News

INSIDE THE PEANUT MARKET – November 2017

Wow. What a peanut crop!  It is difficult to be critical of over production knowing that the United States and the world needs your nutrition to help solve hunger.  One in every 9 people goes to bed hungry each night.  One cannot criticize Mother Nature for blessing the peanut nation with the ideal growing season that produced a top quality crop.  Records were made to be broken and the peanut producers of America have raised the bar.  One cannot blame farmers for responding to markets with better contract prices and poor prices for competing crops. 

RECORD CROP - U.S. peanut production for 2017-2018 is forecast to expand to 7.78 billion pounds or 3, 893,000 tons.   If realized, this year’s peanut crop would be 15 percent higher than the previous record in 2012-2013 and exceed last year’s harvest by 2.1 billion pounds (37 percent).

     Harvested area is expected to total 1.83 million acres, up 19 percent from 2016. The average yield for the United States is forecast at 4,257 pounds per acre, up 3 pounds per acre from September and up 623 pounds per acre from the 2016 average yield of 3,634 pounds per acre. The average United States yield will be the highest on record if farmers can get them in the warehouse. Based on the current production forecast, season-ending peanut stocks are seen accumulating to a 5-year high. Inventories could nearly double to 2.7 billion pounds from the final 2016/17 carryout of 1.44 billion.

     Domestic food demand for peanuts in 2017-2018 is forecast up only 3.6 percent to 3.2 billion pounds. Strong export demand for U.S. peanuts may continue as well—level predicted is 1.5 billion pounds (750,000 tons).  Ending stocks is sure to impact contracts for next season.  With a need of about 500,000 in the carry forward, the industry will have an excess of 1,344,000 tons, over 30% of the peanuts needed for next season.

     The answer is clear…sell more peanuts at home and abroad or negotiate lower contracts in the spring.  Since 2017 contracts were higher, prices for shelled peanuts can only decline so low or the owner will be in jeopardy.  The government does not want excess peanuts forfeited to the government but if stocks accumulate, loan peanuts may be offered for less than price support.  But that’s a government cost that needs to be avoided especially while the Farm Bill is being negotiated.

UNFINISHED BUSINESS on 2016 PEANUTSWhen the prospects for a bumper crop became apparent, my prediction that all 2016 peanut tons would be redeemed, did not come true.  Some shellers had some lower quality peanuts that they decided to forfeit to the government, about 40,000 tons.  But that’s pretty good since loans of 2,269,962 were repaid to the government.  The Commodity Credit Corporation will offer those for liquidation/in an exchange for peanut butter.

     Farmers are looking for their Price Loss Coverage payment for last season.  USDA reports that the national average price for marketing year 2016-17 was $394 per ton.  When the national average price is below the Farm Bill peanut reference price, farmers are eligible for a payment on 85% of the farm base.  With a $535 per ton reference price and a $394 per ton average price, farm base will qualify for a $141 per ton payment.  The estimated payments are before application of sequestration and other reductions and limits, including adjusted gross income limits and payment limitations.  With higher averages on contracts, the PLC payment will be much lower next October for 2017-18 peanuts. 

DOMESTIC MARKET NEWS Studies on peanut allergies are urging parents to offer peanuts early in life – 4 and 6 months, and continue regular consumption, that can prevent peanut allergies.  That’s big and lots of doctors and government agencies are supporting and promoting the studies.

     USDA reports that peanut usage last year was up 1.3% for edible peanuts with peanut candy up 8%, snack peanuts down 7% and peanut butter up 3%.  USDA earlier predicted a 3.4% growth rate, but when prices increased for raw peanuts, some manufactures withdrew some advertising campaigns.

     The entire peanut industry has embraced the sustainability campaign.  The idea of sustainable products and companies has become increasingly important to consumers, and particularly the millennial generation. They care about a company’s transparency, consciousness and understanding of health. Peanuts have a tremendous story to tell and all segments are preaching the peanut story.

BIG QUESTION ON EXPORTS - Will China be back to buy more American peanuts? Last season China was the number one buyer of U.S. peanuts. China has dropped to #3 (Jan-Aug) below Canada and Mexico. China is buying U.S.-produced peanuts on a very high level. The USDA says that will continue.

     The jump in peanut exports to China actually began just last year. China ramped up its imports during the summer of 2016, with the total imports last year at $172 million. That’s a roughly 700 percent increase from the $22 million China imported as recently as 2015.

     Good news on blanched peanuts, the World Customs (WCO) agreed they are a raw product and tariffs will be much lower.

     Then there is the Farm Bill.  The peanut organizations are united and emphasize maintaining the current PLC program in the 2014 Farm Bill including these key provisions: 1) Current Reference Price for Peanuts, 2)  Separate Peanut Payment Limit (as established in the 2002 Farm Bill) and 3) Storage and Handling Provisions.  Look for approval in early 2018.

LEADING MARKETING INDICATORS (As of November 8, 2017)

2017 Acreage (USDA) + 19 %  (planted)    1,829,000 acres

2017 Est. Peanut Production (4,257 ac)     3,893,000 tons

2017 FSIS Inspections (10-12, 2017)            1,335,953 tons

2016 Market Loan (10-6-17)                          2,269,962 tons

2016 Loan remaining (10-6-17)                      18,010 tons

2016-17 Domestic Usage  (12 Mo.)                  UP + 1.3 %

2016-17 Exports (Aug- Jul 2017) 12 Mo          DOWN 23.7%

National Posted Price (10-12-17)               

Runners -$424.43 ton, Spanish - $409.00 ton, Valencia and Virginias - $429.97 ton