Download - Farm Bill, Economics & Outlook for 2002
Farm Bill, Economics & Farm Bill, Economics & Outlook for 2002Outlook for 2002
County Agent Peanut TrainingCounty Agent Peanut TrainingNathan Smith Nathan Smith
UGA Extension EconomistUGA Extension Economist
Peanut Situation
Bumper crop in Southeast Over supply situation Domestic use down 3.3% from last year Exports down in 1st quarter Quota kept at 2001 level Argentina currency devaluation impact? Farm Bill in 2002 or 2003?
US Peanut Production, Quota, and Food Use
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Basic Quota Effective Quota * Production Food Use
Effective Quota is Basic Quota plus Undermarketings 1990-95, and Basic Quota plus Buybacks 1996-00.
Planted Acres by Region
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500
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US Southeast Southwest VC Georgia
US
SE
GA
SW
VC
2001 Peanut CropGA SE SW VC US
Planted Acres (1,000)
515 817 528 198 1543
Harvested Acres (1,000)
512 805 398 198 1401
Yield (lb/acre) 3300 3143 2787 3038 3027
Production (1,000,000 lb)
(1000 tons)
2001 QUOTA
1690845486
25281264695
865555241
602300223
423921201180
U.S. Peanut Balance Sheet
million pounds (Dec 12, 2001)
27.425.4Average Price
1,3751,1161,233Ending Stocks
4,0763,5884,166TOTAL USE
351341493Seed & Res
725519727Exports
800548713Crush
2,2752,1702,233Food Use
5,4514,7035,400TOTAL SUPPLY
178204178Imports
4,1573,2663,829Production
1,1161,2331,392Beg. Stocks
2001/02 Proj.2000/01 Est.1999/00
Estimated 2001/02 Peanut Supply and Disappearance
FS Tons(1,000)
FS Tons(1,000)
Total Production 2,119 Quota Supply 1,303
Less Seg. 2 & 3’s 13.5 Less Food Use 1,138
(A) Total Seg. 1 Production
2,106 (C) Remaining Quota 165
US Qouta 1,180 Seg. 1 Add’l Supply (A-B)
803
Quota Delivery 1,170 Less Exports 363
Seed Delivery 110 Remaining Addtl’s 440
+ Buybacks 23.5
(B) Total Quota Supply
1,303 Seg. 1’s w/o home (C+D)
607
Marketing Assessment
GFA has approximately 243,000 tons of quota in loan
Another 145,000 tons of additionals are in the loan pool
243,000 tons * $400 loss = 97.2 mil. Loss SE has ~ 692,000 tons quota Marketing assessment could be as much
as $140/ton not counting additional losses or gains
What do I need from the Market?Irrigated Budgets
Crop Yield $/ac $/unit
Corn 185 bu $518 $2.80
Cotton 1000 lbs $628 $0.63
Peanuts 3500 lbs $734 21¢
Soybeans 50 bu $334 $6.69
Tobacco 2200 bu $2218 $1.01
* 2002 UGA CES Cost of Production Budgets
Note: Land and Quota costs not included
What do I need from the Market?Dryland Budgets
Crop** Yield $/ac $/unit
Corn 85 bu $277 $3.25
Cotton 650 lbs $460 71¢
Peanuts 2500 lbs $588 23.5¢
Soybeans 30 bu $232 $7.72
Wheat 55 bu $192 $3.50
* 2002 UGA CES Cost of Production Budgets
Note: Land and Quota costs not included
UGA CES Peanut Budgets, South Georgia 2002
Irrigated Dryland YIELD 3500 lb 2500 lb
Per Acre
Per Ton
Per Acre
Per Ton
VARIABLE COSTS $468 $267 $414 $331FIXED COSTS $243 $139 $153 $122MANAGEMENT $23 $13 $21 $17TOTAL COSTS $734 $419 $588 $470Breakeven Price $419 $470Breakeven Yield 2407 lb 1928 lb
Method 1: Based On Producer Net Returns
Expected (Average) Yield Per Acre 3500 lbsExpected (Average) Selling Price For Quota Peanuts 610 dollars per ton
Variable Costs Per Acre 468.00Fixed Costs Per Acre (Excluding Land and Quota) 266.00Rental Value of Land 0.00Total Costs Excluding Quota 734.00
Net Return To Quota 333.50 dollars per acreNet Return Per Pound 9.5 cents per pound
Net Return to Quota per lb for 3500 lb Irrigated Yield
Land Rent Per Acre
Total Cost
$0 $35 $50 $75 $100
$850 6.2 5.2 4.8 4.1 3.4
$800 7.6 6.6 6.2 5.5 4.8
$734 9.5 8.5 8.1 7.4 6.7
$700 10.5 9.5 9.1 8.4 7.6
$650 11.9 10.9 10.5 9.8 9.1
Net Return to Quota per lb for 2500 lb Non-Irrigated Yield
Land Rent Per Acre
Total Cost
$0 $25 $35 $50 $75
$650 4.5 3.5 3.1 2.5 1.5
$600 6.5 5.5 5.1 4.5 3.5
$588 7.0 6.0 5.6 5.0 4.0
$525 9.5 8.5 8.1 7.5 6.5
$475 11.5 10.5 10.1 9.5 8.5
Trade Situation
US is preparing for WTO negotiations FTAA has been stalled since the Sep.
11 attack Argentina facing a currency
devaluation
Tariff RatesNAFTA WTOTariff Tariff
YEAR2000 93 131.82001 81.4 131.82002 69.8 131.8
2003* 58.12004* 46.52005* 34.92006* 23.32007* 11.62008* 0
*3 percentage points tariff reduction for WTO
# Tariff rates on a pound of shelled peanuts
Tidal Wave May Tidal Wave May Be Closer Than Be Closer Than
Thought!Thought!
Argentina
Main exporter of peanuts into USAllocated 78% of the in-quota TRQ
(Tariff Rate Quota)Amounted to 43.9 thousand metric
tons last yearMain competitor in the European
Market Arg 43% market share from 98-00’ US 26% market share from 98-00’
Argentina Exchange Rate
Austral pegged to US dollar in 1991 Austral replaced by Peso in 1992 at a
fixed rate of 1:1 to the US dollar Peso became overvalued by being
tied to the US dollar May 2001 figures show 80-90%
overvalued, reduces Argentina’s competitiveness in the world market
Recent Changes in Argentina’s Exchange Rate
New temporary official exchange rate of 1.4 Pesos/US $
Argentina price is estimated to still be above US price (57.5 cents/pound) with 131.8 tariff rate (using 34.8 cents/lb + 2 cents/lb shipping cost)
Soon will be allowed to float freely (this summer)
What if Exchange Rate continues to drop?
The current free market exchange rate is closer to 1:1.6
At 60% devaluation, Argentina peanuts produced using >80% domestic inputs would be below the US price
Would make the tariff rate quota meaningless as a protection measure
Farm Bill Chronology and TimetableFarm Bill Chronology and Timetable
• House Ag Committee presents HR 2646 -- July 27, 2001
• HR2646 passed the House -- October 5, 2001
• Senate Ag Committee passes S 1628 -- November 15, 2001
• “Harkin Bill” presented S 1731 to the Senate -- November 27, 2001
• Senate Adjourned December 21 without a vote • Senate reconvenes next week• Senate vote• House-Senate conference committee• President
• FSA must write regulations
Major Components Of The BillMajor Components Of The Bill-- Provisions That Impact Income ---- Provisions That Impact Income --
• Loan Rate• AMTA or Fixed, Decoupled Payments • Base• Target Price• Payment Acres• Payment Yield• Payment Limits
Marketing Loan
Non-recourse Marketing Loan for all peanuts produced.
LDP could be taken on peanuts instead of actually taking out a loan.
Payment limitation of Marketing Loan gains and LDPs is proposed at $150,000 (House)
Fixed, Decoupled Payments
New name for AMTA payments. Peanuts would received a Fixed,
Decoupled Payment of $36 per ton. “Historical Producer” is defined as having
peanuts sometime during the 1998-2001 time period on a farm.
Payment limitation: $50,000 (House) $100,000 combined with CCP (Senate)
Counter-Cyclical Payments
Establish a payment to producers with peanut base.
Not tied to production Payments would be triggered when the
average season price for peanuts falls below a target price.
Payment limitation: $75,000 (House) $100,000 combined with FDP (Senate)
Counter-Cyclical Payment Calculation
CCP = TP - ASP - FDP or TP - NLR - FDP, whichever is higher.
CCP = counter cyclical payment TP = target price, $480 ASP = average season price FDP = fixed, decoupled payment, $36 NLR = national loan rate, $350
Base Acres
1996 Farm BillHouse
2002-2011Senate
2002-2006
Quota Poundage Allotment
Producer has a 180-day option to assign base to his own or someone else’s land. Base acreage is the average planted acres during 1998-2001 period
Same
Impact: Will create major tension between some Georgia landowners/quotaholders and producers. Will give the producer leverage for 180 days.Creates the opportunity for long term leases to be negotiated. Total bases of All crops cannot exceed cropland on the farm.
Comparison of House and Senate To Current ProgramComparison of House and Senate To Current Program
Peanut Provision BasicsHouse
H.R.2646Senate S.1731
Quota Buyout
10¢/lb. per year for 5 yrs
10¢/lb. per year for 5 yrs
Loan Rate $350/ton $400/ton
Fixed Decoupled Payment
$36/ton $36/ton
Target Price $480/ton $520/ton
Base Years 1998-2001 1998-2001
1996 Bill1996 Bill HouseHouse SenateSenate
PricePrice 375375 375375
Quota PriceQuota Price 610610
Loan RateLoan Rate 132*132* 350350 400400
Target PriceTarget Price 480480 520520
LDPLDP 00 2525
Decoupled Decoupled PaymentPayment 3636 3636
Counter Cyclical Counter Cyclical PaymentPayment
69 x 85%69 x 85%
= 59= 59109 x 85%109 x 85%
= 93= 93
Total Total Price/PaymentsPrice/Payments
610 quota610 quota
132-375 132-375 addt’laddt’l
375 Price375 Price
95 Pmt95 Pmt400 Price400 Price
129 Pmt129 Pmt
Comparison Of Payments @ 375/ton PeanutsComparison Of Payments @ 375/ton Peanuts
*Additional peanuts
House Senate
Acres Planted 250 250
Base Acres 250 250
Actual Farm Yield 3000 3000
FSA Program Yield 2800 2800
Average Cash Price 375 375
Loan Rate 350 400
Decoupled Payment Rate 36 36
Counter Cyclical Payment 59 93
Crop Income $141,625 $141,625
Decoupled Payment $7,650 $7,650
Counter-Cyclical Payment $14,750 $23,250
LDP or Loan Gain $0 $6,250
TOTAL $163,025 $177,775
TOTAL PER AC PLANTED $652 $711
TOTAL PER TON 434 474
Whole Farm Comparison of House and Senate ProposalsWhole Farm Comparison of House and Senate Proposals
FieldAndResourceManagementCost AccountingTrackingSystem
A tool to help producersA tool to help producers• track and organize real time cost,track and organize real time cost,• track and organize production data, track and organize production data,
including pesticide and water usageincluding pesticide and water usage• determine total costs, determine total costs, • compare the performances of individual compare the performances of individual
fields and the whole farm operation with fields and the whole farm operation with break-even analysis, break-even analysis,
• aid in management decisions aid in management decisions • in a user-friendly formatin a user-friendly format
Overall, an effort to enhance the Overall, an effort to enhance the COMPETITIVENESS of US peanut COMPETITIVENESS of US peanut producers.producers.
We Need Your Help
Cost of Production Survey for Southeast Target Sample Size – 700 from GA,FL,AL
Representative Farms 7 in Georgia 2 Alabama 2 Florida 1 South Carolina
UGA UGA Peanut Peanut
TeamTeam
www.ugapeanuts.com