The ongoing spread of the coronavirus has become one of the biggest threats to the global economy. The agricultural economy was already suffering from low commodity prices and they remain low as major markets are closed to potential buying. The loss of schools and restaurants has interrupted the food chain on a grand scale. The economy being locked down is not an insignificant matter and will have repercussions for years to come.
As the coronavirus turned into a worldwide pandemic, consumers started stocking up to comply with the stay-at-home directive. Half-empty shelves are commonplace now.
Working With Extra Precautions
Peanut buyers have been quiet, and the main concern is getting a consistent flow of peanuts from suppliers. Quality issues from the 2019 crop are hindering timely shipments. The price of available good quality peanuts skyrocketed from the high 40 cents per pound to 90 cents per pound. Many raw shelled peanuts have failed to meet minimum aflatoxin levels and are being stored until they can be recleaned.
Peanut shellers and blanchers have continued to work and follow COVID-19 safety regulations. Because of normal food safety regulations, many of these workers are used to wearing hair nets and protective clothing. Visitors to plants are no longer allowed, and truckers must remain outside to collect signatures and bills of laden. The peanut industry is working hard to provide raw material for peanut butter and peanut products to fill grocery shelves again.
Down on the farm, peanut planting has been delayed in some areas because of cool, wet weather. Many mornings it has not felt like peanut planting time in the Southeast, much less the Virginia-Carolina region. Some producers have chosen to plant cotton first, which is hard to consider with current prices, but crop rotation is important. Wearing today’s safety gear, a face mask, farmers have been meeting with shellers to sign contracts and secure seed for the 2020 season.
Even with the turmoil and higher prices for a small percentage of the 2019 crop, contracts remain at $400 per ton for runners. Some high-oleic varieties have earned another $25 per ton. Farmer sign-up has been good, but other producers are waiting to see if increased contract prices will be offered.
The U.S. Department of Agriculture’s National Agricultural Statistics Service projects 1.529 million acres of peanuts will be planted in 2020, up 7% over last year’s 1.427 million acres. Georgia is projected to plant 740,000 acres, a 10% increase over 2019.
Peanut producers had a choice to plant corn at $3.50 per bushel, cotton at 58 cents per pound, soybeans at $8.50 per bushel or peanuts at $425 per ton with a PLC payment of $123 per ton because of last year’s low prices.
With the equipment and a good partnership with their buying point, most farmers will pick peanuts. The 10% acreage increase for Georgia will likely come closer to 20% if seed can be found. Peanut producers report acreage planted to peanuts by July 15.
Some buyers are awaiting the new 2020 crop hoping the quality is better than 2019. Indications on new-crop prices are currently in the mid to upper 50 cents per pound for kernels and mid to upper 60 cents per pound for blanched jumbo runners for 2021 deliveries.
Domestic And Export Markets
The peanut market is strong with domestic usage up 3.3% after eight months, and exports are up 24% with China and Vietnam making major purchases. Lower-quality peanuts for peanut oil have been cheap enough for the Chinese to buy.
Per USDA, the average price received by farmers for farmer-stock peanuts was $412 per ton in March 2020. February’s prices were lower at $410 per ton. Prices have fluctuated from the lowest in history at $384 per ton in November 2019 to a high of $418 per ton in January. The nine-month average is $404 per ton.
Those farmers who signed up for the PLC program will receive a payment in October that is the difference between the average price, now $404 per ton, and the reference price of $535 per ton for $131 per ton. The preliminary estimate from USDA was $125 per ton. This price would be applied to 85% of the peanut base acres on the farm.
Another Disaster Looming
The recent coronavirus stimulus packages provided little assistance to peanut farmers. Only the Market Facilitation Program, a direct payment based on acres planted and not on prices caused by the tariff war with China, was the most recent help.
Congress and USDA continue to create various programs to help farm and ranch groups, such as the Wildfire and Hurricane Indemnity Program; the Coronavirus Aid, Relief and Economic Security programs; the Small Business Administration loans; federal and state disaster programs; and their regular farm programs.
Three years ago, peanut farmers busted the market with overproduction. The carryforward remains at about 900,000 tons. It has taken this long to chip away at a seven-figure ending stock tonnage, which has kept prices depressed. Peanut analysts believe we are headed for another oversupply disaster if we plant more than a 10% increase in acres.
Another crisis on the horizon is a consistent, safe food supply. The peanut industry is poised to help with this. No matter the diet or lifestyle, peanuts and peanut butter should be a part of most every consumers diet from infancy to old age.
We have the product, the natural resources, the farmers, the buying stations, the shellers, the manufacturers and the industry team with a desire to succeed. We must all adjust to a new normal, whatever it is, and make it happen. I am optimistic, so let’s get to work. Stay safe. We’ve got a peanut crop to make.