Wednesday, July 30, 2008

50 Days, 50 Ways: Peanut Subsidies

Every year, American taxpayers spend $140 million, and get peanuts. Literally. That's how much the 85 years old peanut subsidy now costs us. Here's more information that you ever thought you'd learn about peanut farming from Citizens Against Government Waste:

Established in 1933 as part of the Agricultural Adjustment Act, the peanut subsidy program was designed to stabilize peanut production income through price supports and production control. Administered by the United States Department of Agriculture (USDA), the peanut program controls the domestic supply of peanuts through a poundage quota system. This Soviet-style regulatory approach sets limits on production and specifies who is permitted to produce specified amounts. Also, by restraining the domestic supply through the quota system, the government sets a minimum selling price for all domestic peanut sales.

The Federal Agriculture Improvement and Reform (FAIR) Act of 1996 eliminated supply control programs, deficiency payments and marketing loans, replacing them with transition payments for virtually all farm commodities. As a result, farmers now have the freedom to farm almost everything, except peanuts. Only farmers who own or lease a production quota can legally grow peanuts to be sold for edible use. The FAIR Act continued the peanut program without real reform. The only modest reform in the peanut program was a 10 percent reduction in the price-support level.

With a government-guaranteed support price of $610 per ton, domestic prices are 74.3 percent higher than the average world market price of $350 per ton. This imposes a hidden peanut tax of as much as $500 million annually on U.S. consumers. As taxpayers, Americans are hit again each year for millions of dollars that the federal government pays in inflated peanut prices for government feeding programs.

Seventy percent of quota holders make their profits (more than $200 million annually) by renting their peanut-growing privileges to other farmers, who pay exorbitant rates for those rights. Currently, 80 percent of the peanut quota is owned by 20 percent of the growers, denying many prospective peanut farmers access to a potentially lucrative U.S. market.

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