Nathan Smith, University of Georgia Extension economist, provided a market update to Texas peanut farmers recently from the safety of the Lubbock Civic Center while a West Texas dust storm, whipped up by winds in excess of 60 miles per hour, turned the outside backdrop into a reddish-brown curtain of sand.

“I never understood until now why Texas peanut farmers include sand-fighting in their peanut budgets,” Smith told the audience, participants in the Sixth Annual Southwest Crops Production Conference and Expo.

“We don't deal with this in Georgia.”

He pointed out, however, that farmers across the peanut belt deal with many of the same concerns and especially with peanut marketing, a new wrinkle following the Food Security and Rural Investment Act of 2002.

He said farmers went into the 2003 season in fairly good shape, with a relatively short carryover from 2002. “But the 2003 crop produced a record average yield (more than 3,100 pounds per acre and a 2 million-ton production) and a larger carryover,” he said.

But the increase doesn't tell the whole story. “Domestic use is projected up by 5 percent. We suffered a downturn in the 1990s because of health concerns.” Most of those concerns have been put to rest with research that shows peanuts to be a healthy food. Aggressive promotion also stimulated demand.

The export market may offer some opportunities as well. Smith said Argentina cut production and China's crop had quality problems. “Also, the decreased value of the dollar helps exports.”

He said NAFTA and other trade agreements allow a certain number of peanuts into the United States. Argentina, Mexico and Nicaragua have minimal access agreements, he said. “Argentina has not filled its quota for the last few years. Less than half its allotment has come to our ports.”

He said Argentina's production problems and China's quality issues have stimulated export price offerings.

The key for 2004 prices, Smith said, may be early planting intentions. “We need 1.3 million acres and an average yield, 2,800 pounds per acre, to meet total demand,” he said. He anticipates the 2004 export activity will mirror 2003.

“Right now we're on a fence.” He said cotton acres likely will increase. “And the stocks-to-use ratio is bullish for corn prices. The weaker dollar supports export efforts. China needs cotton, and the domestic demand for peanuts is increasing.”

Smith said early contracts in Georgia have hit $400 per ton as manufacturers line up supply to meet domestic demand.

Smith said high prices could hurt the export market. “But we have to take care of the domestic market first.”

He said the National Posted Price for peanuts has remained above the loan rate for the 2003 crop and likely will be higher next year. “The expected counter-cyclical payment will be less, probably from $65 to $75 a ton.” Last year's CC payment totaled $95.

He said many farmers who grew peanuts under the old program are no longer in the business. Acreage shifts following the 2002 legislation moved significant peanut acreage out of Virginia, North Carolina and Oklahoma. He said Southwest acreage dropped 37 percent but production fell only 10 percent as peanuts shifted to more productive, irrigated land. Smith said Texas might pick up virginia-type acreage when the figurative dust from the revamped program finally settles.

Smith said the latest acreage data come from the 2002 crop year. The Southeast has added acreage. “Alabama acres are moving to the southwest corner of the state, around Mobile. Florida acreage has increased a bit in the Panhandle. North Carolina and Virginia lost acreage and South Carolina acreage nearly doubled.”

Smith said Texas peanuts moved out of the old eastern and central areas into West Texas, “where yields are more competitive.”

e-mail: rsmith@primediabusiness.com