The U.S. peanut market is said to be difficult with producers awaiting marketing signals on how many acres of peanuts to plant. Shellers are struggling to meet deliveries of current contracts and still show little interest to sell more until current contracts are filled. If a buyer does show interest and a price is offered, shellers are still choosing to wait.
Approximately 40% of peanuts shelled are testing above U.S. Department of Agriculture limits for aflatoxin. This is putting extreme pressure on blanchers to keep up and with shellers going into seed shelling in the next 60 days, availability will tighten further.
With cotton in the upper 60 cents per pound, it is difficult to see a sheller getting too aggressive contracting 2020 crop peanuts.
Reducing The Carryover
A positive market influence for the grower is that the industry is finally getting out from under the burdensome carryforward of the past few years. Manufacturers are not trying to aggressively buy 2020 crop right now either, so that takes some pressure off contracting with farmers. Round One of the agreement with China has not yet led to a boost in cotton prices to give producers another option.
The sheller is being squeezed by cleaning and blanching costs. As availability tightens, jumbo runners priced at 45 cents per pound are now 60 cents per pound if negative for aflatoxin.
With peanut volume not a marketing issue, there is no trickle down to the farmer from the higher-shelled prices. It is difficult to get offers for 2020 deliveries and impossible to get offers on 2021 deliveries (2020 crop). Some buying points report $400 per ton for 2020 runners, $425 per ton for high-oleic peanuts and $450 per ton for Virginias with limits. 2019 unsold loan peanuts are still at $400 per ton.
Government programs have had a significant impact on farm income for peanut producers. The USDA has implemented the Market Facilitation Program in response to retaliatory tariffs that took place during 2019.
Peanuts were included in the direct payments through MFP as part of the total planted acreage eligible for a county-level payment rate. The three payments have been made ranging from $35 to $150 per acre depending on the tariff impact.
The peanut program includes a Price Loss Coverage reference price of $535 per ton. Prices during the 2019-2020 marketing year are expected to be low, with estimates for the October 2020 payment around $115 to $123 per ton for 2019-20 crop.
Other industry assistance included $3.4 million from the Agricultural Trade Promotion Program to the American Peanut Council for programs that help farmers increase access to new export markets. Additional assistance came from the Ag Marketing Service in the purchase of peanuts and peanut butter for domestic food programs.
Low commodity prices, hurricanes, slow government disaster aid and added tariffs are all taking their toll on farmers. The most farm bankruptcies filed in 2019 were in Wisconsin followed by Georgia.
The USDA National Agricultural Statistics Service 2019 crop summary places 2019-20 U.S. peanut production at 5.5 billion pounds (2.7 million tons), virtually identical to the 2018-19 crop. Sown acreage for peanuts was also nearly unchanged from 2018-19, while the harvested acreage increased only 1% to 1.39 million acres.
A downward revision of the production forecast reflects lower yields in the Southeast from the hot and dry summer. The average yield estimate for 2019 was reduced 131 pounds from the previous forecast to 3,949 pounds per acre, down from 4,001 pounds per acre in 2018. Despite a steady production level, the total supply of peanuts in 2019-20 is down 4%.
Domestic food use is expected to increase 1.9% while exports are predicted to go up 6.4%. For the grower, ending stocks, now slightly down 13% to 1.05 million tons, continue to hinder contract offers.
U.S. peanut exports are still looking good, up 16% after four months. China and Vietnam are buyers of in-shells despite tariffs. In-shell volume is up 139%, and raw-shelled peanut shipments are up 7.5% with strong buys from Canada and Mexico. Peanut butter shipments are down about 16%. The United States-Canada-Mexico Trade Agreement should help.
In China, fears over the deadly coronavirus have impacted imports from the Asian country. The virus has morphed from being a curiosity into a much more ominous threat to the global economy for 2020.
The new Argentine government slapped all peanut exporters with an additional export tax, which now stands at 12%. Producers there finally received needed rains, but more is needed to combat the high temperatures and winds they are experiencing.
2020 will be a balancing act to plant and harvest a quality crop that equals the market’s needs. Demand for peanuts and peanut butter at home and abroad are strong and continue to increase.