This year, for the first time in many years, several U.S. commodities will be competing for acreage, and that competition will greatly impact peanut production, says Nathan Smith, University of Georgia Extension economist.

“Back in 2006, we started seeing a bull market in grain, particularly in corn,” said Smith, speaking at the recent Georgia Peanut Farm Show in Albany, Ga. “They realized there would be a large shortfall at harvest, due primarily to lower-than-expected yields. But the demand also increased as corn was being used for ethanol production.”

Soybeans, he says, were riding on the “coattail” of corn. “Coming out of the 2006 crop, soybean stocks were at a record high — there were more soybeans on hand than we had ever seen before. This year, we're looking at going from record soybean stocks to very tight stocks. They're not as tight as in 2003, but they're tight enough to boost prices,” says Smith.

Adding to the competition, he says, is a worldwide shortage of wheat.

“With peanuts, supply has been worked down,” says Smith. “We still have a decent carryover, but it's down to a point to where if we have a bad year or don't get enough acreage planted, there could be problems. In cotton, we have reasonable stocks, with a six or seven million bale carryover. But we're losing acres of cotton, so cotton has gotten into the game recently.”

When USDA released its 2007 crop summary in January, the market reacted with increases in the prices of corn, soybeans and wheat, and especially corn. “The average corn yield dropped by almost two bushels, so there isn't as much corn out there as we first thought, and more corn was fed than previously thought. Now there's not as much corn out there, and the market thinks more will be needed,” he says.

Soybeans, he adds, are trying to take back acres that were lost last year to corn. Soybean acreage decreased by 12 million acres this past year, and all of those went to corn, says Smith. Wheat production was expected to be twice as high as indicated by the crop summary.

U.S. peanut yields for 2007 were about 200 pounds per acre higher than anticipated says Smith. “That 200-pound yield increase translates into a 1.87 million-ton crop, and that's 8 percent higher than the 2006 crop. At the beginning of the growing season, we were hoping for a 1.7 million-ton crop. It's a little better than we originally thought,” he says.

Farmer stock peanuts in storage are down from last year, notes Smith, and shelled stocks are down by about one-third from last year.

“So the pipeline is getting a little less full than it was. The USDA thought U.S. acreage may have dropped by up to 5 percent, but it ended up being 1 percent more than last year's crop. Georgia did drop significantly, by up to almost 9 percent,” he says.

The latest number on ending peanut stocks is about 675,000 tons, says Smith, which is not quite as low as was estimated earlier in the season.

Turning to consumption, there was a slowdown with the 2005 and 2006 crop after strong use disappearance in the previous two years, says Smith. There actually has been a bit of a decline in edible use utilization, he adds.

“Exports were up last year, offsetting some of that as well as offsetting some of the crushed and seed residual figures. Overall, disappearance was a little over 2 million tons. That's a benchmark that is used in trying to look at the coming year. Right now, the stocks and processing report is showing that we're 6 percent down on edible use. If that's the case, then we're lagging behind last year. That's really because we're down in peanut butter and candy, according to the reports,” he says.

This past year, peanut planted acreage was 1.23 million acres with Georgia dropping down to 530,000 acres, says Smith. “We've come from a high in 2005 of 755,000 acres. Alabama was at 160,000 acres, Florida at 130,000 and North Carolina at 92,000. South Carolina planted about the same acreage as last year and Texas increased its acreage. Georgia and Texas really drove the crop this past year.”

Harvested peanut acreage was about 98 percent of the planted acreage at 1.2 million acres. The Southeast represents about 870,000 of those acres, he says.

“The five-year average for the United States is about 1.35 million acres. That might be a target of where we're headed if peanut prices stay at $500 per ton or higher. That may be where acres are headed.”

As for yields, says Smith, just about every state saw an improved estimate from the November 2006 report to the January crop summary. Alabama increased from 2,400 to 2,600 pounds per acre and Georgia's final yields were pegged at 3,150 pounds per acre. Mississippi and Texas also saw increased yields from earlier estimates.

“The total U.S. average yield was 3,130 pounds per acre, and that's pretty good considering where we thought we'd be. Comparing that to recent years, Georgia actually was higher than the U.S. average, which is a trend we like to see. In the previous three years, the United States did better than Georgia as far as average peanut yield.

Turning to total supply, the United States has a larger carryover. “That's because in 2005, we had a large crop, with bigger yields and more acres. The carryover or ending stocks was more than 1 million tons. Now it's down to about 275,000 tons.”

A 10-percent increase in peanut acres this year would put acreage at about 1.32, says Smith. With an average yield of about 3,000 pounds per acre, total supply would not increase that much, and ending stocks would be about the same.

“What we're saying is that there is room and a need for a few more peanut acres if we're going to keep things where they are right now in terms of carryover stocks. Ultimately, the weather and yields will be a big driving force. But right now, there is competition in the market for acres. The market wants to keep the corn acres and wants to increase soybean acreage, and there are only so many acres to go around. The market is competing for these acres.”

The NASS report on peanut acres shows the prices paid by shellers has gone from 18.5 cents at the end of September up to the 21 to 22-cent range, says Smith. “This impacts the counter-cyclical payment, and when you average that with the tons sold each week, the counter-cyclical pricing would basically be eroded. It will be small if not close to being gone, just like for the other crops. But that's because prices are higher, and hopefully higher prices are a good thing.”

For Georgia, Smith predicts corn acres may drop back some in 2008. “We'll lose cotton acres to peanuts and soybeans. Certainly soybean acres will increase because Georgia's wheat acres are up. Most of that will be double-cropped with soybeans. But we could have grain sorghum or even cotton behind wheat. Some growers might even try peanuts double-cropped.”

But Smith warns that costs will impact the net returns of growers this year, even with higher prices.