S1E4: 2024 Peanut Situation & Outlook
Today we hear a presentation from Clemson Agricultural Economist, Nathan Smith, as he discussed the market outlook for peanuts in 2024 at the Feb 22nd extension meeting in Allendale, SC.
Date: Feb 22, 2024
Location: Allendale Extension Office
Southern Ag Today
SC AgriWellness
Production Credits:
Introduction: Hannah Mikell
Producer: Kevin Royal
Editor: Kayla Peters
Technical: Trey McAlhany
Music Composer: R.M Davis
Special Thanks:
Transcript:
[Hannah Mikell]
Welcome, it's Cultivate Ag Podcast. I'm your host, Hannah Mikell, Clemson Extension agronomy agent. Dr. Nathan Smith, Extension Ag Economist, will give us the 2024 peanut situation and market outlook. I hope you enjoy.
[Nathan Smith]
I'm just going to spend a few minutes talking about the peanut market outlook. But last year, the 23 crop option contracts were up in the southeast. [We] planted more acres than in 2022. And so, we planted total in the US about 1.
645 million acres, just under 14% increase total. That's the highest since 2017. Use for the ë22 crop, which went through July in terms of the marketing year, was actually down for peanuts overall, but is projected to go back up this for the ë23 crop to over 3 million tons.
That's largely due to peanut butter. Obviously with the high inflation in food prices, peanut butter is a cheap source of protein and we generally see that happen. I was expecting a bigger crop in 2023.
Forecast exports, a little bit of improvement in there too, is forecast. As y'all know, the crop was running late last year in the southeast, probably about two weeks behind. It seemed like everybody because of the cool wet spring in terms of maturity.
And that brought grades down overall, particularly the early planted ones. In the National Peanut Buying Points meeting this past weekend, T. E.
Moye with Federal-State Inspection was on the program and he said quality overall was good for the peanuts except for those areas that were really hit hard with the drought. And that was Alabama, southern part, southwest Alabama, southeast Alabama and southwest parts of Georgia had a little bit higher aflatox[in]. An overview of the current situation, South Carolina, we ended up with just about a two ton crop again, which is three years in a row and that's really good for us compared to where we were before.
I mean, look at where the increase in acres came. Texas actually increased their acres from 157 to 225 in terms of planted acres last year, but we were up about 6,000 in South Carolina in terms of planted acres. Again, we had the highest planted acres since ë20.
We're watching what's going to happen in peanuts this year in terms of planted acres. The recent run in cotton has helped on the rotation and maybe will keep us kind of where we are now. 4,070 pounds was the yield in Georgia, so we were right there with Georgia in terms of yield, but again, Georgia is 50% irrigated roughly.
They were down this year, but still had about half of the crop at a little over 1. 5 million tons for a standard 3-million-ton crop for the US on about 1. 57 million harvested acres and the yield was 3,742.
So again, this year the yield was down, which kept us just a little bit above 3 million tons. When you look at the big picture, we did rebound some on production. We're basically between the use and the production forecast, we're pretty much produced about as much as forecasted to be consumed in 2023-2024 marketing year.
So, carryover should be about the same and actually showing a little bit decrease over last year. So generally, when we see stocks supply not go up and stocks at a lower level, that's usually positive for prices. If you look at how that compares over the previous years, we've had them down as low as 500,000 tons in carryover, but if we got to that now, they would be a little bit panicked because of the number of tons we're processing now.
We need probably at least 750,000 tons, 800,000 tons carryover to make sure the shelling plants operate the whole marketing year before the new crop comes on. So, they're generally wanting to have three monthsí supply in the supply chain or the stocks. I should have mentioned exports.
This green part - USDA is actually showing a little bit increase in exports and that's mainly our neighbors to the north and south, Mexico and Canada, but we did get some of the European market a little bit this past year with issues in Argentina. Mexico, and this was a year before, China was actually a big buyer too, but our main buyers consistently are Mexico, Canada, and EU for the Virginia type peanuts. As far as use for the ë23 crop, again, I was showing peanut butter up.
I think it's actually maybe a little bit stronger than that now, 2% in terms of total use from August to about the end of 2023. Total use, hopefully, if that trend continues, I think we'll see an increase in total use in peanuts. Looking going forward for 2024 crop, these first three columns are the supply and demand for peanuts, and you can see we were projected to end this year a little bit under a million tons carryover, and if we ended up with the same, using an expected year of 4,100 pounds and planted the same acres, about 1.
65 million acres, we'd end up about just under 3. 3 million ton crop, and if we went with the same use, that would increase our carryover to about 1. 3 million tons, but I think we might be up a little bit.
If we had a lower yield, that would definitely get us into the range where the market would be really concerned about having enough supply. If we went 2% higher use, with those assumptions of 4,100 pounds for the US and same planted acres, then we'd still shrink the stocks a little bit, but then if we jump up 4% in acres and the 2% use, we'd be at that 1. 3-million-ton carryover.
Some contracts came out in Georgia, some early contracts for hi-oleic in the $550 to $525 range per ton on a limited basis. That's kind of what was my feeling, is prices would come out about the same or a little bit lower in the beginning. As far as prices for PLC, payment on peanuts, again, $535 is the reference price for peanuts, it's that red line, and last year the 2022 crop came in at $536, so no PLC payment.
FSA is projecting it at $550 right now, although recent prices have been lower. That total number might come down, but I think with where prices were, we'll be closer to $550 than $535 and not likely a PLC payment for the ë23 crop. So, the outlook basically is, we had a smaller crop than expected for the US as a whole, and could it shrink a little bit more coming out of the warehouses because of some areas that had the aflatoxin, and will that affect some warehouses that we'll see as they're being bailed out?
I'm not hearing anything about that right now, but we're looking at basically a similar carryover if we don't increase acres too much in 2024. And hopefully we'll be up maybe 2% or more in food use, and that'll help with prices because shell prices have actually are higher than last year and have remained stable compared to last year. So far, they haven't come down any, and the buyers are pretty quiet.
I guess they're waiting to see what gets planted in terms of trying to cover future needs. That's kind of the overall market outlook as far as budget considerations. When we're looking at the fertilizer prices coming out of AMS, Ag Marketing Service, in South Carolina, about a month ago, they were down compared to January of 2023, ranging from 16% to almost 30% down from the previous year.
Diesel was down about 17. 5%, but now it's about even for where it was last year. That 17.
5% was in January. But last week, this line here, everything above it, inputs are higher than the previous year projection. This is USDA, came out with their outlook form a week ago, and the only thing that was showing decrease was fuel and rent, net rent on land.
Basically, the cost situation, that's what we did in the budget. We increased some of the chemical prices and adjusted the fuel and fertilizer, left seed the same on peanuts. They're not sure what they're going to do.
When you look at the fertilizer prices, while they were down from a year ago, this was the prices in January a year ago, and this was the prices in 2024. We're still well above where they were two years ago, or roughly three years ago, in ë19, and before the increase in ë20. You notice things were a lot more stable back then in terms of where prices were.
We adjusted the budgets with that. That helped a little bit on the projections for corn and cotton, but the prices are what we're really dealing with in 2024. You can see where crop insurance prices were.
They have established from January 15 to February 15, about $4. 70 a bushel on corn, $0. 80 cotton, $4.
77 grain soil on $536 on peanuts, and $600 on Virginia type peanuts, and $12 on soybeans. Those are all down except for peanuts compared to the previous year. So, in the budgets, we were kind of using those prices and looking at cost and returns between corn, cotton, peanuts, and soybeans.
For our non-irrigated yields, we used 125 bushels, 900 pound cotton, 3,800 pounds on peanuts here, and 35 bushel soybeans. At the prices, $4. 80 on corn with a $0.
50 basis, $0. 80 on cotton, $500 a ton at the time on peanuts, and $12 on soybeans. Subtracting off the cost, we ended up with about $147 an acre above the variable cost, or direct cost, the operating cost on corn and cotton, and about $300 an acre on peanuts, and about $70, $76 on soybeans.
This was in January. In February, we adjusted that a little bit. Cotton went up to $0.
84, $0. 85, so we just, what if cotton ends up in that range, and adjusted a little bit down for corn at about $140 on corn. We made a couple adjustments, too, on cost on peanuts.
Basically, cotton and peanuts about the same at those yields and prices. Soybeans falling behind that. I'm not sure anything's really saying change your rotation any.
I think maybe corn might be down a little bit in South Carolina this year. Maybe lose a few acres. This isn't saying that things are totally profitable.
This doesn't include fixed costs, land rent, and your overhead in that fixed cost, whether its principal payments or depreciation on your equipment. This is basically looking at what you have left over to pay for rent. When you look at the returns to direct costs and look at what the operating profit margin is, basically the difference between the total revenue, the price and yield, minus those direct costs or variable costs, that's your efficiency.
And comparing the different crops, corn was about 22%, cotton about 21%, peanuts a little bit higher, and then you've got soybeans falling behind. You say, well, what does that mean, 20%? I got 20% to pay for that other.
Which crop is more financially efficient based on being able to cover those fixed costs that you have on equipment and overhead and stuff? Well, there's not really a lot of difference in that scenario in terms of that, but generally going back and looking at data for the Midwest for corn and soybean, they're up around 25% to 28% efficiency or operating profit margin. In South Carolina, some of the farms we work with, the last couple of years have been more around 19%, 20%.
And what we've done in the budgets, and you can pull these off the agronomy or agribusiness team websites or ask Joe Rogan to get a copy of them. They're downloadable and the budgets contain these tables. What prices do you need to be at 25% operating profit margin?
That's what these are showing, $4. 60 on corn, about . 83 cent on cotton, $500 a ton on peanuts, and I think a little bit, yeah, 1133 on soybeans.
That's how to think about and use that numbers there and looking at what prices you might need and looking at when to try to lock in that higher ratio on those crops or your planting decisions. On irrigated, we use 210 bushel corn, 1250 pound cotton, 4800 pound peanuts, 65 bushel beans at the same prices. And again, when you compare corn, it shows a little bit better return than cotton at those prices and yields, but peanuts still higher, followed by soybeans.
So, changing what your prices are or your yields when comparing these scenarios, when we updated the prices to the higher, if we were able to get . 85 cent cotton, that brings cotton up there with, almost with peanuts, and corn gave up a little bit with the more recent corn prices in February versus January. One thing that you see with the higher yields on irrigated land is that you get a higher operating profit margin just because of the higher yields and compared to the cost.
So, you're looking at about 30, yeah, 33 percent on corn, 40 percent on cotton, 40 percent on peanuts, and 40, a little bit about the same on soybeans. So, you see irrigated gives you a little bit, but you got more fixed costs too with the irrigation to pay for on the irrigation systems. But that's kind of how that compares irrigated to non-irrigated.
So here were our yields for corn last year, 115 bushels per acre, 912 pounds on cotton, again 4,050 on peanuts, and we had a record yield on 39 bushels on soybeans last year, and then 58 bushels on wheat. That's why we raised some of the yields in the budgets in terms of where we are. Hopefully we can keep producing those types of yields in the future.
As far as acres, we were at 365,000 planted acres of corn, 210,000 on cotton, and 77,000 on peanuts, and 395,000 on soybeans. So, we could see some of those corn acres possibly going to cotton or peanuts potentially, but I don't think we'll see major shifts in terms of where we'll be. Most of the surveys said we would be about the same on cotton earlier in the year.
It kind of depends on where prices will go with cotton. Thank you to our folks here in the room and out in the state for helping on these budgets, specialists and agents, and the folks that helped us with prices as far as input dealers and so forth. One last thing, I try to put this up at every meeting - South Carolina Farm Bureau and Department of Ag and Clemson Extension all partnered with South Carolina Agri-Wellness.
That's out there for farm stress. Free to just mention that you're a farmer, and it's a free service. Southern Ag Today Daily, it's folks like myself, ag economists from around the South, writing a daily article Monday through Friday.
Go to southernagtoday.org to subscribe. It's about a page a day.
It's not a long article, but you've got our crop marketing, livestock marketing, farm management and policy, and then just special topics on the five days of the week.
[Hannah Mikell]
Hey Nathan, thanks. That was some pretty good insight on the 2024 peanut situation and market outlook.
Don't forget to check out his last slide on the southernagtoday. org or for more valuable information, visit the SC Agri-Wellness for support and resources in our agriculture community. Thank you for joining us on Cultivate Ag, where we take you from the classroom to the cab.
Hey, stay tuned for our next episode and until then, keep it growing.