NCPA - National Center for Policy Analysis

Proposed Cash to Farmers Isn't Peanuts

March 5, 2002

Buried in the proposed farm bill is an entirely new $3 billion subsidy for peanut farmers -- an initiative which shocks even some agricultural economists who thought they had seen it all.

In addition to the $3 billion subsidy, the government would pay another $1.3 billion to "buy out" many of those same farmers and others who own lucrative licenses, known as quotas, to grow peanuts.

Under the current 70-year-old system, only 1.5 million acres can be used for planting peanuts for domestic consumption -- and the quotas to farm those acres have grown increasingly valuable.

  • Under the new system, the government would buy up those quotas from their owners -- who could them continue to grow peanuts under the new subsidy system.
  • Once a basic price support program, quotas can now be traded and rented and are even part of investment portfolios owned by people who have no intention of growing peanuts.
  • The biggest owner of those quotas is the John Hancock Mutual Life Insurance Company of Boston -- which stands to receive $2.1 million from the government to give up its licenses controlling 3.8 million pounds of peanuts grown in Georgia.

Agricultural economists say they can think of no parallel for such a plan, in which taxpayers subsidize farmers against competition from rising Canadian and Mexican imports.

Source: Elizabeth Becker, "Peanut Proposals Put a New Wrinkle on Farm Subsidies," New York Times, March 4, 2002.

 

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