By now, all adjectives have been used for the 2012 U.S. peanut crop — phenomenal, warehouse-buster, record-breaker.

However you describe it, a tidal wave of peanuts hit the market this past year, says Nathan Smith, University of Georgia Extension economist.

The latest USDA estimate has the 2012 peanut crop pegged at approximately 1.36 million planted acres with an average yield of 4,192 pounds per acre — an average of more than 2 tons per acre, which smashes the last record of 3,426 pounds in 2008.

“Georgia is the reason the United States average is above 2 tons per acre, with 4,550 pounds per acre,” says Smith. “Everything came together. In 2011, the Georgia crop average was 3,652 pounds per acre, and the high prices of the 2011 crop have slowed down peanut use.”

In March of last year, U.S. planting intentions were at 1.422 million acres and Georgia was at 570,000 acres, he says. “I thought that was too low. The June numbers had Georgia at 710,000, and the final number had Georgia at 735,000 acres planted.

“Alabama was the No. 2 state, followed by Florida. So the Southeast had more acreage this past year than the entire U.S. in previous years. The Southeast continues to drive U.S. peanut production,” says Smith.

The trend-line yield for this past year would have been about 3,450 pounds per acre, going back to 1990 and following a linear trend, he says, but yields this past year were far above what the market or industry predicted.

The only states that didn’t have record-high yields this past year were Texas, New Mexico and South Carolina, which was only 100 pounds behind its 2008 record, says Smith.

“Our issue is obvious going into the 2013 crop. A lot of peanuts have been added to the pipeline, and that’ll push our ending stocks from a low of 502,000 tons at the end of July last year to 1.3 million tons projected at the end of July 2013, so we have a lot of peanuts to move,” he says.

USDA currently is projecting a record increase in total use, according to Smith, and that’s a positive considering supplies.

“The last time we saw a boost in production like this was in 2008. Before that, it would have been 1991. This year, we’ll have to reduce production to prevent stocks from staying as high as they are going into next year.

Expects increase in consumption

“I do expect consumption to go up because of the big crop, and the USDA is projecting food use to be up by 7 percent. I don’t know that we’re seeing that yet, but it’s the expectation.

“Exports are expected to be up 50 percent, the highest level of exports since 1995. And there’s a mention of interest from China wanting to buy peanuts this year. If that materializes, it would be good timing and an opportunity to take about 200,000 tons off of that total supply. Total use would be a record at 2.6 million tons.”

Shelled edible use isn’t yet showing that increase, says Smith, but it should pick up and be reflected in shelled use for candy, peanut butter and snacks. Mars reportedly is building a new plant to manufacture M&Ms and Snickers.

“In trying to project the 2013 season, starting out with the 2012 crop which is marketed through July 2013, we started out with about 500,000 tons of carryover and produced a 3.37-million ton crop, ending up with a supply of about 3.9 million tons.

“Total use was down last year because of the short crop, and they’re predicting about a 2.6-million-ton increase. That would leave us with ending stocks of 1.3 million tons. That’s an increase of more than 150 percent in carryover stocks.”

For 2013, if acres go down to 1.25 million with a trend-line yield of 3,520 pounds per acre, it would mean a crop of 2.2 million tons. In the past, that amount would be about equal to consumption, says Smith.

“But if we push up consumption to 2.6 million tons, that would draw down ending stocks by about 300,000 tons. Consumption, exports and crush would probably come down this next marketing year with a smaller crop.

“If acres go down to 1.1 million, it would mean a production of just below 2 million tons, and that would really draw us down in terms of carryover.

“Ending stocks would be down to 800,000 tons. If that happens, with a yield of about that size, we’d be back to $500-per-ton peanuts in just a year’s time or better.

“However, if the average yield is 3,650 pounds, that would bump us up another 100,000 tons in the 1.25 million acres scenario, and bump us up by another 75,000 tons on 1.1 million acres.”

Everyone knows that peanut acres will be low this year. How low will depend on what prices are offered, says Smith.

Most common contracts

The most common contracts that have been offered are about $30 per ton above the loan rate plus the shrink, which equals roughly $12.43 per ton at base grade.

“That would be $385. Is that a good price? It depends on where the shelled prices are. With this large crop, it’s probably better than what most thought it would be. But where is it going to go? Shelled mediums have been at about 45 cents per pound.”

Before growers saw the big yields with the 2012 crop, the thinking was that maybe 50 to 60 percent of the crop was contracted, says Smith.

“If it is 50 percent, that would be six months worth of peanuts. If they start taking delivery early on that first 50 percent, then it might be March or April before they need non-contracted peanuts.

“There might be some upside potential if you want to hold out your peanuts, but you may have to hold them for the duration of the loan — the nine-month period from when you put the peanuts into the loan.”

Considering the current situation, the expectation is that peanuts probably will stay at the current price for a while in terms of price for shelled peanuts, says Smith.

“Manufacturers would like to see prices pushed lower, but if there’s interest from China, the market probably will be around 45 cents per pound for a while.”

In the big production year of 2008, shelled prices were pushed down to 40 cents and then back up to 45 cents and the high 40s, with $375 to $400-per-ton peanuts, he says.

“This fits with what the market currently is doing. Later in that year, as the new crop came in, we hit a bull-run with cotton and that helped to bring up peanut prices, causing the supply to go down in 2010 and 2011.”

Smith says he feels as though this year is similar to 2009, in terms of prices and where planted acres might end up.

“Shellers and manufacturers will try to get acreage down to 1.2 or 1.1 million acres. With the amount of peanuts out there, will farmers be willing to forfeit into the loan?”

Exports should increase with lower prices and with the excellent quality of the 2012 crop, he adds.

“It really is a guess, but we might see $400-per-ton at the beginning on the first contracts. They’ll offer it for a little while on a certain amount of tons and then gauge the reaction from growers.”

The peanut market might go back to a pattern of seeing a better price at harvest, depending on how the season goes, says Smith.

Compared to other crops, he says, Extension enterprise budgets show that with $400-per-ton and a 4,500-pounds-per-acre irrigated peanut yield, income is still less than soybeans at $12 and 60-bushel yields, 1,200-pound cotton at 75 cents, and 200-bushel corn at $6.

“Corn looks the best, followed by soybeans and cotton. Prices will have to go higher to create more interest in peanuts this year.”

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