The peanut market outlook at last year’s Oklahoma Peanut Expo was bleak.

Argentina was nearing harvest with good crop prospects. India was a question mark for production and export potential. China was emerging as a major peanut importer and no one knew who they would favor. And the U.S. was burdened with an oversupply of peanuts and low price prospects.

Then the worm turned. “Everything changed,” says Marshall Lamb, senior scientist at the National Peanut Research Lab at Dawson, Ga., who spoke at the 2017 Oklahoma Peanut Expo at Altus.

Last year, Argentina’s crop was inundated by rain as harvest began. “Argentina is the fourth largest peanut exporter, selling almost 100 percent of its crop abroad annually,” Lamb says.

India had a short crop, and its exports dropped 32 percent. China production was also off. “And South Africa had a crop failure.”

But China still needed peanuts, and had become a major importer in 2014, 2015, and 2016. “The Chinese are using more peanut oil, which they typically buy from India,” he says. “India’s shortfall opened the market for U.S. peanuts.” Exports of U.S. peanuts have risen significantly, from around 370,000 tons in 2014 to a record 700,000 tons in September 2016. That figure could reach 800,000 by the end of the marketing year, with most of the shipments going to China and Vietnam.

Related:10 steps to control weeds in peanuts

U.S. CONSUMPTION UP

“The domestic market is also good,” Lamb says. “That’s a result of grower checkoff dollars paying dividends.” Per capita peanut consumption in the U.S. has reached 7.4 pounds, up from 6.7 pounds in 2012.

“The consumption rate is increasing faster than the population growth rate, so we know people are eating more peanuts,” Lamb says.

Peanut acreage fluctuates, but the trend is 1.5 million to 1.6 million acres, about where the numbers were for 2015 and 2016. “Acreage will be at that level or above for 2017,” he says.

Favorable contract offerings, $500 a ton, will encourage planting in 2017, but Lamb cautions against rebuilding a burdensome supply. “The carryout number is important. A 600,000 ton to 700,000 ton carryout is a farmer-friendly level. Anything less than 500,000 tons means the price goes up.”

U.S. producers find themselves in good shape as they prepare to plant the 2017 crop.  “We don’t have an oversupply of peanuts. That’s why you’re seeing $500 per ton contracts, and why some of you got $475 to $500 per ton for 2016 crop peanuts you put in the loan.”

There are concerns, however. Yield is one. With a favorable Price Loss Coverage option from the 2014 farm bill, farmers saw a good opportunity to plant generic base (old cotton base acreage) and receive a support payment. Those additional acres disrupted some rotation schedules from a “two-out and one-in to a one-out and one-in, and even some back-to-back peanuts. Rotation, Lamb says, is essential to maintain yield.

FOREIGN PRODUCTION REBOUND

He also cautions growers that foreign production may bounce back this year. “Argentina is likely to harvest a good crop. India has had rain. And U.S. peanuts are a bit pricey compared to foreign producers. But China still likes U.S. peanuts, so we may be able to capitalize on quality.”

The PLC payment for 2017 will be “minimal because of the $500 contracts,” Lamb says. He also advises farmers to realize that they deal with three markets at the same time. Producers received a PLC payment for the 2015 crop in late fall 2016. They won’t receive payments for the 2016 crop until after Aug. 1, 2017. They are currently pricing the 2017 crop.

Putting some peanuts in the loan makes sense, he says. “Never commit all of any crop at one time. We can carry peanuts across crop years for market purposes. Consider marketing early, at harvest, and post-harvest through the loan.”

A positive factor for peanuts is the recent improvement in cotton prices. “We need a competitive rotation crop in Georgia to get back to a balanced rotation,” Lamb says. Cotton, at near 75 cents per pound, offers a good alternative. “It’s too late to stop acreage expansion — around 800,000 acres in Georgia — this year, but it could be a factor in 2018.”

The mood of peanut farmers is understandably better now than at this time last year, he says. “We’re in a good position in 2017 — the 2016 PLC payment was good, contract prices are good, and domestic consumption is up.”

And the outlook is not bleak.