The peanut market remains quiet as farmers and shellers are unwilling to negotiate on farmer stock peanuts. With no buying from manufacturers, there is no urgency on the sheller side to issue a 2023 contract. How long will this situation continue? The stalemate will likely go on until manufacturers need to purchase some of the 2023 crop coverage.
Other than being quiet, the market remains firm with Southeast medium runners at $0.63-0.64 on an FOB basis for current crop.
Buyers seem resolute to wait it out until the new crop. With a cotton in the mid $0.80s, there will be fewer acres of that crop. The peanut industry needs a high single-digit acreage increase, not double digit, with good yields and quality to maintain an adequate supply. In the absence of a contract, how many acres will actually be planted is a difficult question to answer.
How Many Acres Will Get Planted?
Manufacturers think producers are going to plant a lot more and prices will drop. Costs have increased for all parties, and prices may settle out around $475 to $500 per ton. Producers see the higher-shelled prices from the 2022 crop, and for good reason, want more for the 2023 crop. But without any competition for acres from cotton or corn, the industry will look for fewer acres of those crops and for more peanuts. A cotton industry survey indicates a 17% reduction in cotton acreage. Marketing analysts have urged farmers to look at soybeans.
State peanut specialists have estimated the peanut acreage for the 2023 season and predict an increase of about 7.1% with all states the same or increasing except Oklahoma.
Opinions about the acreage in Georgia are varied. On the conservative side, some say it will be a 4.7% increase. Looking for a bigger increase, the more speculative group predicts more like a 10% increase. The U.S. Department of Agriculture National Agricultural Statistics Service will issue their prospective plantings report on March 31.
No PLC Payment Expected
The Price Loss Coverage program will not likely have a payout in October as the average price of peanuts paid to farmers averaged above the $535 per ton reference price.
One sheller recently announced a payout of $22 per ton, over and above contracts and other premiums from seed or irrigation. A new ReGeneration cover crop program will net the farmer another $10 per acre.
On the demand side, peanut use is expected to decline by 4% this marketing year. This is primarily due to a forecasted decrease in exports of 7%.
Peanuts In Food Use
Food use, which makes up the largest portion of peanut disappearance, is projected to increase only 1%. A 13% increase in peanut candy consumption kept peanut food use from falling much during the 2021-2022 marketing year, despite decreases in disappearance for peanut snacks, peanut butter, in-shell peanuts and other edible peanut products.
Over the first five months of the 2022-2023 marketing year — August through December — the quantity of peanuts used for peanut butter is at record levels, up 2.9% over the same period last year. This is crucial because more than half the peanuts used for food end up as peanut butter.
Peanut carryover at the end of the marketing year is expected to decrease by 8% to 1.1 million tons. The expected price for the 2022-2023 marketing year is at $540 per ton, which would be the highest level in 10 years.
Exports are relatively strong with Mexico and Canada as the major buyers. The United Kingdom and European Union may give the United States more opportunities for shipments as our primary competitor, Argentina, has suffered devastating weather in drought, eight heat waves and an early frost.
China needs peanuts for crushing to make peanut oil. However, the higher-priced U.S. peanuts most recently have caused China to look elsewhere. Good U.S. quality commands a price China isn’t willing to pay for crushing.
United In Our Goal
It is time to decide whether to plant peanuts, corn, cotton or even soybeans. Check with your local peanut buying point. The buying point managers are waiting for an offer from the shellers, and acreage will likely be limited. Be aware that Tomato Spotted Wilt Virus has been on the increase and could hit again. Follow Peanut Rx, the disease risk index, and invest in your management of TSWV.
Peanut teams will be in Washington D.C. soon meeting with all other Farm Bill participants hoping to save the peanut program. Our goal is to stay united and bring home a strong program that allows farmers to prosper while providing America and buyers around the world with a safe, abundant food supply.
Trade News From The American Peanut Council
The Codex Committee on Contaminants in Foods will again be taking up a discussion on a proposed standard for aflatoxin maximum levels in ready-to-eat peanuts. The meeting is scheduled for April 18-21, 2023, in Utrecht, The Netherlands. APC is actively engaged in working with the U.S. delegation and other stakeholders, citing the lack of scientific evidence to support such a standard and questioning the need for such a standard. Codex already has a voluntary standard for peanuts for further processing at 15 parts per billion. CCCF started work in 2014 to develop a voluntary standard for an aflatoxin maximum level in ready-to-eat peanuts and has had little consensus. Codex standards are used by some countries, primarily developing countries, as a default for their import requirements.
McKalip Discusses Trade Agenda
The Biden Administration’s new Chief Agricultural Negotiator, Ambassador Doug McKalip, is already out and about talking about his goals for expanding U.S. agricultural exports.
At USDA’s 2023 Outlook Conference, he highlighted four areas for success: 1) keeping the markets we have open; 2) expanding exports by fixing regulatory barriers; 3) opening new markets and exporting new products; and 4) making sure trading partners “play fair.” He highlighted negotiations in the Indo-Pacific Economic Framework to make sure countries do not create non-tariff barriers in the name of “sustainability,” with recognition of the stewardship that American farmers already undertake. He noted that the U.S. negotiating approach is to provide flexibility for farmers’ practices, which need to be decisions at the farm level.
McKalip also encouraged the audience to not “shy away” from China because of possible unknowns in foreign policy. China is and is likely to remain a top-tier market for U.S. agricultural exports, and he is prepared to invest in that relationship to improve predictability and fairness.
Congressional Agenda On Trade
Despite a divided Congress, one refrain heard from both congressional Republicans and Democrats is the priority for Congress to protect its constitutional role on trade. Some in Congress view actions by the Trump and Biden Administrations to be undermining congressional authorities by imposing retaliatory tariffs on imports and negotiating trade agreements without sufficient congressional input.
However, some optimism exists for progress on trade legislation over the next two years. While optimism is scarce for Congress and the White House to move on Trade Promotion Authority, which defines negotiating objectives, roles and responsibilities, Congress could act on other priorities. Top of mind would be renewal of the Generalized System of Preferences program, which provides reduced tariffs on imports from certain developing countries.
Congress could also act on the Miscellaneous Tariff Bill, which lowers U.S. tariffs on imports of certain goods. Congress may begin reviewing the African Growth and Opportunities Act renewal, which provides trade preferences to many sub-Saharan African countries.