As markets continue to whittle down what’s left of a record 2012 U.S. peanut crop, cotton likely will be a major driver of acreage headed into 2014, says University of Georgia Extension economist Nathan Smith.

“Cotton will be a driver because corn won’t be as competitive as in the last couple of years,” said Smith at this year’s Southern Agriculture Outlook Conference, held in Atlanta. “Farmers are responding to market signals. There’s about a 2-cent difference between old crop and new crop prices right now for shelled peanuts, and manufacturers are concerned about shelf life and quality.”

 

You can check current crop commodity prices now

 

It’s was no mystery that U.S. peanut production would be down significantly this year due to the phenomenal 2012 crop he says. The only uncertainty was over how much farmers would cut back their acreage.

FSA data shows that U.S. peanut acreage was down 35 percent nationwide, and Georgia was down by more than 40 percent, he says.

“A large crop, and the high prices from 2011, slowed us down on the consumption side. Then at the end of 2012 and the beginning of 2013, exports helped to offset that, mostly from China buying U.S. peanuts,” says Smith.

Overall, he says, the U.S. peanut industry is on a “roller-coaster ride” as far as production goes. “You can say that it’s due to rotations, but really, it’s farmers reacting to the market. The grain bull markets and the cotton market have impacted peanut acreage.”

Looking at historical data, farmers produced more than 1.5 million acres of peanuts in 2008, and then dropped back for three years to below 1.2 million acres. “We went back up in 2010 and then down to what we considered a really low level in 2011 of 1.14 million acres. And then last year, we saw more than 1.6 million peanut acres planted in the U.S.”

When FSA data first came out, it showed fewer acres in Georgia than what NASS was showing, says Smith. “We’re down to about 1,055,000 acres of peanuts in the U.S. We’ve really cut back on acreage in Georgia and in most other states, though Texas increased its acreage some.”

The acreage decrease this year came mostly in runner varieties, while Virginia-type peanuts were down by about 30,000 acres, he says.

Carrying over large stocks from 2012

“As far as stocks, we’re carrying over the large production from 2012. Not only did we go up to 1.6 million acres in 2012, but we also had record yields in every state but New Mexico, South Carolina and Texas. In 2012, particularly in the Southeast, we had the kind of year that was just right for peanut production. Average temperatures stayed below 90 degrees F., minimum temperatures were where they needed to be, and we got rain when we needed it. I think we saw the production potential of these new varieties last year.”

The big question, says Smith, is whether those yields can be maintained for 2013. “When we ran a trend-line of peanut yields going back to 1990, we came up with 3,650.47 as the trend yield for 2013. USDA pegged the average yield 3,650 pounds per acre on its first estimate of the season.”

This year’s crop is not rated as high as last year’s crop, or 2009, as far as growing conditions, he says. “This year’s crop is running behind while last year’s was planted early, dug early and harvested early. On May 20 of this year, less than 20 percent of Georgia’s crop had been planted due to cool, wet conditions. We basically planted the entire crop in the two weeks after that time, so that’ll push back harvest.”

Peanuts in southwest Georgia were seven to 10 days behind normal in maturity, so it was taking 145 days rather than 135 days for the peanuts to mature this year, says Smith.

Eighty-four percent of the seed grown last year was in the GA-06G variety, so more than 80 percent of the peanuts planted in the Southeast were GA-06G, he adds. This particular variety appears to be robust as far as conditions go, and it has raised growers’ yield potential.

Overall yield estimates below last year

As far as yield estimates, Alabama is at 3,100 pounds per acre, Florida at 3,500, Georgia at 3,900, and Mississippi at 3,200, with an average in the Southeast of about 3,645. That would be about 16 percent below last year.

“Oklahoma is looking pretty good at 4,000, and Texas is at 3,500, an improvement over previous years. New Mexico is at 3,200, and even though they are irrigated, they’re mostly organic, so that’s why their yields are lower. Virginia is at 4,100 and South Carolina is at 3,200. North Carolina is at 3,600. The U.S. now is at a 3,600-pounds per-acre average yield, but these are all preliminary numbers, and we won’t really know until the crop is completely harvested.”

The National Center for Peanut Competitiveness runs yield models for Georgia, and compared with the NASS estimate of 3,900, their estimates range from 3,700 to a little more than 3,900 pounds per acre, says Smith.

“This is a year when I just don’t know what the final yields will be. I know there are a lot of fields that had drowned out spots, and fields that were late, but there were also some good fields out there, so we’re looking pretty much at a mixed bag this year. As far as production, we’re going to do that swing this year from almost 3.4 million tons down to less than 1.9 if the yield estimates are accurate.”

Since the change in the farm bill when growers moved away from quota allotments, they over-produced in 2005, over-produced again in 2008 — the year after the bull run in corn and beans — and then over-produced in 2012, after cotton  topped $1, he says.

 

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Stuck in the cycle

“I suppose we’re in stuck in that cycle until manufacturers can figure out how to stabilize their buying of acres. That’s what it boils down to each year – the manufacturers buying acres with their contracts to the shellers for what’s to be planted.”

As far as domestic use, it’s just below 2 million tons annually, says Smith. “This year, production will fall below domestic use. And exports are more variable, with a decline since the 1990s. We’ve seen some increase the last few years and then China came in and helped get some of those peanuts off the market through exports that we haven’t traditionally seen. Perhaps some relationships have been built with China, and we’ll see them coming back in, but they’ll be buying on price — the lowest price will win with China.”

U.S. peanuts are considered superior quality because they are grown for the edible market, and they are exported into Europe, which has high specifications, says Smith. “We receive a premium over other origins because we have a reputation for producing a quality product. Last year, China bought just under 80,000 tons, because India had a drought and they cut off exports. The Chinese middle class is just about equal to Japan’s total population, so if we can get them to eat more U.S. peanuts, then that’s certainly another market.”

Argentina is the U.S.’s largest competitor in the world export market, and the U.S. has increased its exports into the European Union, where Argentina exports most of its peanuts, says Smith.

“But Argentina’s crop was delayed, so it gave us an opportunity, and that was a benefit this year. Right now, we’re up more than 50 percent on exports.”

Canada is the largest U.S. market followed by the EU and Mexico, he says. “We export our peanuts to Canada and Mexico, and it comes back into the U.S. as a processed product. But they also consume a lot of peanuts.”

 

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Million ton carryover

The U.S. is looking at about 1 million tons of carryover this year if it ends up with the currently projected level of production, says Smith.

“Our consumption will pull back down to about 2.2 million tons because we don’t expect China to do what it did last year and because China is expected to have a large crop of its own. That market probably isn’t there, but we still should have strong exports.”

If yields end up 5 percent smaller than projected this year, then production would drop below 1 million tons, and that would be positive for price, says Smith.

“If we end up with a 5-percent higher yield, that would build back another 100,000 tons, and it won’t be positive for price.”

Hopefully, he says, domestic consumption will continue to grow with more advertising and promoting by manufacturers like Jif and Kraft.

Peanut use, says Smith, is broken down into four distinct markets: in-shell, candies, snacks and peanut butter, with peanut butter being the largest use at 56 percent.

 

 

As markets continue to whittle down what’s left of a record 2012 U.S. peanut crop, cotton likely will be a major driver of acreage headed into 2014, says University of Georgia Extension economist Nathan Smith.

“Cotton will be a driver because corn won’t be as competitive as in the last couple of years,” said Smith at this year’s Southern Agriculture Outlook Conference, held in Atlanta. “Farmers are responding to market signals. There’s about a 2-cent difference between old crop and new crop prices right now for shelled peanuts, and manufacturers are concerned about shelf life and quality.”

 

You can check current crop commodity prices now

 

It’s was no mystery that U.S. peanut production would be down significantly this year due to the phenomenal 2012 crop he says. The only uncertainty was over how much farmers would cut back their acreage.

FSA data shows that U.S. peanut acreage was down 35 percent nationwide, and Georgia was down by more than 40 percent, he says.

“A large crop, and the high prices from 2011, slowed us down on the consumption side. Then at the end of 2012 and the beginning of 2013, exports helped to offset that, mostly from China buying U.S. peanuts,” says Smith.

Overall, he says, the U.S. peanut industry is on a “roller-coaster ride” as far as production goes. “You can say that it’s due to rotations, but really, it’s farmers reacting to the market. The grain bull markets and the cotton market have impacted peanut acreage.”

Looking at historical data, farmers produced more than 1.5 million acres of peanuts in 2008, and then dropped back for three years to below 1.2 million acres. “We went back up in 2010 and then down to what we considered a really low level in 2011 of 1.14 million acres. And then last year, we saw more than 1.6 million peanut acres planted in the U.S.”

When FSA data first came out, it showed fewer acres in Georgia than what NASS was showing, says Smith. “We’re down to about 1,055,000 acres of peanuts in the U.S. We’ve really cut back on acreage in Georgia and in most other states, though Texas increased its acreage some.”

The acreage decrease this year came mostly in runner varieties, while Virginia-type peanuts were down by about 30,000 acres, he says.

Carrying over large stocks from 2012

“As far as stocks, we’re carrying over the large production from 2012. Not only did we go up to 1.6 million acres in 2012, but we also had record yields in every state but New Mexico, South Carolina and Texas. In 2012, particularly in the Southeast, we had the kind of year that was just right for peanut production. Average temperatures stayed below 90 degrees F., minimum temperatures were where they needed to be, and we got rain when we needed it. I think we saw the production potential of these new varieties last year.”

The big question, says Smith, is whether those yields can be maintained for 2013. “When we ran a trend-line of peanut yields going back to 1990, we came up with 3,650.47 as the trend yield for 2013. USDA pegged the average yield 3,650 pounds per acre on its first estimate of the season.”

This year’s crop is not rated as high as last year’s crop, or 2009, as far as growing conditions, he says. “This year’s crop is running behind while last year’s was planted early, dug early and harvested early. On May 20 of this year, less than 20 percent of Georgia’s crop had been planted due to cool, wet conditions. We basically planted the entire crop in the two weeks after that time, so that’ll push back harvest.”

Peanuts in southwest Georgia were seven to 10 days behind normal in maturity, so it was taking 145 days rather than 135 days for the peanuts to mature this year, says Smith.

Eighty-four percent of the seed grown last year was in the GA-06G variety, so more than 80 percent of the peanuts planted in the Southeast were GA-06G, he adds. This particular variety appears to be robust as far as conditions go, and it has raised growers’ yield potential.

Overall yield estimates below last year

As far as yield estimates, Alabama is at 3,100 pounds per acre, Florida at 3,500, Georgia at 3,900, and Mississippi at 3,200, with an average in the Southeast of about 3,645. That would be about 16 percent below last year.

“Oklahoma is looking pretty good at 4,000, and Texas is at 3,500, an improvement over previous years. New Mexico is at 3,200, and even though they are irrigated, they’re mostly organic, so that’s why their yields are lower. Virginia is at 4,100 and South Carolina is at 3,200. North Carolina is at 3,600. The U.S. now is at a 3,600-pounds per-acre average yield, but these are all preliminary numbers, and we won’t really know until the crop is completely harvested.”

The National Center for Peanut Competitiveness runs yield models for Georgia, and compared with the NASS estimate of 3,900, their estimates range from 3,700 to a little more than 3,900 pounds per acre, says Smith.

“This is a year when I just don’t know what the final yields will be. I know there are a lot of fields that had drowned out spots, and fields that were late, but there were also some good fields out there, so we’re looking pretty much at a mixed bag this year. As far as production, we’re going to do that swing this year from almost 3.4 million tons down to less than 1.9 if the yield estimates are accurate.”

Since the change in the farm bill when growers moved away from quota allotments, they over-produced in 2005, over-produced again in 2008 — the year after the bull run in corn and beans — and then over-produced in 2012, after cotton  topped $1, he says.

 

Page break

Stuck in the cycle

“I suppose we’re in stuck in that cycle until manufacturers can figure out how to stabilize their buying of acres. That’s what it boils down to each year – the manufacturers buying acres with their contracts to the shellers for what’s to be planted.”

As far as domestic use, it’s just below 2 million tons annually, says Smith. “This year, production will fall below domestic use. And exports are more variable, with a decline since the 1990s. We’ve seen some increase the last few years and then China came in and helped get some of those peanuts off the market through exports that we haven’t traditionally seen. Perhaps some relationships have been built with China, and we’ll see them coming back in, but they’ll be buying on price — the lowest price will win with China.”

U.S. peanuts are considered superior quality because they are grown for the edible market, and they are exported into Europe, which has high specifications, says Smith. “We receive a premium over other origins because we have a reputation for producing a quality product. Last year, China bought just under 80,000 tons, because India had a drought and they cut off exports. The Chinese middle class is just about equal to Japan’s total population, so if we can get them to eat more U.S. peanuts, then that’s certainly another market.”

Argentina is the U.S.’s largest competitor in the world export market, and the U.S. has increased its exports into the European Union, where Argentina exports most of its peanuts, says Smith.

“But Argentina’s crop was delayed, so it gave us an opportunity, and that was a benefit this year. Right now, we’re up more than 50 percent on exports.”

Canada is the largest U.S. market followed by the EU and Mexico, he says. “We export our peanuts to Canada and Mexico, and it comes back into the U.S. as a processed product. But they also consume a lot of peanuts.”

 

Page break

Million ton carryover

The U.S. is looking at about 1 million tons of carryover this year if it ends up with the currently projected level of production, says Smith.

“Our consumption will pull back down to about 2.2 million tons because we don’t expect China to do what it did last year and because China is expected to have a large crop of its own. That market probably isn’t there, but we still should have strong exports.”

If yields end up 5 percent smaller than projected this year, then production would drop below 1 million tons, and that would be positive for price, says Smith.

“If we end up with a 5-percent higher yield, that would build back another 100,000 tons, and it won’t be positive for price.”

Hopefully, he says, domestic consumption will continue to grow with more advertising and promoting by manufacturers like Jif and Kraft.

Peanut use, says Smith, is broken down into four distinct markets: in-shell, candies, snacks and peanut butter, with peanut butter being the largest use at 56 percent.

phollis@farmpress.com