According to the U.S. Department of Agriculture (USDA), the United States is expected to be the fourth-largest producer and third-largest exporter of peanuts in the world in 2016. In addition to its prominent role in international markets, U.S. peanut production and marketing is an important activity in several states located in the southeastern and southwestern United States. Peanuts have participated in federal farm support programs since the 1930s—initially under a quota system, and since 2002 under the income support programs available for other covered commodities like corn, wheat, soybeans, and rice. This report uses the most current public information available (as of September 2016) to provide a brief overview of the U.S. peanut sector and current U.S. farm policy including a discussion of how peanuts (following market adjustments spurred by a 2002 federal quota buyout) fit within current policy relative to other program crops. U.S. peanut production is located primarily in the southeastern United States. The crop is planted in an arc stretching from southern Mississippi to southern Virginia, but with some additional smaller clusters of production in Texas, Oklahoma, and New Mexico ( Figure 1 ). Georgia accounts for just under half of U.S. production, and Alabama and Florida each have 12%. Most neighboring states account for single-digit shares. This geographic location of production reflects the peanut plant's need for 120-160 frost-free days and soil that is sandy and loamy (relatively equal amounts of sand, silt, and clay) for optimal crop performance. The peanut industry is also geographically concentrated within each state, with peanuts accounting for a large share of farm and related agribusiness income earned in a number of peanut-producing counties. About three-fourths of U.S. peanut acreage is dryland (1.1 million acres in 2012), and the remainder is irrigated (0.5 million acres). The major types of peanuts grown in the United States are Runner, Virginia, Spanish, and Valencia ( Table 1 ). The Runner is the most common variety and is used in the manufacture of peanut butter. Peanut butter is the leading use of peanuts produced in the United States (45%), according to the American Peanut Council (APC). Snack nuts and in-shells account for approximately 30% of use. Candy and confections and peanut oil for cooking account for the remainder. According to APC, peanuts are the leading snack nut consumed in the United States, with a two-thirds share of the snack nut market. Peanuts were grown on 6,561 farms in the United States in 2012, according to the 2012 Census of Agricultur e , with an average farm size of 247 harvested peanut acres per farm ( Table 2 ). Similar to output for other commodities, peanut production is primarily through larger farms that typically have lower per-unit costs of production. Peanut farms with at least 250 acres account for one-third of all peanut farms and three-quarters of national production. Most peanut farmers also plant other crops such as cotton, corn, or soybeans in multi-year rotations with peanuts in order to maintain soil health and crop yields. The farm value of peanut production was $1.2 billion in 2015. After harvest, farmers move peanuts to buying points or stations located throughout the production regions. Buying stations are operated by shellers, independent dealers, or warehouse owners. These "first handlers" purchase the peanuts and provide services such as drying, cleaning, and arranging for marketing assistance loans provided by USDA. Shellers sell edible peanuts to processors for manufacturing and bid on USDA-owned stocks of peanuts (forfeitures under the marketing loan program) for processing or export. Sales between shellers and processors are arranged by brokers or done directly. Unlike markets for major crops like corn and soybeans, the U.S. peanut market is considered "thin," with only two peanut shellers reportedly buying over 80% of all peanuts from growers. No futures market exists for peanuts, and private contracts between producers and shellers reportedly account for most transactions. Given the peanut industry's structure and pricing practices (contracting), little public price and other market information is available to USDA. Two opposing but related trends have shaped peanut production during the last quarter century. Planted acreage has declined while productivity (yield measured in pounds per acre) has increased (see Figure 2 ). Acreage had been declining even prior to the policy change in 2002 from a quota system, which tended to lock acreage in place, to traditional commodity support programs (see " U.S. Farm Policy and Peanuts "). The policy change allowed market forces to play a stronger role in producer decision making. As a result, peanut production shifted to higher-yielding land with lower production costs. This acreage shift, including a greater proportion of plantings in Georgia, along with improvements in varieties and management practices, propelled a long-term uptrend in peanut yields that helped to lift peanut production in recent years ( Figure 2 ). Another phenomenon associated with the 2002 peanut quota buyout has been a substantial increase in market volatility as evidenced by the sharp up-and-down cycle of plantings and production since 2002. Some policy watchers are concerned that a new set of government policies established under the 2014 farm bill (discussed in the next section of this report) have artificially reversed the downward trend in peanut planted acreage as seen by higher plantings in 2015 and 2016. A critical long-run factor influencing peanut output is the nature of demand for peanuts. In general, the demand for peanuts and peanut products (especially peanut butter) is fairly inelastic. This implies that even small changes in supply can result in large price movements. Domestic food use has grown slowly but steadily over time. In contrast, the international marketplace has grown in importance in recent years. U.S. peanut exports averaged a 14% share of total use during the 2002 to 2011 period but jumped sharply in 2012 and have averaged 23% of total use since ( Figure 3 ). Canada, the Netherlands, and Mexico are the traditional top export markets and account for about half of U.S. exports. However, it was China—which entered the market in 2012 as a buyer because its regular supplier (India) had encountered yield problems due to drought—that was behind the surge in U.S. peanut exports. In 2015/16, China again entered the U.S. market to purchase peanuts, causing U.S. exports to jump 43% from the previous year to a record 1,544 million tons. This export surge was combined with a 28% jump in domestic peanut use to a record 5.1 million pounds, partly due to government purchases of 37.5 million pounds of processed peanut products (for distribution through domestic feeding channels) in FY2015 and another 39.1 million pounds in FY2016. This surge in total demand (+31%) contributed to an estimated 15% drop in U.S. ending stocks ( Figure 4 ), thus avoiding early-year expectations for large producer forfeitures under the marketing assistance loan program. In 2015/16 (August-July season), the average farm price of peanuts is expected to be 19.3 cents per pound—well above early-year predictions as low as 17 cents per pound. The unexpected jump in 2015/16 demand is in contrast to the trend that has evolved since 2012. High farm prices in 2011 encouraged U.S. producers to sharply increase plantings in 2012 (up 44% from the previous year). A record U.S. peanut harvest in 2012—driven by both large plantings and record yields—resulted in record large domestic ending stocks despite record exports and strong domestic use. The 2012/13 marketing year ending stocks were also record large in terms of their relative size as a share of total use (54%). The large domestic peanut supply has contributed to a strong downward trend in U.S. farm prices for peanuts since 2012 and helps to explain the pessimistic outlook for government program outlays under the new farm revenue programs of the 2014 farm bill as expressed by USDA and CBO in their February 2016 long-run outlooks. Farm policy for peanuts has followed a different policy trajectory from the other program crops for most of the last century. From the 1930s until 2002, peanuts operated under a system of marketing quotas that rigidly controlled domestic supplies and prices. In 2002, Congress eliminated peanut quotas under a new farm bill (Farm Security and Rural Investment Act of 2002, P.L. 107-171 , §1301-§1309) through a series of payments that offset the loss of quota rights—these payments are referred to as a "buyout." Since the 2002 buyout, farm policy for peanuts has followed essentially the same structure as for other "covered" program commodities. In addition to eligibility for major farm support programs, peanuts initially retained their long-standing eligibility for Commodity Credit Corporation (CCC) monthly storage payments (similar to the cotton storage payment program) when put under a nine-month nonrecourse marketing loan. However, eligibility for storage payments was terminated with the 2007 peanut crop. The current farm commodity program provisions in Title I of the 2014 farm bill (Agricultural Act of 2014; P.L.