Date: Wed, 4 Oct 1995 10:04:04 -0400 (EDT) From: Competitive Enterprise Institute To: Recipients of the CEI List Subject: CEI List: Peanut Funding Consumers Shell Out For Peanut Program by Jonathan Tolman, Policy Analyst appeared in *The St.Louis Post Dispatch* August 31, 1995. Just about every kid's favorite lunch is a peanut butter and jelly sandwich. But, as mother will tell you, peanut butter is expensive. One reasons is the federal government -- and its peanut program. The last time the peanut program was up for a vote in Congress, Democratic Minority Leader Richard Gephardt voted to keep your peanut prices high. Every time you buy a can of peanuts, a snickers bar, or even eat Kung Pao chicken at your favorite chinese restaurant, part of that money is going to support the peanut program. Virtually all American families are forced to pay higher prices for peanuts because of this 50 year old program. All told, the peanut program costs consumers $513 million a year. Every family-size jar of peanut butter costs an additional 85 cents. Children eat more than 6 pounds of peanut butter a year so families with children end up paying more than the rest of the population. In addition to the consumers' costs, the program costs the government a pretty penny as well. This year the federal government could end up paying peanut farmers as much as $200 million. Like most US agriculture programs, the peanut program started more than fifty years ago during the Depression. Under the program only farmers who have a federal license can grow or sell peanuts for domestic consumption. These licenses were first handed out in the 1940s and have been passed from generation to generation. Every year the USDA decides how many peanuts the licensed farmers can grow. The national quota for peanut production is then divided, but not equally, among all the license holders. Supporters of the peanut program often claim that it benefits small farmers. A closer look at the program, however, shows that it primarily benefits big operators. Of all the peanut quota handed out by the USDA every year more than half of the 2.8 billion pounds is handed out to just 409 individuals. Many of those receiving peanut quota don't even have to grow peanuts to benefit from the program. The department allows them to rent their portion of the quota to someone else. Peanut quota rents for 12 cents a pound. If these 409 recipients all rented their quota they could collect more than $400,000 each, every year, without planting a single peanut. These aren't poor peanut farmers trying to scratch out a meager living from the soil. To the contrary, peanut quota is doled out to residents of such little known peanut farming areas as Chicago, New York, Los Angeles, San Francisco, St. Thomas Island, Grand Cayman Island, Switzerland, Japan and Hong Kong. Given these exotic locations it is surprising that the government is trying to defend the peanut program based upon its history and culture. According to Secretary of Agriculture Dan Glickman, "The peanut program is historical and it's cultural and a large number of people depend on it." Maybe Glickman doesn't know the whole history of the peanut program. When the USDA handed out peanut quotas in the early 1940s, it refused to grant allotments to farmers growing less than an acre. Consequently, the smallest farms were immediately disenfranchised. In addition, the USDA shelled out its quota on the recommendations of local committees composed of prominent local farmers. In the early 1940s that meant large white landowners. For example, even though 30 percent of Georgia's farmers were black, they received almost no quotas. Today, blacks hold less than 3 percent of Georgia's peanut quota. The peanut program is also bad environmental policy. Under the program a farm will forfeit its peanut quota if the quota is not produced in two out of three years on the land to which it is allocated. This means that peanuts are grown year after year on the same land. This can create a pest-control problem because one of the best defenses against pests is crop rotation. To maintain productivity, peanut farmers often use high levels of pesticides on their crops. Elimination of the peanut program could result in a significant reduction in pesticide use. The peanut program is costly to consumers, the federal government and the environment. It has done nothing for small farmers except perhaps accelerate their demise, particularly minority farmers. The only people who benefit from the program are peanut fat cats who own thousands of pounds of quotas and are likely to contribute to the war chests of their members of Congress to ensure their free ride on the backs of consumers. George Washington Carver, the father of the peanut industry, discovered more than 300 different uses for the lowly nut, including shaving cream, shoe polish, and axle grease. But it took the federal government to turn the peanut into a lucrative cash crop for a privileged few. _______ ________ __________ / | | | |_______ | | | | \ _______ |_______ __________ COMPETITIVE ENTERPRISE INSTITUTE 1001 Connecticut Ave. NW #1250 Washington, DC 20036 202-331-1010, fax 202-331-0640 Permission to reprint must be obtained from the publishing journal listed above. Permission to copy granted as long as these lines are left intact. To subscribe to the cei list, send a message to CEI@digex.com. "The Virtual Hand: CEI's free-market guide to the information superhighway" is available for $5. CEI's monthly newsletter, "CEI UpDate," is free to contributors of $25.