Exports account for 25% of the U.S. peanut market, nearing $1 billion in annual sales in recent years, despite some trade bumps.
Maintaining that market will be crucial to the industry, according to two speakers featured during the July 14 opening session of the virtual 52nd annual meeting of the American Peanut Research and Education Society.
The annual APRES gathering, originally scheduled for an in-person event in Dallas, Texas, switched to a virtual format as a result of the COVID-19 pandemic.
Patrick Archer, president of the American Peanut Council, and Luis Ribera, Texas AgriLife Extension economist, discussed the challenges and opportunities for peanuts in the global market.
Archer said U.S. peanut exports have increased steadily since 2012.
The China effect
China, as with other commodities, looms over the global peanut market. China, Archer said, produces more peanuts, by far, than any other country, 17.8 million metric tons for the current crop. India's 5.5 million metric tons is second. The U.S. anticipates a 2.7 million metric ton crop. India and China produce primarily for the non-edible market. The U.S., Brazil and Argentina produce mostly for the edible market.
The world market is growing, from near 15 million metric tons in 2005 to 30 million in 2019. "That's up a lot over the last few years," Archer said.
Canada is the top market for U.S. peanuts, accounting for 25% of exports. Europe comes in second at 24% with Mexico at 23%. China and Vietnam account for 18% of U.S. peanut exports. Archer said much of the peanut trade to Viet Nam ends up in China.
"China's peanut export numbers have been declining over the past 20 years," Archer said. "China now is a net importer, which opens markets for others, including Brazil, Argentina, India and the U.S."
He added that the China market is volatile, exacerbated by the ongoing U.S./China trade dispute. He said the American Peanut Council works to build relationship with Chinese buyers, hosting industry trade delegations to visit U.S. farms as well as trade missions to China.
"China may not be a steady customer," he said, "in and out of the market but will remain an important customer as exports ebb and flow."
He said trade issues have affected China purchases, but the overall value of peanut exports remains fairly stable. "As China purchases decline, EU purchases increase," he said.
The Canada market, he added, offers opportunities. The Canada export market has grown over the last nine or 10 years. "We work to maintain that mature market. Canada buys a lot of peanut butter. We have active campaigns to improve export growth in Canada."
Archer said Japan is a smaller but important market, accounting for 3% of U.S. peanut exports. "The Japanese trade agreement is an advantage," he said.
He added that Japan values quality, where U.S. peanuts have an advantage over China because of food safety issues.
Archer said the U.S. peanut industry looks to other new markets, including Scandinavia and South Korea.
Exports vital to ag
Ribera said the export market plays a vital role in U.S. agriculture. "The U.S. is the largest agriculture exporter in the world, with $137 billion in exports in 2019. That's 35% of U.S. ag income." U.S. ag imports in 2019 totaled $131 billion.
He said COVID-19, among other factors, puts a question mark on 2020 export projections.
"We are looking at a lot of trade challenges," he said. "A lot of back and forth with tariff issues creates volatility."
Ribera said the Phase 1 trade agreement with China saw an 84% increase in ag exports from 2018 to 2019. From 2016 to 2018, ag exports to China declined by 70%. Value over those two periods show a 57% decline from 2016 to 2018 and a 51% increase from 2018 to 2019.
He said a decline in China is offset to some degree by an increase in Europe. As China buys more, the European market declines.
Phase 1 target
Ribera said despite the improved numbers in 2019, China's ag purchases do not meet the Phase 1 targets. "Exports remain way below what China agreed to under Phase 1. To hit the $39 billion 2020 target, China needs to buy $3.3 billion every month." He said the 2021 target, $34 billion, would require $2.7 billion per month.
"Purchases now are above 2019 but below the target. Currently, purchases are below 2020 and 2021 targets and also below 2012 purchase."
Archer said trade agreements, including USMCA and Phase 1 with China, offer opportunities. He said the U.S.-Japan agreement "slashes tariffs on $7 billion worth of U.S. agricultural products, such as cheese, wine, beef, pork, wheat and almonds.
"The new free trade agreement gives tariff advantages to U.S. peanuts," he said.
China is Japan's dominant peanut supplier, but Japan has tight aflatoxin standards (10 parts per billion).
"The food safety issue is a big concern for Japanese consumers," Archer said. "They are quality conscious, especially with aflatoxin."
Ribera said a challenge for global and U.S. production will be availability of arable land. "Brazil can expand agricultural acreage; in other nations, available ag land is already in production. In the U.S., we are losing agriculture land to development."
It's a challenge farmers can overcome, he said, even as the world population will grow to 10 billion by 2050. Farmers are already more productive, producing more on fewer acres and leaving a smaller environmental footprint.
Ribera said agricultural research, including improved varieties, is helping farmers produce more on less land with less energy.
Archer said the work APRES scientists perform is vital to the peanut industry. "Without research and the people in APRES, we would have no peanut industry," he said. "Your work keeps us competitive."