The latest U.S. peanut crop forecast calls for a production in 2006 of 3.2 billion pounds, down a whopping 34 percent from last year's crop. If realized, this would be the lowest production in more than 20 years, since the 1980 crop.

Planted acreage is now set at 1.24 million acres, down 2 percent from earlier estimates and down 25 percent from last year. Alabama, North Carolina, New Mexico, Oklahoma, and Texas reportedly planted fewer acres than previously estimated while Mississippi, South Carolina and Virginia planted more acreage. Area for harvest is expected to total 1.21 million acres, down 6 percent from last year. Peanut yields are expected to average 2,640 pounds per acre, down 320 pounds per acre from 2005.

Production in the Southeast states, including Alabama, Florida, Georgia, Mississippi and South Carolina is expected to total 2.23 billion pounds, down 34 percent from last year's level. Planted area, at 946,000 acres, is down 22 percent from 2005. Expected acreage for harvest, at 924,000, is down 23 percent from 2005. Southeast yields are expected to average 2,416 pounds per acre or 410 pounds below 2005.

The lack of rainfall and above-normal temperatures in Alabama, Florida and Georgia have caused crop conditions to drop sharply from last year.

Peanuts in some areas of the Southeast have shown poor pod maturity, burnt pegs, and some insect damage as a result of the hot, dry weather.

As of Sept. 3, the percent of the peanut crop rated very poor to poor was 35 percent in Alabama, 55 percent in Florida, and 30 percent in Georgia, compared to 7 percent or less for the same time period last year.

Virginia-North Carolina peanut production this year is forecast at 328 million pounds, down 7 percent from 2005. Planted acres, at 102,000, are down 15 percent from 2005. Expected acreage for harvest, at 101,000, is down 14 percent from last year. Yield is forecast at 3,245 pounds per acre, up 245 pounds from 2005.

As of early September, the crop condition ratings in Virginia and North Carolina were 53 percent and 71 percent good to excellent, respectively.

Southwest peanut production, including New Mexico, Oklahoma and Texas, is expected to total 643 million pounds, down 40 percent from 2005.

Planted acres, at 194,000, are 39 percent below last year. The expected acreage for harvest in the region totals 188,000, down 40 percent from 2005.

Yields are expected to average 3,418 pounds per acre for the region, down 38 pounds below last year's level.

Despite yields in Texas that are expected to equal last year's record-high of 3,500 pounds per acre, production would be the lowest since 1989.

In early September, peanuts rated good to excellent in Oklahoma and Texas were 42 percent and 44 percent, respectively.

Although a weather-shortened crop is never a good thing for producers, it might have a good long-term effect on the peanut market, says a University of Georgia economist.

Coming off a good year of increased acres and good yields, peanut farmers this spring were facing a peanut surplus of around one million tons, says Nathan Smith, a Cooperative Extension Service peanut economist with the UGA College of Agricultural and Environmental Sciences.

“One of the biggest concerns at planting time for the peanut industry was that large surplus,” he says. “The weather-shortened crop this year will slash that surplus and should lead to better prices for farmers next year.”

The peanut industry likes to keep some surplus peanuts in storage to make sure enough are around to meet consumer demand for peanut butter and snack food each year. But the extra peanuts this spring were about three times that comfort level, he says.

Few contracts were issued at planting time, says Smith. Shellers were comfortable there would be enough peanuts to meet demand.

Four years ago, contracts were going for $400 to $425 per ton. Last year, contracts lowered to around $370. Farmers had to settle for $355 per ton, the price guaranteed under the 2002 U.S. farm bill, for the surplus peanuts.

Peanut farmers reacted to the looming surplus by planting fewer acres this past May, he says. But even with decreased acres, says Smith, there was a good chance that surplus wouldn't have budged.

If everything had gone well and average yields were met this year, the United States would have produced two million tons of peanuts, about what the United States uses and exports annually. The surplus would have remained. It just would have been newer peanuts going into storage, he says.

“That surplus outlook has quickly disappeared due to a hot, dry growing season,” Smith says. “And I think it will end up being less than what is currently projected.”

If all of this holds, the surplus that started this year's crop off will be knocked back to what it was about two years ago, he says, or about 500,000 tons. It's still a large surplus, but not near as daunting to the industry.

“I believe there will be an improvement in prices for next year's crop, too,” Smith says. “If not, producers have shown that they will respond to surpluses by not planting.”