What is in this article?:
- Too many acres dragging down U.S. peanut market
- Prices depressed
Prior to the 2010 planting season, the U.S. peanut industry was expecting an acreage increase of 8 to 10 percent. Instead, producers boosted their plantings by 17 percent, and the market is now reacting, says Richard Barnhill, an Albany, Ga., peanut broker.
Shellers cannot sell shelled peanut kernels at the prices at which they sold them earlier, says Barnhill. “The price is getting cheaper, and therefore they’re not going to be able to pay as much for the farmer stock and stay in business.”
At the beginning of planting season, he says, it was believed that higher cotton prices would dampen the excitement for peanuts.
“At the time final planting decisions were being made, cotton was trading at about 77 cents, and we thought those higher prices might decrease peanut acres. But apparently, the price for farmer stock peanuts was more exciting than cotton.”
International factors are also affecting the U.S. peanut market, says Barnhill, including China not offering peanuts now at a very competitive level. “Their prices now are higher than Argentina and the United States. Typically, they’ve been $100 to $150 per metric ton cheaper, and they’ve sold a lot of peanuts. The crop is said to be about the same as the 2009 crop. They’re using more internally as their economy continues to do well.”
Argentina reduced its acres and the crop experienced some freeze damage, he says. But, their yields were good and production is about the same as last year. Argentina will be a major exporter into Europe, says Barnhill.
“Peanuts trade every day, and export interest has pretty much evaporated in the past month or two because the Argentina crop has come in – they harvested in April and May – and those peanuts are now being shipped to Europe. We’re seeing less interest in U.S. peanuts.”
On a more positive note, says Barnhill, if China does not become more competitive with the United States and Argentina, it may give the U.S. an opportunity to sell more peanuts into the EU and other markets.
The USDA 2010 U.S. crop estimate of 2.1 million tons is using a yield of about 3,400 pounds per acre, which Barnhill says might be too optimistic. “With that estimate, we’re looking at a carry-in of 800,000 tons, leaving us a total supply of 3 million tons. The bright spot in this entire industry is peanut butter. It does well in a bad economy, and it allows families to stretch their grocery dollars.”
Assuming the USDA estimates are accurate, it would mean a carry-out of 837,000 acres, and that’s not good news in a soft market, he says.
“We have a five-year yield average of 3,200 pounds per acre, and that’s my gut feeling. An average yield of 3,400 pounds per acre for three consecutive years would be remarkable. If we do it again this year, then we’ll have a trend. As we look forward, we would need to shift expectations to these higher numbers. These higher yields are the result of new varieties, improved farming methods, better land and rotations, and good weather.”
Even if the 2010 crop averages closer to 3,200 pounds per acre, that’ll still be plenty of peanuts, says Barnhill.
“With a good crop this year, we’ll have to reduce acres in 2011 by about 8 to 10 percent to get the market more balanced.”