Total idiocy of government agricultural subsidies now undeniable as peanut glut threatens to cost taxpayers billions in farm bailouts

Thursday, December 10, 2015 by: J. D. Heyes
Tags: peanut crops, bad policy decisions, government subsidies

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(NaturalNews) Why millions of Americans continue to believe that the federal government should be empowered with so much regulatory authority over the private sector and the economy, given Washington's abysmal record of "managing" things, is one of the great wonders of the modern era. But unfortunately, until more of us begin to demand that our representatives both defund and defang the federal Leviathan – now numbering more than 435 government agencies – the same government that spent more than $2 billion to build one website,will continue to frustrate us and cost us too much money.

Consider one the most recent outrages: Uncle Sam's inability to "manage" peanut production.

As reported by Reuters, as a result of bad policy decisions, a "mountain of peanuts" is growing on farms throughout the Deep South, and is threatening a $2 billion bailout price tag that U.S. taxpayers will have to pick up over the next three years, leaving Uncle Sam holding a major portion of the crop.

Peanut growers in Georgia, Alabama and elsewhere increased their planted acreage by 20 percent earlier this year, and are currently in the process of harvesting 3.1 million tons of the crop – the second-largest on record, though prices have fallen to their lowest point in seven years.

What gives?

Tons of costly excess

As Reuters notes:

"There is a debate over why it is happening and how long the supplies and costs will build. Farmers and peanut groups blame the glut on poorer market conditions for alternative crops, such as cotton and corn, and improving yields as a result of crop rotation and new varieties.

"Some experts say it is the unintended consequence of recent changes in farm policies that create incentives for farmers to keep adding to excess supply. [Emphasis added]

"One way or another, U.S. farmers look set to keep producing more peanuts than Americans can consume, leaving taxpayers on the hook."

Given our government's history of bad policy-making, micromanaging and interference in the free market, which reason do you think is most to blame?

Here's what's making this an expensive nightmare for taxpayers. Under the policy changes, the U.S. Department of Agriculture – already struggling budget-wise to deal with a record number of food stamp recpients – is paying farmers much of the difference between "reference" prices of $535 per ton – or 26.75 cents per pound – and lowered market prices, which are hovering around $400 per ton.

Reuters noted that in a Nov. 18 report to Congress, government officials estimated that payments for peanuts this year exceed payments for corn and soybeans by more than $100 per acre.

Also, Reuters reports:

"[G]overnment loan guarantees mean once prices fall below levels used to value their crops as collateral, farmers have an incentive to default on the loans and hand over the peanuts to the USDA rather than sell them to make the payments.

"It's a predicament," Tyron Spearman, executive director of the National Peanut Buying Points Association, told Reuters. "Is it a concern to us? Yes. We certainly hate any increase in cost but that's the way the program was designed."

Higher costs are the result of bad policy

The USDA, through a number of forfeitures and by other means, has collected some 145,000 tons of peanuts from the 2014 crop, the largest stockpile in nearly a decade. That is a large enough stockpile to supply 20 million Americans through normal consumption, or more than the population of Florida – and that's a problem for the administration.

Simply storing the excess supply has its own costs, and selling them would likely further depress prices because it would flood the market with an artificial excess supply.

"Payments to peanut farmers could total between $960 million and $1.9 billion through fiscal 2018, according to estimates from the Congressional Budget Office (CBO) and USDA projections cited in the Congressional Research Service report," Reuters reported.

"The higher costs come as the 2014 Farm Bill set high peanut reference prices relative to historic averages and cut support for production of cotton, an alternative crop, encouraging growers to dedicate more acres to peanuts, the report and experts said."

So once again, lawmakers and the federal bureaucracy prove to be incompetent and inefficient, and always at the expense of the taxpayer.

Sources:

FederalRegister.gov

Bloomberg.com

NaturalNews.com