Learning the Rules of A New Program.

Learning the Rules of A New Program. When the 2002 Farm Bill was signed by the President May 13^th, it was hoped that the rules and regulations for peanuts could be developed before the harvest of peanuts began. In reality, the changes facing peanuts from this farm bill make that a monumental task for FSA. The rhetoric through-out the farm bill process was to "make peanuts like other major program crops". The support mechanisms for peanuts (marketing loan, direct payment, and counter-cyclical payment) are the same as for other crops. However, the handling of peanuts and the structure of the industry is different and presents difficulties for FSA to write the rules and regulations for peanuts. Peanuts being a semi-perishable crop presents more of a problem with storage. Also, the peanut market is a "thin market", thus price information is not easily available.

A key component for the producer to be determined by FSA is "the loan repayment rate" for peanuts. This will determine if a loan deficiency payment (LDP) or marketing loan gain is available and at what level. The loan repayment rate for cotton, for example, is the Adjusted World Price (AWP). The loan repayment rate is the rate at which marketing loans can be repaid if it is lower than the applicable loan rate plus accrued interest (and plus storage costs in the case of cotton). It is set by the Secretary of Agriculture daily or weekly depending on the commodity. The loan rate for runner peanuts has been announced by FSA as $355.72. The key is to set the loan repayment rate at a level that peanuts will clear the market. If set too high, the government will end up owning large quantities of peanuts through loan forfeitures. If set too low, the government will spend excessively and possibly encourage overproduction. The loan repayment rate will likely be adjusted periodically to reflect changes in the world and domestic market.

As a reminder, FSA has announced important dates for producers and landowners. August 31^st is the last day to verify and update acreage, base and yield records with FSA. October 1^st is the beginning date for direct and counter-cyclical payment (DCP) program sign-up. The Peanut Quota Buyout Program (QBOP) sign-up begins September 3rd and ends November 22^nd. (Nathan Smith)

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