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Peanut Predicament

March 14, 2009
By: Sara Schafer, Farm Journal Media Business and Crops Editor
 
 
Of all the management risk factors, those you can't control are the most worrisome. Peanut farmers learned this all too well in January when a peanut butter salmonella outbreak sickened more than 500 people and resulted in several deaths. Recalls emptied store shelves of many peanut products and created indecision for peanut growers.

"It's adding uncertainty to a year that was already uncertain for peanuts,” says Nathan Smith, University of Georgia Extension ag economist.

Investigators with the Food and Drug Administration identified Peanut Corporation of America, in Blakely, Ga., as the sole culprit in the salmonella occurrence. Though the company's peanut butter and paste output is relatively small, it supplied several makers of crackers, cookies, cereal, candy and ice cream, as well as pet food. Peanut demand dropped overnight as consu-mers backed off purchases.

This means that stocks of peanuts remain even higher than anticipated, cutting income potential for farmers. Peanut farmers picked a record crop in 2008. U.S. acreage jumped 25%, compared with the previous year. National yield broke the record at 3,416 lb. per acre, 257 lb. more than the old top mark, increasing production 40% from 2007. In 2008, a relatively compact area in Georgia, Alabama and Florida planted 1.035 million acres of peanuts, about two-thirds of the national crop.

"Farmers are trying to figure out what to do. They were already looking at trimming acreage. Stocks were high. Prices were already significantly lower than last year. Contracts have not been offered as of late January, which is unusual. The salmonella situation is having an impact on the industry,” says Don Koehler, executive director of the Georgia Peanut Commission.

Add that to uncertainty about prices for corn, soybeans and cotton as well as crop inputs and some farmers still have questions about crop acreages even as they prepare planters to roll. Others say they're committed to crop rotations and will likely stick with them despite the marketing dilemma.

"Personally, we're going to change very little this year,” says Allen Whitehead, a farmer near Ashburn, Ga.

"Rotating peanuts with cotton and corn works very well for us. There may be some variation, and that depends more on the value of cotton and corn than peanuts. It's all about the relationship in price between those three commodities. Will we have a major shift on our farm? No,” he adds.

Peanuts have long been the major crop on the farm Whitehead owns with his brother, Jerry. For that reason, they are unlikely to be enticed into planting many soybean acres since both soybeans and peanuts are legumes and host the same disease complex.

"We focus on peanuts. We planted a lot of them in 2008. The overall crop was good and high-quality. Peanuts were good to us in 2008,” Whitehead says.

Tough questions remain.
Everything about the 2009 growing season remains questionable, however, and the recent salmonella outbreak just magnifies the problems that the peanut industry is facing.

"It's all caused by this one plant, one small processor that probably accounts for less than 1% of the industry's production, possibly less. They were a poor performer if they weren't a bad actor. We certainly don't need that kind of thing causing us grief,” Koehler says.

The peanut industry successfully dealt with a February 2007 salmonella problem in a ConAgra plant located in Sylvester, Ga. That situation was remedied fairly quickly without significant market impact. It's anybody's guess how long the effect of this latest outbreak will last.

"We have to press to build consumer confidence back in our product. We have a safe, healthy, wholesome product and have to determine the right tack to take. It's all about timing. At some point in time, we've got to be proactive,” Koehler says.


You can e-mail Charles Johnson at cjohnson@farmjournal.com.

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FEATURED IN: Farm Journal - March 2009

 
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