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Price improvement seen for peanuts

Peanut producers might expect a slight increase in the prices received for their crop this year, and possibly even next year, but it still won't be anywhere near what growers were getting before the 2002 farm bill, says Tim Hewitt, University of Florida Extension economist.

“We thought we'd see more of a decrease in our peanut acreage after the 2002 farm bill, but our farmers in the lower Southeast have shown that they will continue to grow peanuts,” said Hewitt at the recent Southern Region Agricultural Outlook Conference in Atlanta.

In the lower Southeast, including Florida, Georgia and Alabama, there is more acreage fluctuation in peanuts and cotton, he says, with more growers using custom operators. “We did see lower acreages this year for peanuts and cotton, and we had a tremendous amount of disease problems in peanuts in the Southeast, at least in Georgia, Florida and Alabama,” he says.

With farm bill discussions continuing, there were changes in the peanut program when storage and handling fees were not covered in the final year of the 2002 legislation, says Hewitt.

Looking at current conditions, peanut carryout has dropped, demand has stabilized somewhat, exports are up slightly, and production costs have increased, he says. “But we continue to see indications that the price probably will be up somewhat. It looks as though some of the contracts being offered just before harvest season were improved over this time last year,” he says.

Turning to costs, Hewitt says growers in the lower Southeast have seen increases in fertilizer of nearly 50 percent in the past four years. “Fuel costs are up by about 70 percent in the past four years while equipment costs have risen by 3 to 5 percent in the past two to three years. We had a situation for a few years where there was a gradual increase or no increase in equipment costs,” he says.

Obviously, he says, crop production costs continue to rise. “And if we're not getting higher yields, the net profits that we realize are going down. We really haven't seen a tremendous increase in yields. Of course, we've had dry weather and heavy disease pressure,” says Hewitt.

Last year, U.S. peanut production was down 29 percent, and there was a decrease of about 30 percent in the carryover in 2006, he says. In addition, stocks are down by about 23 percent from this same time last year. Acreage for 2007 is down by about .5 percent, says Hewitt.

“We had a late-planted crop this year and we'll have a later harvest. That could cause potential problems depending on weather conditions,” he says.

On the demand side, edible use of peanuts has slowed in the past two years, says the economist. “Exports are up by about 23 percent over last year, so that's a good sign. But total disappearance for the 2006-07 marketing year is up by only 1 percent,” he says.

Peanut yields this year are estimated at 2,800 pounds per acre, says Hewitt. “But not many people think we'll get to 2,800 pounds. We do have a lot of irrigated peanuts in Florida and Georgia, and we could see some good yields. But there will be a lot of poor yields. Even the growers with irrigation have seen problems this year, and their yields probably will be down somewhat.”

For the previous five years, the average U.S. peanut yield has been at approximately 2,800 pounds, says Hewitt. “This shows that if anything, we're trending downward in terms of yields in the past five to 10 years. We're not doing as well as we expect to be doing or as well as we should be doing. Our five-year average definitely should be better than our past 10-year average. Even though it is showing somewhat of an upwards trend, we're still having trouble increasing our yields.”

Varieties, he says, constantly change in peanut production. “A lot of new varieties come onto the market each year. We have our standby varieties. But eventually, all of the other problems start to show themselves, and the older varieties lose some of their advantages such as disease resistance. And we start to lose some of the market because the variety is showing some problems.

“There probably is something in the pipeline that will be resistant to some of the disease problems we're experiencing. Many times, however, the market doesn't want some of these varieties with good resistance properties — they are not the right size or they don't meet other characteristics.”

Georgia Green, says Hewitt, has been the standard in the lower Southeast for more than 10 years.

There are many “pockets” of peanut production, he says. In some of these, the acreage remains fairly stable, while in newer production areas, acreage is increasing. “Mississippi peanut acreage continues to increase and will probably pass South Carolina in the near future. The predominant areas remain basically the same although there have been some shifts, especially in Alabama.

“There has been a decrease in southeast Alabama, shifting to the southwest part of the state, and there are several reasons for this, including more productive land and more favorable weather patterns. But there is no location in this past year that has experienced a tremendous decrease in acreage while a few areas have seen increases.”

Nationwide, there was a slight decrease in peanut acreage in 2007, says Hewitt. “Georgia cut back by a fair amount of acres, and Alabama and Florida dropped a few. But Texas increased again. In fact, Texas made up for most of the decreases in the other states. We'll probably continue to see an increase in Mississippi, and that state had its first peanut field day this year.”

U.S. ending stocks were down for the 2006-07 marketing year and are expected to be down even more for 2007-08, says Hewitt.

“That bodes well for price. We have a system where price is set, but there are sometimes incentives for growers. Shellers want to be sure and cover all of their contracts. We may see some incentives next year for peanut producers. A lot depends on what is grown next year, a lot depends on what happens with the farm bill, and a lot depends on what will happen with corn and soybean acreage next year.

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