By Amanda Huber —
Despite the fact that Congress passed a budget agreement and disaster aid package that eliminates generic base, it doesn’t negate the fact that there is an oversupply of peanuts going into the 2018 planting season. Dell Cotton, Peanut Growers Cooperative Marketing Association, and Nathan Smith, Clemson University Extension ag economist, offer a more complete look at the economic picture.
“The last few years have been the highest acreages planted to peanuts,” Cotton says. “There was a 12 percent increase this year for 2017 from 2016. So that’s about 200,000 more acres planted this year versus last year.”
The states that planted their highest acreage since 2005, when Cotton began keeping up with the numbers, were Georgia, Arkansas, North Carolina, South Carolina and Virginia.
“All three V-C states planted more acres than they have since 2005.”
Average Yield Declines
Average yield figures are more difficult to pin down because it seems to depend on the source, Cotton says.
The average yield in the Southeast, Southwest and V-C was 4,008, 3,524 and 3,944 pounds per acre, respectively. The U.S. average total yield was 3,798 pounds per acre.
“Yields were trending upward in 2012-2014, but have come down since then. Some of that is weather, given the storms we had, and some is lack of rotations,” he says.
Although yield was down, with acreage up, it was another year of tremendous production.
“We’ve had three years where we have gone over 3 million tons of production and this is the largest. We made more than 24 percent more in production than last year with an increase of about 700,000 tons,” Cotton says.
“We exceeded demand of both runners and Virginias by a substantial amount. USDA anticipates the carryover, the amount needed to get you from one year to the next, it needs to be somewhere around 500,000 tons. That’s good for contract prices. This year, it will be in the range of 1.25 million tons of carryover, about 700,000 tons over or about the same amount over last year’s crop,” he says.
More Dependent On Exports
“Exports are an important consideration as about 25 percent of the crop is going for export,” Cotton says. “Canada and Mexico are our best customers, so we need to be aware of any renegotiations of the North American Free Trade Agreement (NAFTA). We don’t want to negatively affect amount of peanuts we have going to those two countries,” he says.
The one country not buying as of November, when numbers were last available, was China.
“For the same period last year, China is down 70 percent and Vietnam is down 88 percent, which it is thought that these peanuts going to Vietnam end up in China,” Cotton says. “These countries have been very important for the last couple of years and will continue to be very important.”
In 2016, China purchased a lot of the excess peanuts in inventory.
“Those were the excess supplies that many times hang over your head come contract time. However, China bought a lot of those peanuts and supplies were cleared out. We’re back to the same situation now.”
What Does 2018 Hold?
Nathan Smith, Clemson University Extension ag economist, says the 2018 cost and return projections for peanuts show a decline in profit potential as costs are expected to rise and prices to decrease given a larger carryover of peanuts.
“Other crops haven’t helped much with corn and soybeans both having large crops and wheat in the doldrums. Cotton has the potential of increasing in acres in South Carolina and other states with futures prices for 2018 approaching 75 cents per pound.
“The expected price used in the 2018 peanut budget is $435 per ton as a starting point and prices likely will range between $425 and $450,” Smith says.
A Caution On Acres
Contract prices will be lower than last year, Cotton says, and he also thinks the number of acres producers will be able to plant under contract will be less than last year.
“I don’t know what percentage they’ll be cut, but I think they will be,” he says.
Cotton urges producers to not just have the mindset to plant the same number of acres as in the past.
“If you do, you are going to end up with additional peanuts and any time you have additional peanuts, you bring down your effective price,” he says. “We could easily find ourselves with too many peanuts again and warehousing will be an issue.”