Why a Good Year for Peanut Farmers is Bad for Taxpayers

November 8, 2012

The NY Times reports on how well peanut growing has gone this year:

In Georgia, where nearly half of the nation’s peanuts are grown, the annual fall harvest has yielded a record amount of big, shell-filling kernels that farmers say taste better than average.

“I’ll just say that the farmers of Georgia have been blessed with weather conditions,” said Armond Morris, who planted about 1,000 acres near Tifton, Ga., and serves as the chairman of the Georgia Peanut Commission.

“We had rain at the right time and didn’t have but three or four days that were 95 degrees,” he said.

Although the harvest is just winding down, the national peanut crop report from October showed that more than 6.1 billion pounds will be harvested this year, compared with about 3.6 billion last year. The yields are especially good in Alabama, Florida, Mississippi and Georgia, where the main crop is a variety called runner peanuts.

So that’s good news for taxpayers right?  No need to bail out struggling farmers whose crops have been ruined by drought?  A good time to end farm subsidies? Unfortunately, it’s quite the opposite:

… there is still a record supply of peanuts on the market, which means farmers will not see high prices to match their yields.

Although some early contracts assured growers of close to $700 a ton, those kinds of deals are long gone, said Patrick Archer, the president of the American Peanut Council, adding that growers will be lucky to get $400.

As a result, many farmers are likely to turn to the federal government to keep the bottom from falling out of the peanut market. Instead of selling their crops right away, they will store shelled nuts in refrigerated warehouses and take government loans, betting that prices will rise within nine months and that their peanuts will bring enough to repay the loans.

If prices stay low on the open market, the government will buy the peanuts for less than it cost to produce them but at a rate that will allow farmers to recoup some of their expenses.

Sigh.  Is there any market situation that doesn’t result in subsidies to agriculture?


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