Farm bill could ruin local peanut industry
Published: Saturday, March 1, 2014 at 6:01 a.m.
Last Modified: Friday, February 28, 2014 at 6:08 p.m.
The Sanchez family started growing peanuts on 1,500 acres of their Old Town farm in 2004.
As more peanut farms sprung up in the region, they added an operation where farmers brought peanuts to be dried and stored before shipping to shelling facilities.
Today, they grow 5,500 acres of peanuts and are the buying point for many peanut growers, with 60 dryers and two 12,000-ton warehouses to serve more than 30 farms.
A change in the 2002 farm bill that did away with the old quota system led to explosive growth in peanut farms in an 11-county region from Marion County to the Georgia line. Peanut farming was no longer restricted by pound limits to historic peanut growers.
Acres in planted peanuts grew from 9,600 to 52,000 in the region to take advantage of profitable market prices fueled by high demand.
Buyers wanted the high-quality peanuts grown in the white-sand Florida soil with its low levels of mold aflatoxins. The entire farm infrastructure expanded to meet demand — from suppliers to farms to shellers — becoming a major economic engine, especially for the small rural counties that rely on agriculture and forestry.
Area peanut farmers fear that all could come crashing down due to provisions in the 2014 farm bill passed in early February that provides incentives for cotton farmers to switch to peanuts and could lead to an oversupply that would drive prices below what it costs to grow peanuts. Insurance programs that support prices of peanuts on acres established for peanuts and cotton in 2002 are not available to farmers who have added acres since, estimated at 80 percent or more of the peanut acres in the 11-county North Central Florida region.
"It would be devastating to these rural counties," said Trey Sanchez, 28, whose father and grandfather started Sanchez Farms in Dixie County in 1980.
His mother, Virginia Sanchez, said they learned about the provisions in the farm bill during a national peanut buying point conference in Nashville two weeks ago and started spreading the word to local farmers.
The farmers got the ear of U.S. Rep. Ted Yoho, the Republican congressman from Gainesville who hosted a meeting Monday with more than 130 farmers and support professionals at the Straughn IFAS Extension Professional Development Center at the University of Florida.
Yoho — who sits on the House agriculture committee — said he is concerned that American taxpayers would have to bail out peanut farmers if cotton farmers shift even a small percentage of acres to peanuts and drive down prices.
He said he plans to work with the agriculture committee to influence the agency rule-writing process that follows new legislation to see about delaying the shift of cotton acres or lowering the insurance support price. If that doesn't solve the problem, he said a legislative fix could be in order.
"If we can avert any unintended consequences that they're talking about in this farm bill and save American taxpayers money, that's what we're going to do before it's a problem," Yoho said.
The U.S. Department of Agriculture is the agency charged with writing the rules for the farm bill. Rick Dantzler, Florida executive director of the USDA's Farm Service Agency based in Gainesville, said he has communicated the requests from Yoho and peanut farmers to delay or mitigate the effects of the regulations.
"I've run that up the flagpole in D.C. but haven't gotten a response," he said. "Our job is to implement what Congress passes, so there are limits to what we can do, but I understand the concern and hope we can help."
Levy extension agent Anthony Drew is working with IFAS' Food and Resource Economics department on an economic impact study to measure the potential effects of the farm bill on peanut farmers and their local economies.
Drew said new and growing peanut farms, suppliers and buyers took on a lot of debt to expand operations. Farmers bought land and equipment. Buying points and shellers bought elevators, dryers, trucks and warehouses.
On top of paying off loans, farmers were already faced with break-even prices due to an oversupply from a bumper crop in 2012 and are now faced with even lower prices.
"That's potentially catastrophic," Drew said.
John Gray, president of the Williston Peanuts shelling facility, said farmers need about $450 per ton to break even. Last year, contracts paid $550 to $575 per ton. Earlier this year, buyers were offering $425 to $475 per ton but canceled offers after the farm bill came out. Gray said one buyer is now offering $400.
With planting season coming up in April, Trey Sanchez said they are very nervous. The farm holds debt on its own expansion and is worried about the 100 people they employ during harvest season and the many smaller farms that have started in recent years.
A young farmer already has to put up more collateral than established farmers to get loans, he said, "and when the farm bill gets written like this farm bill is written and the young farmers are left out, the banks sure aren't going to touch him."
Toby Bass, 38, started his own 300-acre peanut farm south of Chiefland six years ago after years of working for other farmers.
He said he just keeps his head above water to cover the $200,000 in costs every year for equipment, fertilizer, chemicals, land rent and fuel.
If prices drop, he said he couldn't afford to grow.
"I'll have to find another career, I guess, or worry about planting something else."
Gray said the collapse of the local peanut industry would have a domino effect, not just on the tractor, fertilizer and fuel dealers, but on grocery stores, retailers and gas stations that all of their employees support.
"I think everybody is going to be shocked when the University of Florida comes back with this economic study of just how many millions are at stake," he said.
The 2002 farm bill did away with quota restrictions on several crop commodities that limited supplies to prop up prices and instead allowed farmers to establish base acres for various crops depending on how many acres of those crops they had planted over the previous four years. Farmers with base acres have been eligible for crop subsidies.
While peanut farmers with base acres continued to receive subsidies, the growth in Florida peanut farming since 2002 was fueled entirely by market prices since base acres have not been expanded and the new farmers were not eligible for subsidies.
Florida had 78,049 acres of peanut base acres last year, mostly in traditional peanut growing areas in the Panhandle, while growing 130,774 acres.
The Florida Peanut Producers Association recommended that base acres be updated when negotiations on the farm bill started more than three years ago, but were told by Congress that that would be too expensive, said Ken Barton, executive director.
He said the provision that allows cotton acres to convert to peanuts and other crops was added a week before the final vote by a cotton-state member on the Senate agriculture committee.
The provision was in response to a World Trade Organization ruling on behalf of Brazil that U.S. cotton subsidies unfairly lowered prices. The U.S. agreed to pay Brazil $147 million a year since 2010 until passing new farm legislation that eliminated cotton subsidies.
The farm bill converts all cotton acres to generic base acres that farmers can use to plant any covered commodity eligible for crop insurance price supports.
Andy Robinson, co-owner of Williston Peanuts, said the $535 per ton insurance price on base-acre peanuts gives it the highest dollar per acre payout.
"With the price of corn and cotton now, with a $535 guarantee on peanuts, peanuts look like the prettiest girl at the dance," Virginia Sanchez said.
Yoho said that just a 5 percent shift in the 17 million cotton acres to peanuts would add 850,000 peanut acres and could ruin the market.
By comparison, U.S. farmers planted a total of 1.07 million acres of peanuts last year, according to the USDA.
Virginia Sanchez said cotton farmers and most peanut farmers who have base acres are happy with the farm bill.
The 2002 farm bill established 1.47 million base acres of peanuts, a figure that has been surpassed by planted acres three of the 11 seasons since 2002.
While the farm bill will allow the former cotton acres to switch to other commodities such as peanuts, corn, wheat and soybeans every year, it also allows farmers with base acres in those crops to make a one-time reallocation in proportion to their actual planted acres between 2009 and 2012.
For now, the local peanut industry is waiting to see how the USDA interprets the farm bill.
"This 11-county area is at the mercy of those regulations and how they are written," Trey Sanchez said.