Sunday, November 28, 2021

Market Watch

Cool Conditions Push Southeast Planting LaterChart of leading peanut market indicators

Last year, it was predicted that the coronavirus would be the biggest threat to the global economy ever. It was also thought the peanut industry would suffer from lost markets including closed schools and restaurants. With factories shut down, export shipments were likely to be reduced as well. Peanuts and other commodities were already suffering from low prices. No doubt that the pandemic crippled the economy, but the peanut industry did not suffer its expected fate.

Following the Centers for Disease Control’s recommended guidelines, shellers were able to continue processing the crop and delivering raw-shelled peanuts according to orders. More than 1,000 employees covered the federal/state crop inspection with only one COVID-19 incident.

As grocery store shelves emptied, manufacturers ramped up production as much as possible for the easy nutritious comfort food consumers were needing while sheltering in their homes. More than 60% of consumers bought groceries online.

The entire industry is to be congratulated as growth continues with use up 3.4% overall. A manufacturer of the leading peanut butter reported a 7.1% increase during the pandemic.

Planting Conditions

The U.S. Department of Agriculture estimates peanut acreage to be down 2%, mainly because higher corn and cotton prices. Some analysts predict it could be more like 3.5%. The deadline for farmers to report planted acres is July 15. However, planting season has not kicked off all that well with the Southeast experiencing cooler than normal temperatures. Rain is also hit or miss with some areas of the Southeast peanut belt having 7 inches or more and other areas needing significant rain. The Virginia-Carolina region is cold and wet with the Southwest still dry. Peanut specialists cautioned producers not to get in a hurry and to wait for soil temperatures to average 68 degrees for three consecutive says before planting.

Prices And Premiums

With the higher commodity prices, shellers have been offering some premiums to encourage farmers to plant peanuts and stay on rotation. With a base offer of $475 per ton for runners or $500 per ton for Virginia type, premiums included $25 for irrigation use, $25 for high-oleic varieties, $25 for seed production and even some hauling bonuses. Buying points and shellers need to beware of 2022 corn prices as some farmers are booking bushels at high prices.

While the farm price for peanuts increases, USDA’s monthly average price increase will eventually reduce the price loss coverage payment for next year.

Stocks And Processing Report

Export volumes are running about 10% above last year as China continues to buy in-shells. Domestic consumption is now up 3.4% after seven months. Market demand is estimated at 3.18 million tons. If producers average 3,934 pounds per acre, which is the five-year average, total U.S. production would be 3.19 million tons, leading to fairly tight supplies.

U.S. peanut usage for March was up 3.9% compared to March 2020. Categories show positive increases except for in-shells, which is down 14.2%. For the eight-month period, peanut use is up 3.5% with peanuts in candy up 7.5%, peanut snacks up 4.9% and peanut butter up 4.2%. For manufacturers, the market today is priced for a normal-sized crop with prices next year at approximately 53 cents for splits, 54 to 55 cents for mediums and 56 cents for jumbo runners. Prices are much higher for large-kernel Virginia types and for Spanish peanuts, if you can find any.

Buyers are taking a wait-and-see attitude toward this crop and will be watching for problematic weather conditions that would push prices higher. Current crop remaining stocks at shelling facilities are limited, and, if one assumes approximately 60% of farmer stock has been contracted on the new crop, there will still be some negotiating to do at the buying point.

Export Markets

U.S. peanut exports for the 2020 calendar year totaled 910,101 farmer-stock tons and was valued at $759.6 million, up 20% by volume and 12% by value compared to the previous year. This represents the second-highest total in the history of the industry. The value of the 2019 crop was down because of the poor quality. A good portion of that crop was shipped to China for crushing into oil production.

For seven months of this marketing year, China has purchased 131,903 metric tons of in-shells. As a result, reports indicate that in-shell peanuts are in short supply. China is also buying raw-shelled peanuts.

Overall, raw-shelled shipments are down 17.3% and peanut butter is down 9.4%. Total exports are up almost 10%. The 25% tariff into the European Union is a concern as sellers avoid that market until it is settled.

Argentina expects to reduce exports 14% because weather there has caused a delay in maturity. They are hoping for sunshine and dry conditions to finish the crop.

Getting Back To Business

The pandemic is slowly winding down. Thankfully, the 2020 peanut crop is good quality and will be shipped to expanding and growing markets. Hopefully, you will get to meet some of the new leaders around the peanut organizations over the summer. Our industry, like most, is looking forward to a more normal year with good growing conditions and excellent quality. PG

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