Continuation of trends forecas in 2001

Mother Nature, prices will remain first peanut challenges THE MAJOR challenges for U.S. peanut producers in 2001 remain the same as this year - Mother Nature and low prices.

"The peanut program has provided a level of financial stability for peanut growers during a time of general agricultural economic depression," says Nathan B. Smith, University of Georgia Extension economist. "Times have been tough as production costs have increased and the world market becomes more competitive."

Looking to the future, advances in biotechnology are poised to change production practices and marketing, notes Smith.

"Water availability and accessibility has become a major issue in the Southeast and Southwest. These issues will be addressed in the next couple of years and will help to determine the direction of the peanut industry.

"Future domestic policy will be shaped with trade in mind," he says.

Supply situation The 2000 growing season can best be described as a mixed bag for peanuts, says Smith. The Virginia-Carolina region has experienced favorable conditions and is expected to harvest an above-average crop, certainly better than in 1999 when floods lowered production.

The Southwest peanut crop started off well, but hot and dry weather in August and September raised concerns about yield and quality. Producers in the Southeast planted late as a preventative measure against tomato spotted wilt virus and due to drought.

"Many Southeastern growers experienced poor, skippy stands and late emergence," says Smith. "The overall effect on yield is uncertain as the weather has gone from hot and dry extremes to rainfall and cooler temperatures in mid September. Grades are expected to vary widely in the Southeast due to the stressed crop, especially dryland production."

Total planted acreage in 2000 continues a downward trend that began with the 1996 farm bill. U.S. peanut growers planted 1.495 million acres in 2000, which is 39,500 acres less than in 1999.

The Southeast planted 55,000 fewer acres and Texas increased acreage by 15,000 acres. The reduction in the Southeast was due mainly to drought conditions and scarce contracts for additional peanuts, notes Smith.

"Harvested acres are forecast to be 98 percent of the planted acres at 1.466 million acres. Although fewer acres were planted in 2000, harvested acreage is projected to be 30,000 acres more than in 1999. Texas abandoned 80,000 acres in 1999 but was projected in the September report to have a normal abandonment rate of two percent this year. Adjustments downward are possible in the Southeast and Texas where conditions have deteriorated."

The September USDA crop report estimated the national peanut yield to be four percent lower than in 1999 at 2,561 pounds per acre. Broken up by region, the average yield in the Southeast is forecast to be 2,213 pounds per acre or 11 percent below 1999.

The Virginia-Carolina yield forecast is 3,000 pounds per acre, a 14 percent increase over 1999. The Southwest is pegged at 2,962 pounds per acre, a four percent decline from 1999. Alabama is the only state projected to fall short in quota production this year.

U.S. peanut production is forecast at 3.75 billion pounds, a two percent decline from 1999 and five percent less than in 1998.

Beginning stocks on Aug. 1, 1999, were estimated to be 1.392 billion pounds or 696 million farmer stock tons, according to Smith. Ending stocks on July 31, 2000, are estimated to have been 1.229 billion pounds or 615 tons.

"Given the forecast production and disappearance for the 2000-2001 marketing year, ending stocks are forecast to be trimmed to 1.035 billion pounds or 518 tons on July 31, 2001. A reduction in ending stocks would be an encouraging sign that demand is picking up and the use of buybacks is limited."

Imports are projected to remain the same for 2000 at 169 million bushels. Ending stocks, imports and 2000 production give a total supply of 5.261 billion pounds or 2.630 million tons of farmer stock tons.

Demand situation Supply once again will exceed forecast consumption, notes Smith. Domestic food use of peanuts continues to increase slowly but steadily from the low of 1995. Edible consumption is forecast at 2.295 billion pounds for the peanut crop or 1.15 million tons. This is an increase of 2.5 percent from last year.

Fifty-five percent of total peanut use goes to domestic food consumption, he adds. The majority of domestic peanuts are shelled and used for peanut butter, peanut candy or peanut snack products. The breakdown among the three primary uses in 1999 was 51 percent to peanut butter, 24 percent to candy and 26 percent to snack products.

THE AUGUST stocks and processing report showed total use of shelled edible peanuts running 3.4 percent above the same period from a year ago. Peanut butter use rebounded from a decrease in 1999 to a 4.4 percent increase. Snack use continues to show strong increases at 14.7 percent. Snacks, however, dropped back 7.4 percent to nearly 1997-98 levels.

Peanut butter purchases for government programs reversed a trend and increased by 4.6 percent during the first 11 months of the 1999-2000 crop marketing year. Roasted peanut purchases, however, continue a downward trend with 6.1 percent fewer purchases for the same period last year.

"The good news is that peanut butter makes up 96 percent of the government purchases, so overall purchases are up over last year. Looking at the big picture, government purchases now have fallen below 2.5 percent of the U.S. peanut quota. Purchases comprised three percent of the total quota two years ago."

September 15 was the last day to contact 2000 crop additional peanuts, says Smith. "Additionals without a contract must be placed into the CCC loan pool. Loan additionals either are sold for export or crushed to produce oil and meal. Additionals can be purchased by shellers through a buyback contract that allows them to go to domestic use.

"Both quota and additional peanuts put into the loan and not sold by the end of May must be sold for crushing. Crushing quota peanuts leads to large CCC losses as experienced in 1999. Producers are wary of using buybacks after 1999. But without any additional export contracts, the temptation is to sell additionals through buyback contracts. At least 50,000 to 70,000 tons will be purchased as buybacks to make up for the shortfall in quota from Alabama."

The abundant supply of oil and meal on the world market has depressed sales and prices, says Smith. Sales basically have been inactive during June, July and August. Meal prices rebounded from $95 per ton last fall to $118 per ton during the spring. Oil prices averaged about 36 cents per pound this spring after falling from 42 cents per pound to 31 cents per pound during the winter.

2001 peanut outlook The 2001 outlook under current conditions likely will be a continuation of existing trends, says Smith. "The quota will change little if any. With quota prices at the support level and additional contracts at $325 and below, acreage likely will decline."

The Free Trade Area of the Americas negotiations seeks to liberalize trade within the Western Hemisphere, much like NAFTA, says the economist. The structure of negotiations will be set in 2000 and an agreement is to be reached by 2005, he adds.

"The FTAA agreement could have a tremendous effect on the import and export of peanuts in the United States, especially if Argentina falls under the NAFTA rules of trade."

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