A federal appeals court in Richmond has tossed out a nearly $30 million judgment for peanut farmers in seven states who sued the government in a dispute over crop insurance payments.

A three-judge panel of the 4th U.S. Circuit Court of Appeals agreed yesterday with federal officials who had slashed the payments by nearly half. Dan Boyce, lawyer for the farmers, said they will appeal the ruling.

The lawsuit involves about 3,870 farmers in Virginia, North Carolina, South Carolina, Texas, Georgia, Alabama and Florida. They claimed the federal crop insurance program should have paid them 31 cents a pound for peanut crops lost in the 2002 drought.

The appeals court said that under the 2002 Farm Bill that eliminated the peanut quota system, the farmers were only entitled to 17.75 cents a pound.