In December, 1998 USDA announced a 1% increase in peanut quota for 1999. The quota will be 1.18 million tons compared to 1.167 million tons last year. This quota increase appears well in-line with current demand trends and should result in adequate, but not burdensome supply.

Through December, shelled peanut consumption is running 1.1% above the same period a year ago. Consumption of in-shell peanuts (roasting stock), however, is currently 23% behind last year. In total, when you combine shelled and in-shell use, consumption for the period August-December was down 2% from the same period a year earlier.

Looking more closely at the in-shell market, candy and snacks continue to be the bright spot- up 13% and 12% respectively. After an increase last year, thus far peanut butter continues to be somewhat of a concern. Use of peanuts in peanut butter is currently running 8½% below last year's pace. Despite a few "caution flags", few peanut farmers will argue with an increase in quota. Peanut consumption, however, still has a long row to hoe to get back to the levels of the late '80's and early '90's. Of course, part of the market has been lost permanently to imports.

An increase in peanut acreage (perhaps 10% or more) is expected in 1999. The price outlook for all of Georgia's other major row crops does not look good. Also, peanut yields in 1998 did very well compared to other crops despite drought conditions. Farmers may find additional peanuts competitive with other crops at current price levels.

Given the lack of profit in other crops, the potential exist that the demand for peanut quota pounds will be even higher than normal. This could lead to some inflation in lease rates. Growers are urged to budget and plan carefully.

For additionals, again given the lack of profitability in other crops, the temptation may be to overplant. We have seen a trend toward increased use of the buyback option on additionals. This has offered a better than average price for the grower. Export markets have been soft, however, and with a potential increase in acreage, growers cannot be guaranteed a good price ($350/ton or better) outside the buyback option. Again, growers are urged to budget cost carefully and evaluate how additionals compare to other crops under at various prices for additionals based on expected contract prices or other marketing scheme such as the buyback option.

Thus far this 1998/99 marketing year, over 200,000 tons of additional peanuts have been converted to quota through the buyback. That is equal to 17% of the '98 quota. Generally, buybacks are a win-win situation- the grower gets a better than average price and the user gets a peanut for less than the quota support price. Surprisingly 100,000+ tons of buybacks for 3 consecutive years has had no negative impact on CCC loan. It does question, however, what quota could be if not for buybacks.

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