Peanut Program

The U.S. Department of Agriculture's (USDA) peanut program has been a steady source of income for farmers and has generally stabilized the U.S. peanut supply. Yet peanut farming, like much of U.S. agriculture, has undergone profound changes since the 1930s. Small farms have gradually been bought out and consolidated into large-scale operations. By 1991, about one-fourth of all producers controlled more than 80 percent of the peanut quota. Today, the small number of producers who hold most of the quota are reaping huge profits from the program. Because the yearly quota support price since 1982 has been well above production costs, quota peanut producers have received, on average, a 51-percent minimum net return after costs. The peanut program also benefits individuals who own farms with assigned quota but choose to sell or rent their quota to others. Economic studies and GAO's analysis show that the peanut program adds from $314 million to $513 million each year to consumers' costs of buying peanuts. At the same time, USDA spends tens of millions of dollars each year to run the peanut program, make mandatory payments to producers, and cover the high cost of peanut products it buys under various food assistance programs. Finally, the program, by boosting the volume of U.S. peanuts available for export, may be lowering prices paid for peanuts abroad. GAO summarized this report in testimony before Congress; see: Peanut Program: Changes Are Needed to Make the Program Responsive to Market Forces, by John W. Harman, Director of Food and Agriculture Issues, before the Subcommittee on Specialty Crops and Natural Resources, House Committee on Agriculture. GAO/T-RCED-93-18, Mar. 10, 1993 (six pages).

GAO found that: (1) the number of peanut farms with quota has decreased as the average farm size has increased; (2) peanut farms now produce yields nearly five times greater than yields produced in 1934; (3) 22 percent of U.S. peanut producers control over 80 percent of the quota; (4) quota peanut producers have had an opportunity to receive a 51-percent minimum net return after costs, since the yearly quota support price has been well above production costs; (5) the peanut program provides disaster transfer payments to protect quota producers from losses in peanut quality caused by adverse conditions; (6) the peanut program supports farmers with assigned quota who elect not to grow peanuts, since these farmers sell or rent their quota to others; (7) the peanut program adds $314 million to $513 million each year to consumers' costs of buying peanuts; (8) USDA incurred average annual costs of $34.4 million from 1986 through 1990 supporting the peanut program; (9) government agencies that are required to purchase peanuts and peanut products for various food assistance programs at the high quota support price continually pay more for peanuts than they would without the program; and (10) the peanut program may affect the international market by increasing the volume of peanuts available for export.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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