A look at peanut pricing in the post quota era

The peanut sector operated under a supply management program until 2002. With the passage of the 2002 Farm Bill, however, the sector was ushered into a more market-oriented program. The new program brought along challenges of price discovery and marketing options. This study seeks to: 1) understand the relationship between peanut prices and supply and demand as a means of establishing the outlook for the crop, 2) assess the accuracy of price and yield forecasts published by Food and Agricultural Policy Research Institute (FAPRI) and Congressional Budget Office CBO), and 3) econometrically estimate the impact of the 2002 Farm Bill on the peanut price series. The results show peanuts do not exhibit the conventional inverse relationship with the current stocks-to-use ratio that is seen with other crops but instead do so with a lagged stocks-to-use ratio. Forecasting errors are also computed to show a 7%-22% range.