite of A.
flavus, is considered to be the most important because it
is the most toxic and has been classified as a probable
human carcinogen. Aspergillus flavus and A. parasiticus
are distributed in soil and air and, under certain environ-
 
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   ¹Agric. Economist and Agric. Engineer, USDA, ARS, Nat. Peanut
Research Lab., 1001 Forrester Dr., S.E., Dawson, GA 31742.
   *Corresponding author (email: mlamb@nprl.usda.gov).

mental conditions, can produce aflatoxin in several agri-
cultural commodities, including peanut (Cole et al., 1995).
Research on aflatoxin in feed and food products was
heightened in the early 1960s after the `turkey X disease'
syndrome. A federal marketing agreement, administered
by the Peanut Administrative Committee, was estab-
lished in 1965 to provide "The Incoming Quality Regu-
lations" and "The Outgoing Quality Regulations" of do-
mestically produced peanuts. The Incoming Quality
Regulations dictate the grade and quality of farmer stock
peanuts which may be acquired by handlers for commer-
cial shelling or cleaning. The Outgoing Quality Regula-
tions cover the grades and specifications of shelled and
cleaned inshell peanuts which a handler may dispose of
for human consumption (Peanut Administrative Commit-
tee, 1996). The marketing agreement divides incoming
farmer stock peanuts into Segregation I, II, or III on the
basis of damage and the visual detection of A. flavus.
Segregation I lots have less than 2.50% damage and
visible A. flavus is not detected. Segregation I lots are
intended for edible consumption in either domestic or
export markets. Segregation II peanuts have 2.50% or
greater damage and visible A. flavus is not detected.
Segregation II peanuts are generally crushed for oil
unless market shortages allow them to enter domestic
edible markets. Peanut lots are termed Segregation III if
any amount of visible A. flavus is detected during farmer
stock grading. Segregation III lots are not allowed to
enter edible markets and must be crushed for oil unless
they are retained for use as seed peanuts (Sands, 1982).
However, retention of Segregation III lots is not recom-
mended or commonly practiced because the seed quality
is generally substandard.
    To ensure the quality of U.S. peanuts, development of
integrated management systems and equipment designed
to segregate and remove high risk peanuts from edible
lots evolved resulting in large capital investments
(Davidson et al., 1981, Cole et al., 1991, 1995). Such
investments seemed to have paid off when The Council
for Agricultural Science and Technology reported in
1989 that aflatoxin posed no threat to humans at expo-
sure levels found in the U.S. (CAST, 1989). As techno-
logical advances in testing, removal, and segregation
improve further capital investments were required to
maintain competitiveness.
   The objective of this report is to quantify the net
economic cost of aflatoxin in peanuts to the farmer,
buying point, and sheller segments of the southeast U.S.
peanut industry during crop years 1993 through 1996. It
is important to note that the cost estimates are on a net
basis because safety nets such as disaster transfers, PAC
indemnification, and insurance are designed to minimize
the downside risk associated with substandard quality
peanuts. These will be discussed in the following sec-
tions where applicable.

Peanut Science (2001) 28:59-63                                                            59