Actual peanut plantings will not be known until the end of June. In March, USDA reported that farmers intended to plant 1.47 million acres-- 3 percent above last year. Of course, plans can and do change due to weather, field conditions, and changes in crop prices.

Assuming for now that these intentions are actually realized, the 1998 US peanut crop could approach 1.77 million tons based on a typical harvest of 98% of acres planted and a US average yield of 2,450 lbs per acre (a little better than the average of the past 5 years). This would be almost the exact same crop size as last year.

The 1998 peanut quota (for domestic edible use and seed) is 1.167 million tons-- up 3% from last year. USDA increased the quota poundage due to improving peanut consumption over the past 2 crop years. In addition to quota, the past 2 crop years approximately 120,000 tons of additionals per year have been diverted to the quota market as "buybacks". In effect, this has added another 10% or so to the USDA established quota.

Assuming that 97% of the quota pounds will be produced and marketed (this is typical) and assuming another relatively heavy year of buybacks, total supplies for edible and seed use could reach 1.23 million tons.

This should be a comfortable but potentially tight supply situation. US food use (unadjusted for imports and exports) was about 1.05 million tons last year. Seed use is typically another 100,000 tons. Thus far during the 1997-98 marketing year, consumption remains at very good levels compared to previous years. To date (August through March) use of shelled peanuts is up 6% from last year. Use in snacks and peanut butter have paced the increase.

The quota side looks to be balanced. There is always the caution and potential for oversupply if use of the buyback option is not kept in check. This has not been a problem the past 2 years, however. Judicious use by shellers on the availability of buyback contracts continues to be needed.

Adjusting for Seg 2's and 3's (typically only about 2% or less of total production) and buybacks, the supply of Seg 1 additionals could reach about 503,000 tons. These are peanuts available for export and crushing. Exports typically are in the neighborhood of only 300-400,000 tons. This year's Argentina crop, however, remains in question. Limited direct information is available but USDA attache and other reports suggest that crop losses have occurred due to persistent wet weather during the harvest period. This could result in reduced quality and a higher than normal percentage of the crop going to the oil/meal market and unavailable for export. This would bode well for U.S. additionals which could be in good supply based on expected plantings and yields.

Uncontracted additionals must be placed in CCC loan or may be converted to quota using the fall lease option. Peanuts (both quota and additionals) not sold from CCC loan must be crushed. Loan additional peanuts have been helped the past several years by tight supplies and high prices in the world oil/meal complex. For example, peanut oil prices f.o.b. southeast mills are currently over 50 cents per lb compared to 40 cents in 1995 and less than 30 cents in 1992.

Based on current price offerings, additional peanuts do not appear attractive when compared to other crop alternatives. One must look at this, however, from within the framework of the entire farm considering resources available, management, and crop rotations. Despite the present downward movement in cotton prices from a year ago, cotton still appears the most profitable crop. Very likely, however, corn acreage still increased this year due it's use of early season resources, rotation benefits, and general bad feelings left over from last years harvest-season disaster with cotton.

Due to unfavorable weather during the prime corn-planting period and possible decline in cotton acreage due to lower prices, peanut acreage may in fact be higher than March intentions. This means more additionals if yields are average or better. At $325 or even $350 per ton, additionals appear to be less attractive than other crops but farmers may plant them anyway due to limited other options late in the season and may try to trim costs where they can. Buybacks at $375 per ton or better would be competitive with corn and soybeans and farmers will certainly be tempted to grab up a buyback option. The use and supply of buybacks can be controlled by continued wise and judicious decisions by shellers.

Don Shurley, Professor and Economist- Cotton and Peanuts

912-386-3512

donshur@uga.cc.uga.edu

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