US Peanut Producers: A Multi-Economic Analysis of Their Competitive Position in the Domestic and Global Markets

When the U.S. peanut program was significantly changed in the 2002 Farm Bill, there were components of the old quota program that were carried over into the new peanut program while other parts were not. The definitions for Segregation 1, Segregation 2 and Segregation 3 for farmer stock peanuts were not changed. However, what farmer stock peanuts could be used in the domestic edible channel was changed. Under the old quota peanut program, any farmer stock peanut that was graded a segregation 2 or 3 had to be crushed. This was based on value and not actually tonnage. Under the new peanut program, this criterion was eliminated and only the outgoing criterion is utilized. For example, if a farmer delivers a ton of peanuts that were graded Segregation 2, the sheller has the opportunity to potentially clean them up to meet the outgoing specifications for edible sale. For farmer stock peanuts, the main criterion for Segregation 2 was that the percent damage had to exceed 2.49%. Until recently, the outgoing specification was also the 2.49% damage threshold. Shellers requested through the Peanut Standards Board that the outgoing specification for maximum allowable damage in a lot to be increased to 3.49%. The Peanut Standards Board approved the request and was accepted by the Secretary of Agriculture.