U.S. peanut growers need to reduce acreage by 35 percent this year to bring production in line with demand.

But that’s not likely to happen, says a Georgia peanut broker.

“Nationally, we expect an acreage reduction of about 22 percent,” said Richard Barnhill, president, Mazur and Hockman, Inc., Albany, Ga.

Barnhill, speaking via phone to the Oklahoma Peanut Expo in Lone Wolf, Okla., said the Southeast is more likely to cut acreage by 15 percent to 18 percent. “Growers do not have very good alternatives. Also, farmers will try to keep their rotations.”

USDA National Agricultural Statistics Service estimates a 400,000-acre reduction for peanuts this year, 1.1 million compared to 1.5 million in 2008. NASS figures put Texas at 160,000 acres, down from 195,000 last year. Georgia growers should plant 500,000 acres, off from 690,000 last year. Alabama, at 170,000, will be off from 195,000 in 2008.

North Carolina, at 75,000 will be down from 98,000 acres; South Carolina, at 55,000 will be down from 71,000; Virginia, at 12,000 will cut acreage in half from last year’s 24,000; Oklahoma, with 15,000 acres anticipated, will be down from 19,000; Mississippi, a relative newcomer to peanut production, will be down to 20,000, off just 2,000 from last year; and New Mexico, at 7,000 acres will be down 1,000 from 2008.

“Growers will have some tough decisions at planting time,” Barnhill said. “Other commodity prices are off their peaks, too.” He said if peanut acreage is less than 1 million, prices should hold. “If acreage tops 1 million, prices will weaken further.”

He said prices for the 2008 crop averaged from the mid-50-cent to the mid-60-cent range. “Now they are down into the low 40s. We have an oversupply of peanuts. A 1 million ton carryout from the 2008 crop is 600,000 more than last year.”

Production in 2008 was the biggest in four years, 2.5 million farmer stock tons. “Acreage was up and (moisture from) a hurricane in the Southeast came at the right time to produce big yields,” Barnhill said.

Demand is about 2 million farmer stock tons: 1.4 million for snacks, peanut butter, and other products; 100,000 for seed; 125,000 for oil; and 425,000 for export.

Supply looks like this: 2.5 million farmer stock tons from the 2008 crop, a 410,000 ton carry-in, 100,000 tons imported. Total is just over 3 million tons.

“A 1 million-ton carry-out is why no contracts have been available like last year’s,” Barnhill said. “We have way too many peanuts and the salmonella scare is not helping. The 2.5 million-ton 2008 crop made the market weaker. Supply and demand always works.”

He said the impact of salmonella also remains a question. “The issue affects the whole industry.” Barnhill said January consumption numbers for peanut products were off. Peanut butter was down more than 8 percent, “the first time we’ve seen a significant downturn in peanut butter in eight years.”

And the worst is yet to come. “February numbers will be worse because they will show the whole market effect of salmonella. It could take up to two more months to calm the issue down — get it out of the media. The plants are closed; the products are off the market. We hope USDA announces that.”

Barnhill said the salmonella scare could reduce demand by 100,000 tons, about 5 percent of the reduced demand.

And that’s not the only issue facing peanut farmers as they make planting decisions. “China is getting more aggressive for exports in 2009. But a weak U.S. dollar could help U.S. producers compete.”

He said Southwest peanuts could have an advantage in export markets because of demand for high oleic and low aflatoxin peanut production. “We also see specific demand for Spanish and Virginia-type peanuts.”

Barnhill said the United States needs about 1.5 million tons of farmer stock peanuts in 2009. “A 500,000 to 600,000 ton carry-out is reasonable for a 2.6 million ton supply. He said a 550,000 ton carry-out allows for crop yield problems.

Because of oversupply and the salmonella issue, “we don’t see much activity in the market,” Barnhill said.

Oklahoma, with just 15,000 acres planned for 2009, could maintain or increase plantings without significantly affecting the market, Barnhill said. “I’m not certain why acreage is shrinking so much (in Oklahoma).”

email: rsmith@farmpress.com