Economic Viability of the Southeastern Representative Peanut Farms over the Period 2005-2010 based on August 2004 Baseline Overall Economic Viability

GA 2008 Predicting Peanut Yields(Pounds/Acre) By Different ModelsAnd Comparison With NASS Forecast(Week01-02 as Forecasted

Aug. 1 and Week03-06 as Forecasted Sept. 1, Week07-11 as ForecastedOct. 1, Week12-14 as Forecasted Nov. 1)

31553119 3136 3121

3196

3145

3242 3230 3248

3100 3100 3100 3100 3100 3100

3150 3150 3150

30132988

3038 3028

3104

3053

3148 31313165

2679 2672 26602699

2757 2775

2864

2915 2902

2,500

2,600

2,700

2,800

2,900

3,000

3,100

3,200

3,300

Wk01 Wk02 Wk03 Wk04 Wk05 Wk06 Wk07 Wk08 Wk09 Wk10 Wk11 Wk12 Wk13 Wk14

Yiel

ds(P

ound

/Acr

e)

Trend Model

NASS Forecast

Revised Model

GPC Model

Economic Viability of the Southeastern Representative Peanut Farms

over the Period 2005-2010 based on August 2004 Baseline

Overall Economic Viability1 P(Negative Ending Cash)2 P(Real Net Worth Decline)3

Farm A 1-1 1-1

Farm B 3-99 1-86

Farm C 1-35 1-1

Farm D 1-1 1-1

Farm E 1-1 1-1

Farm F 1-43 1-48

Farm G 1-1 1-1

Farm H 96-99 1-11

Farm I 1-1 1-1

Farm J 1-3 1-1

Farm K 1-1 1-1

26-50<25 >501) Viability is classified as good (green), moderate (yellow), and poor (red) based on the probabilities of having negative ending cash reserves and losing real net worth:2) P(Negative Ending Cash) is the probability that the farm will have a negative ending cash reserve. Reported values represent the probabilities for 2005 and 2010.3) P(Real Net Worth Decline) is the probability that the farm will have a loss in real net worth relative to the beginning net worth. Reported values represent the probabilities for losing real net worth from 2002 to 2004 and 2002 to 2010.

Economic Viability of US Representative Peanut Farms over the Period 2008-2013 based on January 2008 Baseline Benchmark

Overall Economic Viability1 P(Negative Ending Cash)2 P(Real Net Worth Decline)3

Farm A 3-59 1-35

Farm B 88-99 1-94

Farm C 99-99 1-99

Farm D 1-40 1-11

Farm E 99-99 1-28

Farm F 90-99 1-97

Farm G 44-74 1-20

Farm H 96-99 1-84

Farm I 81-99 1-64

Farm J 66-97 1-93

Farm K 8-20 1-1

Farm L 3-28 1-1

Farm M 39-89 1-84

Farm N 1-1 1-1

Farm O 29-83 1-40

Farm P 95-99 1-99

Farm Q 44-80 1-32

Farm R 55-92 1-69

Farm S 23-66 1-49

26-50<25 >501) Viability is classified as good (green), moderate (yellow), and poor (red) based on the probabilities of having negative ending cash reserves and losing real net worth:2) P(Negative Ending Cash) is the probability that the farm will have a negative ending cash reserve. Reported values represent the probabilities for 2008 and 2013.3) P(Real Net Worth Decline) is the probability that the farm will have a loss in real net worth relative to the beginning net worth. Reported values represent the probabilities for losing real net worth from 2005 to 2008 and 2005 to 2013.

SE Representative Peanut SE Representative Peanut Farms Total Variable Input Farms Total Variable Input

CostCost$/AC change $/AC change from ’02 to from ’02 to

‘08‘08

Percent Percent change from change from

’02 to ‘08’02 to ‘08

Irrigated Irrigated Peanuts Peanuts

$214$214 57%57%

Non-Irrigated Non-Irrigated PeanutsPeanuts $155$155 54%54%

91%84%82%

25%21%17%

11% 9%11%9%

35%

21%

67%

16%

0%5%

9%

40%

57%

17%

74%

0%

20%

40%

60%

80%

100%

GOOD MARGINAL POOR

Chart 1. Overall Economic Viability of Various U.S. Representative Farm Types Over the Period 2008-2013

Wheat Feed Grain Dairy Cotton Rice Cow-Calf Peanut

The Food, Conservation, and Energy Act of 2008Enacted into law on June 18, 2008

Effective date: May 22, 2008Regulations deadline: Sept. 16, 2008

Some features deadline: Dec. 16, 2008

Treatment of Farms with Limited Base Acres

• Sum of the base acres of the farm is 10 acres or less– No Direct Payments– No Counter-Cyclical Payments– No Average Crop Revenue Election Payments

• Exception – Farm is wholly owned by a socially disadvantaged farmer or rancher; farm is wholly owned by a limited resource farmer or rancher

Payment AcresYear Percentage of Base Acres

Used to Calculate Direct Payments

Percentage of Base Acres Used to Calculate Counter-Cyclical

Payments

2008 85% 85%

2009 83.3% 85%

2010 83.3% 85%

2011 83.3% 85%

2012 85% 85%

Average Crop Revenue Election Program (ACRE)

• 2009 through 2012 crop years• Irrevocable election • Failure to make election (all producers on a

farm), then farm considered enrolled in DCP• Alternative to receiving counter-cyclical payment• 20 percent reduction in direct payments• 30 percent reduction in marketing assistance

loan rates

Average Adjusted Gross Income (AGI) Limitations for 2009 through 2012

Payment Limitation Amounts - 2008 through 2012 ($40,000/$65,000)

Separate payment limitation for MAL gains and LDP’s for wool, honey, mohair, peanuts, and unshorn pelts

Farm Bill Comparison (Peanuts)

2002 Farm Bill 2008 Farm Bill

Direct Payment $36/ton Same

CCP Target Pr $495/ton Same

Market Loan Rate

$355/ton Same

2008 Crop Peanut Loan Rates

• On June 26, 2008, CCC announced the 2008 crop peanut loan rates by type.

• Peanut premiums and discounts remain unchanged from 2007 crop year for 2008 but undecided for 2009-2012.

Peanut Type Loan Values Per Ton

Virginia $357.32

Runner $354.75

Spanish $348.95

Valencia $357.32

Peanut Storage, Handling, and Associated Costs (LITE)

• CCC shall pay handling and other associated costs (other than storage costs) when peanuts placed into loan

• Repayment of handling and other associated costs when peanuts are redeemed

• CCC pays storage, handling, and other associated costs when peanuts are forfeited

Crop loss-provides assistance to farmers who suffer crop losses due to natural disasters.

Livestock indemnity-provides assistance to ranchers whose livestock are killed in a natural disaster.

Livestock, honeybees, farm-raised fish-provides funds for losses that are not covered by any other program.

Livestock Forage-provides assistance to ranchers who suffer grazing losses due to drought.

Tree assistance-provides assistance to orchardists whose vines or trees are killed due to a natural disaster.

Supplemental Revenue Assistance Program (SURE)

• Covers crop losses due to natural disasters• Producers must have purchased or be enrolled

in: – CAT for insurable crops – NAP for uninsurable crops

• Waiver provision of CAT or NAP purchase for socially disadvantaged, limited resource, or beginning farmer or rancher

Supplemental Revenue Assistance Program (SURE)

• “Farm” means the sum of all crop acreage in all counties that is planted or intended to be planted for harvest by the eligible producer

Farm Bill & WTO:Farm Bill & WTO:Is There Co-Existence for Peanuts?Is There Co-Existence for Peanuts?

PERS PERS Peanut Environmental Resource StewardshipPeanut Environmental Resource Stewardship

WTO: Limiting scope of traditional income support programs

The Brazilian cotton case against the U.S. is an exampleof non-compliance within the WTO. The U.S. has lostevery attempt to fight the Brazilian challenge.

Rewards a peanut producer that adopts a resource-conserving crop rotation to achieve beneficial crop rotations as appropriate for the land controlled by the producer.

OTHERCROPS

OTHERCROPS

OTHERCROPSPEANUTSPEANUTS

CROP CROP ROTATIONSROTATIONS

PERS PERS Peanut Environmental Resource StewardshipPeanut Environmental Resource Stewardship

TRADE COMPLIANT• Annex 2 of GATT Agreement on Agriculture

implies PERS is an allowable domestic support program– Decoupled income support program– Payments under environmental program

OTHERCROPS

OTHERCROPS



Conservation Stewardship Program (CSP):

OTHERCROPS

OTHERCROPS



Supplemental Payments for Resource-Conserving Crop Rotations

WTO compliant. Fits into the “GREEN BOXGREEN BOX” of trade agreementsIncrease peanut yields per acre over timeDecrease peanut disease pressure over timeProvides incentive not to plant peanuts in soils where peanut yields and quality typically sufferThe public will benefit from significantly less chemical usage and improved soils for generations to comePERS would be an optional program to producersProducers would receive additional income from increased yields and quality as well as from the PERS paymentsSets precedents for future environmental stewardship programs

Benefits of a Resource-Conserving Crop Rotation Program


OTHERCROPS

OTHERCROPS




‘‘(f) SUPPLEMENTAL PAYMENTS FOR RESOURCE-CONSERVINGCROP ROTATIONS.—‘‘(1) AVAILABILITY OF PAYMENTS.—Producers that agree to adopt resource-conserving crop rotations as determined by the Secretary of Agriculture to achieve beneficial crop rotations as appropriate for the land of the producers.‘‘(g) PAYMENT LIMITATIONS.- $200,000 per person or legal entity during any 5-year period.

Under the Conservation Title, Starting on page 127 of 2008 Farm Bill.


OTHERCROPS

OTHERCROPS




OK, so where do peanut farms fit in this program?

How can the CSP Crop Rotation Program Work for YOU???????

FA

RM

ID

PEA

NU

TS

CO

TTO

N

CO

RN

OTH

ER

Tota

l Acre

s

FARM A 26.7% 53.3% 8.3% 11.7% 3000

FARM B 30.0% 60.0% 10.0% 2000

FARM C 33.3% 52.4% 14.3 700

FARM D 21.4% 78.6% 1400

FARM E 63.2% 6.3% 30.5% 2375

FARM F 12.4% 84.7% 2.9% 1210

FARM G 33.3% 54.9% 5.9% 5.9% 1275

FARM H 33.3% 47.9% 12.5% 6.3% 1200

FARM I 33.3% 66.7% 1500

FARM J 33.3% 52.5% 14.3% 2000

FARM K 52.9% 47.1% 850

Crop Mix by Percent of the U.S. Crop Mix by Percent of the U.S. Representative Peanut Farms Representative Peanut Farms (2006 Update)(2006 Update)

FA

RM

ID

PEA

NU

TS

CO

TTO

N

CO

RN

OTH

ER

Tota

l Acre

s

FARM L 16.7% 23.3% 20.0% 40.0% 1500

FARM M 18.5% 55.6% 7.4% 18.5% 1350

FARM N 16.7% 66.7% 16.7% 1200

FARM O 22.2% 66.7% 11.1% 1800

FARM P 26.7% 16.7% 16.7% 40.0% 3000

FARM Q 19.2% 14.4% 9.6% 56.8% 2500

FARM R 31.3% 62.5% 6.3% 4000

FARM S 22.5% 22.5% 55.0% 1600

OTHERCROPS

OTHERCROPS




OTHERCROPS

OTHERCROPS




3 Year Rotation< 33.3% Peanuts

> 33.3% Peanuts

Percentage of 19 U.S. Representative Farms 89% 11%

4 Year Rotation< 25%

Peanuts> 25%

Peanuts

Percentage of 19 U.S. Representative Farms 58% 42%

19 U.S. Representative 19 U.S. Representative Peanut Farms:Peanut Farms:

Total Cultivatable AcresTotal Cultivatable AcresPlanted in PeanutsPlanted in Peanuts


OTHERCROPS

OTHERCROPS




Will the CSP program be financially beneficial for you to enroll?

Assuming the Rotation Program will operate similar to other CSP programs, a producer should do the following prior to signing CSP contracts:

Project your farm’s annual income over the next 5 years with your farm’s current crop mix and acreage Project your farm’s annual income over the next 5 years with the new

compliant crop mix and acreage. Compare farm’s income with each scenario and determine how much CSP payment would be required to offset loss of income from peanut acreage reduction.

OTHERCROPS

OTHERCROPS





FA

RM

J

PEA

NU

TS

CO

TTO

N

CO

RN

OTH

ER

Tota

l A

cre

sNON-COMP 33.3% 52.5% 14.3% 2000

COMPLIANT 25.0% 59.2% 15.8% 2000

AVG PRICES $500 $0.80 $6.00

Example, using the U.S. Representative Peanut Farms

Change in Net Cash Farm Income (NCFI) 2009-2013 is an average loss of $33,010 per year.

Methodology:1st, Shifted Non-Irrigated Peanut Acres to Non- Irrigated Cotton Acres

2nd, Shifted Irrigated Peanut Acres to Irrigated Corn Acres

OTHERCROPS

OTHERCROPS





FA

RM

K100%

D

ryla

nd

PEA

NU

TS

CO

TTO

N

CO

RN

OTH

ER

Tota

l Acre

s

NON-COMP 52.9% 47.1% 850

COMPLIANT 25.0% 75.0% 850

AVG PRICES $500 $0.80 $6.00

Example, using the U.S. Representative Peanut Farms

Change in Net Cash Farm Income (NCFI) 2009-2013 is an average loss of $44,946 per year. Exceeds Payments Limits

Methodology:1st, Shifted Non-Irrigated Peanut Acres to Non- Irrigated Cotton Acres

Thank You Thank You for Your Attention.for Your Attention.

Questions?Questions?

Basic Provisions

Payment Limitation Amounts - 2008 through 2012

Program Payment Limitation Per Crop Year

DCP (any covered commodity except peanuts)

Direct - $40,000

Counter-Cyclical - $65,000

DCP - Peanuts Direct - $40,000

Counter-Cyclical - $65,000

ACRE ACRE Payment – Sum of $65,000 and the amount by which the Direct Payment limitation is reduced for the 20 percent reduction. Example – Producer participates in ACRE on all farms –

ACRE Payment Limit is $73,0000

Direct Payment Limit is $32,000

Basic Provisions

Payment Limitation Amounts - 2008 through 2012

Program Payment Limitation

Supplemental Agricultural Disaster Assistance Programs

Total amount of disaster assistance payments received directly or indirectly may not exceed $100,000 for any crop year

CRP $50,000 per fiscal year

NAP $100,000 per crop year


Commodity Programs, Disaster Assistance - AGI– DCP, ACRE, Marketing Loan Gain, LDP,

Supplemental Agricultural Disaster Assistance, MILC, NAP

• Average AGI – 3 taxable years preceding the most complete taxable year

• Nonfarm AGI greater than $500,000, the individual or entity ineligible

• Farm AGI greater than $750,000, the individual or entity ineligible


Conservation Programs – AGI• Average AGI – 3 taxable years preceding the most

complete taxable year• Total Nonfarm AGI greater than $1 million, the individual

or entity ineligible unless 66.66% is derived from farming, ranching, and forestry operations

• Secretary may waive ineligibility on a case-by-case basis if determined that environmentally sensitive land of special significance would be protected

Marketing Assistance Loan (MAL) and Loan Deficiency Payment (LDP)

• Authorized for crop years 2008 through 2012• $75,000 payment limitation for MAL gains and LDP’s for

the 2008 crop year; Separate combined $75,000 payment limitation for MAL gains and LDP’s for wool, honey, mohair, peanuts, and unshorn pelts

• Beneficial interest policy for the 2008 crop year same as 2002 Act

• MAL have a term of 9 months beginning on first day of the first month after the month in which the loan is made

• LDP rate in effect when a producer makes request

Documents

Economic Viability of the Southeastern Representative Peanut Farms over the Period 2005-2010 based on August 2004 Baseline Overall Economic Viability