Prior to the 2012 planting season, peanut marketing experts warned growers against over-planting.
The message didn’t take and now growers are facing the consequences of over-supply and subsequent low prices for their crop.
To emphasize the over-supply problem, peanut growers in Alabama, Florida and Georgia grew more than enough peanuts to meet the domestic demand for peanuts. In theory, all the peanuts grown in the Carolinas, Virginia, Texas, Oklahoma and a few other states were excess.
In Georgia, it seems clear now that more than 50 percent of the peanut crop was planted without a contract. There is some hope these peanuts can be sold, but the only guarantee is they will go into the Federal loan program and the grower will receive $355 per ton.
The real problems for growers who put peanuts in the loan are the delay in getting additional money for their crop and the uncertainty of how much money that will be.
This year, there is real concern the market may not be there and these peanuts could sit in the loan program for a long, long time.
Though some growers contend they are at the mercy of shellers, the sheller is really the middle man in the whole peanut buying process.
If the sheller buys and shells the peanuts, he pays back the $355 and gives the grower whatever additional price he chooses.
Buyers who did not book long would typically get 50-55 cents a pound, but the market is just not there. Manufacturers are buying a month at a time, because they are waiting for peanuts to get to the lowest price.
Shellers are using the peanuts they contracted for $600-700 a ton first. Then, when they fill the contracts, they will start offering some price for the peanuts in the loan — what that price is nobody knows.
Above average yield
Peanut acreage in the Upper Southeast increased substantially in 2012 and growers are likely to finish up with an above average yield. Some peanut experts are predicting this to be the highest yielding peanut crop per acre in history. Others contend that estimate is a little steep.
Long-time Virginia Crop Consultant Wendell Cooper says the crop in southeast Virginia may not be as high as expected. “It will be a good crop, but I expected to see several fields top 6,000 pounds per acre, and it just isn’t happening.
“Harvested acres are looking good yield-wise, but not as good as some of us thought prior to digging,” he explains.
In both the Carolinas, peanut acreage was up significantly, and it has become nip and tuck as to which of the Carolinas will produce more peanuts.
North Carolina has traditionally been the highest production state in the V-C belt, but that may not be the case much longer.
In South Carolina, Commissioner of Agriculture Hugh Weathers says, “This year South Carolina peanut farmers planted a record 105,000 acres of peanuts. Ten years ago that number was just 10,000 acres.
“The increase is keeping inspectors and crews busy at the nine drying and buying stations across the state. On average, this year’s peanut crop is yielding nearly two tons to the acre.”
The South Carolina Department of Agriculture (SCDA) hired 69 peanut inspectors to help with this season’s grading process. Each part-time employee is trained to grade the peanuts for sale, according to the United States Department of Agriculture grade standards.
After visiting one peanut buying station in Cameron, S.C., Commissioner Weathers notes, “The work done at this buying station and others show the emergence of peanuts in South Carolina farming.
“The crop has real potential for further expansion of acres planted and that could lead to an even bigger economic contribution from the peanut industry.”
News from other peanut producing countries seem to indicate a similar interest in increasing peanut production, despite a worldwide over-supply.
In a recent issue of Peanut Market News, long-time peanut marketing guru Tyron Spearman says, “The Cereals Board of Cordoba, Argentina has reported that peanut planting intensions across Cordoba, La Pampa and San Luis, the major peanut growing areas in Argentina, are expected to increase acreage about 7.6 percent, to 386,560 hectares.
“Officials report that European buyers were a bit surprised with the U.S. bumper crop that has pushed prices lower.
“Most of the peanut planted area in Argentina is managed by shellers under lease contracts from farmers and plantings could change. One explained that the land was leased from farmers when prices for peanuts were higher.”
Spearman also notes that Argentina has invested in more warehouses, including cool storage, so peanuts will be available year-round instead of just in-season. Instead of a springtime supply of peanuts from the Southern Hemisphere, it appears peanut buyers will have access to the crop during peak production times in the U.S.
The over-supply problem with peanuts now and likely in the near future is clear. What to do with all these peanuts is not so clear.
Growers saw dollar signs
Spearman, who is about as involved in the peanut industry as it’s possible to be, from reporting on production and marketing, to buying and selling peanuts, says in 2012 too many growers saw too many dollar signs, and they simply planted too many peanuts.
“The USDA says we have about 3 million tons, and it takes 300,000-450,000 tons to fill the pipeline.
“They think we will have a million ton surplus from the 2012 crop. If those numbers turn out to be accurate, we need to grow half the peanuts we grew two years ago,” Spearman says.
In 2010, peanut acreage in the U.S. was down to 1.2 million acres and in 2011 acreage dipped again to less than 1.1 million acres.
The drop in acreage did not come in tandem with a drop in production in either year, which contributed to the false sense of a shortage of peanuts and perhaps to high peanut contracts and even higher prices for peanuts bought from the Federal loan program.
In 2012, growers planted about 1.5 million acres and appear headed toward one of the highest yield per acre totals on record.
If all these ‘perfect storm’ economic and production factors play out, U.S. peanut producers may need to plant the fewest acres of peanuts in the past 20 years to get supply and demand back in synch.
For 2013, Spearman says, “We’re going to have enough peanuts to carry us 6-7 months into the growing season. So, we will need to grow a big enough crop to meet a 5-6 month demand. How much we will need to fill that 5-6 month supply, we don’t know.”
“We are going to need some peanuts next year and the high value of corn and soybeans is going to have an impact on the price of these peanuts.
“The big question is how many we are going to need. For growers who are dependent on peanuts for a rotation crop and/or are committed to growing peanuts for a co-op, they will have some hard decisions to make at planting time next year, Spearman says.
“On the positive side for peanuts, demand remains good. Traditionally, when peanut prices come down demand for peanuts goes up.
“The demand for peanut butter, in particular, remains very strong. And, the National Peanut Board and other peanut-based organizations do an outstanding job of promoting peanuts, so there is hope that we will deplete the current supply faster than we expect,” he adds.
“Right now, I’m telling everybody I know — eat more peanuts, send peanuts for Christmas presents, send raw peanuts for cooking. We’ve got plenty of peanuts and the price is right,” Spearman says.