11/03/1995

Peanut Program Cuts Could Cost Southeast 2,824 Jobs, $219 Million

AUBURN, Ala. - Alabama, Georgia and Florida could lose as much as 2,824 jobs and $219 million in the proposed 1995 Farm Bill's peanut program, according to a study by Auburn University agricultural economists.

"This is a pretty hard hit, and the communities involved need to understand that the economic impact will be broad," said Rob Martin, a researcher in the Alabama Agricultural Experiment Station System who directed the AU study. "This is a matter of great importance not just to the people who grow peanuts but to everyone in peanut-producing regions."

Nationally, Martin's study projected that all peanut-producing regions could lose a total of $375 million and 5,440 jobs because of the proposed farm program reforms.

"These total economic losses would far exceed the direct farm income losses, which are estimated to be $144 million in the nation's three peanut-production regions combined," Martin said. "It's impossible to say at this time how many farmers would go out of business.

"In fact, both the job losses and the economic output losses are spread widely across the general economies of the peanut industry areas," he added. "Reduced crop activity would be accompanied in each area by large losses in real estate and finance, wholesale and retail trade, industrial output, and personal services.

"However, under the present philosophy of government, peanut producers must be able to accommodate some reduction to help reduce federal budget costs," Martin continued. "But the proposed cuts are about all the economies in the peanut-producing regions should be called on to stand. If they are hit any harder, the impact could be many times greater."

The AU study was sponsored by the Alabama Peanut Producers Association and similar groups in Florida and Georgia. On Oct. 31, Martin presented his findings at public forums on the 1995 Farm Bill at the U.S. Department of Agriculture headquarters in Washington, D.C.

Peanut production and primary processing are concentrated in nine states in three regions. The Southeast accounts for 64 percent of U.S. peanut production. According to the AU study, the peanut industry generates almost $900 million in Alabama, Georgia and Florida. Each dollar generated in the peanut industry creates a ripple effect throughout hundreds of other sectors in the general economy, generating even more spending. Given this "multiplier effect," the study estimates that the peanut industry is responsible for more than $1.3 billion in total economic output and 16,242 jobs in the Southeast.

"U.S. peanut farmers produce a high-quality, dependable supply of peanuts," Martin said. "They would like to maintain that, but they don't want the government to subsidize more peanuts than they can sell. We've had the ability to produce more peanuts than we can move in the domestic market, and the government has taken on the excess, but it's not going to do that anymore."

The current Farm Bill guarantees peanut farmers a price of $678 per ton for up to a national poundage quota of 1.35 million tons. Farmers can sell additional peanuts at the world market price. However, if the industry cannot sell the entire 1.35 million tons, the government buys the surplus.

The Senate has passed a proposed peanut supply management program in which the quota price would be dropped to $628 per ton. A proposal by the House of Representatives calls for a quota price of $610 per ton. Both bills propose decreasing the national poundage quota to match the domestic consumption level, which is now estimated to be 1.1 million tons. A Senate-House conference committee has begun the process of resolving the differences in these bills. These deliberations are expected to last throughout the week of Nov. 6.

The AU recent study was based on provisions proposed in the House bill. These reforms would cost 2,824 jobs and $219 million in the Southeast; 1,343 jobs and $80 million in Texas, Oklahoma and New Mexico; and 1,273 jobs and $76 million in Virginia and the Carolinas. In the nine peanut-producing states combined, these losses would include 1,437 jobs and $51 million in the wholesale-retail sector; 728 jobs and $89 million in finance-real estate; 962 jobs and $44 million in personal services; and 530 jobs and $27 million in the medical community. In the Southeast, losses would include 858 jobs and $31 million in the wholesale-retail sector; 476 jobs and $56 million in finance-real estate; 574 jobs and $27 million in personal services; and 306 jobs and $15 million in the medical community.

"Our study did not isolate the impact on Alabama specifically." Martin said. "This is not really feasible because the industry is so integrated within the tri-state area. However, the impact estimated for the Southeast would be concentrated in a 109-county area of Southeast Alabama, South Georgia and North Florida."

In his testimony on Oct. 31, Martin said that while peanut producers are willing to support current Farm Bill proposals, a peanut reform bill sponsored by Sen. Howell Heflin and Rep. Charlie Rose of North Carolina more closely reflects the original proposal outlined by the National Peanut Growers Group. This proposal holds the quota price at $678 per ton but would reduce the quota poundage to match domestic market demand, thus eliminating government cost for the program.

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News from:

Office of Ag Communications & Marketing

Auburn University College of Agriculture
Alabama Agricultural Experiment Station
3 Comer Hall, Auburn University
Auburn, AL 36849
334-844-4877 (PHONE) 334-844-5892 (FAX)

Contact Jamie Creamer, 334-844-2783 or jcreamer@auburn.edu
Contact Katie Jackson, 334-844-5886 or smithcl@auburn.edu

Nov. 3, 1995