Peanuts have helped produce profits for many Texas growers. But even without the horrific salmonella scare that recently roasted the industry, the glut of goobers grown in the Southeast last year means loan-level prices may be the best farmers expect for 2009. And it could cut Texas acres by up to 30 percent.
“I plan to plant peanuts on land with good water,” says Otis Johnson, a Seminole, Texas, grower. “But I think we'll be planting them without a contract from regional buyers.”
Johnson farms peanuts and cotton in the semi-arid region about 100 miles southwest of Lubbock. He uses center pivot irrigation to produce high-yielding crops in the 3-bale-plus range for cotton and 3-ton area for peanuts. When cotton is hailed-out or faces other big problems, he plants grain sorghum as a catch crop.
He is a member of the Texas Peanut Producers Board and Western Peanut Growers Association and is loyal to the crop — to a point.
“It's a crying shame that one company can cause such harm to an entire industry,” says Johnson, speaking of the salmonella outbreak attributed to the Peanut Corp. of America's Blakely, Ga., plant, and later the company's Plainview, Texas, plant.
The national scare had scores of would-be buyers of peanut butter and other peanut products and products containing peanuts thinking twice about them. More than 500 incidents of salmonella, including several deaths, were allegedly caused by consumption. Even though roughly 97 percent of the nation's peanuts were processed through other companies, the industry sustained a nasty black eye because of unconscionable actions of this one bad company, according to Marie Fenn, managing director of the National Peanut Board.
“If there is any good news from the recent salmonella outbreak, it's that Americans should feel perfectly safe in eating their favorite major national and specialty peanut butters on grocery store shelves,” she says. “There has been absolutely no link between commercially available peanut butter and the recall in the current FDA investigation.”
USDA says peanut stocks reported in commercial storage on Jan. 31, 2009, totaled 3.98 billion pounds of equivalent farmer stock, compared with 2.90 billion pounds a year ago. This total includes 3.25 billion pounds of actual farmer stock.
Those stocks followed 2008 production of 2.57 million tons from 1.5 million acres nationwide, or an average yield of about 3,400 pounds per acre. That compared to 2007 production of 1.83 million tons from 1.19 million acres, or an average yield of about 3,000 pounds per acre.
Those large numbers were mainly from the Southeast. Texas production topped 430,000 tons, up from 345,000 tons in 2007. But yields were 3,400 pounds per acre, compared to 3,700 pounds in 2007. “Our state yields were hurt by drought and other bad weather last year,” says Johnson.
All those high production numbers had peanut prices in the 24 cents a pound range at the end of January, or barely above the $355 per ton government loan rate.
Jackie Smith, Texas AgriLife Extension economist in Lubbock, says there won't be many peanut acres unless buyers offer a contract price of $375 per ton. His budgets for 2009 production indicate that with a $375 price, peanuts would likely lose more than $150 an acre for a 2.25-ton per acre crop.
He figures typical direct and fixed expenses would top $1,000 per acre, including irrigation fuel costs of about $250 and harvest/hauling cost of about $135. Direct expenses would be above the $844 an acre return for the 2.25-ton crop. If growers like Johnson can produce 3 tons, or a gross return of $1,125 based on the $375 a ton price, they could make a small profit above all costs.
Comparing 2.25-ton peanuts to a 1,000-pound cotton budget indicates that cotton would have more profit potential, even at the 54 cents a pound government loan rate expected to be the price this year.
Smith says that to match 1,000-pound cotton and 54-cent price, the 2.25-ton peanut crop would require a price of $397 a ton. “But if you can make 3 tons, you would only have to have a $325 price to equal cotton yielding 1,000 pounds,” he says.
Smith's typical cotton budget for a 1,000-pound yield provides gross returns of about $680 an acre. Fixed and direct expenses, including about $144 in irrigation costs, would be about $710 an acre. That's a loss of about $30 per acre. Of course the potential for profit would be greater with higher yields. (To view Texas AgriLife Extension crop and livestock budgets, go to http://agecoext.tamu.edu/resources/crop-livestock-budgets/by-commodity.html.)
Those budgets, published in January, would likely show some variation now and would probably vary for each individual farm. But they indicate what could be expected from peanut and cotton production this year, says Smith.
Johnson says growers will likely be “scratching their heads” on whether to plant peanuts or cotton.
“Fortunately, I prepare ground the same for peanuts as I do for cotton,” he says. “But if we have prices below $400, we could lose 20 percent to 30 percent of our Texas peanut acres this year.”
He points out that peanut export sales are a bright spot for the crop. The American Peanut Council (APC) notes that the United States exported 239,000 metric tons (mt) of peanuts and products valued at $262 million during January through September 2008 — up 41 percent for the nine-month period. That included peanut kernels, in-shell peanuts and prepared or preserved peanut products, including peanut butter.
APC says the USDA export forecast for 2008-2009 has been raised to 365,000 mt. The United States accounts for only 3 percent of world peanut acreage, but because of higher yields, it accounts for 5 percent to 7 percent of world production, says APC. The United States is more important in export markets, accounting for 14.3 percent of world exports in 2007-2008 and forecast to account for 16 percent this year.
Although U.S. markets remain protected from peanut imports, access is increasing. The United States accounted for 1.6 percent of world imports in 2007-2008.