Economic Viability of the Southeastern Representative Peanut Farms over the Period based on August 2004 Baseline Overall Economic Viability 1 P(Negative Ending Cash) 2 P(Real Net Worth Decline) 3 Farm A 1-1 Farm B Farm C Farm D 1-1 Farm E 1-1 Farm F Farm G 1-1 Farm H Farm I 1-1 Farm J Farm K <25 >50 1) Viability is classified as good (green), moderate (yellow), and poor (red) based on the probabilities of having negative ending cash reserves and losing real net worth: 2) P(Negative Ending Cash) is the probability that the farm will have a negative ending cash reserve. Reported values represent the probabilities for 2005 and ) P(Real Net Worth Decline) is the probability that the farm will have a loss in real net worth relative to the beginning net worth. Reported values represent the probabilities for losing real net worth from 2002 to 2004 and 2002 to 2010.

Economic Viability of US Representative Peanut Farms over the Period based on January 2008 Baseline Benchmark Overall Economic Viability 1 P(Negative Ending Cash) 2 P(Real Net Worth Decline) 3 Farm A Farm B Farm C Farm D Farm E Farm F Farm G Farm H Farm I Farm J Farm K Farm L Farm M Farm N 1-1 Farm O Farm P Farm Q Farm R Farm S <25 >50 1) Viability is classified as good (green), moderate (yellow), and poor (red) based on the probabilities of having negative ending cash reserves and losing real net worth: 2) P(Negative Ending Cash) is the probability that the farm will have a negative ending cash reserve. Reported values represent the probabilities for 2008 and ) P(Real Net Worth Decline) is the probability that the farm will have a loss in real net worth relative to the beginning net worth. Reported values represent the probabilities for losing real net worth from 2005 to 2008 and 2005 to 2013.

SE Representative Peanut Farms Total Variable Input Cost $/AC change from ’02 to ‘08 Percent change from ’02 to ‘08 Irrigated Peanuts $21457% Non-Irrigated Peanuts $15554%

The Food, Conservation, and Energy Act of 2008 Enacted into law on June 18, 2008 Effective date: May 22, 2008 Regulations deadline: Sept. 16, 2008 Some features deadline: Dec. 16, 2008

Treatment of Farms with Limited Base Acres Sum of the base acres of the farm is 10 acres or less –No Direct Payments –No Counter-Cyclical Payments –No Average Crop Revenue Election Payments Exception – Farm is wholly owned by a socially disadvantaged farmer or rancher; farm is wholly owned by a limited resource farmer or rancher

Payment Acres YearPercentage of Base Acres Used to Calculate Direct Payments Percentage of Base Acres Used to Calculate Counter-Cyclical Payments % %85% %85% %85% %

Average Crop Revenue Election Program (ACRE) 2009 through 2012 crop years Irrevocable election Failure to make election (all producers on a farm), then farm considered enrolled in DCP Alternative to receiving counter-cyclical payment 20 percent reduction in direct payments 30 percent reduction in marketing assistance loan rates

Average Adjusted Gross Income (AGI) Limitations for 2009 through 2012 Payment Limitation Amounts through 2012 ($40,000/$65,000) Separate payment limitation for MAL gains and LDP’s for wool, honey, mohair, peanuts, and unshorn pelts

Farm Bill Comparison (Peanuts) 2002 Farm Bill2008 Farm Bill Direct Payment$36/tonSame CCP Target Pr$495/tonSame Market Loan Rate $355/tonSame

2008 Crop Peanut Loan Rates On June 26, 2008, CCC announced the 2008 crop peanut loan rates by type. Peanut premiums and discounts remain unchanged from 2007 crop year for 2008 but undecided for Peanut TypeLoan Values Per Ton Virginia $ Runner $ Spanish $ Valencia $357.32

Peanut Storage, Handling, and Associated Costs (LITE) CCC shall pay handling and other associated costs (other than storage costs) when peanuts placed into loan Repayment of handling and other associated costs when peanuts are redeemed CCC pays storage, handling, and other associated costs when peanuts are forfeited

Crop loss-provides assistance to farmers who suffer crop losses due to natural disasters. Livestock indemnity-provides assistance to ranchers whose livestock are killed in a natural disaster. Livestock, honeybees, farm-raised fish-provides funds for losses that are not covered by any other program. Livestock Forage-provides assistance to ranchers who suffer grazing losses due to drought. Tree assistance-provides assistance to orchardists whose vines or trees are killed due to a natural disaster.

Supplemental Revenue Assistance Program (SURE) Covers crop losses due to natural disasters Producers must have purchased or be enrolled in: –CAT for insurable crops –NAP for uninsurable crops Waiver provision of CAT or NAP purchase for socially disadvantaged, limited resource, or beginning farmer or rancher

Supplemental Revenue Assistance Program (SURE) “Farm” means the sum of all crop acreage in all counties that is planted or intended to be planted for harvest by the eligible producer

Farm Bill & WTO: Is There Co-Existence for Peanuts?

PERS Peanut Environmental Resource Stewardship WTO: Limiting scope of traditional income support programs The Brazilian cotton case against the U.S. is an example of non-compliance within the WTO. The U.S. has lost every attempt to fight the Brazilian challenge. Rewards a peanut producer that adopts a resource- conserving crop rotation to achieve beneficial crop rotations as appropriate for the land controlled by the producer. CROPROTATIONS

PERS Peanut Environmental Resource Stewardship TRADE COMPLIANT Annex 2 of GATT Agreement on Agriculture implies PERS is an allowable domestic support program –Decoupled income support program –Payments under environmental program CROPROTATIONS

Conservation Stewardship Program (CSP): CROPROTATIONS Supplemental Payments for Resource-Conserving Crop Rotations GREEN BOX  WTO compliant. Fits into the “GREEN BOX” of trade agreements  Increase peanut yields per acre over time  Decrease peanut disease pressure over time  Provides incentive not to plant peanuts in soils where peanut yields and quality typically suffer  The public will benefit from significantly less chemical usage and improved soils for generations to come  PERS would be an optional program to producers  Producers would receive additional income from increased yields and quality as well as from the PERS payments  Sets precedents for future environmental stewardship programs Benefits of a Resource-Conserving Crop Rotation Program

Conservation Stewardship Program (CSP): CROPROTATIONS Supplemental Payments for Resource-Conserving Crop Rotations ‘‘(f) SUPPLEMENTAL PAYMENTS FOR RESOURCE-CONSERVING CROP ROTATIONS.— ‘‘(1) AVAILABILITY OF PAYMENTS.—Producers that agree to adopt resource-conserving crop rotations as determined by the Secretary of Agriculture to achieve beneficial crop rotations as appropriate for the land of the producers. ‘‘(g) PAYMENT LIMITATIONS.- $200,000 per person or legal entity during any 5-year period. Under the Conservation Title, Starting on page 127 of 2008 Farm Bill.

Conservation Stewardship Program (CSP): CROPROTATIONS Supplemental Payments for Resource-Conserving Crop Rotations OK, so where do peanut farms fit in this program? How can the CSP Crop Rotation Program Work for YOU???????

FARM ID PEANUTS COTTON CORN OTHER Total Acres FARM A26.7%53.3%8.3%11.7% 3000 FARM B30.0%60.0%10.0% 2000 FARM C33.3%52.4% FARM D21.4%78.6% 1400 FARM E63.2%6.3%30.5% 2375 FARM F12.4%84.7%2.9% 1210 FARM G33.3%54.9%5.9% 1275 FARM H33.3%47.9%12.5%6.3% 1200 FARM I33.3%66.7% 1500 FARM J33.3%52.5%14.3% 2000 FARM K52.9%47.1% 850 Crop Mix by Percent of the U.S. Representative Peanut Farms (2006 Update) FARM ID PEANUTS COTTON CORN OTHER Total Acres FARM L16.7%23.3%20.0%40.0% 1500 FARM M18.5%55.6%7.4%18.5% 1350 FARM N16.7%66.7%16.7% 1200 FARM O22.2%66.7%11.1% 1800 FARM P26.7%16.7% 40.0% 3000 FARM Q19.2%14.4%9.6%56.8% 2500 FARM R31.3%62.5%6.3% 4000 FARM S22.5% 55.0% 1600 CROPROTATIONS

Conservation Stewardship Program (CSP): CROPROTATIONS Supplemental Payments for Resource-Conserving Crop Rotations 3 Year Rotation < 33.3% Peanuts > 33.3% Peanuts Percentage of 19 U.S. Representative Farms 89%11% 4 Year Rotation < 25% Peanuts > 25% Peanuts Percentage of 19 U.S. Representative Farms 58%42% 19 U.S. Representative Peanut Farms: Total Cultivatable Acres Total Cultivatable Acres Planted in Peanuts

Conservation Stewardship Program (CSP): CROPROTATIONS Supplemental Payments for Resource-Conserving Crop Rotations Will the CSP program be financially beneficial for you to enroll? Assuming the Rotation Program will operate similar to other CSP programs, a producer should do the following prior to signing CSP contracts:  Project your farm’s annual income over the next 5 years with your farm’s current crop mix and acreage  Project your farm’s annual income over the next 5 years with the new compliant crop mix and acreage.  Compare farm’s income with each scenario and determine how much CSP payment would be required to offset loss of income from peanut acreage reduction.

CROPROTATIONS Conservation Stewardship Program (CSP): Supplemental Payments for Resource-Conserving Crop Rotations FARM J PEANUTS COTTON CORN OTHER Total Acres NON-COMP33.3%52.5%14.3%2000 COMPLIANT25.0%59.2%15.8%2000 AVG PRICES$500$0.80$6.00 Example, using the U.S. Representative Peanut Farms Change in Net Cash Farm Income (NCFI) is an average loss of $33,010 per year. Methodology:  1 st, Shifted Non-Irrigated Peanut Acres to Non- Irrigated Cotton Acres  2 nd, Shifted Irrigated Peanut Acres to Irrigated Corn Acres

CROPROTATIONS Conservation Stewardship Program (CSP): Supplemental Payments for Resource-Conserving Crop Rotations FARM K 100% Dryland PEANUTS COTTON CORN OTHER Total Acres NON-COMP52.9%47.1%850 COMPLIANT25.0%75.0%850 AVG PRICES$500$0.80$6.00 Example, using the U.S. Representative Peanut Farms Change in Net Cash Farm Income (NCFI) is an average loss of $44,946 per year. Exceeds Payments Limits Methodology:  1 st, Shifted Non-Irrigated Peanut Acres to Non- Irrigated Cotton Acres

Thank You for Your Attention. Questions?

Basic Provisions Payment Limitation Amounts through 2012 ProgramPayment Limitation Per Crop Year DCP (any covered commodity except peanuts) Direct - $40,000 Counter-Cyclical - $65,000 DCP - PeanutsDirect - $40,000 Counter-Cyclical - $65,000 ACREACRE Payment – Sum of $65,000 and the amount by which the Direct Payment limitation is reduced for the 20 percent reduction. Example – Producer participates in ACRE on all farms – ACRE Payment Limit is $73,0000 Direct Payment Limit is $32,000

Basic Provisions Payment Limitation Amounts through 2012 ProgramPayment Limitation Supplemental Agricultural Disaster Assistance Programs Total amount of disaster assistance payments received directly or indirectly may not exceed $100,000 for any crop year CRP$50,000 per fiscal year NAP$100,000 per crop year

Average Adjusted Gross Income (AGI) Limitations for 2009 through 2012 Commodity Programs, Disaster Assistance - AGI –DCP, ACRE, Marketing Loan Gain, LDP, Supplemental Agricultural Disaster Assistance, MILC, NAP Average AGI – 3 taxable years preceding the most complete taxable year Nonfarm AGI greater than $500,000, the individual or entity ineligible Farm AGI greater than $750,000, the individual or entity ineligible

Average Adjusted Gross Income (AGI) Limitations for 2009 through 2012 Conservation Programs – AGI Average AGI – 3 taxable years preceding the most complete taxable year Total Nonfarm AGI greater than $1 million, the individual or entity ineligible unless 66.66% is derived from farming, ranching, and forestry operations Secretary may waive ineligibility on a case-by-case basis if determined that environmentally sensitive land of special significance would be protected

Marketing Assistance Loan (MAL) and Loan Deficiency Payment (LDP) Authorized for crop years 2008 through 2012 $75,000 payment limitation for MAL gains and LDP’s for the 2008 crop year; Separate combined $75,000 payment limitation for MAL gains and LDP’s for wool, honey, mohair, peanuts, and unshorn pelts Beneficial interest policy for the 2008 crop year same as 2002 Act MAL have a term of 9 months beginning on first day of the first month after the month in which the loan is made LDP rate in effect when a producer makes request