Never before has the U.S. peanut market been in such disarray with so many unusual circumstances as it is in 2020. The peanut market continues to rise with very thin trading volume. Prices for peanuts testing negative for aflatoxin are about 68 cents per pound for whole peanuts. Blanched material is priced in the mid-70s to low 80 cents per pound for medium and jumbo runners. Most of the U.S. peanut crop was contracted by manufacturers for 45 to 46 cents per pound.
Shellers continue to experience delays in shipments in 2019 crop because of quality and movement of product through the blanching system. Buyers and sellers have to work together to keep product moving, but more delays in product availability are expected.
Aflatoxin levels in the 2019 Southeast peanut crop are worse than expected. Late-season drought and increased temperatures in late summer and fall were the perfect conditions for the Aspergillus flavus fungus to thrive, devastating the crop. More than 40% of the crop is not meeting minimum U.S. standards and is having to be recleaned, some as much as three times to meet grade. Blanching, which usually cleans up the peanuts, is not always the answer on this crop. Losses will continue to mount.
Last season was extremely hot and dry, thus the reason for the elevated level of A. flavus in peanut seed than we usually see. A. flavus produces aflatoxin and also seems to be linked to lower germination rates in seed.
Culturing the pathogens from seed also seems to show a big difference in seed treatments. While this is still being studied, initial observations appear to show a difference in the efficacy of seed treatments on seedborne A. flavus. The difference may be one explanation why seed treated with Rancona PD is producing a higher germination rate.
Seed prices are expected to be about the same as last year at 86 cents per pound for runners with 3 cents per pound savings if paid by June 15.
Thus far, the coronavirus pandemic has affected U.S. companies through travel restrictions and meetings being canceled or delayed. The travel bans will prevent in-person visits with customers. The International Peanut Forum, which would have been in Hungary this month, will be rescheduled.
The dynamics of the peanut market may also change. With families remaining at home, peanut butter consumption is already increasing, and shortages are likely.
Farmer Peanut Market
With cotton priced in the mid-60s, peanuts have no competition and therefore no aggressive contracting of 2020 crop peanuts.
The Round 1 trade agreement with China did not cut tariffs. Some are optimistic that Round 2 will lower tariffs, and China could help the cotton and peanut markets improve. Now, the virus has slowed any trade negotiations.
It appears that peanut carryforward is no longer a marketing issue. It could become one again if minimum tonnage is eliminated and a price war starts for early deliveries or clean lots. An increased shelled market is often of little value to the farmer in contracting.
Some buying points in the Southeast report $400 per ton for 2020 runners, $425 per ton for high-oleic varieties and $450 per ton for Virginias in the Virginia-Carolina region with limits. Unsold loan peanuts from 2019 are still at $400 per ton with some at $425 per ton. Farmer-stock peanut contracts are higher in the Southwest and V-C region.
Peanut usage in January was record setting and awesome. Peanut butter posted a 14.1% increase, up 6.5% for the first six months. Peanut usage in candy, up 14% for the month, is back even for the year. Overall, it is outstanding that usage of peanuts and peanut butter in primary products has increased 4.1% after six months.
U.S. peanut exports are booming, too, up 24% over the six-month period and up 62% from December 2019 to December 2020. In-shell peanuts are moving to China with 12,867 metric tons in December and 33,710 metric tons for the marketing year. China is also buying raw-shelled peanuts, ranking third behind Canada and Mexico. Raw-shelled exports are up 10.1%.
Although the COVID-19 virus is spreading all over the world, the situation in China seems to get better every day. The good news is that most factories started operating again, and China is slowly returning to normal. The market is now hampered by isolation policies. As preventive measures are increased, logistics, as in shipping containers, ports and means of transportation, are affected.
Government programs continue to help peanut producers. The Market Facilitation Program was in response to retaliatory tariffs during 2019, and farmers have received three payments from $35 to $150 per farm acre depending on 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 again, and the October 2020 payment is estimated at $123 per ton for 2019-20 crop.
The American Peanut Council received $3.4 million from the Agricultural Trade Promotion Program to help farmers increase access to new export markets, and Ag Marketing Service purchased peanuts and peanut butter for the domestic food distribution program.
Stay healthy, avoid the virus, if possible. Plant early. The bank may require a minimum of contract coverage, but save some tonnage to take advantage of possible top quality early deliveries in the fall. Remember, people are demanding your product, which could merit a 10% acreage increase.