Two crop years into the new farm bill, growers, shellers, manufacturers and all segments of the peanut industry are finding that it is anything but "business as usual". Due to the large (18%) quota reduction in 1996 and the elimination of undermarketing provisions (carry-forward of unproduced quota), supply and demand are now in much closer balance. Furthermore, if quota is set correctly by USDA, relatively tight supplies can be expected to be the norm. Tight and uncertain quota supplies can help explain the marked increase in use of "buybacks" last year and again this year. Approximately 114,000 tons of additionals from the 1996 crop entered the quota trade as buybacks and the amount could be as high as 100,000 tons this year.

Second, there is at least early evidence that peanut yields may be improving. This is perhaps due to lower peanut acreage and improved rotations, increased proportion of irrigated acres, higher-yielding varieties, and improved disease controls. Growers will plan carefully to avoid overproduction.

Finally, with disposition of quota from out-of-state owners, limited across-county-line spring transfer, and unlimited fall transfer within a state, marketings could now be near 100% of the available quota compared to 95% or less historically. USDA may wish to study marketings carefully and adjust the quota poundage accordingly. Typically, non-delivery is factored in when the national quota poundage is set to meet the demand for the U.S. edible market.

The 1997 U.S. crop is currently forecast at 1.83 million tons but could be reduced from this number due to drought and lower than expected grades. Quota marketings (for edible and seed needs) are expected to be no more than 1.2 million tons plus 100,000 tons of buybacks. This compares to a total expected use (excluding use of imports) of about 1.1 million tons.

The contract deadline for additionals has passed. Growers with uncontracted additionals now must place the additionals in CCC loan or fall lease unproduced quota pounds from another farm. Contract prices for quota are currently about $650 per ton. Leasing for 10 cents/lb would return $450 per ton. Growers should compare this to the prospects available from loan.

Back to Peanut Outlook