An economic analysis of peanut production in the southeast and southwest regions of the U.S. under alternative government programs

Abstract

There has been some type of government peanut program in effect since 1933. The stated purpose of these programs has been to control production and support prices. Production control has been attempted through imposing acreage allotments. The Commodity Credit Corporation has supported prices through purchase of excess production peanuts and diverting the excess to crushing for oil. The CCC operations losses have increased steadily since 1956 when losses totaled {dollar}6.3 million. The current program costa in terms of CCC price support operations losses amounted to {dollar}66.3 million in 1970. This loss averaged {dollar}41 per alloted acre. The major purpose of this study is (1) to provide an economic analysis of the current government peanut program, (2) to provide an appraisal of some proposed alternative peanut program, and (3) to define efficient interregional allocations of peanut production under various market and government program assumptions. A major part of this analysis involved the development and utilization of a linear programming model. The production alternatives included in the model were peanuts and competing crop and livestock enterprises. The constraints imposed on this model were aggregate amounts of available land and peanut allotment. The objective function reflecting aggregate net returns was maximized subject to various resource and institutional restraints associated with the different programs considered. The estimate pf production response to price change involved consideration of price levels of 50 to 100 percent of the 1968 price in the 10 percent increments. At the 50 percent price level the estimated production was only 25 percent of 1968 production. A proposed allotment transfer program allowing intercounty and interstate transfer of peanut allotments was evaluated. ...