Consumption Soars, But A Big Crop Is Expected

J. Tyron spearman

J. Tyron Spearman
Contributing Editor

When COVID-19 hit, it took a while to understand the pandemic and the impact it would have on the peanut industry. With the economy shut down and families forced to stay at home, peanut butter and peanut snacks started flying off grocery store shelves as much as toilet paper and hand sanitizer.

Peanut shellers had to find a way to carry on with shelling and also keep trucks rolling product to manufacturers. Immediately, rules were implemented to allow for the safety of employees while meeting processor demand.

As for the peanuts, aflatoxin continues to be found in the 2019 crop, but quality is an issue of which everyone has been aware. Blanching those peanuts and blending them in with others is standard operating procedure.

To meet demand, one manufacturer decided to run only creamy peanut butter to stock the shelves. Several manufacturers struggled to get enough peanuts to meet the record demand and opted to not bid on the U.S. Department of Agriculture’s request for peanut butter for food banks and feeding programs.

Oct 6 2020 peanut pricesThe market that hit new heights has shown no signs of slowing down.

Little In The Loan

As shellers tried to clean up the 2019 peanut crop and supplies became tight, shelled prices jumped from 45 cents per pound for jumbo runners to 80 cents per pound. Blanched peanuts were as high as 85 to 90 cents per pound.

Farmers had already contracted the farmer-stock peanuts at $400 to $425 per ton on runners and $500 per ton on Virginias. Clean-up costs were expensive for the sheller.

The government loan program was being redeemed fast and there were rumors of running out of peanuts. By Oct. 1, loan peanuts totaled only 97,000 tons compared to 201,000 tons on this date in 2019. Last year’s low prices had farmers figuring on about $100 per-ton assistance on 85% of the farm base.

2020 Production Estimate

Then came the market depressant! Production figures are now estimated up 24% from 2019.

Area harvested is expected to total 1.62 million acres, up 10% from the previous forecast and up 17% from 2019. The average yield is forecast at 4,185 pounds per acre, up 236 pounds per acre from 2019.

peanut consumption by category chartDisappearance for domestic food is 1.64 million tons, up 2.4%. This past year showed an increase of 3.3% after a correction in the candy usage category. Exports are estimated to remain the same at about 800,000 tons. Recent 12-month shipments were up 41% over the previous year to 663,000 metric tons.

The ending stocks or carryforward is now up to 1.13 million tons. That will likely keep farmer-stock contracts low for next season.

The peanut program balance is a positive. Estimates show the peanut supply is 6.793 million pounds and disappearance is 6.764 million pounds.

Now that a good crop seems likely and little or no aflatoxin is expected, shelled market prices have dropped from 85 cents per pound to 50 cents per pound. It is worth noting that the United States has very little carryout from the 2019 crop and needs to begin shelling the better quality 2020 crop as soon as possible, some of which will be used to service 2019 contracts.

peanut consumption chart

Shellers still need to contract a larger-than-normal percentage of the crop with the farmers. Farmer’s stock prices continue to hover around $425 to $450 per ton for runner-type peanuts and Virginias mostly $450 to $500 per ton.

COVID-19 Consequences

The impacts of COVID-19 are expected to continue into next year. One study says farm income will fall by $21.9 billion in 2021 compared to the forecast prior to COVID-19, even when accounting for higher Farm Bill program payments.

Having a nutritious, reasonably priced, tasty product has meant prosperity for the peanut industry during the pandemic, and that trend should continue.

market watch chart 3Congress is considering additional assistance to help agricultural producers adjust to disruptions in domestic and global agricultural markets. Earlier this month, USDA announced the second round of the Coronavirus Food Assistance Program (CFAP 2), which will provide additional assistance of up to $14 billion to farmers facing market disruptions.

CFAP 1 was of no value to peanuts since the price had not dropped the 15% needed to qualify. Peanuts are included in CFAP2, which is estimated at $15 per 2020 acre.

2020 – Be Gone

Everyone, including farmers, is ready to see 2020 in the rearview mirror. From storms, hurricanes, floods, a derecho, rock-bottom commodity prices and a pandemic, plus uncertain government assistance programs, life on the farm wasn’t much fun this year. Even with all of these issues, the peanut industry has been fortunate and should be thankful.