Peanut growers, facing a glut, will have to decide how much to plant in 2016 after record bumper and carryover crops last year.
Many farmers shifted to peanuts when cotton prices fell in 2011, due to the higher prices and the Farm Bill’s safety net for the nut crop. But now there’s a glut, lower prices and looming storage shortages.
“The main (market) factors are all coming downward,” said Steve Brown, executive director of the Peanut Foundation.
Even so, growers are expected to plant as much as they did last year, according to industry officials.
The reason is simple economics. Unlike many crops right now, the yield on peanuts is good enough to break even. In 2015, peanut farmers planted 1.625 million acres of peanuts, 20% more than the year before, according to a report by the National Center for Peanut Competitiveness.
Peanut growers will begin planting after mid-April in Florida, Georgia, Alabama, South Carolina and Arkansas if the soil temperatures are warm enough. Most of the peanut planting will take place in May.
“The big question for 2016 is how many acres will be planted,” said Nathaniel B. Smith, professor and extension economist at Clemson University in Clemson, S.C.
Low prices are set to continue for the 2016 crop. “Consumption is growing, but not at a pace that can keep up with the recent increase in production,” he noted.
Peanuts stocks are expected to be close to 1.44 million tons by August 1, 2016, up from 1.05 million tons in 2015, according to the USDA.
With so many peanuts, finding storage for 2016 crops could be hard.
If growers have trouble finding storage, they might not be able to store their peanuts in a federal license warehouse and participate in the marketing loan program, the Center’s report said.
Top producer Georgia already has about 200,000 additional tons in storage from last year’s crop, thanks to a 24% increase of plantings last year and a high yield per acre, according to the report.
“The main challenges is keeping a rotation and managing risk,” said Smith. “With cotton, corn and soybean prices low, there is not a market incentive to reduce peanut plantings.”
But Smith sees other looming issues looking down the road, including the long-term effects of short rotations, warehouse space and greater financial risk.
“Payment limitations could be an issue for some peanut farmers as prices continue to drop. There is increased risk in growing un-contracted peanuts,” Smith cautioned.