Will There be a Peanut Shortage by Next Spring?
Tuesday, August 16th, 2011
Will there be a shortage of peanuts by the time the 2012 planting season rolls around next April and May?
Weather in the last 40 days of the 2011 crop season will have a partial answer to the question, but the big answer may come from the final tally on the 2010 crop.
If peanut growers are looking for high prices for their peanuts, the 2011 and likely the 2012 crop may be the most valuable on record. On the other hand, getting supply and demand so far out of kilter gives these crops the potential to be the most destructive on record to the entire peanut industry.
A perfect storm is brewing, consisting of a poor quality in 2010 crop, a lower than expected planting acreage in 2011, a poor growing season in 2011 and growing demand for peanut products.
If all these factors come together, it could be a devastating storm for the peanut industry to weather.
Whether we will run out of peanuts by the end of the 2011 growing season is still open to debate and highly dependent on harvest-time weather.
There is considerably less doubt that we will run out of edible peanuts before the 2012 crop is planted.
The 2010 peanut crop was good one! Or was it? From a yield standpoint it was good - national average was just over 3,400 pounds per acre, but from a quality standpoint, the 2010 crop was one of the poorest in history, rivaled only by the 1980 crop.
"Had it not been for improved technology since 1980, in the area of blanching and resorting, we likely would have had a shortage of edible peanuts last year," says Jim Leek, president and owner of JLA International.
Leek, who spent many years analyzing the peanut-food industry for Procter and Gamble and subsequently has tried his hand at growing peanuts, says the 2010 U.S. peanut crop was the most expensive in history to clean up.
The 2010 crop, he says, appears to have had the highest level of aflatoxin of any crop since the drought plagued 1980 crop. When all is said and done, he adds, the 2010 crop may prove to have had the highest levels of aflatoxin - ever.
Leek says from his perspective, there is better than a 30 percent chance that by the time this year's crop is dug, we will run out of peanuts.
As of mid-July, there were less than 550,000 tons of peanuts in the U.S. pipeline. It takes 150,000 to 160,000 tons per month for the U.S market. Even with ideal harvest time weather, it will be a tight fit to get 2011 peanuts into the pipeline before we run out.
WORLD IN SAME BOAT
Tyron Spearman, long-time peanut marketing expert and publisher of the Spearman Reportsays most of the world is in the same boat as the U.S. when it comes to quality and quantity of peanuts.
"Argentina has some peanuts, but quality is always an issue. Other peanut producing countries had similar challenges as U.S. growers, and the result is just a so-so year for peanuts worldwide," Spearman says.
Marshall Lamb, head of the USDA National Peanut Lab in Camilla, Ga., says as many as 30-35 percent of the 2010 peanut crop could go into the loan program for oil, because of quality problems.
"The crop looked good, yields were good, and even visually looking at the crop, it looked good from a quality standpoint, but the quality just wasn't there when chemical analysis was done on samples," he adds.
Approximately 45 percent of the 2010 crop delivered to buying points had to be further processed to reduce the aflatoxin level enough to deliver these peanuts to a buyer to use in edible peanut products.
Long-time North Carolina Peanut Grower and recent winner of the Virginia-Carolina Peanut Profitability Award, Vic Swinson says his crop of peanuts in 2010 was difficult to figure out. "Our yields were good, but the quality just wasn't there. We had to blanch and re-sort lots of peanuts to get them ready to sell," he says.
The 2010 crop put some shellers and buyers in a precarious financial position and may yet knock some of them out of business, Leek says.
"I talked to one sheller who told me 100 percent of the peanuts he bought that were in the #1 category, or good for the edible market, went to oil. Another sheller told me he spent 25 cents per pound, not per ton, to clean up the peanuts he bought," Leek says.
"Just to make these peanuts edible, shellers who bought some of these high aflatoxin peanuts had to pay up to $500 per ton just to make the peanuts edible," Leek adds.
"When you add 25 cents per pound to the cost of the peanuts, plus sheller costs, many peanut buyers lost money on every pound of peanuts they bought in 2010. Obviously, not many buyers are going to want to repeat that business decision next year."
"Further processing was expensive. Many shellers and buyers went out on a financial limb to reduce the threat of aflatoxin, and still a lot of these peanuts won't be used in the edible market, Leek adds.
Based on trend yields, the 2011 peanut crop is projected at 3.6 billion pounds - a 14-percent decline from last year and a 5-year low. The decline in acreage is likely to go considerably higher, because thousands of acres in the drought-plagued Southwest peanut belt either didn't get planted or were destroyed and not re-planted.
Even the country's top peanut producing state - Georgia - is looking at a huge drop in peanut acreage and perhaps a big dip in yields as well. Planting time drought and high temperatures have left little planting moisture for dryland peanuts and has clearly taken a toll on irrigated peanuts.
Georgia is projected to plant and harvest the fewest acres of peanuts since 1982. Nationwide, peanut acreage could fall below one million acres, or as much as 20 percent below projected pre-plant estimates.
Not only is this year's crop one of the smallest on record, but yields are expected to be below average. As of mid-July, only 30 percent of the crop nationwide was rated in good-to-excellent condition.
Long-time South Carolina Peanut Specialist Jay Chapin says the key to reducing insect and disease damage to the 2011 peanut crop is water.
LATE RAINFALL THE KEY
"If we get decent moisture in the last 40 days of the crop, we could have a decent yield year and good crop quality. If we don't get the needed moisture, it could be a disaster, especially in quality," Chapin says.
Dry harvest time weather, combined with an already dry growing season, could be a bad recipe for aflatoxin again in 2011.
Leek uses the analogy of having a cut on ones hand. "If you keep the cut clean and keep the skin around the cut well treated with an antiseptic, the chances of getting an infection are low. With peanuts, if you can keep insects from poking feeding holes in the pods and leaf feeding insects from destroying peanut foliage, the risks to aflatoxin infection is low," he says
Unfortunately, lack of water and high soil temperatures put peanuts in high risk of white mold, burrowing bugs, and a number of other pests and diseases that can stress the peanut plant and open it up to the fungi that causes aflatoxin.
Especially in the Southeast, and in some areas of the Virginia-Carolina peanut belt, high temperatures and drought have plagued the 2011 crop from the start. In many areas, peanut planting was pushed back, and even under the best of pod production environments, late planting is typically a bad deal for peanut yield and quality.
In 2009, the peanut industry was hit by tidal wave of bad publicity because of an outbreak of salmonella from peanut-containing products. Bad as the salmonella outbreak was, the peanut industry took its shots, regrouped and did a phenomenal job of mending fences and rebuilding markets.
In less than two years, The National Peanut Board, state and regional peanut organizations, even efforts by individual peanut growers has restored confidence in peanut products and the market is rebounding nicely.
Demand for peanut butter has steadily grown since the salmonella crisis and demand has increased at a slower pace for other peanut-containing products.
The recession played a role in the renewed culinary interest in peanuts, as more and more American families looked for lower cost, high protein food sources.
While safety and protein value of peanuts continues to climb, the lower cost component of growth could take a severe hit, if shortages in supply and good demand, push peanut prices above sustainable levels.
Virtually everyone in the peanut industry agrees that prices pushing $1,000 per ton aren't sustainable. Reality is a shortage in peanuts, especially edible peanuts, would push peanut prices further toward unsustainable levels.
Unfortunately land prices, fertilizer, and other input costs traditionally follow high crop prices. When commodity prices fall, input costs are often slow to follow suit.
If there is a shortage of peanuts prior to the 2012 season, high prices could undo a lot of hard work and innovative work done by a number of professionals charged with building peanut product markets.
Southeast Farm Press