People who love peanuts and peanut products shouldn’t expect
the new farm bill to lead
to lower prices.

"I don’t expect there to be any difference at all,"
said Don Shurley, an
economist with the University of Georgia Extension Service.
"I don’t expect retail
prices to drop."

In the long run, consumers may see more widely changing
prices.

"We’re likely to see the peanut quota set much closer to
demand than in recent
years," Shurley said. "In close crop years, with less
buffer supplies, we could
see wider price swings.

"Manufacturers have complained that this year’s quota
(1.1 million tons) is too
low," he said. "But the farm bill has some provisions
that can divert nonquota
peanuts into the domestic market if supplies are short."

The low supplies that could lead to higher retail prices
aren’t out of the question.
"If we have a short crop anywhere, the market could be very
tight," Shurley
said.

Meanwhile, as spring heats up, Georgia farmers are busy
putting peanuts into the
ground. But they can’t expect to get as much out of their
efforts as they once did.

Under the new farm bill, the U.S. Department of Agriculture
has slashed the peanut
quota (the amount farmers can grow) by 18 percent from last
year. To make matters worse,
the federal support price is 10 percent lower, too.

In the short term, Shurley said, farmers’ depressing numbers
may not be as bad as they
seem.

"Unlike past years, the 1996 quota doesn’t include
seed," he said.
"Under the new farm bill, the USDA bases the peanut quota
on their estimate of what
is needed to meet the edible market demand."

Peanut quotas go to the farms on which they’ve been grown
over the years. Now, though,
a temporary seed quota (about 140 pounds per planted acre) will
go straight to the grower.

"Counting the seed quota, we’re looking at a net quota
reduction of 12 percent to
15 percent from last year," Shurley said.

The support-price cut may be a softer blow, too, he said.
About 40 percent into their
planting, Georgia growers have been able to get contracts for
about $650 per ton. That’s
closer to last year’s $678 support price than this year’s
$610.

"The price to growers may not be too different this year
than in the past,"
Shurley said.

"The support price is supposed to be a floor. It
protects growers from big price
drops," he said. "In the recent past, they’ve been
more like a ceiling."

Shurley expects the purchase value of peanut quota to remain
at current or slightly
higher levels. But that’s largely because uncertainty over the
peanut program had already
driven prices to about half of earlier levels.

Quota lease rates will have to drop, too.

"For a grower to make the same net return as last year,
his lease rate will have
to drop 25 percent to 30 percent," he said. "They may
not drop that much right
away. That will vary with local competition, past lease rates,
etc. But if rates don’t
come down right away, chances are they will eventually."

Peanut farmers will face a cost-price squeeze toward the end
of the seven-year farm
bill, which ends in 2002, Shurley said.

"The price support is frozen at $610 for the entire life
of the farm bill,"
he said. "Their costs are going to go up during that time.
With the support price
frozen, that will put further pressure on the lease
market."

The value of peanut quota gets bid into the value of farm
land, he said. If quota
values drop, so do land values. That will affect local tax
bases. And that will hit people
who don’t grow or even eat peanuts.

"Peanuts undergird local economies," Shurley
said.