market development potentials for southwestern peanuts...

MARKET DEVELOPMENT POTENTIALS

FOR SOUTHWESTERN PEANUTS

A Task Force Report by

Carl E. Shafer, John P. Nichols

and Robert E. Branson

a research project conducted for TEXAS PEANUT PRODUCERS BOARD

December 1973

THE TEXAS AGRICULTURAL MARKET ",',,, RESEARCH AND DEVELOPMENT CENTER ~

in cooperation with Department of Agricultural Economics

The Texas Agricultural Experiment Station College Station, Texas

THE TEXAS AGRICULTURAL MARKET RESEARCH AND DEVELOPMENT CENTER

An Education and Research Service of

The Texas Agricultural Experiment Station and

The Texas Agricultural Extension Service

The purpose of the Center is to be of service to agricultural producers, groups and organizations, as well as processing and marketing firms in the solution of present and emerging market problems. Emphasis is given to research and educational activities designed to improve and expand the markets for food and fiber products related to Texas agriculture.

The Center is staffed by a basic group of professional agricultural and marketing economists from both the Experiment Station and Extension Service. In addition, support is provided by food technologists, statisticians and specialized consultants as determined by the requirements of individual projects.

Robert E. Branson Coordinator

i i

ACKNOWLEDGMENTS

This research was funded in part through grants from the Texas Peanut Producers Board and the Economic Research Service, U.S. Department of Agriculture. Mr. Wayne Eaves, Executive Secretary of the Texas Peanut Producers Board provided direction and guidance in defining the scope of the project and carrying out the research.

Of particular value was the time and information provided through interviews by persons involved in the peanut trade at all levels. These persons are far too numerous to list here but include representatives of peanut trade associations, U.S.D.A., producers, shellers, brokers, processors, food manufacturers, retailers and educational institutions. Without the benefit of their opinions, data and experience, this study would not have been possible.

The help of Robert Degner, former research associate, and Linda Short, research technicia~ in conducting analyses and preparing the manuscript is also gratefully acknowledged.

; i ;

TABLE OF CONTENTS

PageHIGKLIGHTS • . . . . . . . . . . . . . " .. • • • • I' xv• • • • •

PART I: THE SETTING

INTRODUCTION • • • • • • . . . . . . . . . . . . . . . . . 3

The Changing Agricultural Program Environment ...•••• 3

"rhe Peanut Industry Position ...... . . . . . . . . 4

Objectives of the Market Development Study • • • 6

Research Procedures . . . . • • • . . . . • • • . . . . . • 6

DESCRIPTION OF THE NATIONAL SURVEY . . . . • • • . · . . .. 9

GOVERNMENT SUPPLY CONTROL AND PRICE SUPPORT OPERATIONS . •• 11

Supply Control .•••.• . . 11

Price Supports •••••.••••...•. . . . • • • • 11

CCC Supply and Diversion . . . 15

Government Loan Stocks . . . • . . • • • 15

PART II: GENERAL PRODUCTION AND UTILIZATION TRENDS

THE WORLD VIEW • • . . . • · . . . . . 25

Exports and Imports • .•... • • • . · . . . 25

Peanut Trade . . . . . . . • ." .•. • . 29

Peanut Oil Trade • . . • • 30

Peanut Meal Trade •••. 31

World Market Peanut Prices .... 31

THE UNITED STATES SITUATION 35

U.S. Peanut Production . . . • • ... • 35

Yields . . . . . . . . . . . . • . . 35

Costs and Returns per Acre . . . . • . . . . . 40

U.S. Market Prices: Peanuts and Related Commodities 40

011 Pri ces .. . . . • . . . . . . . . • . . . . 43

Other Nut Prices .. . . . . . . . . . . . . . . . . . 43

Prices for U.S. No. l's and for Split Peanuts at Sheller

Level .................... 43

Grade Outturn and Prices per Ton . . . . • . . . 47

Farmers Stock Price Based on Crushing and Export . . . . . Price Effect on Edible Consumption . . . . . . . 48

v

TABLE OF CONTENTS (continued)

Page

Utilization .......... . 50

Edible Use . . . . . . . .. . ... 50

Crushings for Oil and Meal 55

Exports of U. S. Peanuts . . . . . . . . . 55

Projections of Production and Consumption . . . . . . 56

PART III: PEANUT MARKETING STRUCTURE

MARKET STRUCTURE . • • •• 61

Shellers ..... 61

Brokers . . . 66

Processors . . . 66

Plant Location ..... . . . . .. 67

Volume Processed by Regions • . . • . 67

Types of Peanuts Processed by Region 72

PART IV: TRENDS IN PEANUT PRODUCT MARKETS

CHANGING PRODUCT MARKETS . . 79

Major Product Markets . . . . 79

Peanut Butter . . . . . . . . • . . . . . . . . 79

Candy . . . . . . • . . • • • 83

Salted Peanuts ...........•. 85

Bakery Products, Oil and Other Food Uses 86

Peanut butter sandwiches . 87

Cookies ..... . 87

Peanut oil .....• 87

Raw shelled peanuts 88

Roasting stock . . . 88

New Product Concepts . . . . . . 89

FACTORS AFFECTING FUTURE MARKET GROWTH . . 91

General Factors Affect1ng the Consumer Demand for Peanuts. 91

Population Growth . . . . . . . . . • . . . . . • • • . 91

Consumer Buying Power . . . . . . . • . . . • .• 94

Consumer Tastes and Preferences •. •. 94

Price of Peanuts . . . . . . . . . • . • . • . . •. 94

Prices of Compet1ng Products . • . . 95

Imports . • . . . . . . . . . . . • . • . 96

Export Markets . . . . . . . . . . . 96

vi


Page PART V: MARKET DEVELOPMENT FOR PEANUTS

CURRENT MARKET DEVELOPMENT ACTIVITIES . . . 99

Estimates of Expenditures (Branded) 99

Estimates of Expenditures (Generic) . 100

MARKET DEVELOPMENT OPPORTUNITIES: OBSERVATIONS, DISCUSSION

AND CONCLUSIONS . . . . . . . . . . . . • . . . . . 103

Market Development Motivation Below Processor Level • 103

Improved Peanut Promotion to Processors . . . . . . 104

Continuing Grade and Quality Reevaluation ...•. 104

Research Information on Peanut Variety and Quality

Performance in Food Products . . . . . • . .• 105

Technical Services for Peanut Processing Firms .. 106

Establishment of Comprehensive Information System on

Domestic Peanut Marketing ........ . 106

Develop Information on Foreign Market Potential .. 107

Encourage Development of New Processing Plants in

Market Areas Served . . . • . • . . . . . . 108

Survey of Consumer Attitudes and Uses of Peanuts . . .. 108

Potential in the Commercial Eating Establishments Market 109

Consumer Education Program for Peanut Oil •...•.... 110

Development of Peanuts as a Food Protein Ingredient 110

PROGRAMS AND ORGANIZATIONS . • • . . . . • . . . . . . . 111

Programs for Addressing Market Development Opportunities 111

Marketing Committee ............. . 111

Checkoff Program . . . . . . . . . • . • . . . . 111

Research and Development Program . . . • • . . . 112

Processor Field Services ........•... 112

Hotel, Restaurant and Institutional (HRI) Field Service 112

Consumer Education • . . • . . . . • • • . 113

Market Promotion . • • . . • . . ..••• 113

Organization Approaches . • • . . • ••• . 114

Continuation of Present System . 114

Market Development Agency ... 114

Integration into Marketing . . . 115

Regional or National Organizations 115

Suggested Program of Action ..... . 115

vii


Page

REFERENCES . 117

APPENDIX A: Shelling, Processing and Consumption Tables. 119

APPENDIX B: Production Costs and Returns . . . . 127

APPENDIX C: Monthly Average Prices of Cleaned and Shelled

Peanuts, August '65-December '72 ... 141

APPENDIX D: World Production, Exports and Imports. . . . . 147

APPENDIX E: Data, Information and Studies Pertaining to the

Economics of Peanut Production and Marketing . . .. 163

APPENDIX F: Telephone Survey of Major Supermarket Chains in Texas. 173

APPENDIX G: Consumption of Nuts and Nut Butter per Person and

Percentages of Persons Eating, 1965 . . . . • . 181

APPENDIX H: Government Program Costs by Crops . . . . . . . . . 187

viii

LIST OF TABLES

Table Page

1 Field research activity summary ....... . 10

2 Apportionment of 1972 peanut acreage allotments among states 12

3 Peanuts (farmers' stock basis): U.S. and support rates, by types, 1951-73

average support level .......... 13

4 Peanuts: CCC price support operations, crop years, 1950-73 16

5 Quantity and cost of peanut butter distributed to schools, institutions and needy persons, fiscal year, 1955-73 17

6 Peanut production and CCC acquisitions under the support program, by three major producing regions and total, crop years 1959-70 . . . . . . . . . . . . . . . . . . . . 18

7 Peanuts: inspections for commercial and types, 1972-73 . . . . . . . . . . . .

loan use, by . . . . 20

8 Peanut production by country, in shell, 1971 26

9 Peanut production by continent, in shell, 1970-72 average 27

10 Peanuts (farmers' stock): production by regions, average 1963-65 and projection to 1980 . . . . . . . . . . . . . 28

11 Peanut prices: U.S. No.1, Spanish shelled at southwestern shipping points, India wholesale shelled, Bombay, and Nigerian shelled C.I.F. European ports, 1960-73 . . 32

12 Peanut prices: U.S. oil, annual, 1960-73

and European ports for peanuts and ................ 33

13 Peanuts (farmers' stock basis): price, 1959-73 ....... .

supply, disposition and 36

14 Peanuts: acreage, production and price, by states and areas, 1970-73 . . . . . . . . . . . . . . . . . . . . 38

15 Peanut production, average prices and value of production, 3 year averages, crop years 1959-61 to 1969-71, by three major production areas and total ............. 39

ix

LIST OF TABLES (continued)

Table Page

16 Peanut farm enterprise and resource comparisons 41

17 Summary of costs and returns for peanut production, major areas, 1971 . . . . . . . . . . . . . . . . .

three 42

18 Prices received by growers:1960-73 ........•.

pecans, peanuts and almonds, 45

19 Season average prices of cleaned and shelled peanuts by major shipping regions, 1965-72 crop year. . . . . . . . • • . . . 46

20 Utilization of peanuts (farmers' stock) by major categories, 3-year averages, 1959-61 and 1969-71, with proportions and changes . . . . . . . . . . . . . . • . . . . • . . . . .. 51

21 Use of edible peanuts (farmers' stock) among primary products, proportions, and percent change between 1960 and 1970 . . . . . . . . . . . . . . . . . . . . . . . . . . .. 51

22 Shelled peanuts (raw basis) used in selected products, by type of peanut, 3-year averages for 1959-61 and 1969-71 crop years . . . . . • . . . . . . • . . . . . . . . 54

23 Peanuts: yield, production, edible use, price and CCC acquisitions, forecast 1972 and projections for 1980 and 1985 57

24 Selected major corporations engaged in peanut product processing and marketing, corporate sales and national ranking, indicated years . • . . . . . . . . . . 62

25 Distribution of peanut shellers by geographic regions, 1970-71 season . . . . • . . . • . . . • . . . . . . . 64

26 Volume and percent of total Georgia peanuts purchased by she11 ers accordi ng to size of fi rm, 1968 • . . . . . 65

27 Concentration of buying power by class of processor of shelled edible peanuts, 1967-68 market season . • . •. 68

28 Ranking of edible peanut processing plants by size, by region, United States, 1971 .. .. . . . 70

x

LIST OF TABLES (continued)

Table Page

29 Edible peanuts: percentage of total peanuts used for a particular primary product, by region, 1968-69 . . . . 71

30 Edible peanuts: types of peanuts used within and amongregions for primary products, 1968-69 season, percentages 73

31 Peanut butter: consumption per household and percent of households using during the survey week, by seasons, and regions, all urbanizations, 1965-66 . . . . . . . . . . . 81

32 Regional markets for peanut butter and probable sources of peanuts by production areas, 1970 and projected 1980 . 93

33 Estimated annual advertising and promotion expendituresby brand advertisers for peanut products . . . . . .. . 101

LIST OF FIGURES

Figure Page

1 Illustration of U.S. demand and production for farmers· stock pean~ts with support price using 1972 data 5

2 Percent of commercial inspections by types of peanuts and by areas for Spanish, Runner and Virginia, 1963-71 21

3 Oil prices per pound for soybeans, peanuts, corn and cottonseed, calendar year, 1960-72 ........ . 44

4 Peanuts (farmers· stock basis): edible use in primary products, 1959-71 ...... . 53

5 Major stages in the peanut industry 63

6 Number of peanut processors by states, 1970-71 69

xi

LIST OF APPENDIX TABLES

Table Page

A1 Farmers' stock peanuts milled, by seasons, 1954-55

through 1972-73 (by varieties, Spanish by area and

total all types) ........•....... 121

A2 Production of shelled edibles, oil stock and roasting

stock (in-shell) peanuts, by seasons, 1954-55 through 1972-73 122

A3 Shelled peanuts (edible grades, raw basis): Reported use in

primary products, all types, 1950-72 123

A4 Peanut oil and meal: Supply, disposition, utilizations and

price, 1950-70 ... . . . . . . . .- . . . . . . . 125

B1 Summary of costs and returns for peanut production,

3 major areas (per hundredweight), 1970-71 .... 131

82 Summary of costs and returns for peanut production

3 major areas (per acre), 1970-71 ...... . 132

83 Direct costs per acre for peanuts produced in.

3 major areas, 1970-71 . . . . . . . . . . 133

84 Indirect costs per acre for peanuts produced in

3 major areas, 1970-71 ..... . 134

85 Peanuts, dry1and, Lower South Central Texas Region

estimated costs and returns per acre high level management 135

86 Peanuts, irrigated, Lower South Central Texas Region

estimated costs and returns per acre high level management 136

87 Peanuts, dry1and, Texas Cross Timbers Region estimated

costs and returns per acre typical management ..... 137

88 Peanuts, dry1and, Texas Cross Timbers Region estimated

costs and returns per acre high level management 138

89 Peanuts, irrigated, Texas Cross Timbers Region estimated

costs and returns per acre typical management ..... . 139

810 Peanuts, irrigated, Texas Cross Timbers Region estimated

costs and returns per acre high level management .•.. 140

xii

LIST OF APPENDIX TABLES (continued)

Table Page

Cl Monthly average prices of cleaned and shelled peanuts,

August 1965 - December 1972 ............ . 143

C2 Average peanut outturns per ton of in-shell nuts and

weighted average prices received by shellers, 3-year

. average, 1967-69 ................. . 146

01 Peanuts (farmers' stock): production in specified countries

and the world, annual 1960-72 . . . . . . . . . . . . . . 149

02 Peanuts; Exports from specified countries and estimated

world total, annual 1961-70 (peanuts in the shell) 152

D3 Peanuts: Imports into specified countries annual 1961-70

(peanuts in the shell) ............... . . 153

04 Peanut oil: Exports from specified countries, and estimated

world total, annual 1961-70 ................. 154

05 Peanut oil: Imports into specified countries, annual 1961-70 155

06 Peanut cake and meal: Exports from specified countries,

annual 1965-70 ... 156

D7 Peanut cake and meal: Imports into specified countries,

1965-70 ...... . 157

D8 United States exports of shelled green peanuts, 1972 158

09 United States exports of crude peanut oil. 1972 159

010 Peanuts shipped to points of export from the U.S., shelled,

1964-65 to 1971-72 ................... , 160

011 Apparent destinations of edible peanuts shipped from U.S.,

shelled, Southwest Spanish and Southeast Runners and

Spanish, 1965-66 to 1971-72 . . . . . . . . . . . . . . . .. 161

Gl Consumption of nuts and nut butter per person and percentage

of persons eating. one day's intake, spring 1965 . . . . . . 183

G2 Consumption of nuts and nut butter per person and percentage

of persons edtinq, by age (Jroups, income levels, all

urtltlnizatioll5, om~ tidY'S intake, spring 1965 ........ 184

xiii

LIST OF APPENDIX TABLES (continued)

Table Page

G3 Peanuts, in-shell and shelled: Consumption per household and percent of households using during the survey week, by seasons and regions, all urbanizations, 1965-66 household food consumption survey. .. . . . . . . . . . . . . . . . 186

H Peanuts and other specified crops: CCC cost relationships, by crops, 1967-71 ........ . 189

xiv



REPORT HIGHLIGHTS

WHY THIS REPORT

Peanut growers must assist in expanding the market for peanuts over the next few years or face the possibility of cutting peanut acreage by as much as 25 percent. Repercussion in the Southwest could be particularly severe because of comparative production costs.

Only continuation of the recent strong world market demand for U.S. peanuts because of reduced foreign supplies could alter the above prospect.

This report presents results of a nationwide study of peanut marketing problems and opportunitites for market development. Over 100 firms and organizations were included in the research effort.

TRENDS AND ENVIRONMENT IN PEANUT MARKETS

U.S. market demand for edible peanut products has expanded steadilyfrom 1960 to the present but not equal to the increases in peanut production.

Since 1960 increased domestic use of peanuts has been closely related to increases in population and consumer buying power. Edible peanut product use increased by 37 percent between 1960 and 1972 with approximately 16 percent due to increased population and the remaini ng 21 percent associ ated wi th higher consumer buying power.

Market data show that peanut butter is still the most importantproduct in terms of volume, with candy experiencing the greatest relative growth over the last ten years.

Shelling and processing of peanuts is somewhat concentrated with several billion dollar food manufacturers among the leading peanut processors. Processor plant location influences the type and origin(producing area) of peanut utilized.

xv

HIGHLIGHTS . . . .

There is no recent information available on consumer opinions of peanut products. The latest attitude study was in 1955. Accordingto the 1965 Food Consumption Survey, the latest available, almost one-half of the households in a 1965-66 survey were using peanut butter but less than 5 percent were using peanuts as such.

Indications are that export markets and new food uses have a potential for significant expansion of demand for U.S. peanuts. There is also need for extensive market development activity in the U.S. market.

Market development efforts by producers are presently divided amongvarious state and national organizations. Only about one to one and a half million dollars are spent for market promotion by growers.Brand advertising and promotion, by comparison, may exceed $25 million annually.

The upward trend in world peanut production has leveled off since 1970 causing higher international market prices. Commercial exportmarket demand for U.S. peanuts is thus improved. It is not certain at this time as to whether this is a temporary situation.

Recently projected production and utilization showing increased CCC purchases and costs need to be reevaluated in light of the recent decline in world peanut supplies.

MARKET DEVELOPMENT OPPORTUNITIES FOR ACTION

Market Development Motivation Below Processor Level ..... is lacking. Producers should encourage shellers to participate with them in an overall market development program.

Improved Peanut Promotion to Processors ..... many reportedlittle or no contact with representatives of the peanut industry in contrast to other ingredient sources. An integrated field service program is desirable.

Continuing Grade and Quality Evaluations ... cleanliness, matching grades with processor usage, the role of splits, all bear on servicing the market. Laboratories feeding information to the field service staff would facilitate.

Research Information on Peanut Variety and Quality Performance in Food Products ..... use of Spanish or Runner sometimes depends on beliefs about shelf life and/or taste. Research would evaluate such beliefs.

xvi

HIGHLIGHTS . . . .

Technical Service to Peanut Processors ..... in support of promotion, grade and quality, and variety performance research.

Establish Comprehensive Information System on Domestic Peanut Market .... much of the on-going data and information required for a viable program is unavailable. Both private and public sources could be developed.

Develop Information on Foreign Market Potential .... a significant volume of peanuts is exported but to where and for what uses? Little hard data are available on the export market--one of the greatestpotential areas for expanded sales.

Encourage Development of New Processing Plants in Market Areas Served ..... location of plant affects the source of peanuts used.

Southwestern and Western markets are growing--market analysis and information can aid in leading processors to build plants in these areas.

Survey of Consumer Attitudes and Uses of Peanuts . . . . . What do consumers think about peanuts? Child's food, fattening, nutritious ... ? An in-depth study of consumer attitudes toward, and usageof, peanuts is necessary before promotion programs are formulated.

Analyze Potentials in the Commercial Eating Establishments Market ..... why are so few peanut products used in hotel, restaurant,

and institutional eating facilities?

Consumer Education Program for Peanut Oil ..... uncertain supplies, relatively high prices, and lack of consumer knowledgehave stifled the peanut oil market. Some of this problem is associated with the support program but consumer education could lead to increased home use.

Assist in Developing Food Protein Market for Peanuts ... peanut flour, protein concentrates and isolates have a role to play in today's protein hungry world. Work has been started but needs continuing support and development--laboratory research, kitchen testing, consumer education and availability at competitive prices.

IMPLEMENTATION APPROACHES

Marketing Committee .. . TPPB should establish a marketing committee to evaluate and recommend market development prioritiesto the full board.

xvii

HIGHLIGHTS . . . .

Checkoff Program ..... should be increased if the necessary funding for a meaningful marketing program is to be available. All Southwestern producers should be involved because of the scopeof the marketing problem.

Research and Development Program . . • . . recommendations for research are numerous in this study because relatively little has been done outside of brand promotion in the production oriented peanut industry.

Processor Field Service ..... liaison with processor for promotion, grade and quality, dissemination of research findings, plant location and business goodwill. Must be backed by research and development.

Hotel, Restaurant and Institutional (HRI) Field Service ..... HRI offer a market potential and their special needs may be worthyof special consideration.

Consumer Education . . . . . obviously an important part of market development. Must be based on consumer research and coordinated among the various consumer education agencies available.

Market Promotion .•••• really ties together the implementation items mentioned above. Requires special staff such as those of Cotton Incorporated or United Dairy Industries Association.

ORGANIZATION APPROACHES

Continuation of Present System ..•.• contingent on the supply control and price support program. Marketing committee could handle but additional financing and interregional cooperation is important to success. If program moves toward free market producers must consider organizations for protecting their interests.

Market Development Agency ..•.. may be desirable for full time market development work based on success of American Rice Growers, Inc., Florida Citrus Commission, and Cotton Incorporated; needs national support.

Integration into Marketing . • . . . effectiveness in marketing can be better facilitated when market development is combined with actual marketing of the product. Direct control over grading and the development of contractual arrangements with processors can be effected.

Regional or National Organizations .•••. consideration of a national organization approach to market development will hinge largely on whether sufficient national goals can be established among the three regions. If this does not occur, the regional programs will be the stronger of the two approaches. With a change in government programsadditional incentives will be created for expanded market development programs. National efforts would likely be the most efficient.

xviii

PART I

THE SETTING



Carl E. Shafer, John P. Nichols and Robert E. Branson*

INTRODUCTION

Increased peanut yields and production in recent years have'caused supplies to exceed peanut markets at support price levels. As a result, Commodity Credit Corporation (CCC) support purchases grew to the point that the U.S. Secretary of Agriculture advised that modifications were required in the peanut program because of its financial cost.

In view of the circumstances, Texas peanut producers requested a study of peanut marketings its problems, opportunities and needed changes.

The Changing Agricultural Program Environment

Concern of peanut growers over marketing programs and alternatives is not singular. The Texas Agricultural Market Research and Development Center, for example, has responded to similar marketing studies requests from cotton, grain sorghums and rice growers--all government program support commodities. That present programs require change is generally accepted. What to do is where opinions diverge.

One view is that agricultural producers themselves should assume more of the price stabilization and marketing job. In the 1972 session of the U.S. Congress, two legislative proposals of this effect received considerable debate. These were the Si sk and Monda1 e bill s. Both sought ways for agricultural producers to gain more economic muscle in their commodity marketing programs. The Sisk approach called for the establishment of recognized bargaining procedures which producers, as a group, would use with buyers and processors of agricultural commodities. The Mondale bill, on the other hand, takes the concept of marketing orders as a basis for management of marketing operations for the major agricultural commodities. Whether these types of programs will ever become law is a matter of conjecture. It is essential, nonetheless, that peanut producers take stock of their present and foreseeable situation. Out of a better knowledge of the marketing problems can evolve suitable legislative and industry guidance.

*Associate Professor, Associate Professor and Professor, Department of Agricultural Economics and Rural Sociology, and staff members Texas Agricultural Market Research and Development Center, Texas A&M University.

3

4

The Peanut Industry Position

Although domestic civilian food use of peanuts keyed to price support levels increased by 28 percent between 1960 and 1970, production rose by 74 percent. This is the heart of the problem. The national acreage allotment has been cut to the legal minimum of 1.61 million acres. Price is at the legal minimum support of 75 percent of parity. Under these fixed conditions the clear signal to producers is to increase yields as rapidly as possible.The program thus has develo.ped a sURply incentive rather than being demand or market oriented.

Thus far, all surplus peanuts acquired by the eee have been successfullydiverted to crushing and export, but only at below support prices. Thus, stock build-ups as occurred in cotton, wheat, and feed grains during the 1960 ' s have been avoided. However, the percentage of the crop acquired by eee and, therefore, the costs to the eee increased considerably.

There are four possible solutions to the peanut problem: (1) reduce price, (2) reduce supply, (3) increase demand, or (4) a combination of these. At the 1972 support price, 1.53 million acres were planted and 3,275 million pounds of farmers 1 stock peanuts were produced. But only1,694 million pounds or 52 percent of production was used for domestic edible purposes, Figure 1. Some peanuts go for seed and feed while the eee acquired about 38 percent of the 1972 crop. A free market pricefor all peanuts in a reasonably normal year might be one-third to onehalf lower than recent support levels, Figure 1. The free market pricewould be determined by domestic and export demand for edible peanuts, peanut oil, and peanut meal. ]j

One study indicated that Texas producers would suffer a greater net income loss at lower peanut prices than would producers in Oklahoma, Georgia,and Alabama [3]. For example, a 40 percent reduction in the 1968 loan price would cut net income to Texas peanut producers that year by 80 percent. In Oklahoma, Georgia, and Alabama, by comparison, the loss would have been only30-35 percent because of more profitable crop alternatives in those areas.

The present price support program has some advantages to processors. They benefit by abundant supplies of peanuts for traditional products (not including oil, meal, or exports) and from very stable and predictable prices during the season. However, they expect that prices will continue to rise under the current program, causing them to seek lower priced alternative ingredients where feasible.

If the alternative of reducing supply is selected to keep the recent price level intact, acreage and production would have to be cut by about one-third. Such a reduction would increase operating costs per acre since production equipment investment is a fixed cost in the short run.

]jAt printing time (~January 1974) domestic oil and export demands had iraised market prices close to support levels.

5

Figure 1. Illustration of U. S. demand and Production for farmer stock peanuts with support price using 1972 data

Pri ce per pound " " "

Support pri ce

14.25¢

Free market price

~ Domestic~? food use

Production

, ",

c.c.c. , seed and

" " " ",, ",

" Demand2

crushing Demand 1

1694 3275 a A C

Quantity of peanuts (mi 11 i on pounds)

6

The third possibility is to increase the demand for peanuts and peanut products. Effects of such a course of action can be noted in Figure 1. In 1972, producers offered 3,275 million pounds of farmers' stock (the quantity oe on the graph, Figure 1). eee purchased about one-third of this. If demand could be expanded to clear the market at recent support prices, eee purchases would not be necessary. This course of action would be preferable for peanut producers. But market development is not easily achieved and the possibility of expanding the market to absorb the entire surplus is unlikely. However, since this course of action appeared to have received little attention, this study was requested to evaluate opportunities for peanut market expansion.

Objectives of the Market Development Study

The purpose of this report is to establish an information base for the consideration of approaches to expand the total market for U.S. peanuts. It views the marketing outlook from the vantage point of the Southwest, but also considers the national market in considerable detail. It was essential to conduct a national study inasmuch as there is substantial regional interdependence insofar as peanut markets are concerned.

The study objectives were to (1) evaluate the competitive position of peanuts in the total U.S. food market, (2) assess the competitive position of Southwestern peanuts within that market, (3) identify market development opportunities for Southwestern peanuts and (4) identify those market development possibilities having application to U.S. peanuts generally.

This study is of a macro rather than micro survey nature of various peanut market segments. With the market development alternatives identified, hopefully follow-up research will treat each in greater detail.

Research Procedures

A Texas Agricultural Market Research and Development eenter task force was assigned to the study. It was comprised of a four man team of marketing economists plus support effort ~ other technical research associates within the Experiment Station.

The initial step was to develop a file of information regarding the production-marketing structure of the peanut industry. Included were numerous reports from the U.S. Department of Agriculture, from universities and industry sources. After reviewing these, an extensive field survey was planned covering all major facets of the industry. Included were producers, driers, shellers, brokers, processors and distributors, financial agencies, retail firms, university and government agencies as well as producer and trade organizations. Salted nut, peanut butter, candy, confectionery, baked goods and peanut oil firms were surveyed in the processor segments.

7

Because regionalization of production, drying, shelling and processingfacilities influences utilization and distribution practices, the field survey was a coast to coast and border to border task. Over 100 firms or establishments were involved.

Interviewing began at the producer lever and moved directly throughthe various handling and marketing stages to the retail food store shelf. Buying, handling and processing methods were observed and discussed at each level. Associated services such as grading, storage, financing, packaging, transportation, merchandising and advertising were explored to provide a comprehensive overview of industry operations.

Interviews were the executive open-ended type built around specificsubject areas of importance at the various functional levels. Two task force members normally participated in each executive interview to achieve more comprehensive results. All interviews were on a confidential basis.

The field survey was conducted primarily during 1972 and was essentiallyconcluded during early 1973. Preliminary reports of findings were given. to the Texas Peanut Producers Board during late 1972 and mid-1973. A final report was presented in December 1973.

DESCRIPTION OF THE NATIONAL SURVEY

A reasonably comprehensive study of the present peanut marketing situation, and current trends, requires analysis of industry data and interviews with industry personnel. The combined results are woven together in this report. Although some of the basic data was readily available, a considerable part had to be obtained from special tabulations requested for this particular study. Appreciation is expressed therefore to the various agencies of the U.S. Department of Agriculture for their assistance in the latter.

A brief overview of the extensive field research is provided by the foll owi ng summary. Indicated are the number and types of fi nns or agencies represented, by industry category and the number of states in which interviews were conducted.

Special effort was made to include the major or dominant firms in the various industry categories. Therefore, deterministic, structural sampling was employed rather than probability methods. Peanut shellers were located in Texas, Oklahoma and Georgia. Brokers interviewed included at least two of the top firms in the industry. Processors interviewed represented all of the national top brands of peanut butter, as well as the nationally known firms in peanut oil, candy, salted nuts and bakery foods. A partial list of the firms and organizations cooperating in the research is included in the appendix.

Because of interest by some producers in potentials for in-shell marketing of peanuts at retail to consumers, a special survey was conducted of food chains primarily in Texas. Food chains were of special concern because of the importance of their attitudes and policies regarding peanut products of all forms sold through their stores.

Information regarding peanut quality and/or processing problems is based on interviews with laboratory personnel in industry, government and at the university level.

No standardized questionnaire of the usual survey type was formulated. Rather the research approach was to use focused interviews that would evoke a maximum of response opportunity from the executives concerned in the various segments of the industry. Frequently. two staff members of the Market Research Center would participate in the executive interviews in order to gain speed of interviewing as well as synergistic effects in the question and answer process. Such a technique has proven valuable in prior research. All -interviews were conducted on a confidential basis by Market Research Center personnel as 1) a protection to the respondent and 2) a 1II('.ms of enhancinf] frankness of discussions. Face to face interviews were tiSI'd. ~UPpICIIK\IlLed occdsionally by telephone interviewing.

The field research was conducted throughout calendar 1972 and early 1973. Results were reported to the industry in the latter part of 1973.

9

http:1II('.ms

10

Table 1. Field research activity summary

States~where~ Firms or agenciesIndustry category interviewsinterviewed conducted

Peanut shellers Peanut brokers Manufacturers

Peanut butter Peanut oil Peanut candy Salted nuts Bakers and snack foods

Produce dealers Food chains

National chains Regional chains

Peanut research laboratories Peanut industry associations Governmental agencies

Source: Survey data.

number 9 4

4 3

12 4

11 7 7 8 7 3 4

11 10

4

9 4 6 5 4 2 2 2 1 5 6 2

GOVERNMENT SUPPLY CONTROL AND PRICE SUPPORT OPERATIONS

Peanut production and marketing have been heavily influenced by government programs since 1933. The mechanics of the program are straightforward. The key features of supply control, price support, CCC diversion and loan stocks are noted below.

Supply Control

Acreage allotments and marketing quotas have been in effect since 1949. Acreage allotments have been determined from marketing quotas as approved by growers in referendum. The national acreage allotment for peanuts has, for all practical purposes, been set at the legal minimum of 1,610,000 acres since 1957. The Southeast region had almost 50 percentof the allotment with the Southwest and the Virginia-Carolina areas having 31.2 and 17.8 percent, respectively, Table 2. Acreage allotments can be transferred among farms within a county but cannot move among counties or states. The removal of such a provision would probably result in shifts among presen~or even to new, production areas.

Price Supports

When marketing quotas are approved by producer referendum, the support price ranges between 75 and 90 percent of parity depending on the "supply percentage" at the beginning of the marketing year. 1/ The level of price support has varied from 90 percent of parity during 1952-55 to the current legal minimum of 75 percent, Table 3. The supply percentage has exceeded 130 since crop year 1970, resulting in a minimum price support level of 75 percent of parity. The support price is based on the August parity value at the beginning of the crop year. Price support differentials among types of peanuts, and among regions in the case of Spanish peanuts, have been established through a somewhat complicated process but were originally based upon a 20 year average price series (1931-1950) for each type of peanut [7] .

..!!IISUpply percentage" is the percentage which the forecast "tota1 supply" is of the "norma1 supply" at the beginning of the crop year for the commodity. "Total supply" consists of the carryover, estimated production for the forthcoming marketing year and the estimated imports during the coming year. "Normal supply" is composed of the estilllated domestic consumption for the coming marketing year, estimated exports and an allowance for carryover [12J.

11

12

Table 2. Apportionment of 1972 peanut acreage allotments amonq states

Region and state State acreage allotment Proportion

acres percent

Virginia-Carolina

Virginia North Carolina South Carolina

Sub total

104,809 167,898 13,891

286,598 17 .8

Southeast

Georgia Florida Alabama

Sub total

529,855 55,529

216,713 802,097 49.8

Southwest

Texas Oklahoma New Mexi co

Sub total

358,005 138,348

5,787 502,140 31.2

Other

Mississippi Arkansas Tennessee Loui si ana Arizona California Mi ssouri

Sub total

7,492 4,184 3,606 1,945

761 930 247

19,165 1.2

TOTAL 1,610,000 100.0

Source: Federal Register, Vol. 37, No. 233, Saturday, December 2,1972.

--Tab 1e 3. Peanuts (farmers· stock basis): U. S. average support level and support rates, by types, 1951-73

U.. S. average su~~ort leveL~ $~QQQr1 price of av~rage quali tyllCrop Su~~orted atyear Effective Percentbeginning parity Southeast Southwestof August Amount Virginia Runner ValenciaAugust August 1 Spanish Spanishparity

dollars dollars dollars dollars dollars dollars dollars per ton percent per ton per ton per ton per ton per ton per ton

1951 262 88 230.56 244.00 218.51 238.11 266.47 Y

1952 266 90 239.40 252.71 227.90 245.38 233.52 21

1953 264 90 237.60 250.77 225.90 243.38 231. 52 Y

1954 272 90 244.80 257.99 233.29 250.66 238.56 2/ ......1955 272 90 244.80 257.99 233.29 250.66 238.56 Y w 1956 264 86 227.04 242.98 212.56 230.30 223.43 231 .83 1957 272 81.4 221.40 236.80 206.70 224.38 218.33 226.95 1958 264 80.8 213.20 224.97 200.50 217.69 209.69 220.17 1959 258 75 193.50 205.30 180.64 197.90 189.83 200.94 1960 256 78.6 201.24 213.93 188.08 204.36 197.61 210.95

1961 258 85.6 221.00 233.69 207.84 224.12 217.37 233.82

1962 270 82 221.40 234.19 208.71 226.35 217. 13 234.19

1963 280 80 224.00 236.86 211.24 228.98 219.70 236.86

1964 282 79.4 224.00 236.86 211.24 228.98 219.70 236.86

1965 290 77.2 224.00 236.86 211.24 228.98 219.70 236.86

1966 296 76.7 227.00 239.86 214.24 231.98 222.70 239.86

1967 302 75.2 227.00 239.86 214.24 231.98 222.70 239.86

1968 310 77 .5 240.25 253.73 227.37 245.63 236.07 253.73

1969 326 76 247.50 257.41 238.00 249.37 245.12 257.41

1970 340 75 255.00 264.93 245.23 256.77 252.45 264.93

1971 358 75 268.50 278.54 261.26 268.42 263.86 278.54

1972 380 75 285.00 292.27 287.55 280.15 276.11 292.27

1973 438 75 328.50 334.90 331.90 322.94 319.23 334.90

Table 3. (continued) . ~' lIBasis of support price determination over 1951-55 period not comparable with that of 1956-;~. During the

1951-55 period price support by types was on the basis of a "base grade ton"; but average quality ton prices rather than base grade ton prices are shown for those years. For years subsequent to 1955, price support by types was based on an average quality ton.

~For Valencia type containing less than 25% discoloration and damage, the support price was the same as the Virginia type support price for the same grade except no premium for extra large kernels.

Source: U.S.D.A., Fats and Oils Situation, FOS-265, ERS, November 1972, p. 31.

..... ~

15

The support level also varies with the percent of sound mature kernels. Such discounts have remained the same for Runners, Southwest Spanish and Southeast Spanish peanuts since 1971. Support price variations for kinds shown in Table 3 reflect differences in gradeout for the specified years .

. CCC Supply and Diversion

Producers receive at least the support price on their total production on allotted acres, whether their peanuts go to the domestic commercial market or to the CCC. CCC quantities and diversion uses are noted in Table 4. Crushing was the main diversion until recently when exports became an important market at world prices.

The Foreign Agricultural Service, National Peanut Council and privateinterests are at work developing the export market for U.S. peanuts.Peanut oil, meal and edible peanuts are exported at prevailing export market prices. Those prices have, in recent years, been significantly lower than equivalent domestic support price. At present (January 1974) oil, meal. and export prices are such that many U.S. producers could probably compete in these markets. The duration of these high prices is, of course, uncertain.

Government purchases of peanut butter for distribution to needy persons and school lunch programs supplement the domestic demand for peanuts, Table 5. In 1971 these purchases were transferred to CCC and are reflected in the price support program costs.

Total losses and/or costs incurred by the CCC for peanuts increased from about 17 million dollars in 1960 to 113 million in 1971, Table 4. The total fell sharply for 1972 to 60.5 million dollars with rising prices for oil, meal and export peanuts. Compared with other major price support commodities, the CCC peanut program cost ;s relatively small. Nonetheless, it has been appreciable in comparison \rJith the total value of the crop, i Appendix Table H.

Government Loan Stocks

The Commodity Credit Corporation has acquired peanuts for price support purposes in all but five years since 1935. The percentage of the Grop going to the ece government loan program varied considerably over the last ten years, Table 6. Compared with an average percentage of 22.3 percent for 1960-69, about 35 percent was acquired by cee in 1970 and 1971. In the early 1960 1 s, as now, the Southeast contributed most of the surplus or loan peanuts. Reflected in part is the larger total production in that area. Virginia-type peanuts, all from the Virginia-Carolina area, generally have low rates of surplus with the Southwest usually falling between these regions.

TABLE 4. PEANUTS: eec PRICE SUPPORT OPERATIONS, CROP YEARS, 1950-73·

CROP YEAR

PERCENTAGE OF PARITY ON AUG. 1

PER POUND

AVERAGE PRICE PER POUND RECEIVED BY

FARMERS

QUANT ITY PLEDGED

FOR PRICE SUPPORT

LOANS

LOAN ACQUISITIONS

PLUS DIRECT PURCHASESlI

UNDER

ED IBLE AND SEED

PRICE SUPPORT PROGRAM (FARMERS' STOCK DISPOS ITiON 2/

CRUSHING EXPORT SEC. 32

BASIS) eee REALIZED

TOTAL

NET LOSS PER

POUND ACQUIRED

MILLION MILLION MI LLI ON MILLION MILLION MILLION MILLION PERCENT CENTS CENTS POUNDS POUNDS POUNDS POUNDS POUNDS POUNDS DOLLARS CENTS

1950 90 10.8 10.9 552 835 132 582 61 17.1 2.0 1951 88 11.5 10.4 253 540 106 390 6 9.4 1.8 1952 1953

90 90

12.0 11.9

10.9 11.1

107 457

106 294

16 10

55 189

. -238

4.e 14.0

4.7 4.8

1954 90 12.2 12.2 14 2 18 8 1955 90 12.2 11.7 300 268 186 1 17.1 6.4 1956 1957 1958 1959

86 81.4 80.4 75

11.4 11.1 10.7 9.7

11.2 10.4 10.6 9.6

366 243 264 317

334 108 383 246

8

18

170 81

233 178

99 45 59 65

8 9

10

20.2 6.1

21.2 11.4

6.0 5.6 5.5 4.6

1960 78.6 10.1 10.0 277 299 244 86 66 16.7 5.6 1961 85.6 11.0 10.9 199 231 122 33 63 12.1 5.2 --' 0'1 1962 82 11. 1 11.0 276 331 181 46 63 21.2 6.4 1963 1964

80 79. It

11.2 11.2

11.2 11. 2

340 403

371 512

64 87

289 337

90 199

]/5961

28.3 30.5

7.6 6.0

1965 71.2 11.2 11.4 1t68 688 16 437 254 60 44.3 6.4 1966 76.7 11.35 11.3 534 701 77 471 230 38 43. B 6.2 1967 1968

75.2 77.5

11.35 12.01

11.1t 11.9

458 1t52

605 581

80 118

478 487

180 92

54 66

48.2 38.e

"1./7. B 6.7

1969 76 12.38 12.3 415 588 35 472 115 67 36.0 6.1

1970 1971

75 75

12.75 13.1t2

12.8 13.6

877 1,033

1,062 1,173

22 64

710 743

243 469

69 £/70

66.3 11112.7

6.2 .£!E.3

1972 75 14.25 14.3 60.5 1973

!/ACQUISITIONS AND PURCHASES FROM THE CROP. 110lSPOSITION MADE WITHIN THE CROP YEAR. DOES NOT INCLUDE STOCKS CARRIED INTO THE NEXT YEAR. IN 1963 AND SUBSEQUENT YEARS, THE QUANTITIES :ISPCSED FOR

"EDIBLE AND SEED" ARE NOT INCLUDED IN ACQUISITIONS BY eec. ]/BEGINNING WITH 1963, DIRECT PURCHASES OF PEANUT BUTTER WERE MADE FOR DONATIONS TO NEEDY PERSONS AND SCHOOL LUNCH PROGRAMS. THESE QUANTITI~S tqE NOT

INCLUDED IN THE ACQUISITION FIGURES.

~/LOSS PER POUND DIVERTED, WHICH INCLUDES ACQUISITIONS AND 54 MILLION POUNDS FROM INVENTORY. 2/PRELIMINARY.

~/IN 1971, DIRECT PURCHASES OF PEANUT BUTTER WERE TRANSFERRED TO eee. l/INCLUDES $15.4 MILLION FOR DIRECT PURCHASES OF PEANUT BUTTER. ~/BASED ON $97.3 MILLION LOSS. SOUROE: U.S.O.A., FATS AND OILS SITUATION, FOS 265, NOVEMBER, 1972, P. 31.

Table 5. Quantity and cost of peanut butter distributed to schools, institutions and needy persons, fiscal year, 1955-73

Fi sca 1 Schools Institutions Need~ Persons Total Year Quantity Cost Quantity Cost Quanti ty Cost Quantity Cost

t ... ousands thousands thousands thousands thousands thousands thousands thousands (1 bs. ) of dollars (lbs.) of dollars (1 bs . ) of dollars (1 bs. ) of dollars

1955 5,475 $1 ,461 5,474 $ 1 ,461

1960 6,036 1,078 6,036 1,078

1965 14,250 4,110 28,914 8,339 43,164 12,449

1966 14,509 3,925 25,658 6,940 40,167 10,865 ..... ""'-I

1967 16,259 4,489 18,584 5,131 ·34,843 9,620

1968 18,825 5,211 19,851 5,495 38,676 10,706

1969 17,313 5,244 26,926 8,156 44,239 13,400

1970 17,308 5,454 31,144 9,813 48,452 15,267

1971 17,444 5,593 957 $307 31 ,278 10,027 49,679 15,927

1972 17,846 5,804 3,143 1,022 29,782 9,685 50,771 16,511 1973- 19,264 6,530 4,313 1,462 25,341 8,591 48,918 16,583

Source: U.S.D.A., Food and Nutrition Service, Program Reporting Staff.

18

Table 6. Peanut production and CCC acquisitions under the support program, by three major producing regions and total, crop years 1959-70

Percent of region's prjJuction acguired b~ eceCrop year Virginia- Southeast Southwest United States Carolina

percent

1959 3.0 26.4 11.9 16.1

1960 5.6 23.3 19.4 17 .4

1961 6.6 16.5 17.8 13.9

1962 19.0 20.0 18.0 19.2

1963 7.7 28.9 8.2 19. 1

1964 17.0 28.2 23.5 24.4

1965 22.7 33.4 25.5 28.9

1966 19.0 31.1 36.0 29.1

1967 15.6 30.0 21.0 24.4

1968 14.9 27.5 20.1 22.9

1969 10.2 28.5 21.5 23.3

1970 32.2 36.0 38.8 35.6

1971(preliminary) 39.0

!!Inc1udes purchase of shelled peanuts and farmers' stock sold from the loan at eecls direction in those years \'Jhen partial redemptions were not authorized.

Source: USDA, Fats and Oils Situation, FOS-261, February 1972, Tables 7 and 10. Peanuts acquired shown in TablelO were taken as proportions of the respective area's production shown in Table 7.

19

Tabulation of Federal-State Inspection Service data for (a) commercial and (b) loan stock purposes provides an alternative determination of contributions to loan stocks by region and type of peanut, Table 7. Loan stocks are usually slightly underestimated because CCC purchases some peanuts originally inspected and intended for commercial use from shellers.

More extensive planting of the high-yielding Runners in the Southeast has increased their large contributions to CCC loan stocks. According to 1972-73 inspection data Runners increased from 57 percent of the total U.S. loan inspections in 1971 to 61 percent in 1972, Table 7.

During the late 1960 1 s, Spanish peanuts led all others in inspections for commercial use, Figure 2. By 1971, however, Runners approached Spanish and are now the leading commercial variety, accounting for 37 percent of the commercial inspections in 1972 compared to 34 for Spanish. A lag is presentin some processors' acceptance of Runners. This is typical for any new variety. Therefore, commercial use of Runners is likely to increase over the next several years, but large yields may continue to make Runners the major contributor to CCC stocks.

According to one U.S. Department of Agriculture estimate, total CCC losses are projected to increase to $200 million in 1980 and $300 million in 1985. 1/ These projections may be conservative considering increased peanut yieTd potentials and further competition from new snack foods. Thus, it is obvious that market development is needed to assist in balancing demand with foreseeable supplies.

lilt should be noted that government costs dropped considerably in 1972 and 1973 due to rising prices for oil, meal and edible peanuts exported.

Tab le 7. Peanuts: inspections for commercial and loan use, by types, 1972-73 1I

Corrmerc; a 1 Loan Total

tons percent tons Flercent ton percent

Tons 315,004 28.9 59,703 11.6 374,707 23.4 Virginia Percent 84.1 15.9 100.0

Runners Tons 399,742 36.7 312,788 60.6 712,530 44.4 Percent 56.1 43.9 100.0

Spanish Tons Percent

372,875 72.2

34.3 143,726 27.8

27.8 516,601 100.0

32.2

Tons 119,854 11.0 36,269 7.0 156,123 9.7 N 0 Southeast Percent 76.8 23.2 100.0

Tons 253,021 23.3 107,457 20.8 360,478 22.5 Southwest Percent 70.2 29.8 100.0

Total 1,087,621 100.0 516,217 100.0 1 ,603,838 100.0 67.8 32.2 100.0

!/Exc1uding Valencia type peanuts which amounted to 10,293 tons or less than one percent of the total. Seventeen percent of the Valencias were inspected for loan.

Source: Federal-State Inspection Service, Final Peanut Tonnage Report, 1972-73 Season, Albany, Georgia, February 19, 1973.

21

Figure 2. Percent of commercial inspections by types of peanuts and by areas for Spani sh, Runner and Vi rgi ni a, 1963-71

percent of total

cOl1111er.cial inspections

50

40 /'"...---"'"' ."". -- -:-..... .-

PART II

GENERAL PRODUCTION AND UTILIZATION TRENDS

THE WORLD VIEW

After trending upward slightly the last decade, world peanut production declined 9 percent in 1972. The drop was due largely to drought conditions in India and Africa and was further enhanced by Brazilian producers turning from peanuts to soybeans. World peanut exports dropped as a consequence, resulting in higher peanut prices in Europe. World production responded and increased by almost 13 percent in 1973.

Approximately 82 percent of the world's peanut production comes from 13 countries, Table 8. India and China contribute almost one-half of the production. The U.S. contributes only 8 percent but ranks third behind India and China. Appendix Table Dl. Africa produced 27 percent of the world's peanuts during 1970-72, Table 9. There is little or no productionin Europe.

A U.S.D.A. 1971 study projected world peanut production at 28 million short tons by 1980 [17], 51 percent above the 1970-72 average, Table 10.

Exports and Imports

World trade in peanuts has not shown any decisive trend from 1961 through 1970. Volume fluctuated between 1.4 million and 2.5 million short tons, Appendix Table D2. However, international movement of peanuts dropped significantly between 1968 and 1972 due to corresponding declines in production in the exporting countries.

Compared with world production of around 17 million short tons, world trade accounts for only about 12 percent of the market. U.S. peanut exports during the 1961-70 decade averaged nearly 68 thousand short tons, or only3 percent of the total international trade. Under these conditions U.S. exports obviously do not influence greatly the total world trade situation nor set the pace for terms of trade. The export market is one of the most promising areas for expanding demand. In particular, growing world interest in food protein can alter international demand levels over the next decade. International relations may require consideration in formulating trade policies because most of the competition comes from the less developed nations.

World peanut trade is conlprised primarily of three forms: in-shell or shelled peanuts, peanut oil, and peanut cake or meal. During 1965-70, the average annual volume was apportioned among:

25

26

Tab le 8. Peanut product; on by country, in shell, 1971

Country 1971 Product; on

1000 short tons percent of total India Mainland China Un ited States SenegalBrazil Ni geri a Burma

6,296 2,844 1,501 1,014 1,003

931 464*

32.3 14.6 7.7 5.2 5.1 4.8 2.4

Indonesia 463 2.4 S. Africa 424 2.2 Sudan 367 1.9 NigerUganda Thailand

287 220 220

1.5 1.1 1.1

Subtotal 16,034 82.3

World production 17,676 100.0

*1970

Source: U.S. Department of Agriculture, World Agricultural Products and Trade, Statistical Report, May 1973, p. 5.

27

Table 9. Peanut production by continent, in shell, 1970-72 average

Area Production Percent of total

Asia

Africa

N. America

S. America

Oceania

Europe

1000 short tons

10,486

5,149

1,735

1,394

39

25

percent

55.7

27.3

9.2

7.4

0.2

0.1

World total 18,828 100.0

Source: U.S.D.A., Peanut Market News, Vol. LV, No.2, Jan. 10, 1973.

28

Table 10. Peanuts (farmers stock): production by regions, average 1963-65 and projection to 1980

Region 1963-65

1000 short tons21

United States 1,101.2 1,945.6

South Africa 238.1 374.8

Communist Asia 2,385.4 3,968.3

South America 1,124.3 2,094.4

East and West Africa 4,861.1 6,613.8

North Africa and West Asia 440.9 826.7

South Asia 5,661. 4 10,609.6

Southeast Asia 545.6 937.0

Total 17,155.1 28,464.7

lJprOjections based on linear trends.

1VData were adjusted upward by a factor of 1.1023 to convert metric tons to short tons.

Source: U. S. Department of Agriculture, World Supply and Demand Prosoects for Oil seeds and Oil seed Products in 1980, Forei gnAgricultural Economic Report No. 71, Economic Research Service, March 1971, p. 107.

29

Form Short tons Percent (DOD)

Peanuts 2,106 51 Peanut oil 475 11 ~1ea1 and cake 1,567 38

Tota1 . 4,148 100

Trends in each form of trade are considered below.

Peanut Trade

The major portion of world peanut exports are from Africa. Principal African exporting countries are Nigeria, Niger, Senegal, Sudan and South Africa. Nigeria is clearly the dominant exporter; however, their production and export volume dropped sharply in 1970, 1971, and 1972 from the high of 1968, Appendix Tables Dl and D2. In addition to Africa, the United States, Brazil and Mainland China are important sources, Appendix Table D2. U.S. exports moved to almost 200,000 short tons in calendar year 1972 going primarily to Canada, Italy, Switzerland, Portugal and Japan, Appendix Table D8. U.S. peanut exports are exclusively for edible use while for most other countries peanuts are exported for processing into oil and meal. However, it has been reported that Chinese and South African edible peanuts are preferred to U.S. in some areas because of their aflatoxin free reputation. For example, producers of peanut butter in Holland are reported to have used Chinese ungraded peanuts for this reason. l!

France is by far the largest importer of peanuts with an annual average of 753 thousand tons for 1965-70, Appendix Table 03. Major importers of peanuts ranked by thousands of short tons in 1970 were France 496, Italy 184, West Germany 141, Switzerland 127, United Kingdom 98 and Japan 93.

Germany has used the Spanish varieties of peanuts almost exclusively for roasting and salting, importing them mainly from South Africa, but supplementing the supply from the U.S.A. and Sudan. Most other European countries use the large size nuts, as well as the Spanish, for roasting and salting. Recent price increases, however, are turning them to the cheaper, smaller nuts.

Canada buys small peanuts almost exclusively, although there has been an increased marketing of IIBeer Nuts ll processed from the large Virginia kernels. Japan imports large Virginias, Indian Javas (Spanish types) and Bolds, U.S. Spanish and Runners, Sudanese and Brazilian Spanish. The

l/Information on types and uses of edible exported peanuts from personal correspondence with large exporter.

30

Virginia type has been purchased about equally from the U.S. and China. Knowledge of these market preferences is quite useful in developing strategies to expand U.S. exports.

Peanut Oil Trade

A large volume of peanuts are exported as peanut oil, Appendix Table 04. The 472 thousand short tons of peanut oil exported in 1970 converts to one million short tons of shelled peanuts, or 80 percent of the world trade volume exported as nuts. 1/ Estimates of world trade during 1960-70 averaged 438 thousand short tons-and ranged from 296 thousand to 558 thousand. Peanut oil ranked a poor fourth among the major vegetable oils byworld export volumes for 1971 [2]:

Oil 1000 short tons

Palm 1,257 SoybeanOlive

1,250 376

Peanut 299 Cottonseed 179* Pa 1m kernel 130

*1970

The largest exporters of oil have been nations in Africa, principally Senegal and Nigeria. In South America, Argentina and Brazil are active, the 1 atter spasmodtca11y.

U.S. peanut oil exports have been extremely variable, ranging during 1961-70 from a low of 82 to a high of 40,664 short tons in 1964. Around 16,000 tons were exported in 1969 and 1970. The latter, however, represented only 3 percent of world peanut oil trade. As was found for in-shell and shelled peanuts, U.S. exports of peanut oil are a minor part of world total. Expanded U.S. exports, if markets can be developed, therefore would likely have little if any effect on world market supplies or prices.

Exports of U.S. peanut oil during calendar 1972 went to the Dominican Republic (61 percent), United Kingdom - North Ireland (13.7 percent), Australia (8.9 percent) and other (16.4 percent), Appendix Table 09.

Europe is the dominant market for peanut oil, Appendix Table 05. It accounted for 89 percent of the international purchases during 1966-70 period. France and the United Kingdom are the major buyers.

lIConversion rate used assumed 41.6 percent oil per ton of shelled peanuts.

31

Peanut Meal Trade

In terms of tonnage, more peanut cake and meal were shipped in 1970 than peanuts, Appendix Table 06. The big exporters were India, Brazil, Senegal and Nigeria. The largest peanut cake and meal buyers are the United Kingdom and France, Appendix Table 07.

India, the world's leading producer of peanuts, uses them primarilydomestically for oil. A comparatively small amount of their productionis exported as cake and meal. The U.S. likewise has not been a large exporter of peanut cake and meal. Market development in this product area should also be pursued.

World Market Peanut Prices

International peanut prices are difficult to obtain but FAO provides some idea of recent "world" price levels, Table ll. U.S. No.1 Southwest Spanish prices at Southwestern shipping points averaged 20 cents per poundduring the 1960-71 period, exactly twice the India wholesale prices and 2 1/2 times the average Nigerian c.i.f. European port price. The Indian and Nigerian prices reflect the oil value and thus are not comparable to the edible grade U.S. prices. However, as may be noted, the India and Nigeria prices do reflect changes in response to world supply and demand conditions as indicated by the large increase in 1973.

The substantial rise in world peanut prices during 1973 improves the possibilities for U.S. producers competing in the world market. In this regard, Oon Sands, Chairman of the National Peanut Council's Export Committee believes that world prices may rise to approach the U.S. domestic level. He suggests, for example, that Africa may begin to utilize more of their natural resources for trade purposes, while keeping more agricultural products at home. II

Prices for shelled Nigerian peanuts c.i.f. European ports averaged 8.3 cents per pound in 1967-69 or approximately one-half or less of U.S. No. 1 Spanish shelled at Southwestern shipping points. However, European pricesaveraged over 20 cents per pound during the first six months of 1973 [2J. Oil prices in Europe have generally exceeded U.S. prices in recent years, Table 12.

Important to U.S. peanut growers is the fact that (1) rising world prices plus (2) more favorable dollar exchange rates for importing nations can result in some lessening of difficulties in marketing U.S. surplus supplies in world markets.

liAS reported in The Texas Peanut Producer, Vol. 2, No.1, August 1972.

32

Table 11. Peanut prices: U.S. No.1, Spanish shelled at southwestern shipping points, India wholesale shelled, Bombay, and Nigerian shelled C.I.F. European ports, 1960-73

U. S. No. 1 India wholesale, Nigerian C.I.F1/Year Spanish prices Bombay European ports(shell ed) shelled shelled

cents per pound

1960 17.2 8.4 8.9 1961 18.4 9.3 8.9 1962 18.5 8.7 7.8 1963 19.9 8.5 7.8 1964 20.4 11 . 1 8.5 1965 19.2 12.5 9.3 1966 19. 1 14.7 8.5 1967 19.5 10.7 8.1 1968 21.2 8.6 7.5 1969 22.0 12.0 9.4.'1970 21. 7 13.6 10.4 1971 23.4 11.6 11.6 1972 23.8 12.2 11.9 1973£1 26.1 20.2 16.6

l'From December 1963, reseller cash on arrival.

YMonth1y average first six months 1973, first 10 months for Spanish.

Source: F.A.O., Monthly Bulletin of Agricultural Economics and Statistics, April and October issues, 1967, 1972 and 1973.

33

Table 12. Peanut prices: U.S. and European ports for peanuts and oil, annual, 1960-73

Peanut prices Peanut oil prices

Year U.S.lI European~ U.S.~ European~shellers ports wholesale ports(shelled) (shelled)

cents per pound

1960 17.2 8.9 15.1 14.8

1961 18.4 8.9 16. 1 15.0

1962 18.5 7.8 16.4 12.4

1963 19.9 7.8 11. 7 12.2

1964 20.4 8.5 12.9 14.3

1965 19.3 9.3 13.5 14.7

1966 19. 1 8.5 13.7 13.5

1967 19.5 8. 1 11.9 12.7

1968 21.2 7.5 13.2 12.2

1969 22.1 9.4 13.7 15.1

1970 21. 9 10.4 15.9 17 .1 1971 23.4 11.6 17 .4 20.1 1972 23.8 11.~ 17.05/ 19.35/i 973 26.1 16. 20.2- 21.7

1/- F.O.B. shipping point, No. 1 shelled Southwest Spanish.

~Nigerian, shelled, reshe11ers, cash on arrival nearest forward shipment, c.i.f.

1ICrude, S.E. mills.

~Bulk, nearest forward shipment, Nigerian - Gambian, 3-57, c.i.f., U.K. ports.

~Six month average, January - June, 1973.

Source: FAO, Monthly Bulletin of Agricultural Economics and Statistics, October and April issues, 1968, 1970, 1972, 1973. United Nations.

THE UNITED STATES SITUATION

U.S. Peanut Production

Non-agricultural production is usually continuous and varied to match the expected demand at administrated prices. In contrast, agriculturalproduction is discontinuous and usually sold at whatever price will clear the market. Producers attempt, often poorly, to adjust future output to the price they think will prevail at the next market period. Their outlook, though, is highly influenced by the price of the previous season. The lagged reaction creates production induced marketing and pricing problems.

For peanuts, the market supply for a given year has three components: (1) carryover stocks from the previous crop, (2) current year's production and (3) imports. The latter is not very important. Peanut imports are limited by law to two million pounds per year. Carryover stocks since 1967 amounted to 11 to 13 percent of the supply and varied from 353 million pounds to 453 million pounds, Table 13. Production by states is shown in Table 14.

The variable supply problem in peanut marketing comes mostly from the production component. Production rose steadily from 2.5 billion poundsin 1967 to about 3.3 billion in 1973, a gain of 33 percent in only six years. Few markets can expand that fast without accepting considerable price reductions.

Changes in crop values among the three major U.S. production regions during the last decade reflect mostly production shifts, since farm prices increased similarly in all areas, Table 15. Crop values more than doubled in the Southeast and the Southwest and were up 58 percent in VirginiaCarolina. Peanut prices received by growers increased 27 percent compared to a 30 percent rise in the Prices Paid by Farmers Index for all commodities during the 10 year span.

Yields

Analysis indicates that growth in U.S. peanut production resulted almost entirely from rising yields. Changes over a recent 10 year period are indicated below:

35

TABLE 13. PEANUTS (FARMERS' STOCK BASIS): SUPPLY, DISPOSITION AND PRICE, 1959-73

SUPPLY DISPOSITION PRICE PER POUNDYEAR BEGINNING IOTAL EXPORTS L;RUSHED SEED, FEED, DOMESTIC FOOD USE RECEIVED BYBEGINNING PRODUCTION IMPORTS STOCKS SUPPLY AND FOR OIL FARM LOSS [ J:1VILL~N FARMERS SUPPORTAUGUST 1 AUGUST 1 SHIPMENTS AND MILITARY I TOTAL PER CAPITA SHRINKAGE

MILLION POUNDS POUNDS CENTS CENTS 1959 1,52311 511f 2,038 72 292 96 3 1,151 6.5 9.6 9.68 1960 1,718 11 If 21f 2,llf2 81 362 87 8 1,236 6.9 10.0 10.06 1961 1,657 3 368 2,028 31f 256 81f 7 1,258 6.9 10.9 11.05 1962 1,719 2 389 2,110 1f3 302 75 8 1,285 6.9 11.0 11.07 1963 1,9lf2 2 397 2,3lf1 97 380 107 5 1,3lf2 7.1 11.2 11.20 1961f 2,099 2 Ifl0 2,511 179 If 73 75 8 1,lf03 7. If 11.2 11. 20 1965g/ 2,381f 373 2,758 238 517 137 llf 1 , 1f31 7. If 11.1f 11.20 W 1966 2,lf10 2 If 1 2 2,821f 222 587 211 2 1, 1f1 8 7.3 11.3 11.35

C'\

1967 2,lf73 2 3721il 2, 81f 7 198 61f1f 156 3 1 , 1f93 7.6 11 .If 11.35 1968 2,5lf3 2 353 2,898 105 651f 2lf3 3 1,536 7.7 11.9 12.01 1969 2,529 357 2,888 lifO 581 237 3 l,571f 7.8 12.3 12.38 1970 2t 979 2 353 3,331f 290 799 209 3 1,580 7.8 12.8 12.75 1971 3,005 2 1f53 3,lf60 552 811f 79 11 1,623 7.9 13.6 13.lf2 19722.1

1973fi 3,275

3,389

2

2

392

If 29

3,669

3,820

521

575

850

900

175

175

1,691f

1,735

8.2

8.3

1If. If

16.5

llf. 25

16.1f 2 1971f21 If 35

TABLE 13 (CONTH,uEO)

11 BEGINNING WITH 1959 CROP, PRODUCTION REPORTED ON A NET WEIGHT BASIS. PRIOR YEARS WERE GROSS WEIGHT.

gJ LESS THAN 500.000 POUNDS.

2i BEGINNING 1965 REPORTED CRUSH AND EXPORT OF SHECLED PEANUTS CONVERTED TO FARMERS' STOOK BY 1.33 FAOTOR.

~ NET WEIGHT BASIS BEGINNING 1967.

2! PRELIMINARY. S/ FORECAST.

SOUROE: U. S DEPARTMENT OF AGRICULTURE, FATS AND OILS SITUATION FOS-269, EOONOMrO RESEARCH SERVIOE, WASHINGTON, D. C., OOTOBER 1973, P. 19•.

w ........

TABLE ,_. PEANUTS: ACREAGE, PRODUCTION AND PRICE, BY STATES AND AREAS, 1970-72

STATE AND AREA

ACREAGE HARVESTED FOR NUTS YIELD PER ACRE HARVESTED PRODUCT I orJI PRICE PER POUND RECEIVED BY FARMERS

SEASON AVERAGE

----

1970 1971 1972 1973?/ 1970 1971 1972 1973~ 1970 1971 1972 1973Q1 1970 1971 1972 19?31.t:

1,000, 1,000 1,000 POUNDS POUNDS POUNDS POUNDS MILLION MILLION MILLION MILLION CENTS CENTS CENTS CENTS ACRES ACRES ACRES ACRES POUNDS POUNDS POUNDS POUNDS

VIRGINIA 102 93 102 102 3,060 2,360 2,605 2,800 312.1 219.5 265.7 285.6 13.6 1_.2 1_.0 __5.9NORTH CAROLINA 167 155 166 166 2,670 2,100 2,230 2,650 325.5 370.2 439.9 13.2 1_.0 1_.5 15.613. _TOTAL VA.-N.C. AREA 269 2_8 268 268 2,818 2,198 2,373 2,707 758.0 5_5.0 635.9 725.5 n.l 1_.3 15.6

SOUTH CAROLINA 13.8 15 15.5 16._ 1,880 2,000 2,050 1,850 25.9 30.0 31.8 30.3 12.7 PI.O 15.0 16.0 GEORGIA 507 510 512 512 2,220 2,_90 2,620 2,600 1,125.5 1,269.9 ',3_'._ 1,331.2 12.8 13.5 1_.8 15.8 FLORIDA 53 5_ 5_ 54 2,075 2,590 2,550 2,550 110.0 139.9 137.7 137.7 13.0 n.o 1_.5 15.2 ALABAMA 190 19_ 197 200 1,660 2,070 1,870 1,850 315._ _01.6 368.4 370.0 12.8 13.8 14.5 15.5 MISSISSIPPI 9.5 10 9.5 1,100 1,735 1,600 1.700 4._ 16.5 16.0 16.2 15.0 14.0 14.5

TOTAL S. E. AREA 767.8 782.5 788.5 791.9 2,060 2,374 2,_0_ 2,381 1,581.3 1,857.9 1,895.3 1,885.4 12.8 13.9 111.7 15.6-OKLAHOMA 116 119 115 120 1,655 1,8_0 2,110 2,150 192.0 219.0 242.6 258.0 12.2 13._ 14.0 15.0 TEXAS 306 297 307 314 1,_05 1,235 1,565 1,600 429.9 366.8 480.5 502.4 12.2 12.8 13.7 1_.8 w NEW MEXICO 8.2 8 7.9 7.8 2,230 2,070 2,590 2,300 lR.3 16.6 20.5 17.9 1_._ 1_.5 15.1 00

TOTAL S. W. AREA 430.2 _24 _29.9 441.8 1,_88 1,_21 1,730 1,762 6_0.2 602._ 743.6 778.3 12.3 13.1 13.8 14.9

UN /TEO ST ArES 1,_67.0 1,454.5 1,_86.4 1,501.7 2,031 2,066 2,203 2,257 2,979.5 3,005.1 3,274.8 3,389.2 12.8 13.6 14.4 15._

11 FARMERS I STOCK BASIS, NET WEIGHT.

"PRELIMINARY.

ilSEPTEMBER 1 INOlcAT IONS.

!II AUGUST-SEPTEMBER AVERAGE.

SOURCE: U. S. DEPARTMENT OF AGRICULTURE, FATS AND OILS SITUATION FOS-269, ECONOMIC RESEARCH SERVICE, WASHINGTON, D. C., OcTOBER 1973, P. 19.

39

Table 15. Peanut production, average prices and value of production, 3 year averages, crop years 1959-61 to 1969-71, by three major production areas and total

3-,Year averages PercentArea 1959-61 percent 1969-71 percent change

1,000 tons, farmers I stock

Virginia-Carolina Southeast Southwest

239.54 404.23 172.62

29 50 21

312.31 793.69 310.62

22 56 22

31 96 80

Total 816.39 100 1,416.66 100 74

Average farm price (cents per pound)

Virginia-Carolina Southeast Southwest

11.07 9.69

10.04

13.50 12.83 12.47

22 32 24

All region average 10.15 12.90 27

Value of production (millions of dollars)

Virginia-CarolinaSoutheast Southwest

53.06 78.64 34.76

32 47 21

84.11 205.08 77.37

23 56 21

58 161 123

Total 166.46 100 366.57 100 120

Index

Prices paid by U.S. (1967 =100)

87.7

farmers

114.33 30

Income

Realized U.S. gross farm income (billions of dollars) 38.33 57.87 51

Sources: U.S.D.A., Fats and Oils Situation, FOS-261, Economic Research Service, Washington, D.C., February 1972, p. 14. U.S.D.A., Working Data for Demand Analysis, ERS, Washington, D.C., October 1972. Council of Economic Advisers, Economic Indicators, Government Printing Office, Washington, D.C., Sept. 1972.

Production region

3-year average yield 1959-61 1969-71

Percent increase

pounds per acre percent

Virginia-Carolina Southeast Southwest U.S.

1,719.7 1 ,100.3

874.7 1,159.3

2,364.3 2,062.0 1,451. 7 1 ,939.7

37.5 87.4 66.0 67.3

The near doubling of yields reflected the introduction of the high-yielding F10runners in 1970. Southwest yields, though up significantly, remained far below the other regions. This may change if the Southwest also adopts the F10runner variety.

Costs and Returns per Acre

Three recent research reports indicate that peanuts have been considerably more profitable than alternative crops in the three production regions, Table 16. Therefore, continuance of markets for peanuts is essential to income maintenance in these production regions. Net returns, both per acre and per hundredweight, were higher in the Eastern production areas than in the Southwest, Table 17. Total production costs averaged about 7 to 8 cents per pound in Virginia-Carolina, the Southeast and for Texas-Oklahoma dry1and productionin 1970-71, see Appendix Tables B1 through B4. Texas-Oklahoma irrigated costs for a 2,700 pound per acre yield approximated 10 cents per pound in 1971. Production costs and net returns are considered in more detail in other tables of Appendix B.

U.S. Market Prices: Peanuts and Related Commodities

In recent years peanut prices have increased because they are, by law, tied to the Parity Index, which has been rising. For example, the 1973 crop support price was $328.50 per ton, a 15 percent increase over the $285.00 in 1972. As previously noted, it is stipulated under current legislation that prices to producers cannot be less than 75 percent of parity. At the mandatory price levels, two-thirds to three-fourths of the crop has gone into domestic edible uses. The remainder is diverted into crushing where the value is only one-half to two-thirds of the support level. Prices for crushing are in turn determined by demand and supply conditions for food oils and feed meals where there is extensive competition from soybeans, cottonseed, corn. palm. coconuts, safflower and animal oils.

41

Table 16. Peanut farm enterprise and r.esource comparisonsll

Southeast·y Small farms Large fanns

Peanuts Cotton Corn Peanuts Cotton Corn

Gros s per

recei pts acre

218 116 dollars

59 218 128 59

Variable costs per acre

101 113 42 89 99 35

Net returns Y 117 2 16 129 28 23

Southwest l' Irri -

Irri - Dry1and gated Dry-Dryland gated grai.n grain land peanuts peanuts sorghum sorghum cotton

Gross recei pts per acre

144 324 dollars

36 81 116


68 192 24 50 87

Net returns Y 75 131 11 30 28

Virginia-North Carolina Peanuts Corn Soybeans

Gross recei pts per acre

337 dollars

115 87


174 66 40

Net returns 4/ 163 49 47

Continued

42

Table 16 continued

lIData in this table were developed by ERS and Experiment Station personnel in the various states represented.

~These data are for Georgia and Alabama.

~rhese data are for Texas and Oklahoma. ~Net returns are returns to land, management, risk, and overhead.

Source: [3, p.130]

Table 17. Summary of costs and returns for peanut production, three major areas, 1971

Per ~ound Net returns ~erArea Yield Return Total cost Pound Acre

lbs./acre cents/l b. cents/1b.

dollars/ acre

Texas-Okla. irriqated dryland

2,700 1,300

13.12 13.12

9.66 7.65

3.46 5.46

93.39 71.08

A1a.-Ga.-Fla. 2,000 13.14 7.00 6.14 122.64

Va.-N.Car. 2,800 13.85 7.80 6.05 169.67

Source: Computed from data in Appendix Tables B1 and B2.

43

Oil Prices

Prices for peanut oil and the major vegetable oils are shown in Figure 3. Soybean oil generally is the lowest priced oil with cottonseed, peanut and corn oil usually higher in that order. Peanut oil priceshave averaged about 2 to 5 cents above cottonseed oil since 1968. Peanut oil has superior characteristics for a number of cooking uses. Consequently,it should carry a premium price. However, these superior attr"' butes are not generally known by consumers; therefore, the higher price has adverselyaffected demands.

Other Nut Prices

Peanuts used in candy or as salted nuts compete primarily with almonds, pecans, cashews, walnuts, filberts, Brazil and pistachio nuts. Cashews, almonds and pecans are peanut's biggest competitors. Coconut, however, is also an important ingredient in the candy market.

Cashew nuts are all imported. In fiscal year 1972 the U.S. importedabout 105 million pounds [16]. Prices are not readily available but import data suggest a price of 60 cents per pound, shelled basis, at exporting country ports. Cashew prices at export ports were relatively stable from 1969 to 1972.

Fiscal year Cents per pound 1969 56.7 1970 56.4 1971 59.6 1972 60.6

Almond prices also have been relatively stable, Table 18. In contrast, pecan prices have been quite variable, ranging from 18 to 42 cents per poundduri ng 1960 to 1972.. Because of the pr; ce increases and i nstabi 1 i ty, one large candy manufacturer reported completely dropping pecans from their product lines.

Prices for U.S. No.1 IS and for Split Peanuts at Sheller Level

Sheller prices for No. lis and U.S. splits are very similar among typesof peanuts and areas of production, Table 19. Southwest Spanish and Southeast Spanish season average prices were essentially equal during 1965-66 to 1971-72 while Runner No.1 prices were only slightly higher, if at all, than Spanish No. lis in recent years. Shelled medium Virginia peanuts sell for significantly more than Spanish and Runner types. Season average

Figure 3. Oil prices per pound for soybeans9 peanuts, corn and cottonseed, calendar year, 1960-72.

¢/lb.

20

15

10

5

()

()

,,,,...0_.:..::_0\ /·--= ..... peanute' .... -1 • 0 0,/'

• "\ °corn'J" o 0 '/

• \ . x• o)t. ./ /\• .._0 _ - 7'":-... ' ' fJ/ ",... )l. '::'" .--, / '" • .... /'"I) ......... ,,,/, .... ,.'_ x: \

....... \::1./ .' / ~ 0 .... ;;::'7'-, /

/ K .',' ~.""/" ~

/ .......

Je- _~ '0' .)(. / \/ ,,/' /~~ '-" "cottonseed ...

}II: .f::>soyA

o 60 62 64 66 68 70 72

calendar year

Source: U.S.D.A., Fats and Oils Situation, FOS-266, February 1973.

45

Tab1 e 18. Pr; ces rece; ved by growers: pecans, peanuts and almonds, 1960-73.

Year Pecans Peanuts Almonds all improved seedling

cents per 1 b .

1960 31.0 34.1 28.7 10.0 26.3

1961 18.1 19.5 16.2 10.9 28.0

1962 35.2 39.0 31.0 11.0 32.7

1963 18.4 18.7 17.8 11.2 29.6

1964 22.0 27.5 20.4 11.2 31.5

1965 17.9 20.3 15.6 11.4 30.8

1966 28.9 31.7 26.0 11.3 30.5

1967 33.6 37.7 30.4 11.4 29.1

1968 37.5 42.3 32.8 11.9 29.8

1969 29.8 31.7 26.9 12.3 30.3

1970 39.1 42.1 35.6 12.8 32.3

1971 33.0 35.8 29.1 13.6 32.5

1972 42.0 46.8 37.4 14.3

1973 15.5

Source: U.S.D.A., The Fruit Situation, issues TFS-162 and 186, Feb. 67 and 73, respectively.

Table 19. Season average prices of cleaned and shelled peanuts by major shipping regions, 1965-72 crop year.

Crop Virginia Southeast shelled Southwest year Cleaned Shelled Runners Spanish Span; sh Valencia

fancy. medium No. 1 U.S. Spl its No. 1 U.S. Splits No. 1 U.S. Spl; ts unshelled

cents per lb.

1965 19 7/8 20 1/8 19 1/4 18 1/2 19 1/4 18 1/2 19 1/4 18 1/2 17 5/8

1966 21 22 7/8 19 1/2 18 5/8 19 1/8 18 5/8 19 1/8 18 5/8 18

~1967 19 1/2 24 3/4 20 1/2 18 1/2 20 3/4 18 5/8 19 5/8 18 1/2 18 7/8 0"1

1968 21 1/8 25 3/8 21 5/8 19 1/2 21 1/8 18 3/8 21 1/4 19 1/4 19 1/2

1969 20 5/8 23 3/4 22 20 1/4 21 7/8 20 1/2 22 20 1/2 20

1970 21 1/8 22 3/4 21 5/8 21 5/8 21 1/2 21 1/8 21 3/4 21 1/4 20 5/8

1971 23 1/8 26 3/8 23 3/8 22 5/8 23 3/8 22 7/8 23 3/8 23 21 3/4

1972 23 7/8 29 7/8 24 3/8 23 1/4 24 3/8 23 3/4 24 1/2 23 1/2 22

Source: U.S.D.A., Peanut Market News - Weekly Report, April 14, 1971, Vol. LIII, No. 15 and Vol. LVI, No. 16, April 17, 1974, Agr. Marketing Services, Washington, D.C.

47

prices for Runners No.1 and splits were reported as being the same in crop year 1970. Southwest Spanish splits and No. l's have been reported as equal in price in some months; e.9., March, April, May and July of 1971 and April of 1972 (Appendix Table Cl).

Grade Outturn and Prices per Ton

Average peanut outturns per ton for 1967-69, the only period for which these figures are available, are shown in Appendix Table C2. Southeast Spanish yielded more jumbos and No. l's than did Southwest Spanish. Also, note that a large number of Runners were sold with splits.

Farmers Stock Price Based on Crushing and Export

What price could U.S. peanut producers expect under recent domestic oil and meal and world edible export prices? November 1973 vegetable oil prices were high relative to previous periods. The peanut oil price was 24 cents per pound (crude, Southeast locations) and peanut meal was $140.00 per ton (Peanut Market News, November 7, 1973). Unofficial sources indicated that U.S. edible peanuts were selling for 20 to 21 cents per pound c.i.f. European ports in the spring of 1973, which is equivalent to 15 to 16.5 cents bids at U.S. ports. Exporters suggest that only about 800 pounds per ton of gross farmers' stock will meet current U.S. exportrequirements, leaving 700 pounds oil stock and 500 pounds of hulls and foreign material. Thus, 800 pounds will be exported at the 20 cents per pound c.i.f. European port and the 700 pounds crushed for domestic oil and meal. Disregarding the value of the hulls, the expected farmers' stock price can be computed as follows.

Price for crushing

Yield* Price/"lb. Product

oil meal

42% 56%

x x

24¢ 7¢

= =

10.08¢ 3.92¢

crushing price 14.00¢

*of shelled peanuts

Price for ex~ort edibles

20¢ - 2.0¢ (freight, insurance) = 18.0¢ at sheller location in U. S.

48

Value of peanuts (shelled)

0; 1 and meal 700 lbs. x 14.0¢/lb. = $ 98.00 export 800 lbs. x l8.0¢/lb. = 144.00

$242.00 per 1,500 lbs.

or 16.13 cents per lb. shelled which is equivalent to

12.1 cents per lb. farmers stock

Subtracti ng a process oj ng cost of 1 cent from the farmers' stock price of 12.1 cents suggests a net farm price of approximately 11 cents. That is 3.25 cents below the 14.25 cents support level of 1972-73, but still above estimated costs per pound in all production areas (Appendix B). However, 1973 oil, meal and edible export prices were significantly higher than has historically been the case.

Peanut oil and meal prices were such that a computed farmers' stock price of 9.5 cents is obtained from these two markets alone. While a 10 or 11 cent farmers' stock price is not preferred to 16.4 cents, it is an improvement over the 6 and 7 cent crushing prices which prevailed during the latter 1960's. The foregoing example did not include any peanuts for domestic edible us

market development potentials for southwestern peanuts...

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