One-thousand-dollar-per-ton prices, as good as they sounded at the time, might have been the worst thing to happen to the peanut industry, says Nathan Smith, University of Georgia Extension economist.
“As an industry, we’re probably going to regret $1,000-per-ton peanuts,” says Smith, referring to the run-up in prices last year caused by a peanut shortage. This year, there will be no such shortage, he says.
“We’ve got a flood of peanuts coming, and they’ll have to be moved somewhere this coming year,” says Smith.
“Our planted acres also were up this year. Our certified acres came out in mid-August, and they jumped up to a little more than 1.6 million after a little more than 1.1 million acres last year. There’s a huge estimate for yield, at 3,700 pounds per acre. We’ll have a really big crop this year.”
According to the October USDA crop production report, U.S. peanut growers planted 1.636 acres this year compared with 1.1 million acres in 2011. Yield per acre is predicted at 3,832 pounds compared with last year’s crop that averaged 3,386 pounds per acre.
Georgia’s estimated average yield is 4,150 pounds per acre, far exceeding the state’s record-high yield.
Peanut use, on the other hand, has slowed, says Smith.
“We’re seeing a similar situation as we saw in 2009, where we had a big carryover, and then prices went down in 2010,” he says.
The high average yield prediction is a result of more than 75 percent of the crop being in good to excellent condition, he says. The previous record-high average yield was set in 2009, when more than 70 percent of the crop was in the good to excellent range.
“It is a very good looking crop that was planted early, so planting and pegging were ahead of schedule. Crops are maturing slower this year, but growers are still making a big crop.
“We could very easily be at two tons per acre in Georgia when it’s all said and done.
“Using the U.S. trend yield, I would have figured this year’s yield to be around 3,450 pounds per acre. Looking at all peanut-producing states, most are not only above 3,000 pounds per acre but above 3,500 pounds.
“Arkansas could be on the USDA chart next year as a major peanut-producing state, because they have about 18,000 acres this year, according to FSA numbers.”
Record high yields
States likely to set record-high yields this year include Florida, Georgia, Texas and possibly North Carolina.
“So we’re looking at a big carryover from this year’s crop, double that of last year. We’ll have slightly less than next year’s use just in carryover.
“Looking at peanuts in cold storage, it has gotten tighter this year than in 2011. From a stocks-to-use ratio, it’s the lowest level we’ve had in years at 500,000 tons. That’s a little over two months of supply, and they like to have at least three months of carryover.”
If the U.S. ends up with a 3 million ton crop compared to 1.8 million tons last year, and there’s an increase in total use of about 2 percent, then there will be about 1.2 million tons in carryover, says Smith.
“I think we’ll have some increase in use, so I’m forecasting about 10 percent increase in domestic use. With a 3,700-pound U.S. yield, we’ll have about a 1.1 million-ton carryover.”
Imports have doubled this year because of last year’s short crop, at about 150,000 tons, says Smith. In a normal year, imports run at about 60,000 to 70,000. This led to prices increases for peanut butter and other peanut products, he says.
“We were looking good on use until they adjusted stocks-to-use processing numbers. On shelled edible use, we used about the same amount — 2 million tons — as the previous year for candy, peanut butter and snacks. Demand basically leveled off, with no growth for this past year.”
Exports are expected to increase some this year because of the lower value of the dollar, says Smith.
“The majority of our exports occur at Christmas and during the holidays. Europe is our largest export market, followed by Canada, Mexico and Japan. Peanuts going to Canada and Mexico are being processed and brought back in as products. Peanuts are popular as gifts in Europe, so that’s our best time for exports.”
Peanut prices for 2011-2012 averaged 33 to 34 cents and rose to more than 36 cents at one point on weekly prices, he says.
“Early peanut contracts in the Southeast were $650 to $700 per ton. They came in a little too high, but they ended up at $550 to $600 per ton, although the number of tons that could be contracted was limited.”
The government’s peanut quota program, says Smith, was successful at controlling supply and keeping things level.
“After the end of the quota program, shelled prices adjusted to the market, and farmer stock prices went down to $355 to $380 per ton on contract.
“In 2003 and 2004, we had low production, so farmer stock prices got up to $400 per ton. Manufacturers were happy because shelled prices got down to 32 cents.
“Then, in 2007 and 2008, we had a bull run on soybeans and corn and we lost peanut acres. We had a shortfall in peanuts, with shelled prices reaching 80 cents per pound, and farmer stock prices reached $500 per ton in 2008.
“That caused us to over-produce, and prices went down to $350 to $400 per ton in 2009 and 2010, and that’s what I expect for this coming year, $380 to $400 per ton.”
Looking at loan-rate
Growers who haven’t already contracted their peanuts are looking at the loan-rate now, says Smith.
“Loan rate means $355 per ton. If you put them in a nine-month loan, and that loan begins on the first day of the month that you put the loan in, you can hold them for eight or nine months and wait for the price to improve.”
When marketing the 2012 peanut crop, patience will be the key for non-contracted peanuts, says Smith.
It’s really a guess as to how many peanuts were not contracted, he says.
“In the Southeast, we have more of a history of planting additional acres and non-contracted acres, so there were more acres planted without contracts, and right now there aren’t any bids for them, so they’ll be pushed straight into the loan for $355 per ton.
“In the next few months or so you might have an opportunity to sell them in the spot market.
“The hopeful high would probably be $400 per ton. If you put them in the loan, it’ll take $380 to get them out of the loan unless the sheller agrees to pay for the storage costs and handling fees.
“If you forfeit them in the loan, the government will pay for the handling and storage of those peanuts. We know what the bottom price is going to be for peanuts if they’re going to come out of loan — it’ll be somewhere around $380.”
Growers can store them and wait for the 2013 crop to see what the expectations are and maybe get a little better price from where they are right now, says Smith.
“If you’re able to hold them and pay for the storage into January, and then put them in the loan, the last day you can apply for a loan on peanuts is Jan. 31.
“Then, you could actually get into next October for the loan. A lot of people do that, and it’ll put pressure on the shellers, because they need their warehouses cleaned out. They’ve got peanuts coming into the warehouse in September and October, and they don’t have enough room to store two crops.”
The loan will be tested this year, says Smith.
“In 2013, the shellers and manufacturers are going to try and find a price that won’t encourage more acres but won’t lose too many acres.
“Peanut acres definitely will be going down, I think to about 1.2 million or a little less. I expect exports to increase and consumption to go up because manufacturers will be trying to boost peanut sales.”