Currently, the peanut market has too many peanuts in the supply chain. Georgia and other peanut producing states experienced an excellent overall production season in 2001. US production was up 30% and Georgia production was up 27% from 2000. Planted acreage was up slightly at 1.543 million acres. The national average yield rose from 2,444 pounds per acre in 2000 to 3,024 pounds per acre in 2001. Georgia was looking at a record yield before harvested acreage was adjusted up in the January report by 35,000 to 512,000 acres. Still, Georgia averaged its second highest yield on record at 3,300 pounds per acre. Georgia's record average yield is 3,375 pounds per acre made in 1984.

Entering the 2001 season, the national quota poundage allotment was kept at 1.18 million tons, the same as in 1999 and 2000. Shelled peanut use has slowly but steadily increased since 1995, primarily due to growing peanut butter usage. The 2000/01 marketing year, however, saw a reversal of trend where domestic shelled peanut use dropped 3.3% from 1999/00. Snack peanut use was down 8.3% and peanut butter use was down 2.4%. Peanut candy remained steady. Exports were also down by nearly a third from the previous year. Increased foreign competition and the strong dollar worked against US exports. The combination of increased supply and slowing demand has created a situation of too many peanuts in the pipeline.

Further confounding the market situation, talk of a new farm bill encouraged buyers to minimize inventory in order to take advantage of lower prices in the event a new peanut program is implemented for the 2002 crop season. Under the new peanut program being proposed, quota would be eliminated thereby lowering the price of farmer stock peanuts. Rather than carry $610 per ton peanuts into the 2002 marketing season, shellers cut back on 2001 quota purchases leading to about 20% of the national quota going into the CCC loan. A third of the quota in the Southeast, 243,500 tons, is in the GFA quota loan pool. This much quota in the loan creates almost a certain loss for Southeast producers. The loss could range between $140 and $180 per ton depending on the level of purchases from the quota and additional loan pools this marketing season.

The No Net Cost provision in the peanut program, established by the 1996 Farm Bill, requires the losses to be made up through marketing assessments on quota the following crop season. Unfortunately, the 1999 loss in the Southeast has not been totally paid. The marketing assessments from 2001 and 2002 were to go towards paying off the earlier loss. Without a new farm bill in 2002, peanut growers will operate under the current quota system and face a potential marketing assessment that would virtually eliminate any return to quota. As a result, growers, bankers, landowners and quota holders are struggling with how to prepare for this coming season. The uncertainty of which peanut program will be in place for the 2002 crop season leads to the question: what will quota and land rent be worth? What price should be used for making operating loans? Should you go ahead and pay rent for land and quota? Some are waiting to see how the farm bill comes out while others are continuing with rental agreements contingent upon renegotiations if a new farm bill is passed. All in all, the peanut industry is in limbo as it faces unprecedented change and uncertainty. Quite a change for a commodity program that has been regarded as stable and effective for nearly 70 years.

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