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GAO-01-1135R 1 (2001-09-26)

handle is hein.gao/gaobaalvo0001 and id is 1 raw text is: £ Accountability * Integrity * Reliability United States General Accounting Office Washington, DC 20548 September 26, 2001 The Honorable Christopher Shays House of Representatives The Honorable Paul E. Kanjorski House of Representatives Subject: Peanut Program: Potential Effects of Proposed Farm Bill on Producers, Consumers, Government, and Peanut Imports and Exports The current federal peanut program, administered by the U.S. Department of Agriculture (USDA), is designed to support producers' incomes while ensuring an ample supply of domestically produced peanuts. To accomplish these goals, the program controls the domestic supply of peanuts and guarantees producers a minimum price for their crops. This price substantially exceeds the price for peanuts in world markets. The program uses two mechanisms to control the domestic supply of peanuts: (1) a national quota on the number of pounds that can be sold for edible consumption domestically and (2) import restrictions. While anyone can grow peanuts, only producers holding quota, either through ownership or rental of farmland, may sell their peanuts domestically, as quota peanuts. Generally, all other production, referred to as additional peanuts, must be exported or crushed for oil and meal. The program protects producers' incomes through a two-tiered system that sets minimum support prices for quota and for additional peanuts. Producers of quota peanuts are guaranteed a support price of $610 per-ton, called the quota loan rate. Producers of additional peanuts are guaranteed a lower support price of $132 per-ton, called the additional loan rate. Producers may sell their peanuts at or above these loan rates, or they may place their peanuts under loan with USDA and have the government sell them. This program, while long-standing, has been criticized by GAO and others because, among other things, it provides substantial benefits to a relatively small number of producers who hold most of the quota, generally restricts nonquota holders from producing peanuts for the U.S. domestic market, and increases consumers' cost.' The program is, however, designed to 'Peanut Program: Changes Are Needed to Make the Program Responsive to Market Forces (GAO/RCED-93-18, February 8, 1993). GAO-01-1135R Potential Effects of Proposed Peanut Provisions

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