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Peanut growers face major price pressure

Peanuts in the form of peanut butteris headed to Oklahoma tornado victims
<p> Peanuts, in the form of peanut butter,is headed to Oklahoma tornado victims.</p>
Peanut farmers face a big challenge to move 1 million tons of surplus peanuts. A peanut shortage leading up to the 2012 crop had prices high. Overproduction in 2012 sent prices plummeting.

Some southwestern farmers are hoping the new baseball season has every fan waving to the peanut vender. But it will take a lot more than a 162-game schedule to get rid of about 1 million tons of surplus peanuts still in storage.

Call it a major league problem, or the world series of carryovers – massive peanut supplies raised from growers in Oklahoma, Texas, New Mexico and other states has the peanut pipeline clogged for months to come, said Tyron Spearman, Tifton, Georgia peanut prognosticator.

Spearman, editor of The Peanut Market News, spoke recently at the Oklahoma Peanut Expo in Lone Wolf, Okla. He cited the explosive 2012 U.S. production as reason behind the glut of peanuts that is likely to keep prices down for farmers.

“Farmers (setting on peanuts in storage) will face about a $385 per ton price if none has been contracted,” Spearman said, after reviewing reasons behind huge peanut supplies.

“We had one fantastic production year,” he said. “All the stars lined up and we produced the finest crop of peanuts the world has ever seen in America. While we normally produce about 1.8 million tons, we produced 3.37 million tons, about 85 percent more. The major problem is how to get rid of those peanuts.”

A peanut shortage leading up to the 2012 crop had prices high, with some markets approaching $1,000 per ton, Spearman said. Others hit $650 and more settled at $600. As often happens, with high prices came increased planted acres. They surged to 1.6 million, about 44 percent over normal.

Increased acres plus excellent seed varieties and a perfect growing season caused the production surge and sent prices tumbling. “The average yield was 4,192 pounds per acre, a 26 percent increase,” Spearman said, adding that Oklahoma production increased more than 30 percent per acre.

Total domestic and world peanut use is projected at about 2.6 million tons this year. But with about 3.87 million tons worldwide, that leaves about 1 million tons that must be worked through.

Fortunately, exports, including large sales to China and Europe, will help consume much of the surplus. Spearman said both regions got back into the U.S. market after prices dropped to $450 and below. “China likes our high quality peanuts for their cooking oil,” he said.

There are projections of 600,000 tons of U.S. export sales. But if Argentina has a short peanut crop, that could reach 800,000 tons. Spearman added that U.S. shellers may require nine months to wade through surplus peanuts in storage before reducing stocks.

“A lot will depend on whether farmers hold peanuts in storage and wait for higher prices, or move them through the government loan program at $385 per ton,” he said.

Planted acres are projected in the 1.16 million to 1.2 million range, with USDA projections out March 28. The 1.2 million acreage level, sought by shellers, would produce about a 2.2-million-ton crop, Spearman said.

“A lot will depend on cotton prices and peanut prices,” he noted. “If cotton is at 85 cents to 90 cents and peanuts are at $450, we will see more cotton acres.”

Texas peanut acres are projected at about 110,000, down about 15 percent, while Oklahoma acres are forecast at about 20,000, down from 22,000 for 2012. Mike Kubicek, executive director of the Oklahoma Peanut Commission, said there remains demand for high oleic peanuts grown in Oklahoma and Texas, so acres with those varieties should remain steady.

Enhanced peanut promotion campaigns through the National Peanut Board should increase domestic demand, said Bob Parker, NPB president and CEO. “Health and wellness, and flavor and value” are keys areas of the campaign, he said, pointing out that NPB’s “peanut butter for breakfast program is a great opportunity for consumers to eat more peanuts.”

Parker said that even though only 0.6 percent of the population suffers from peanut allergies, “we have a public relations problem because there is a huge gut reaction” by some to ban or limit peanuts in schools, airline flights and other public areas.

However, thanks to overall efforts by NPB to educate consumers and food service providers, peanut butter consumption has increased steadily the past decade, Parker said.

Spearman said the peanut industry is hoping the next Farm Bill maintains a good peanut marketing loan program, crop insurance, research funding and export promotion. “The MAP (market assistance program) helps generate our foreign sales,” he said.


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