and 50 percent of world’s edible groundnut export in 2001. Due to lack of more recent data, the comparison is done for the years 1992 and 1993. As Table 2 shows, economic costs per acre were more than three times higher in the US than in China in the early 1990s. Cost per acre in groundnut production stood at $694.03 on average for the United States, more than three times higher than the average cost for China, $164.45 per acre, in 1993.

The larger economic costs per acre for U.S. groundnuts were chiefly attributed to production quota rent, land value, and “other expenses” (i.e., costs of using and maintaining farm equipment, cost of fuel, electricity, repair, capital replacement). Quota rent and land value are not an effective cost for farmers in China, since there is no production quota as such in China, and land is considered as a public property, belonging to local communities organized in groups of 30-40 households (Chen et al. 1997)<sup>3</sup> . Net returns between the U.S. and China were not significantly different if one excludes quota rent (irrelevant since the 2002 Farm Bill) in US production costs. US cost disadvantage is however compensated by higher producer prices brought about by the groundnut program and higher US quality groundnuts. The elimination of quota production (thus quota rent) in the 2002 Farm Bill reduces further US production costs. This development as well as the reputation of high quality groundnut producer warranting a high price premium in international market may well uphold US future competitiveness vis-à-vis China<sup>4</sup> .

**Table 2. Economic costs and returns in groundnuts, China and the U.S.** (US$/acre, 1992 and 1993)

||19|<br>92|19|<br>93|
|---|---|---|---|---|
|Item|US|C hina|US|C hina|
|Variable costs:|||||
|Seed|70.32|43.83|71.18|45.96|
|Fertilizer|43.27|25.03|42.40|26.13|
|Chem icals|89.70|3.40|92.57|3.68|
|Labor|89.14|71.51|86.17|75.86|
|O ther expenses|212.84|41.43|188.54|12.82|
|Subtotal|505.27|185.20|480.86|164.45|
|Fixed costs:|||||
|Land value|92.58||97.77||
|Q uota rent|113.38||115.40||
|Total Costs:|711.23|185.20|694.03|164.45|
|Yield (lb/acre)|2576|2520|1940|2135|
|Revenue (producer price*yield)|753.66|323.69|570.58|280.83|

**Source** : C hen _et al. (1997)_

There has been a gradual increase in the use of groundnuts for food purposes, and a resulting decline in the share of groundnut production crushed for oil and meal over the last 20 years (Figure 2). The largest increase in food use occurred in developed countries and fast

> 3 Any growers in the group are eligible to farm a certain number of acres of land. Farmers who use the land are obligated, however, to pay agricultural tax in kind and sell a certain amount of their products to the state government at regulated prices (Chen et. 1997).

> 4 Export markets display relatively high quality premiums/discounts depending upon quality reputation of exporters. Prices of groundnuts originated from the US set in fact a ceiling for international prices because the US export high quality groundnuts which command a relative high price premium in international markets. In 2000, edible U.S. groundnuts commanded a 40 percent premium on world markets compared to shelled Chinese groundnuts, according to FAO trade data.

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