Market Prospects for Groundnut in West Africa COMMON FUND ...

2. Producers with a history of groundnut production during the
1998-2001 period receive a fixed “decoupled” payment and a
countercyclical payment. Eligible production is the product of
average yield in the base period and 85 percent of base-period
acres. The countercyclical payment kicks in when market prices
fall below an established target price of $495 net of the direct
payment ($36/short ton). The payment rate is the difference
between the target price net of the fixed payment and the higher
of the 12-month national average market price for the marketing
year for groundnuts or the marketing assistance loan rate.
3. Former owners of groundnut quotas receive compensation
payments for the loss of quota asset value (see Revoredo and
Fletcher 2002 for details).
The elimination of production quotas decreased the price paid by
US food processors and thus increased domestic use of peanuts. It
also took away the logic of importing confectionery peanuts to
lower the cost of processing food items intensive in peanuts. The
US TRQ scheme is still in place but is redundant and the TRQs
remain underfilled (Fletcher and Revoredo 2003). The lower cost
of production of peanut butter/paste in the United States follows
the same logic. The incentive to import cheaper peanut butter/
paste from Argentina or Mexico has thus been seriously mitigated
by the recent changes in the farm program. Production incentives
created by the 2002 farm bill vary among different types of
producers but the net effect is likely to be an increase in
production. The fixed and countercyclical payments provide some
incentives to increase production and can be viewed as supplyinducing
subsidies (Adams et al. 2001).
Groundnut of US origin consistently sets the upper price limit of the
international market, with export prices from $600 to as high as $950 per ton.
US groundnut enjoys an envied reputation for quality as well as reliability of
supply.
This is not to imply that the US crop is always a reliable source of supply,
nor that it is always uniformly free of aflatoxin, which has indeed proven to be
a serious problem in recent years. The most notable aflatoxin infestation of the
US crop was seen in the 1999, particularly in the southeastern US production
areas (including Georgia and Virginia) – which suffered 60-70% rejection
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