An increase in peanut usage in the period of November to February has made a small dent in the surplus of U.S. peanuts in the pipeline. Perhaps more importantly it has given buyers some indication that increased usage throughout the year may further reduce the current carryout.

Consumption of all peanut products was up in the past three months (November-January). Peanut candy was up 15 percent and peanut snack foods were up 43 percent. These products contain a higher percentage of nuts than other nut-food products because peanuts are now much cheaper than other nut crops.

Peanut butter, which topped the billion pound barrier in 2008, continued an upward climb, with an increase of 2.2 percent over the past three months.

All the production figures are causing peanut buyers to take notice, but they still have a sizable supply in the pipeline. While the prices are good — near levels available to growers back in the hay-day of the peanut program, prices are still not comparable to some other crops.

Cotton continues to trade at better than a dollar a pound, and though most of the reason for a drop in peanut acres in the upper Southeast is aimed at cotton, it’s not the only crop that is attractive to growers.

Highly productive peanut land in southeast Virginia and northeast North Carolina, complete in many cases with irrigation, is also good for grain production. Corn prices have remained good and look to remain good well into 2011. Soybeans and wheat, especially when grown in a double-crop, are highly competitive with corn, cotton or peanuts, even at $600 per ton.

“I don’t expect peanut acreage in the entire Southeast will go down significantly, but I likewise don’t think there’s much chance it will go up, despite the high prices. In Virginia and North Carolina, I expect there will be at least a slight drop in acreage,” Cotton says.

Southeast peanut growers are within a 60-90 day period of having to pull the trigger on which crop to plant. Historically, having a peanut contract in hand that guaranteed a farmer would make a profit 60 to 90 days prior to planting would have generated a big purchase of seed, but that hasn’t happened this year.

The price of peanut seed, which may jump by 10-15 percent, pushing seed costs to a dollar a pound, is one reservation. The high cost of inputs across the board ramp up the risk of all high dollar crops that are options in 2011. Peanuts are near the top of the list in cost per acre to produce, which further reduces the impulse to jump on $500 and $600 contracts.

The continued low value of the dollar makes export of excess peanuts a real possibility, which could further reduce the current supply.

In addition, Argentina, the leading competitor with the U.S. for foreign markets, is headed to a bad to disastrous year for peanuts and other crops.

Though acreage is up 20 percent in Argentina, La Niña-influenced heat and drought, accompanied by unusually low humidity in December and January, has put the crop at risk. Typically Argentina needs a longer growing season for peanuts because of the high risk of bad weather during the harvest season.

“If domestic and export markets remain strong throughout the year, and peanut acreage does indeed decline slightly, that could be a long-term advantage for U.S. peanut growers,” Spearman says.

“The peanut industry has done a great job of promoting peanuts and those efforts are paying off in increased domestic use. As long as we keep domestic demand up, control production and grow a high quality peanut, price and profitability will take care of themselves,” he adds.

rroberson@farmpress.com