To say that it has been an interesting year for the peanut industry is a great understatement. But what’s even more interesting is how things have turned out.

“The year probably turned out differently from what most people expected given the way it began with the salmonella outbreak,” said Nathan Smith, University of Georgia Extension economist, speaking at the recent Southern Agricultural Outlook Conference held in Atlanta.

The overall message from the peanut industry concerning the salmonella outbreak was that it was something that should not have happened, says Smith. “It wasn’t an indictment of the whole peanut industry — it was one bad apple in the barrel,” he says.

U.S. planted peanut acres dropped by 28 percent this year to just over 1 million, the lowest since 1915, notes Smith.

“Basically, an oversupply brought about this drop. We had a record yield last year on top of large acreage increases. Then, we had the salmonella outbreak on top of that, and we had a situation where we were looking at loan rate prices of $355 in the spring. Eventually, some contracts came out at $375 per ton, but that was on a limited basis. Some farmers signed it because of the uncertainty in the market,” he says.

The end result of all these factors, says Smith, was sharply reduced acreage for 2009. The U.S. peanut yield projection according to the Sept. 1 survey was 3,400 pounds per acre. “With 1.082 million harvested acres, that would give us a 1.8-million ton crop. It will be plenty of peanuts coming off a 2.5 million-ton crop in 2008. That’ll still keep stocks fairly plentiful and the pipeline will still be full if we have this size crop,” he says.

Going into this crop year, more than 1 million tons of peanuts were carried over, he says.

Looking at peanut acreage for each region of the United States, every state dropped its peanut acreage this year but Mississippi, says Smith. Georgia growers planted about 460,000 acres, according to the June 1 NASS survey, he adds, but more than 40 percent of the state’s crop was planted after that initial survey was conducted. The latest estimate on Georgia’s planted peanut acreage stands at 500,000.

Texas is the “wildcard” in planted acreage, says Smith. “Georgia’s acreage was revised up and everybody else was revised down except Texas, and we’re not sure where they stand,” he says.

The sharp decrease in acreage this year was needed, he says, to help get supply and demand back in line. “Georgia will be a big driver on what the final U.S. yield will be. Almost 50 percent of U.S. production could be attributed to Georgia this year. Typically, we’re around 45 percent of the total production,” he says.

Georgia has a very late peanut crop this year, he says, with pegging running far behind normal averages.

“The September crop report had us with an average yield that’s roughly equal to last year’s record, and that’s mainly because we’ve had favorable growing conditions for peanuts this year. In fact, we’re looking at strong yields in each of the states this year. But the big difference between last year and this year is the timing of the crop, particularly in the Southeast. Yields might not be as high as the crop condition is telling us. We do have a lot of new varieties, and they have better yield potential.”

Florida, he says, is actually running slightly ahead in its harvest progress, but Alabama and Georgia are behind.

A crop of about 1.8 million tons would help to bring the carryover down, but it probably won’t bring it down to 600,000 tons, which would be a more comfortable level, says Smith. “If we have a 1.7 million-ton crop, we’d definitely see an improvement in the pipeline.”

Looking at the consumption of peanut butter, candy and snacks during the market year that ended in July, peanut butter sales ended up with an increase of 9 percent, he says. “That’s good, especially considering the hit we took from the salmonella outbreak. The recession had a lot to do with the increase. Candy sales went down and snack foods flattened out. We were actually ahead of that 9 percent pace when the salmonella outbreak hit.”

The industry is still shelling the 2008 crop, and shellers will probably be working on it into December, says Smith. “It’s probably good that we have a late crop this year. We’ll probably be harvesting peanuts up until December, and that’ll help with some of our storage issues.”

Peanut exports have been strong for the past three years, he says, partly because of the value of the dollar and problems with the Argentine and Chinese crops.

“The United States has been able to capture back some of the market share we lost over time. Exports make up about 18 percent of total disappearance.”

At the end of last year, all peanut prices were at about $500 per ton, says Smith. “Prices started out high last spring. Prices have dropped around 23 cents per pound. Farmers get paid per ton and shellers sell based on sheller prices.

“In 2009, they traded between 40 and 48 cents in the medium runners market. The market is looking to set a range in the long-run. They’ve been as high as above 80 cents and as low as below 30 cents since the farm bill changed.

“Before the farm bill changed, shelled prices were in the high 50s and 60s. I think we’ll see them settle out to about 45 cents to 50 cents, and farmer stock prices will be $425 to $475 per ton. The market is starting to look for some stability there.”

Based on conditions now, Smith says he is leaning towards a crop of approximately 1.7 million tons this year, with a carryover of 600,000 to 650,000 tons. “I think we’ll see some price improvements in the $425 to $450 range. Some acres will increase next year just because a lot of acres went out this year. Peanuts are now competing with other row crops.”

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