PEANUT QUOTA MARKETS AND PEANUT PRODUCTION AFTER FAIR

Abstract

The U.S. peanut program has limited peanut production since 1949. Unlike the programs for grains, cotton, and rice, the 1996 FAIR Act left the peanut program largely intact. As before FAIR (and since 1977) the right to grow peanuts for the domestic edible market is embodied in marketing quota, which can be leased and sold. The FAIR Act for the first time allowed quota movement across county lines. We now have four years of experience with peanut quota markets post-FAIR. In some parts of the country, quota has moved as much as the regulatory caps allow. But in most of the traditional peanut-growing areas of the Southeast there has been little cross-county movement. In this paper we analyze a large county-level panel of pre- and post-FAIR data to assess the effects of these changes in policy. We have compiled from USDA-FSA sources data on quota movements for virtually every peanut-producing county in the seven major peanut-producing states. We use these data to test microeconomic predictions of the effects of the loosening of transfer restrictions. Analysis of the data shows large quota movements in areas where observations on additionals production and lease rates would have predicted such. We find that movements in production, as distinct from movements in quota, cannot be explained entirely by FAIR, but can reasonably be attributed to changes in the profitability of growing competing crops such as cotton. The reduced profitability of the latter might itself be attributed in part to the elimination of cotton deficiency payments.Agricultural and Food Policy,