Cost of Aflatoxin to the Farmer, Buying Point, and Sheller in Sourtheast US, page 2.

PEANUT SCIENCE

Materials and Methods

Data for this analysis came from several sources for the
different segments of the peanut industry. The discussion
following will be separated accordingly.
    Peanut Producer Level. Data on the tonnage of Segrega-
tion III lots in southeast farmer stock peanuts are available
from CCC loan association tonnage reports. Segregation III
lots retained for on-farm use as seed peanuts are excluded
because seed peanuts are deducted from farm quota poundage
and are thus valued as a quota marketing. Data on the disaster
transfers on Segregation III lots also are available. Prior to
1996, disaster transfers were paid based on a $27.55/Mg
deduction from the quota support price with no limitations on
tonnage up to the farm's quota. In 1996 through 2002 crop
years, disaster transfers are paid at 70% of the quota support
on 25% of the farm's quota. Disaster transfers in excess of
25% of the farm's quota are paid at the lower additional
support price. When the disaster transfer option is utilized
by growers, the poundage transferred is deducted from the
farm's quota. Utilization of crop insurance coverage is not
deducted from the farm's quota and thus allows growers to
conduct a fall transfer on unfilled quota for a particular farm
(provided that the farm in compliance with USDA-FSA
regulations). The presence of Segregation III lots also
reduces the tonnage that a producer could market in addi-
tional markets. Thus, from the total Segregation III ton-
nage net of seed, disaster transfers are subtracted first and
the remaining tonnage is valued at contract additional prices.
   Buying Point Level. Data from the CCC loan associa-
tion tonnage reports were utilized to estimate the impact
of Segregation III lots on southeast buying points. Pea-
nuts found to be Segregation III are not allowed to enter
edible channels. Segregation III lots can be used as seed
which is a quota deduction but primarily they are placed
under CCC loan. This is a loss to the buying point
segment of the industry because CCC loan payments to
buying points are lower than commissioned rates paid by
shellers. Southeast commissioned buying points receive
approximately $41.88/Mg for commercial purchases while
receiving about $16.53/Mg for loan purchases.
   Sheller Level. A confidential survey of southeast
peanut shellers was conducted to gather information on
the cost of aflatoxin in shelled stock peanuts. Two
shellers having buying points in Alabama, Georgia, and
Florida completed the questionnaire. The questionnaire
required data over the 1993-1996 crop years including all
buying point aflatoxin testing cost, farmer stock pur-
chases, shelled stock outturn and sales, shelled stock
aflatoxin testing cost, equipment, and the cost allocation
based on removal of aflatoxin, number of lots success-
fully and unsuccessfully remilled and/or blanched due to
aflatoxin and the associated cost, and PAC premiums and
indemnifications. During the 1993-1995 crops years, the
PAC provided indemnification to peanut shellers for
remilling and/or blanching of lots rejected due to afla-
toxin. A set indemnification rate was established for
remilling and/or blanching. If the sheller's cost exceeded
the PAC set rate, the sheller was responsible for the
difference. Further, indemnification was limited to the
per-unit cost of remilling and/or blanching and the asso-
ciated rejects. The indemnification did not apply to

shrinkage of product during these processes which can
account for approximately 8% of product loss (Lamb et
al., 1993). Thus, lots requiring further processing can
significantly increase cost to peanut shellers even though
the sheller is fully indemnified by PAC. The Peanut
Administrative Committee eliminated indemnification
effective in the 1996 crop year. Shellers then had to
purchase coverage from private insurance companies in
order to obtain similar protection provided by the PAC in
previous years.
The survey data were compiled and the net cost of
aflatoxin to the cooperating peanut shellers was esti-
mated in total and on a farmer stock tonnage basis. Based
on the ratio of the shellers farmer stock purchases to the
actual southeast production, the data were extrapolated
to obtain an estimate of the cost to the shelling industry
in the Southeast. To ensure anonymity of the survey
participants, only the extrapolated data will be presented
for the southeast peanut shelling industry.

Results and Discussion

Segregation III tonnage in Alabama, Florida, and
Georgia from 1976 through 1996 is illustrated in Fig. 1.
Alabama generally had the highest percentage of Segre-
gation III lots per tonnage followed by Georgia and
Florida. Over the 1976-1996 period, the average percent-
age of Segregation III lots for Alabama, Florida, Georgia,
and the Southeast were 4.83, 1.36, 2.07, and 2.74, respec-
tively (Fig. 1). However, Georgia was highest on a total
Segregation III tonnage basis followed by Alabama and
Florida because of its large acreage. The Southeast
recorded an annual average of 23,285 Segregation III
farmer stock Mg with a minimum of 1917 [crop year (cy)
1994] and a maximum of 170,774 (cy 1990).
Peanut Producer Level. In this analysis only the
1993-1996 crop years will be addressed. The Segregation
III tonnage in the Southeast averaged 17,781 farmer stock
Mgs with a minimum of 1917 (cy 1994) and a maximum
of 38,599 farmer stock Mg (cy 1995). The estimated cost
of Segregation III lots in the Southeast during the 1993-
1996 crop years averaged $2.595 mil/yr (Table 1). The
costs in each state and the Southeast are consistent with
the total Segregation III tonnage in each state (Fig. 1).
The net cost of Segregation III lots in the Southeast was
0.42% of the total southeast crop value, ranging from
0.02% in crop year 1994 and 0.80% in crop year 1995.

Table 1. Estimated southeast farm sector net cost of Segregation III lots
for Alabama, Florida, Georgia and the Southeast during crop years
1993-1996.
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Year Alabama Florida Georgia Southeast
——————————————————————————————
$ $ $ $

1993           1,049,241            174,904           3,829,231          5,053,376
1994                 68,461                9,780                 39,718             117,959
1995           1,829,908            191,392           2,838,985          4,860,285
1996              104,154               34,573              208,309             347,037

Average         762,941            102,662           1,729,061         2,594,664
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