www.caes.uga.edu/departments/agecon/extension/agoutlook

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Peanut Situation & Outlook

Peanut Situation & Outlook

Southern Outlook ConferenceAtlanta, GASeptember 22, 2008Nathan B. Smith, Amanda R. Smith

Current SituationCurrent Situation• Improved Production Prospects

– 2007 production 1.87 M tons, 8% higher than 2006. (Federal State Inspection Service shows 1.81 M tons inspected)

– 2008 production estimate pegged at 2.38 million tons, 3rd largest on record if realized.

– US Acreage is up 25% in 2008• Stocks down from this time last year:

– Farmer stock peanuts in storage are down 52%,– Shelled stocks are down 16%, – Roasting stock up 37% and – Oil stocks are up 18%.

• Exports increasing, up ~60% from 2005. • Domestic food use projected to increase less

than 1%.

Peanut Planted Acreages(1,000 acres)

Peanut Planted Acreages(1,000 acres)

2004 2005 2006 2007 2008*

AL 200 225 165 160 195

FL 145 160 130 130 145

GA 620 755 580 530 685

MS - 15 17 19 22

SC 35 63 59 59 71

SE 1000 1218 951 898 1118

NM 17 19 12 10 8

OK 35 35 23 18 19

TX 240 265 155 190 255

SW 292 319 190 218 282

NC 105 97 85 92 99

VA 33 23 17 22 24

V/C 138 120 102 114 123

US 1,430 1,657 1,243 1,230 1,533

*Source: NASS Crop Production Report, Sept 12, 2008

Peanut YieldsPeanut Yields2005 2006 2007 2008*

AL 2750 2500 2600 3000

FL 2700 2500 2700 3100

GA 2840 2780 3150 3150

MS 3200 2900 3300 3300

NM 3500 3600 3500 3500

NC 3000 3200 2800 2900

OK 3270 2850 3400 3800

SC 2800 3000 3100 3400

TX 3750 3550 3950 3500

VA 3000 3200 2700 2900

US 2989 2863 3130 3188Source: NASS Crop Production various issues, *September Estimate

US Peanut Yield (1978 - 2008)

3,159 3188

1,500

1,7502,000

2,250

2,500

2,7503,000

3,250

3,500

78 80 82 84 86 88 90 92 94 96 98 '00 '02 '04 '06 '08

Year

Lb

s/A

cre

US

Total US Peanut SupplyTotal US Peanut Supply

2007 Estimate 1.1% decrease in US acreage, 3,130 lb yield, 2.151 M tons use2008 Forecast 25% acreage increase, 3181 lb yield, 2.260 M ton use

Peanut Disappearance by UsePeanut Disappearance by Use

Shelled Edible Use in Primary Products

Shelled Edible Use in Primary Products

1,000 lbsAug 07’ to Jul 08’

% Diff from 06/07

Candy 425,166 + 2.4%

Peanut Butter

1,012,263 + 1.9%

Snacks 320,467 - 14%

Total 2,141,552 - 1.6%

In-Shell 150,204 - 2.3%

0

200

400

600

800

1000

1200

Crop Year

M lb

s.

US Peanut Exports

Exports = 18% of total disappearance in 2008

Input Costs on the RiseInput Costs on the RisePrices Paid Indices by Sub-Component

75

175

275

375

475

575

675

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

19

90

-92

= 1

00

Nitrogen Diesel Potash & Phosphate Wage RatesSupplies & Repairs Herbicides Insecticides Fungicides

Impact of Fuel & Fertilizer Prices on

Cost of Crop Production ($/acre)

Impact of Fuel & Fertilizer Prices on

Cost of Crop Production ($/acre)

$200

$300

$400

$500

$600

$700

Cotton Peanuts Corn Soybeans

2002 2008

* Does not account for changes in technology.

Non-Irrigated Crop Comparison September 9, 2008

Non-Irrigated Crop Comparison September 9, 2008

Conventional TillageBy Amanda R. Smith, Nathan B. Smith and W. Don Shurley, UGA Extension Economists, Department of Agricultural & Applied Economics

BR RR RR GrainCotton Peanuts Corn Soybeans Sorghum Wheat

EXPECTED YIELD 700 2,700 85 30 65 55CURRENT PRICES $0.610 $500.00 $5.00 $10.50 $4.50 $4.00GROSS RETURN $427 $675 $425 $315 $293 $220TOTAL VARIABLE COSTS $430 $533 $304 $222 $238 $189RETURN ABOVE VARIABLE COST ($3) $142 $121 $93 $54 $31TOTAL SPECIFIED FIXED COSTS $138 $140 $57 $53 $54 $37

TOTAL COST EXCL. LAND & MGT $568 $673 $361 $274 $293 $226RETURN TO LAND AND MGT ($141) $2 $64 $41 ($0) ($6)

BREAKEVEN PRICE $0.81 $498.40 $4.24 $9.15 $4.50 $4.11BREAKEVEN YIELD 931 2,691 72 26 65 56

SUMMARY OF 2008 SOUTH GEORGIA CROP ENTERPRISE ESTIMATES

* As of April 21, 2008 Fertilizer Prices per Pound of Nutrient were as follows: N=$0.60, P=$0.70, K=$0.50** Calculated using a Diesel Fuel Price at $4.00 Gallon*** Assuming Diesel Irrigation. Electric is estimated to be 45% of the cost of $4.00 Diesel Irrigation

NON-IRRIGATED

Irrigated Row Crop Comparison September 9, 2008

Irrigated Row Crop Comparison September 9, 2008

Conventional TillageBy Amanda R. Smith, Nathan B. Smith and W. Don Shurley, UGA Extension Economists, Department of Agricultural & Applied Economics

BR RR Grain Int MgmtCotton Peanuts Corn Soybeans Sorghum Wheat

EXPECTED YIELD 1,100 3,700 185 55 100 75CURRENT PRICES $0.610 $500.00 $5.00 $10.50 $4.50 $4.00GROSS RETURN $671 $925 $925 $578 $450 $300TOTAL VARIABLE COSTS $582 $677 $657 $316 $333 $306RETURN ABOVE VARIABLE COST $89 $248 $268 $261 $117 ($6)TOTAL SPECIFIED FIXED COSTS $232 $237 $164 $147 $149 $59

TOTAL COST EXCL. LAND & MGT $814 $914 $822 $464 $482 $365RETURN TO LAND AND MGT ($143) $11 $103 $114 ($32) ($65)

BREAKEVEN PRICE $0.74 $494.31 $4.44 $8.43 $4.82 $4.87BREAKEVEN YIELD 1334 3,658 164 44 107 91

SUMMARY OF 2008 SOUTH GEORGIA CROP ENTERPRISE ESTIMATES

* As of April 21, 2008 Fertilizer Prices per Pound of Nutrient were as follows: N=$0.60, P=$0.70, K=$0.50** Calculated using a Diesel Fuel Price at $4.00 Gallon*** Assuming Diesel Irrigation. Electric is estimated to be 45% of the cost of $4.00 Diesel Irrigation

IRRIGATED

OutlookOutlook

• Current prices favor peanuts compared to cotton and corn (dryland).

• Bumper crop will cause prices to back off of $500 per ton at harvest.

• 2009 plantings will depend on contracts:– Growers are saying will take $600+ per ton

price due to higher input costs,– However, growers will be tempted to grow,

same or more peanuts if cotton does not rally,– Should consider the possibility of $355 per ton

on non-contracted peanuts if have record crop.

Crop Rotations (GPAC % Growers Applied)

Crop Rotations (GPAC % Growers Applied)

0%10%20%30%40%50%60%70%80%90%

100%

2004 2005 2006 2007

Corn Cotton Crn/Ctn Other

Years Between Peanut Crops(GPAC % Growers Applied)

Years Between Peanut Crops(GPAC % Growers Applied)

0%10%20%30%40%50%60%70%80%90%

100%

2004 2005 2006 2007

< One Two Three Four > Four

Tillage (GPAC % Growers Applied)

Tillage (GPAC % Growers Applied)

2004

2005 2006

2007

Bottom plow 75 88 67 62

Disc harrow 50 69 67 67

Field cultivator 38 63 50 29

Rip & Hip 13 6 - 10

V-Ripper - 6 - -

Hydro-Till 6 6 8 19

Rototill/Tillovator

25 19 - 10

Conservation Tillage (GPAC % Growers Applied)

Conservation Tillage (GPAC % Growers Applied)

0%

5%

10%

15%

20%

2004 2005 2006 2007

Stip Tilled No Tilled

2008 Farm BillSubtitle C - Peanuts

2008 Farm BillSubtitle C - Peanuts

• Peanuts were able to remain a separate title (distinguished from “covered commodities”)

• Maintains a separate payment limit for peanuts– $40,000 Direct Payment Limit– $65,000 Counter-Cyclical Payment Limit

• Direct Payment same at $36/ton• Target Price same at $495/ton• Advances and timing of DCP same as “covered

commodities” • Payment level changes to 83.3% for 2009-2001

Peanut Market Assistance Loans

Peanut Market Assistance Loans

• $355 National Loan Rate• 9 month loan beginning first day of

the first month in which loan is made.• Marketing loan may be obtained thru:

– FSA county office, – Designated Marketing Association, – or Cooperative Marketing Association

Marketing Loan ChangesMarketing Loan Changes

• Change in Storage, Handling and Associated Cost Rules– Handling and associated costs (other than

storage) will be paid by the Secretary (CCC) incurred at the time peanuts are placed under loan to be repaid at redemption of peanut loan.

– Pay for storage, handling, and other associated costs for all forfeited.

• Adjustments of loan rates? “The Secretary may make appropriate adjustments in the loan rates for peanuts for differences in grade, type, quality, location, and other factors.”

USDA ProposalUSDA Proposal

• White paper sent out to peanut industry proposing to adjust loan rates by type to reflect price differentials by type.

• Based on NASS prices since 2005 would result in lowering the 2007 loan rate for runners from $355 to $348 per ton.– Also would raise virginia ($382) & spanish

($377)

• Looking a phasing in the loan differentials beginning with 2009 crop.

Peanut StewardshipPeanut Stewardship

• Peanut eligible under new CSP program for stewardship payments for “adopting” a resource-conserving rotation (4-year?).

• 5-year contract.• Originally proposed as PERS program

for peanuts.

Georgia Cotton & Peanut Average Yield: 1990-2007Georgia Cotton & Peanut Average Yield: 1990-2007

0

100

200

300

400

500

600

700

800

900

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

Year

Co

tto

n L

int

Lb

/Ac

re

0

500

1000

1500

2000

2500

3000

3500

4000

Pe

an

ut

Fa

rme

r S

toc

k

Lb

/Ac

re

Cotton Peanut

*Source: NASS Crop Production, Various Issues, UGA Preliminary Estimate

2003 2004 2005 2006 2007 2008?Corn 340 335 270 280 510 435Cotton 1300 1290 1220 1400 1030 950Peanuts 545 620 755 580 530 625Grain Sorghum55 45 40 40 65 75Soybeans 190 280 180 155 285 400Tobacco 27 23 17 17 20 17Wheat 380 330 280 230 360 480

Total 2837 2923 2762 2702 2800 2982

Georgia 7 Major Row Crops Planted Acres*(1,000 Acres)

US Dollar IndexUS Dollar Index

Total Cost of Crop Production, 2002 and 2008 ($/acre)

Total Cost of Crop Production, 2002 and 2008 ($/acre)

$0

$200

$400

$600

$800

$1,000

2002 2008 2002 2008 2002 2008 2002 2008

Fixed Costs Variable Costs

Cotton Peanuts Corn Soybeans