This week, Pancho Abello gives us a market update on peanuts. While we have seen higher prices than last year, competition against corn and cotton prices and inputs costs will be key to defining contract prices and acreage this year.
Dates and Deadlines
2/23, 3/9/2022 – North Region Production Education Online
2/28/2022 – Spring Ag Conference, Armstrong County
3/1-2/2022 – High Plains Dairy Conference
3/3/2022 – Spring Ag Seminar, Clay County
3/15/2022 – ARC/PLC Sign-up Deadline
What We’re Reading
Producers with crop insurance to receive premium benefit for cover crops – Morning Ag Clips
Court returns gray wolf to endangered species list – Feedstuffs
Frustration growing over EPA’s pesticide actions – Feedstuffs
Net Zero Plans of the Biggest Global Companies do Not Add Up to Net Zero – Bloomberg
High Plains Dairy Conference set March 1-2 in Amarillo – AgriLife Today
Market concerns equal good commodity crop prices – AgriLife Today
Peanuts Market Outlook Update
This year, the market is still discovering contract peanut prices and acreage. While we have seen higher prices than last year, competition against corn and cotton prices and inputs costs will be key to defining contract prices and acreage this year.
U.S. Peanut Production
Last year we saw a reduction in planted acres even with higher contract peanut prices. 2021 planted acreage decreased by 4.9% (Table 1). High cotton and corn prices and the need for crop rotation in some areas were the leading cause of this acreage reduction.
Table 1. Planted Peanut acres per State. Source: USDA – FSA
Even though acreage was smaller this last season, production was 4.1% higher than last season (3,194 tons). Twelve percent higher yields (4,135 Lb/acre) compensate for the loss of acreage Graph 1). These were the highest yields obtained since 2012. Total world production also increased by 2.2% during this current production year.
Graph 1. Peanut Production and Yields
U.S. Exports
Total Exports from the U.S. during 2021 showed a reduction of 25.7% compared to 2020 (Table 2). This reduction in exports can be mainly attributed to lower In Shell exports destined to China last year. Exports to China decreased by 62.9%.
Table 2. U.S. Peanut Exports.
The U.S. exported roughly 19% of total world exports in volume during these last five years. The United States ranks number 3 on world volume exports, below India and Argentina and above China, while producing approximately 6% of total world production. China imports during 2020 increased by more than 100%. These imports were lower during 2021. The main question today remains if China’s high current level of imports will continue in the future.
Table 3. China Peanut Imports (2015-2020).
Domestic Demand
Domestic demand has continued increasing this last year. Shelled Peanuts (Raw Basis) Used in Primary Products and In Shell Peanuts increased by 3.4% for 2020-21, showing another consecutive increase in demand for peanut products. Peanut butter consumption, peanut snacks, peanut candy, and In Shell peanuts lead to this higher demand.
Graph 2. Primary Peanuts Products Consumption
Ending Stocks and Prices
Higher exports and a robust domestic consumption overcame the higher production from the last two years. U.S. ending stocks have slightly decreased over these previous years. Ending stocks by July 2021 were the lowest from the previous four years, 984 thousand tons.
Graph 3. Peanuts Ending Stocks
As expected, 2021-22 prices have increased and are currently above the five and 10-year average. So far, 2021-22 average prices reported by USDA-NASS have an average of $473/ton. These levels of prices have been the highest from 2013-14.
Graph 4. Peanut Monthly Prices
Projected Ending Stocks
Projected U.S. ending stocks for 2022-23 crop showed similar ending stocks assuming little change in the planted and harvested acreage and lower exports (Table 4). Projected future ending stocks used an average yield of 3990 Lbs/acre. A reduction in planted acreage or harvested and lower yields might potentially reduce ending stocks to similar levels as the 2016-17 crop season.
The remaining question is whether U.S. consumption demand will keep at the current level and if exports will recover. The high-level prices of corn and cotton will compete for acres in many regions and help support peanut prices for the next season.
Table 4. Supply and Demand Projections
Production Costs
Breakeven prices have increased compared to last year’s budgets. For a 2 ton/acre yield, the estimated District 1 and District 3 budget breakeven prices are $508/acre and $521/ton to cover total costs (Table 5). Total costs calculated in the district’s budget included variable costs and fixed costs such as depreciation, equipment investment opportunity costs, and cash rent, which are highly variable between producers.
Overall commodity prices and input prices have increased during this last year. Locking contract prices at higher levels than total costs plus the farmer’s expected profit margin is critical to keep farmers investing in new technologies and better production systems in the future.
Table 5. Estimated District Breakeven Prices
Price Loss Coverage
Peanuts are still one of the few crops where the USDA-FAS projected 2022-23 MYA price is lower than the reference price ($535/ton). USDA 2022-23 projected price of 430 $/ton is below the 2022 Effective reference price of 535 to calculate the Price Loss Coverage payment. Counter-cyclical payment yields per county in Texas vary from a minimum of 819 Lb./acre (0.41 Ton/acre) to a maximum of 5,519 Lb./acre (2.76 ton/acre). Assuming USDA projected price of 430 $/ton and similar base yields, estimated PLC payments per county will vary from 26 $/acre to 176 $/acre average per county (Table 5). This final estimated payment will depend on your farm’s actual PLC base yield and the final reference price for the 2022-23 season, which could be higher.
Table 6. Estimated PLC Payment Rate for 2022-23 by County, Texas.
ARC-CO Max Expected Payment for Districts 1 and 3 average $98.4/acre. 2022-23 MYA prices should be lower than $460/ton to trigger an ARC-CO Peanuts payment. With every percentage price increase, county yield should decrease by the same amount to trigger a payment. If prices increase to $500/ton, average county yields should be reduced by 8%.
Table 7. ARC-CO Estimated District Summary – Peanuts
The Agricultural & Food Policy Center at Texas A&M University has developed a 2022 ARC-CO/PLC Decision Aid (https://www.afpc.tamu.edu). This decision aid will help you understand the probability of receiving a payment, and how your choices under the 2018 Farm Bill may affect your FSA payment based on your decisions and farm history.