With a single, one-page letter to Loyd Hodges's Texas farm in 1985, the U.S. Department of Agriculture did what no amount of tilling, weeding and fertilizing could do: It boosted the value of his peanuts by 40 percent.
Hodges had been growing peanuts for several years, but the government, in an effort to prop up the domestic price by limiting supply, had restricted him to peddling his crop for export. The letter gave him entry to the highly lucrative, highly protected domestic market, allowing him to sell 274,000 pounds of peanuts for 40 percent more than the world price.
"It was a big windfall, like manna from heaven," Hodges said. His annual profits shot up by $60,000. With that income, plus all the money he made exporting peanuts and farming other crops, Hodges retired this year at age 49, a wealthy man.
Hodges realizes he is looking a gift horse in the mouth, but he is no fan of the federal program that brought him such good fortune. It delivered what he considered "enormous" profits at the expense of consumers, who subsidize the program at the grocery checkout counter. It required a federal license to sell a crop in his own country, something Hodges said "is against everything I think America was meant for."
"I never thought it was right," he said. "I'm not for any kind of program that won't allow anybody to practice free enterprise in the United States. . . . My argument is, do away with the program."
To its critics, the federal peanut program embodies the worst in federal farm subsidies: restrictive, expensive and divorced from any standard of need. Its beneficiaries include some of the richest people in America, like the Mellon family of Mellon Bank fame, and the William B. Turner family, who made a fortune in sports real estate and sports apparel.
Fewer than 6,200 farmers capture 80 percent of program benefits, according to a recent report by the U.S. General Accounting Office (GAO). While the cost to the federal Treasury averages about $15 million a year, consumers pay between $314 million and $513 million in higher prices, according to the GAO. Peanut butter manufacturers say the program drives up the cost of an 18-ounce jar of peanut butter as much as 40 cents.
William Fred Mayo, a GAO analyst who studied the program for two years, said its combination of supply limits and price supports guarantees peanut farmers an extraordinarily high rate of return. "This is probably the most profitable business in America. It's virtually risk-free," Mayo said.
James Moody, a Washington lawyer active in agricultural issues, said the program inverts the whole concept of strength in numbers, like the machine that yanks peanut plants out of the ground and flips them upside down at harvest time. "How do 6,000 farmers screw the rest of us out of cheap peanuts?" Moody asked. "That's the magic of politics in this town."
The peanut program's principal defenders in Congress do not rush to be quoted in print. Neither Sen. Howell T. Helfin (D-Ala.) nor Rep. Charlie Rose (D-N.C.) returned repeated calls from a reporter. But when Congress last debated peanuts in 1990, they surrounded the program with a seemingly impenetrable shell.
Heflin dismissed criticism then as the "great lamentations" and "fictitious arguments" of the ill-informed. "This is a model program for American agriculture and for the American people," he said on the Senate floor. It "provides consumers with adequate supplies of excellent quality peanuts at reasonable prices" and helps maintain "the stability of small family farms."
Many peanut farmers insist their profits are far from exorbitant. As they see it, peanut butter would cost exactly the same if the program did not exist, because manufacturers would simply keep the money they now give farmers. But many peanut farms would vanish, wreaking economic havoc in regions such as south Georgia. "You could really hurt the farmers a great deal and not help consumers at all," said Mitchell Head of the Georgia Peanut Advisory Board.
Few programs so vividly illustrate how deeply the federal government has plowed its way into the world of agriculture. Like corn and wheat subsidies, the peanut program is rooted in the farm bankruptcies of the Great Depression. Since 1949, when the modern version of the peanut program was born, the government has controlled not only how many peanuts can be grown for domestic consumption, but where they can be grown. It also sets a minimum support price, which the Agriculture Department must pay if the market doesn't.
Under the program, only farms with a peanut "quota" or allotment can produce peanuts for sale in the United States, and only so many pounds of them. Virtually all cheaper foreign peanuts are banned. Few if any other crops are so tightly controlled.
Congress decided in 1967 that farmers could sell or rent their quota to other landowners, but only within county lines. By then, whole congressional districts had come to depend on the benefits of the peanut program, and their legislators wanted to keep them. That's partly why the county map of peanut farms has not changed much in 40 years, despite the fact that some of the land is wearing out and yields are falling.
Once it could be separated from the land, quota became a commodity all of its own, with a market all of its own, just like silver, or a seat on the Chicago Board of Trade. Quota is now sold at public auctions and advertised for rent in newspapers.
It is a source of income for people who never lived on a farm, but simply inherited quota from farmers a generation or two back. The Agriculture Department once estimated about half of all quota is rented out.
It is not easy for USDA to maintain its grip on the peanut market. USDA employees study aerial photographs to help identify farmers who are planting more than their allotted amount of peanuts. Violators are heavily fined. USDA also issues each farmer a card imbedded with a computer chip that lists his quota. The farmer must present that card before he can sell his peanuts at a buying point.
The trickiest part is matching supply to demand so USDA is not forced to buy any peanuts that cannot be sold for the support price. In 1991, USDA wrongly guessed that consumer demand would rebound after the previous year's drought. It was a $95 million mistake. The peanuts USDA had to buy and crush for animal feed or oil filled roughly 40 warehouses.
No state has benefited more from the program than Georgia. It controls 45 percent of the national peanut quota, and farmers there consider the program as essential as a tractor.
Georgia's peanut farms are concentrated in its southern counties, where the elaborately twisted live oaks conjure up visions of the old South and ruler-straight pine trees 70 feet high line the roads. The farms stretch for hundreds of acres, and add to the region's beauty and air of prosperity, despite the higher than average poverty levels. Irrigation systems, for all their huge size, span the fields with a spiderlike delicacy. Rows of red wagons mark the peanut buying points.
The program is literally dug into the earth in Georgia. Quota adds to the value of the land that contributes to the tax base that helps pay for the schools. Agricultural economists predict that if the program collapsed, land values would fall with it, not to mention the impact on shellers, warehouse workers, pesticide suppliers and fertilizer dealers.
Farmers here have struggled to accumulate quota, just like other Americans struggle to buy a house. The idea that it could suddenly become worthless is "mind-boggling," said Glenn Heard, whose family is the nation's sixth-largest peanut producer.
The Mellon family would not suffer unduly. Their peanut crop helps pay the upkeep on the family's gracious Pineland Plantation that spans six square miles south of Albany, Ga. Family members use it mainly for hunting parties, employees said.
But what about the 85-year-old widow, who rents her 100,000 pounds of quota every year to Heard for $11,000? "A lot of people in this area, that's what they live on. Social Security and peanut quota," said Heard, who farms in the state's far southwest corner.
As for exorbitant profits, south Georgia farmers insist they do not see them. GAO estimates that peanut farmers average a 51 percent return after costs, excluding certain land and quota expenses. But David Bryan, the country's eighth-biggest peanut producer, insists: "If we could clear 10 percent, we'd be feeling like we're doing good."
There's no doubt Earl Bass of Leslie, Ga., is doing well. At 46, he's the nation's premier peanut farmer. He employs about 200 people in 11 counties. He owns so much land he needs two planes to oversee it.
Together with his partner, an Atlanta shopping center developer, Bass controls 30 million pounds of quota -- nearly four times as much as the next biggest producer. He lives in a white-columned, red-brick mansion he paid for in cash. He estimates his 1991 profits at $1.5 million.
Unpretentious, almost shy in his manner, Bass disputes any suggestion that his success is government-made. He recounts how he drove tractors down the highway before dawn, scouted for the best land and invested early in irrigation. He makes his secretaries pull weeds, so like him, they will know what it is like to grow peanuts.
"This was no play deal," he said. "I didn't inherit any land. I didn't marry into any land. I hustled. I got out there and worked. Fourteen hours a day."
If Georgia represents the status quo in the peanut program, then west Texas is the upstart, the newcomer. Farmers there face less disease, weeds and insects than in south Georgia, and government controls probably deprive them of some of their rightful share of peanuts, agricultural economists said. West Texas legislators finally exerted enough political pressure to win a special provision in the 1990 farm bill designed to give 18 counties more quota.
West Texas is home to at least a few strong critics of the program, like Hodges. "It's just real lucrative, that's why people have fought so hard for this thing," he said. "They're living high on the hog, I guarantee you. It's very easy to sit back here and live off this government license for this enormous profit. But that's not the kind of person I am. That's not what makes me get up in the morning."
In the Jackson family, the peanut program has divided father and son. Jim Jackson, who rents land and quota from Hodges, said his 62-year-old father "owns a lot of quota, and he likes it. . . . It's made him a lot of money. I'm just the opposite. I feel like America still ought to free."
"The quota is just pure gravy, just added extra," Jackson said. "It clouds their thinking. These guys get to where that's all they can see. They cannot see anything but the program."
Congress holds its own version of the Jackson family debate about every five years, when farm programs come up for reauthorization. The fathers always win.
Until 1980, anyone who tried to touch the program had to get past then-Sen. Herman Talmadge, a Georgia Democrat who sat on the Senate Agriculture Committee for 24 years and chaired it for 10.
Now Rose and Heflin carry on the tradition, with the help of the legislators from the five other principal peanut-producing states. They are extremely astute in trading votes for administration support, said Robert L. Thompson, USDA's former chief economist.
The most recent example came last month. Rose said he extracted a promise from President Clinton to try to stop imports of peanut butter and peanut paste as Clinton looked for votes on his economic package.
Peanut state legislators also capitalize on the five-year time span between farm program votes. The House Agriculture Committee tried to further lengthen the time frame in the House version of tax increases and spending cuts now under fire in the Senate. If Congress adopts the House language, the peanut program budget would not come up for reauthorization until 1998.
"Agriculture Committee members do not want the light of day shining on this," said Rep. Richard K. Armey (R-Tex.), who tried without success to kill the program in 1990. "This is a triumph of the special interest over the public interest."