Peanut market tightening in 2010?

With a salmonella outbreak, poor prices, and delayed planting and harvest, it’s easy for a lot of Georgia peanut producers to forget they achieved a record-yield in 2009.

“Given the conditions we saw, it was an interesting year,” says Nathan Smith, University of Georgia Extension economist. “In Georgia, we made 3,530 pounds per acre last year. It doesn’t mean our growers did well, because prices were down this past year, but the record yield did help us in terms of returns for the crop year.”

There was a sizeable drop in acreage in 2009 due to lower prices, says Smith. “We also had an over-supply situation this past year. Our carryover was about one million tons, which was the second highest on record. We had somewhat of a glut of peanuts, and we had the salmonella outbreak, which did impact prices going into the season,” he says.

The good news, notes Smith, is that domestic consumption withstood the salmonella outbreak.

“That’s a credit to our promotion boards and grower associations that got out the message that this was not a problem with peanuts, but it was a specific company that was a bad apple in the barrel. It represented only a small percentage of the market, but a record number of products were recalled. But the message got out quickly, especially in the case of retail peanut butter, and consumption recovered as the year progressed” he says.

Last year, 1.1 million acres of peanuts were planted in the United States. “We’ve kind of been in a three-year cycle, so you wouldn’t expect a big increase in acres if you go by that cycle. I’d expect acreage to be up about 5 percent. It’ll depend on where prices end up.

(For another look at the U.S. peanut situation see and

“Looking at last year, we were late planting, digging was late, and harvest was late — it was a late year all around. But conditions were good during the growing season, with the statistics service rating 60 percent of the crop as good to excellent,” says Smith.

The U.S. yield this past year was 3,412 pounds per acre, which is about equal to the record set in 2008, he says.

“So we’ve had two really strong years of yields in the peanut industry. In the last two years, every state had yields beginning with the number ‘3.’ Is this weather-driven, technology driven or both? I think it’s a combination. We’ve had good weather and timely rains. We also have new varieties that have higher yield potential for the Southeast,” he says.

Based on these two factors, and predicting yields and acreage for 2010 based on the five-year trend, Smith says he expects to see an average yield of about 3,300 to 3,350 this year. And, with a 5 percent increase in yield, the 2010 crop would be about 1.95 million tons.

“Unless a lot more peanuts are planted — which I don’t think will be the case — under the current scenario, consumption will be above production again, which will help to draw down stocks.

The outlook right now is for a tightening situation in terms of stocks and supplies. The key will be what growers do in response to contracts and planting peanuts.”

On the demand side, peanut butter and edible use have continued to grow, says Smith, and that’s encouraging news for producers. USDA is predicting that total peanut consumption will increase by about 10 percent by the end of this marketing year.

“I think demand will be there,” he says. “We’re looking at a little over 2.1 million tons next year. The market is going to be driven by what production will be.”

Last year, peanut prices were at about 25 cents per pound, says Smith. Right now, he adds, peanuts are about the only crop with the possibility of a counter-cyclical payment. “Taking an average-season price of the market year, I expect the price to be 21 to 22 cents per pound, and you’d be looking at $40 in a counter-cyclical payment.”

Turning to shelled prices, Smith says it’s interesting to compare prices now versus what they were during the old quota system. “Before 2002, under the quota system, we were at 58 to 60 cents per pound. After the program changed, it went down to 40 cents for a couple of years. Then we saw medium runners at 30 cents and 80 cents. We didn’t see this variability before. It’s market driven now. This is a different environment that manufacturers have to deal with. If they’re willing to deal with this variability, we’ll continue to see this three-year, boom-bust peanut market.”

Smith expects a continuation of the current trend in consumption. “I would expect some increase in the peanut acreage, but the question is how much? Some $425 contracts have been offered for spring planting. In some counties, farmers have added soybeans to the rotation, and that causes some limitations. The price of cotton also will have an impact.

“I think crop insurance plays a bigger and bigger role in a lot of growers’ decisions. Some banks, especially larger ones, may be tightening their lending. With peanuts being a high-cost crop, that may play into decisions.”

Looking at input costs for this year’s crop, Smith says fuel and fertilizer prices came down while chemical prices increased.

e-mail: [email protected]

TAGS: Peanuts
Hide comments


  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.