Overall, U.S peanut production has a bright outlook with strong domestic demand and steady exports, but the 2005 crop could prove to be the first real test of the new peanut program, says Nathan Smith, University of Georgia Extension economist.

Smith presented his peanut marketing outlook in the recently published 2005 Georgia Farm Outlook and Planning Guide.

The peanut program has worked fairly smoothly to date, says Smith. “The market fundamentals suggest prices should remain the same, but farmer prices likely will start out lower in 2005 due to lower prices for competing commodities, maybe $380 per ton,” he says. The big question is, says Smith, will producers be willing to contract at that level, or will they wait and utilize the marketing loan, waiting for the prospect of higher prices. “The 2005 crop could be the first real test of the new peanut program,” he says.

Reviewing this past year, Smith says the 2004 crop did not turn out to be as good as 2003 for Georgia peanut producers. During late summer of 2004, the National Agricultural Statistics Service estimated a 3,300-pound per acre average yield for Georgia.

“But storms from hurricanes Charlie, Francis, Ivan and Jeanne knocked down Southeastern yields in September and October. Georgia’s final 2004 yield estimate was 3,000 pounds per acre. Much of the yield loss was due to delayed harvest as well as flooding and increased disease pressure,” he says.

Financially speaking, the lower yield was offset some by higher prices in 2004 for farmer stock peanuts, says Smith. Marketing contracts offered by shellers were typically $45 per ton above the loan rate or $400 per ton. Seed contracts included a $25-per-ton premium.

“The estimated gross income per acre for 2004 is $609. This would be $29.25 less than in 2003. Input costs were up in 2004 as disease pressure increased, requiring more sprays. Input prices increased by more than 5 percent. Thus, net income was down by a greater percentage,” he says.

Peanut acreage continued to increase in the Southeast and in Georgia in 2004, according to Smith. Producers planted 75,000 more acres in Georgia for a total of 620,000 acres. The Southeast has increased planted acreage to 1 million acres, which is up from 806,000 in 2002. Texas and Oklahoma’s acreage continued to decline by dropping to below 300,000, while the Virginia-Carolina Region has steadied at 138,000 acres. U.S. total peanut acreage was 1.43 million.

“Total peanut production exceeded 2 million tons again in 2004. The large crop was a result of several thousand late-planted acres in Georgia, and the second-best U.S. average yield on record. The 3,000-pound barrier was broken for only the third time.

“This makes two consecutive years of excellent yields. Fortunately, strong demand had coincided with the large crops, and carryover stocks have not become burdensome.”

Unlike last year, peanut marketing contracts for 2005 had not been offered by the first of January, says Smith. Georgia’s peanut acreage is expected to increase again in 2005.

“There is the potential to reach 700,000 acres. This would be another large jump, but it could occur, given lower market prices for corn and soybeans. The cotton market also is lower but net prices — including the LDP — are in the 58 to 60 cents range, making cotton still competitive with peanuts.

“Another factor favoring more peanut acres is an increase in fertilizer prices and an increase in seed technology fees for corn, cotton and soybeans. In addition, soybean producers are wary of additional spray expenses in 2005 due to Asian rust.”

Peanut food use in 2004 is forecast to be 1.336 million tons, says Smith, an 8.8 percent increase. Adding 100,000 tons for seed gives a consumption level of 1.436 million tons before exports, crush and residual. Using carryover stocks to meet part of the demand, a minimum of 815,000 harvested acres would be needed to meet food demand projections, he adds.

“When crush, exports and residual use forecasts are added, 1.29 million acres are needed given a 2,800-pound average yield. Current forecasts suggest the market needs a minimum of 1.3 million acres to keep a comfortable level of stocks.

“One factor that could change the outlook is the export market. Argentina increased acreage for 2005 and could again compete strongly with the United States for European exports. Or, Argentina could import again into the United States to meet part of domestic demand.”

The season-average price for peanuts in 2003 was $386 per ton, resulting in a $73 total counter-cyclical payment for peanuts per base acre, says Smith. “Given that 2004 contracts were $400 and above, the counter-cyclical payment will be less for the 2004 crop. The first four months — September through December — suggest about a $50-per-ton total counter-cyclical payment.

e-mail: phollis@primediabusiness.com