Federal Peanut Program — Quota Buyout, Loans & Price Support

The federal peanut program has undergone one of the most dramatic transformations in commodity policy history. For decades, the federal government managed peanut production through a marketing quota system that limited how many peanuts each farm could sell domestically — quota rights were tradeable assets worth hundreds of dollars per ton. The 2002 Farm Bill eliminated the quota system entirely — mirroring the later tobacco buyout — compensating quota holders with $1.1 billion in buyout payments over 5 years and transitioning peanuts to the same safety-net framework used for other commodities: Price Loss Coverage (PLC), marketing assistance loans, and crop insurance. Today, peanuts are a $1.5+ billion annual crop grown primarily in Georgia, Alabama, Florida, Texas, and the Carolinas, with a separate PLC reference price (historically $535 per ton, with reference-price escalators added by the 2025 OBBBA agricultural provisions) and marketing loan rate of $355 per ton — reflecting peanuts' unique economics and the political clout of peanut-state delegations.

Current Law (2026)

Parameter	Value
Governing law	7 U.S.C. §§ 9011–9017 (ARC/PLC for peanuts); 7 U.S.C. §§ 9031–9037 (marketing loans)
Historical authority	7 U.S.C. § 7959 (quota termination and buyout, 2002)
PLC reference price	$535 per ton
Marketing loan rate	$355 per ton
Payment limitation	$125,000 per person per year (separate from the $125,000 limit for other commodities)
Peanut crop insurance	Peanut Revenue Crop Insurance (7 U.S.C. § 1508c)
U.S. production	~3 million tons annually; ~1.5 million acres
Major states	Georgia (~50% of production), Alabama, Florida, Texas, North Carolina, South Carolina
Quota buyout total	$1.1 billion (paid 2002–2006 to former quota holders)

Legal Authority

7 U.S.C. § 7959 — Termination of marketing quota programs for peanuts and compensation (ended the decades-old peanut quota system; authorized $1.1 billion in buyout payments to quota holders at $0.11/lb over 5 years; funded by assessments on domestic peanut handlers)
7 U.S.C. § 7957 — Marketing assistance loans for peanuts (established nonrecourse marketing loans for peanut growers at statutory loan rates for the 2002–2007 crop years)
7 U.S.C. § 8757 — Marketing assistance loans for peanuts (continued the program for 2008–2012 crop years)
7 U.S.C. § 7952 — Establishment of payment yield and base acres for peanuts (determined each farm's peanut base acreage and payment yield for program calculations)
7 U.S.C. § 1508c — Peanut revenue crop insurance (authorized a special crop insurance product for peanut growers starting with the 2015 crop year)

How It Works

For decades, the federal peanut program operated through production marketing quotas: the government assigned each peanut farm a quota specifying how many pounds it could sell in the domestic ("edible") market at a guaranteed support price (roughly $610/ton), while peanuts produced above the quota could only be sold for export or crushing at much lower prices. Quota rights became capital assets, trading for $150–$200+ per ton. The Farm Security and Rural Investment Act of 2002 eliminated the quota system and compensated holders at $0.11 per pound of quota owned, paid over five years (2002–2006) and totaling approximately $1.1 billion, funded not by taxpayers but by assessments on domestic peanut buyers. Peanuts then transitioned to the standard commodity safety net. Today they participate in the ARC/PLC framework but with separate peanut-specific parameters: a PLC reference price of $535/ton (significantly higher than most other commodity reference prices relative to market value), a marketing loan rate of $355/ton, and a separate $125,000 payment limitation that doesn't count against the $125,000 limit for other commodities. Payments flow through the Commodity Credit Corporation. Peanut revenue crop insurance (7 U.S.C. § 1508c), added for the 2015 crop year, provides farm-level actuarial revenue protection supplementing ARC/PLC.

The U.S. is one of the world's largest peanut producers and exporters: Georgia alone produces roughly 50% of the domestic crop, and peanut butter consumes about half of total production, followed by candy, snack nuts, and peanut oil. The elimination of quotas dramatically restructured the industry — production shifted to the most efficient growing regions (particularly the Southeast), farm sizes increased, and domestic prices moved closer to (though still above) world levels. The separate policy treatment reflects the peanut industry's enduring political influence: Georgia and other peanut states have consistently ensured favorable Farm Bill terms across successive reauthorizations.

How It Affects You

If you're an active peanut farmer: The PLC program and marketing assistance loans are your primary federal safety net. Enrollment is through your local USDA Farm Service Agency (FSA) office — you must enroll during open enrollment periods to elect PLC coverage. The PLC reference price of $535/ton means PLC payments are triggered when the national average price falls below that level; the payment rate equals the difference between the reference price and the higher of the effective price or national loan rate ($355/ton). The separate $125,000 annual payment limitation for peanuts is distinct from the $125,000 limit for other commodities — your peanut program payments don't crowd out your corn, cotton, or soybean payments. Marketing assistance loans allow you to pledge peanuts as collateral and receive loan proceeds at the $355/ton loan rate — if market prices rise above the loan rate, repay and sell at market; if prices stay low, forfeit the peanuts to CCC and keep the proceeds. Peanut Revenue Crop Insurance (authorized under 7 U.S.C. § 1508c) provides farm-level revenue protection — enroll through a private crop insurance agent approved by USDA's Risk Management Agency.

If you produce peanuts in Georgia, Alabama, Florida, Texas, or the Carolinas: Regional agronomic and market factors significantly affect your program economics. Georgia producers (~50% of U.S. production) benefit from the Southeast's long growing season but face significant aflatoxin risk (mold contamination that affects food safety grading and marketability) during drought-stressed years. The FSA county office in your production county administers ARC/PLC enrollment and marketing loan originations; the peanut buying points where you deliver your crop also participate in the marketing loan process. State extension services — especially University of Georgia Cooperative Extension — provide production guidance, variety trials, and management recommendations specific to your region.

If you own farmland that was subject to the old peanut quota system: The 2002 buyout paid $0.11 per pound of quota owned (to quota holders, not necessarily the current landowner) over five years (2002–2006). Those payments are history — no further quota-related payments are available. However, if the land has established peanut base acres from the quota era, those base acres provide the foundation for current PLC and marketing loan eligibility. Base acres are associated with the farm (FSA farm number), not the individual — if you purchase farmland with peanut base acres, those acres transfer to you and confer program eligibility. Verify your farm's base acres and payment yields at your local FSA office.

If you're a peanut buyer, processor, or trader: The end of the quota system eliminated the two-tier domestic/export pricing that complicated procurement under the old regime. Today, peanut pricing reflects market supply and demand plus the marketing loan floor ($355/ton). When farm prices approach the loan rate, FSA marketing loans effectively set a price floor — buyers and processors can predict a supply floor because farmers won't sell below their loan rates. Aflatoxin grading and the multi-tiered contract system (farmer stock, sheller stock, in-shell, splits) require attention to food safety and grading standards. Export markets — particularly China, EU, and Canada — have grown significantly since the quota buyout removed the structural domestic/export price differential. USDA's Foreign Agricultural Service publishes peanut export data and attache reports for major markets.

State Variations

The peanut program is federal, but production is concentrated:

Georgia dominates (~50% of production), followed by Alabama, Florida, Texas, North Carolina, South Carolina, Mississippi, Virginia, and Oklahoma
State extension services provide peanut-specific management and marketing guidance
State crop insurance agents handle peanut revenue coverage enrollment
State environmental regulations (irrigation, pesticide use) affect peanut production costs
Regional peanut buying points and shelling operations are concentrated in major producing states

Implementing Regulations

7 CFR Part 1412 — ARC/PLC programs (peanut-specific base acres, payment yields, county/individual coverage)
7 CFR Part 1421 — Marketing assistance loans (peanut loan rates, storage, handling)
7 CFR Part 996 — Minimum Quality and Handling Standards for Domestic and Imported Peanuts Marketed in the United States. This is the food safety layer of peanut regulation — the rules that ensure peanuts entering the U.S. food supply are free from aflatoxin and meet minimum quality standards. Key provisions:
- § 996.11 — Aflatoxin limit: peanuts are certified "negative for aflatoxin" only when testing shows 15 parts per billion (ppb) or less — this threshold is the national food safety ceiling for peanuts intended for human consumption; lots exceeding 15 ppb cannot enter the food supply regardless of other quality characteristics
- § 996.21–996.22 — Testing authority: aflatoxin testing must be performed by AMS's Science and Technology Programs labs or a USDA-approved laboratory; private labs can qualify for approval but must be certified — handlers cannot self-test for aflatoxin
- § 996.30 — Incoming quality standards: every farmer-stock peanut load received by a handler must be officially inspected and certified by the inspection service for segregation (quality grouping), moisture content, and foreign material; peanuts must be dried to 18% moisture or less before storage — moisture above this level accelerates aflatoxin mold growth; domestic and imported peanuts face the same incoming standards
- § 996.31 — Outgoing quality standards: no handler or importer may ship shelled peanuts for human food without (a) lot marking and tracking, (b) aflatoxin testing by a USDA or USDA-approved lab certifying "negative," and (c) inspection certifying the peanuts meet AMS quality limits; this two-step requirement — quality grade inspection AND aflatoxin chemistry — is the primary regulatory gate before peanuts reach food processors
- § 996.50 — Reconditioning failing lots: peanuts that fail food-grade standards must be marked with red identification and segregated; they can be diverted to non-food uses (crushing for peanut oil, where aflatoxin is destroyed in the refining process) but cannot re-enter the food supply without passing a new inspection cycle; all diversions must be documented
- § 996.60 — Import safeguards: importers must file electronic advance notice with U.S. Customs and Border Protection before each foreign-grown peanut lot arrives at a port of entry; the notice must include the Customs entry number, container identification, and origin; under §996.2, importers may take conditional release (remove peanuts from Customs custody during USDA sampling and testing), but the peanuts cannot enter commerce until USDA certification is complete
- § 996.74 — Compliance enforcement: USDA's primary enforcement tool is suspension of inspection services — a handler or importer who violates quality, labeling, or recordkeeping rules can be barred from receiving federal inspection services; since federal inspection is required before any peanut lot can be shipped for human food, suspension effectively halts a violator's ability to operate; USDA inspectors may enter any handling or storage facility during business hours and review purchase, storage, and sales records
Part 996 sits alongside (not within) the farm program — it applies to all peanuts entering U.S. commerce for human food, regardless of whether the producer or handler participates in FSA payment programs. The aflatoxin problem is particularly acute in the Southeast during drought years: heat-stressed peanuts are more susceptible to Aspergillus flavus mold infection, which produces aflatoxin in the field and in storage. Lots that fail aflatoxin testing impose real economic losses — the only commercial recovery is diversion to the crush market (peanut oil), which typically commands a lower price. This is why Georgia and Southeast peanut producers monitor drought conditions, soil moisture, and harvest timing so carefully: field management directly affects aflatoxin risk and therefore food-grade certification rates.

Pending Legislation

No standalone peanut program reform bills have been introduced in the 119th Congress. Peanut policy is addressed through the Farm Bill — see Farm Bill Commodity Programs.

Recent Developments

The 2018 Farm Bill maintained the peanut program structure with continued separate payment limitations and favorable reference prices. Peanut prices have generally been above the PLC reference price in recent years, limiting program payments. The peanut industry has benefited from growing export markets, particularly in China and the EU. Aflatoxin management (a food safety concern specific to peanuts) remains a significant production and regulatory issue. The consolidation trend continues — fewer, larger farms produce an increasing share of the U.S. peanut crop.