Peanut acreage in the Southeast is expected to drop in 2009 to the lowest level since 1915 because of an over-supply of peanuts, expected lower prices than 2008, and a well-publicized salmonella outbreak that cut peanut butter consumption.

Peanut economists and industry leaders called for a 25 percent to 30 percent cut in production to compensate for the over-supply resulting from a bumper crop in 2008. What may happen could send shockwaves throughout the peanut industry.

When the USDA issued its Intentions to Plant Request in March, peanut producers from Virginia to Florida still expected a contract offer that would keep peanuts profitable. At planting time, the best contracts were for $40-$50 over loan value for runners and $85-$95 for Virginia-type peanuts. Average price for the four peanut types grown in the U.S. has hovered around $425 during the early planting cycle. For many growers, contract price cuts came with reduced pounds, and in some cases no contract offers at all.

Growers knew a 10-year high in acreage and a bumper yield in 2008 would mean lower contract prices in 2009. Few expected peanut contract prices to drop so low, nor be so limited, and most all to come later in the year than at any time in history.

How many acres earmarked for peanuts in the Planting Intentions survey actually go into peanuts remains to be seen. And, even the best pre-planting estimates called for a 20 percent to 25 percent cut in acreage — long before contracts were offered.

Talk to any peanut grower in the Southeast and all can rattle off a dozen or more growers in their area who either dramatically cut back peanuts or got out all together for the 2009 season.

Suffolk, Va., grower John Crumpler says a number of growers in his area set a minimum contract price for which they would grow peanuts. When contracts came out 20 percent to 25 percent less than last year, they simply chose to get out of peanuts this year.

Crumpler is growing about the same acreage he grew last year, but all are either grown under seed contracts or with no contract. Many growers, especially those with storage capacity are choosing to refuse the low contract prices and grow peanuts in hopes acreage cutbacks will drive prices up.

Virginia grower Jimmy Oliver says 2009 will be the first year in several generations of his Isle of Wight County, Va., farm that peanuts will not be grown. "Even during the lean years, when we weren't making money and the government was cutting back acreage, we always planted peanuts,” Oliver says.

Peanuts topped a multi-year comeback in Virginia in 2008, with 24,000 acres. Dell Cotton, executive director of the Virginia Peanut Growers Association says 10,000 acres is optimistic for 2009.

Some economists still contend the peanut cutback will be less than the expected 30 percent. The USDA National Agricultural Statistics Service estimates a 400,000-acre reduction for peanuts this year, 1.1 million compared to 1.5 million in 2008.

NASS figures put Texas at 160,000 acres, down from 195,000 last year. Georgia growers should plant 500,000 acres, off from 690,000 last year. Alabama, at 170,000, will be off from 195,000 in 2008. Growers in Alabama, Florida, Georgia, Mississippi, and South Carolina intend to plant 855,000 acres in 2009, compared with 1.13 million acres planted in 2008, the USDA said.

In Georgia, the largest peanut-producing state, planted acreage is expected to decline 28 percent from last year. Growers in New Mexico, Oklahoma, and Texas intend to plant 182,000 acres, down 36 percent from the previous year, the USDA said.

Plantings in the Virginia-North Carolina region are expected to total 87,000 acres, down 29 percent from 2008. Acreage in Virginia is expected to decline 50 percent from 2008, the USDA said.

Darlington, S.C., grower Britt Rowe says he plans to sit out 2009 with peanuts. The President of the South Carolina Peanut Growers Association says the economics just don’t add up for him. And, he hopes taking 800 or so acres of peanut out of production will help prices bounce back quicker.

“I’m not getting out of the peanut business — not selling my peanut equipment or anything like that,” he stresses. I’m just going to watch from the sidelines this year and see what happens.”

In the lower Southeast, where 65 percent to 70 percent of the country’s peanuts are planted, pricing is not the only factor causing peanut acres to be cut back. Extreme wet weather has delayed planting across Alabama, Georgia and the Florida Panhandle.

On May 27, the Georgia Peanut Commission sent out an appeal for help, asking the Risk Management Agency to extend the peanut planting deadline for crop insurance by a minimum of 10 days. The peanut planting deadline for crop insurance was May 31.

“Georgia has seen a tremendous amount of rain this spring,” says Don Koehler, Georgia Peanut Commission executive director. “It has caused flooding throughout the peanut belt and has delayed peanut planting in many areas.”

Long-time Virginia/North Carolina Crop Consultant Wendell Cooper says a number of his clients face a low or no contract peanuts versus low cotton price dilemma. Cotton, he says, for most will be the best option.

Cooper says the problem isn’t so much that growers can’t make a profit with contracts under $500 per ton. If they can grow two tons per acre, they can come out all right, he says. The problem is they cannot properly insure their crop. Crop insurance doesn’t include variable costs for high intensity farmers.

“By comparison, soybeans are a much lower risk, if you have a decent yield in soybeans at $8.80 a bushel. You can insure that crop well past your variable cost — almost to the point of insuring the crop to profit,” he contends.

Peanut contract prices were primarily a function of an over-supply of peanuts, but the well-publicized salmonella outbreak further complicated things for Southeastern peanut growers.

“This is the darkest year I’ve ever seen going into the upcoming crop year,” said Mike Newberry, a fourth-generation farmer who has been working his family’s southwest Georgia farm near Arlington for 29 years. “And that was before the peanut scare.”

Prior to issuance of the 2009 peanut contracts, North Carolina Peanut Specialist David Jordan estimated an acreage cut of 25 percent or more — that was expecting contracts to come in at $500 or better.

Both Jordan and South Carolina Peanut Specialist Jay Chapin point out that 80 percent to 85 percent of peanut acreage in their states is not irrigated. High input costs and lack of irrigation significantly pump up risk. Higher risk typically results in reduced acreage.

One argument for less dramatic cuts in peanut acreage is grower-need to maintain peanut acreage for proper rotation. Continued low cotton prices and lack of irrigation to produce high grain yields support that contention.

Another reason for expecting peanut acreage cuts to remain in the 25 percent to 30 percent range is shrinking of acreage worldwide. Price has affected how many peanuts are being planted on a global scale. A good example is China, where acreage has been expanding in recent years. In 2009, Chinese production is expected to fall by 10 percent or so. Regardless of the levels of peanut acreage cuts, it is clear that the infrastructure will be further damaged.

Harford, Ala., Grower Jim Kelly says the reduction in buyers from 10 or so to three in the past few years has given peanut buyers too much control over pricing. “There is no doubt having 10 or 12 companies bidding on your peanuts helped keep prices high. Big cuts in peanuts is a threat to further reducing the number of buyers and buying points, all of which create a further threat to the peanut industry, the Alabama grower says.

How big a cut in peanut acreage in the Southeast is dependant on myriad production and economic factors. When it’s all sorted out, there is no doubt the peanut industry will take a big hit in 2009.

e-mail: rroberson@farmpress.com