Two billion dollars may be peanuts to Uncle Sam, but to taxpayers that’s real money — money they’re going to have to shell out over the next three years to peanut farmers who have overproduced.
“Peanut growers in states including Georgia and Alabama boosted sowing acreage by a fifth this spring and now are wrapping up harvesting their 3.1-million-ton crop, the second-largest ever, even as prices plumb seven-year lows,” reported Reuters.
The good news for these farmers is that they can profit from their seemingly poor planting judgment in two ways — which may, in fact, be the reason they have been overplanting peanuts in the first place.
First, under the 2014 Farm Bill, the federal government will pay them most of the difference between a statutory “reference price” and the actual market price. The law set reference prices for a variety of commodities, but rice and peanuts — no doubt thanks to lobbying by their producers — got highly preferential treatment. For peanuts, the reference price is $535 per ton; had its reference price been calculated under the formula used for most other commodities, the price would be just $283 per ton, according to the Heritage Foundation.
With the reference price set so high, it would be almost impossible for peanut farmers not to make out like bandits. Senator Pat Roberts (R-Kan.), then the ranking member of the Senate Agriculture Committee and today its chairman, told the Kansas Ag Network in 2013 that Congress was “essentially guaranteeing that a farmer profits if yields are average or above average.” Or, as Heritage put it, “farmers would be winning the lottery at the expense of taxpayers.”