U.S. & World Peanut News

              The peanut industry has been jolted by two Hurricanes during the annual peanut harvest.  Florence hit North and South Carolina as harvest was about to start with floods that caused rivers to overflow and the drainage downstream covered crops waiting to be harvest.

              With about 40% of the Southeast peanut crop dug and harvested, Hurricane Michael plowed into the Florida Panhandle with 155+mph sustained wind destroying crops, rural cities and valuable infrastructure.             

               Officials report it will be years in recovery mode as towns were devastated in the heart to the agricultural belt from Florida to Virginia.  The major destruction was along the Southeastern peanut belt from North Florida, Southeast Alabama, Southwest and Central Georgia and on to South Carolina, North Carolina and Virginia. 

              Several structures have been damaged or destroyed with heavy damage to trees and power lines.  Many locations are without electricity and that brings on problems with peanut harvest.  Without electricity in these rural buying points, peanuts cannot be dried for grading and warehouse storage.  The Federal State Inspection offices based in Albany had to relocate to Moultrie to provide internet services that were lacking with no electricity in Albany.  

              Storm losses will improve market prices and cause come of the industry problems to be answered.   Nationally, Congress can’t agree on passing the Farm Bill and face a one-year extension.  Leaders are positive on passing the bill in November.

             The Trump administration is applying tariffs and farmers are expecting retaliation on farm products. USDA has tried to help with implementing a payment program for commodities and even, buying $12.3 million of peanut butter for nutrition program.  One farmer commented that that may help the situation, but won’t help the farmer in the short run.

LOWER ACREAGE BUT STILL LARGE CARRYFORWARD

              USDA indicates the 2018 crop will be down about 19% from last year after reducing harvested acreage 22%, down to 1,384,500 acres.  With an average yield of 4,167 pounds per acre, that’s a U.S. peanut harvest of 2,884,515 tons.   That’s a production reduction of 19%. 

             Reductions for sown area in Georgia and Texas trimmed the total acreage by 75,500 acres to 1.43 million. The forecast yield would remain the second-highest on record—just 1.4 percent lower than the record yield in 2012/13. The carryover ranks second-highest after the record stock level in 2012/13. Peanut carry-forward remains at 1,278,000 tons. Agronomist indicate peanuts fared well in the storms aftermath.

PLC 2017 PAYMENT

            The Price Loss Coverage (PLC) payment has been announced by USDA for farmers with a farm base.  The average farm price of peanuts in 2017 was $458 per ton.  USDA announced the PLC payment at $77 per ton.  That only applies to 85% of the farm base.

REDEEMING LOAN TON

            Shellers are offering $381-$385 per ton for un-contracted 2017 peanuts stored away in the loan.  Loan inventory was at 183,858 tons as of October 3 compared to 2016 levels of 18,010 tons.

            USDA would like for these loan peanuts to be redeemed and sold to the trade.  USDA wants to avoid forfeitures.  Already, 87,000 tons have been forfeited from the 2017 crop.  USDA has not indicated the plan to sell the forfeitures.  About 90 percent of the 2018 peanut crop has been entered into the loan.

DOMESTIC MARKET SLOWS

            Peanut stocks in commercial storage as of August 31, 201 totaled 2.31 billion pounds equivalent farmer stock, compared to 1.01 billion pounds last year, UP 129%.  Shelled peanuts on hand farmer stock equivalent totaled 694 million pounds, UP 19.0%.  Roasted stocks were 47.8 million pounds, UP 105.0%. Stocks indicate the tremendous supply of peanuts awaiting a market. 

           There is a slowing of peanut usage. USDA shows only one month, but it could be a trend.  Peanut use in candy is down 10.4%, snack peanut usage is up 18%, peanut butter down 12.5%...overall down 2.67% for the first month.  These numbers are not a trend, just one month.  Peanut usage last year was up 1.8%.

EXPORT UNKNOWNS

            U.S. peanuts, both processed and unprocessed, will continue to have duty-free access to both Canada and Mexico, as in the previous agreement. That’s good news for the trading partners.  The 25% tariff being posed by China could impact shipments, but they have a good crop and not buying anyway.  China is reporting that the 2018 crop is large and coupled with a large carryover, don’t look for many exports.  Then there is Argentina, they just keep coming back after terrible harvest weather and indications they will plant about the same this year.  Overall, the uncertainty from storms, tariffs and lack of transparency have the export market is disarray

HURT BAD

            The U.S. peanut crop has been hurt, not only in the field, but the infrastructure.  Farmers, buying points, shellers and associated businesses have been damaged by the two hurricanes.  It will take years to recover and some may not survive.  Meanwhile, markets seem secondary when disaster comes.

LEADING MARKETING INDICATORS (As of October 15, 2018)

2018 Acreage (USDA) - 22%                             1,384,500 acres

2018 Est. Peanut Production (4,167 ac)           2,884,525 tons

2017 Market Loan (from 2017 crop)                  2,734,479 tons

2017 Market Loan not redeemed                       183,858 tons

2017 Forfeits   (10-2)                                         87,385 tons

2017-18 Domestic Usage (12 Mo.)                   UP + 1.8 %

2017-18 Exports (Aug-Jul 2018)12 Mo              DOWN -5.5%

National Posted Price (10-9-2018) Runners -$424.32 ton, Spanish - $413.60 ton, Valencia and Virginias - $430.46 ton

WORLD PEANUT SITUATION

         The World Peanut Market continues to be QUIET and BEARISH although some of the small to medium buyers show interest.

ARGENTINA – THE ARGENTINE PEANUT INDUSTRY IS SUFFERING ON ALL FRONTS.

The EXPORT REBATES were lowered, EXPORT TAXES were imposed and all of this on top of ENORMOUS LOSSES ON PRODUCTION AND QUALITY ON THE 2018 CROP, The EUROPEAN UNION Market has yet TO FULLY REACT.  Argentine Sellers have moved their prices up months ago, but buyers have not reacted to it. It seems that the high supply from BRAZIL this year, the good quantity and quality of the US 2017 crop and the expectation of a good 2018 US crop have kept a lid on the market.

The Argentine problems are AS SEVERE as expected and by the end of this year and certainly by the beginning of next year; ARGENTINE shellers will have problems supplying their contracts either because of lack of goods or because of lack of quality.

UNITED STATES – (Portion provided by Alex Izmirlian of Alimenta Agri LLC) -U.S. Peanut Production is forecast at 5.77 billion pounds, (2,880,500 tons) down 19 percent from the revised 2017 total of 7.12 billion pounds. Harvested area is expected to total 1.38 million acres, down 22 percent from 2017.  The average yield is forecast at 4,167 pounds per acre, 160 pounds per ac from the 2017 average yield of 4,007 pounds per acre.

So, at this point, officials estimate a crop of 2.775 million FSST. This would represent a drop of 21.86% in acres and a drop of 23.27% in production.   With a carryover of 1.385 million FSST from the 2017 crop, the supply is still plentiful.  Moreover, with the tariff dispute between the USA and China continuing, officials expect exports to decline to 650,000 FSST from 730,000 FSST, and that includes a 50’000 FSST increase because of the higher interest caused by the Argentine lower supply and higher prices.  The carryover for next year should go down to 1.3 million FSST. If one deducts the forfeitures from this number (and they would estimate at the moment 100,000 FSST for 2017crop), the carryover would then be at best 1.2 million FSST.

So, all eyes will be on the plantings for 2019 crop.  Cotton prices have gone down to 75/76 cents, but even at those levels some think that it is a better return than a $ 400.- per FSST peanut.  U.S. sources think at those levels U.S. could see a drop in peanut plantings of up to 5%. Should the price of cotton rally, they think U.S. could then see a 10 to possibly 15% reduction.

For calculation sake, a 10% reduction would get U.S. close to a crop of 2.5 million tons,

FSST which could potentially extrapolate in a 900,000 FSST carryover by Aug 1, 2020.  In this weak market, one might want to start evaluating if U.S. is not already at the lower end of the market. 

The quietness of the market combined with a good growing season and longs in 2017 crop continues to keep prices weak.  Domestic market prices are roughly at 46, 47, 48 cents Fob SE for resp. runner splits, medium and jumbos.  Those long holders of 2017 crop probably would sell cheaper than that.

Prices for EU SPECS quality seem to be at different levels depending on who one talks to.  Have heard prices as low as USD/MT. 1250 - CIF Rotterdam, but most seem to be around USD/MT. 1325/1350 CIF EMP.

  Blanched Peanut prices would be at between USD/MT. 1550 & 1600 CIF Rotterdam.  As much as the 2017 crop was a good growing season, not many 2018 crop were shelled, thus a little early to go aggressive on an unknown quality. 

Aug 17-Jul 18 vs. Aug16-Jul 17: The US ended up the year down 4.54% with 451,100 mt exported vs. 472,566 mt a year

ago. The increase of exports to the EU 28 in July pushed the exports up for the year by 1.54%. U.S. can expect exports to the EU to stay strong for the next year provided the quality of the 2018 crop allow it. Mexico was down 4.36% and Canada was down 6.33%. Vietnam was down as well by 15.50% while China was up 1.54%.

Until the trade war between China and the US is solved, there would not been seen many shipments from the US to China. The only shipments to China might be high oleic, while the others might take place through Haiphong. The farmer stock shipments will be completely stopped.

USDA exports for August 2018:  33,763 mt exported vs. 28,073 mt a year ago, an increase of 20.27%.  Exports to China

and Vietnam continue to be non-existent with only 100 mt exported. Exports to Mexico were back up with an increase of 28.05%, but Canada was down 17.85%, while exports to the EU 28 were up an outstanding 96.30%.

CHINA - Total production for 2017 crop estimated at 18.2 million tons with a carryover of 3.1 million tons. Total production for 2018 crop estimated at 15.5 million tons giving a total supply of 18.5 million tons.  Total demand for 2017 crop estimated at 17.4 million tons (10.5 million crush, 5.1million food, 0.98 seeds and 0.82 exports). With a potential increase in demand, supply should basically meet demand for 2018 crop.

Quality seems to be good.  Potential for early winter in the Northern provinces.  The oil crushers are carrying big stocks of 2017 crop.  Peanut prices continue to rise and the domestic market is hard. Shandong, Henan and other land have different degrees of rise, trading is active, purchase and sale is smooth, small dealers stock is positive, buyers only incremental purchase.