Published on 09/07/06

Weather-trimmed peanut crop may have silver lining

By Brad Haire
University of Georgia

Due to severely dry, hot weather over most of the summer, the U.S. peanut crop will be smaller then expected. Crop loss is never good, but there is a silver lining to this one, says a University of Georgia economist.

Coming off a good year of increased acres and good yields, peanut farmers this spring were facing a peanut surplus of around 1 million tons, said Nathan Smith, a Cooperative Extension peanut economist with the UGA College of Agricultural and Environmental Sciences.

"One of the biggest concerns at planting time for the peanut industry was that large surplus," he said. The weather- shortened crop this year will slash that surplus and should lead to better prices for farmers next year.

The peanut industry likes to keep some surplus peanuts in storage to make sure enough are around to meet consumer demand for peanut butter and snack food each year. But the extra peanuts this spring were about three times that comfort level, he said.

Few contracts were issued at planting time, he said. Shellers were comfortable there would be enough peanuts to meet demand. Four years ago, contracts were going for $400 to $425 per ton. Last year, contracts lowered to around $370.

Farmers had to settle for $355 per ton, the price guaranteed under the 2002 U.S. Farm Bill, for the surplus peanuts.

Peanut farmers reacted to the looming surplus by planting fewer acres in May, the normal planting month, he said.

Georgia farmers traditionally produce close to half of the total U.S. peanut crop each year. This spring they planted 580,000 acres, about 23 percent less than their 2005 acreage. U.S. farmers collectively planted 1.3 million acres this spring, 24 percent less than in 2005.

But even with decreased acres, he said, there was a good chance that surplus wouldn't have budged. If everything had gone well and average yields were met this year, the United States would have produced 2 million tons of peanuts, about what the United States uses and exports annually. The surplus would have remained. It just would have been newer peanuts going into storage, he said.

But then summer hit hot and dry.

"The peanut situation can be summed up in two words: not good," said John Beasley, a UGA Extension agronomist.

Between June and August, rainfall across most of Georgia was below normal, with many days of temperatures in the mid-90s. That combination is tough on plants trying to send pegs into the ground to make peanuts, he said. Insect and disease pressure, too, has taken a toll on yields.

"That surplus outlook has quickly disappeared," Smith said.

U.S. peanut farmers are expected to yield about 2,645 pounds per acre, 315 pounds less per acre than last year. Georgia farmers are expected to average around 2,500 pounds per acre, 370 pounds less per acre.

Total U.S. peanut production is expected to be around 1.6 million tons, about 30 percent less than last year. "And I think it will end up being less than what is currently projected," Smith said.

If all this holds, the surplus that started this year's crop off will be knocked back to what it was about two years ago, he said, or about 500,000 tons. It's still a large surplus, but not near as daunting to the industry.

"I believe there will be an improvement in prices for next year's crop, too," Smith said. "If not, producers have shown that they will respond to surpluses by not planting."

Brad Haire is the former news editor with the University of Georgia College of Agricultural and Environmental Sciences.