U.S. expects smallest peanut crop in 91 years

Published 5:54 pm Wednesday, July 26, 2006

U.S. peanut farmers, responding to low prices and higher production costs and now hit by a drought, are expected to produce their smallest crop since 1915, but there still should be enough to keep consumers supplied with jars of peanut butter and nutty chocolates without significant price increases.

Large peanut crops in 2004 and 2005 created a surplus that depressed spring contract offers, prompting farmers to reduce their peanut acreage, while increasing the amount of land devoted to other crops, such as cotton.

Then dry weather set in, threatening to make an already scaled-back peanut crop even smaller.

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“There are two simple reasons: economics and drought,” said Dallas Hartzog, a peanut agronomist at Wiregrass Research and Extension Center in Headland, Ala. “The inflationary spiral of imputs has caught up with the peanut farmer. Since 2002, they’ve been essentially selling peanuts at about a level price of approximately $355 a ton, while imput costs have skyrocketed.”

U.S. peanut acreage dropped to an estimated 1.3 million acres this year, from about 1.7 million last year — the second largest peanut crop on record, according to the Agriculture Department.

The large supply going into 2006, plus low prices and spiraling costs for fuel, fertilizers and pesticides provided fewer incentives for planting peanuts, agriculture officials said.

As a result, growers in Alabama, Florida, Georgia, Mississippi and South Carolina planted 22 percent less than last year, growers in Virginia and North Carolina planted 18 percent less and growers in New Mexico, Oklahoma and Texas planted 20 percent less.

A drought is plaguing the crop throughout most of the peanut belt, with Texas, Oklahoma, Alabama reporting very short soil moisture in more than half of the fields. Forty-four percent of Georgia’s fields also have reported very short soil moisture.

Experts say peanuts have a potential to rebound if they receive adequate rainfall in August and early September.

“Our crop right now is struggling,” said John Beasley, a University of Georgia peanut agronomist. “But there’s still time for this to turn around.”

Georgia Agricultural Commissioner Tommy Irvin has asked Gov. Sonny Perdue to request a disaster declaration from the Agriculture Department, which would provide low-interest emergency loans to the state’s drought-stricken farmers. However, in previous disasters, farmers have said the low-interest loans have limited value because they had already maxed out their debt load.

Joe Boddiford, a Screven County peanut farmer and member of the Georgia Peanut Commission, said he’s running his irrigation systems around the clock and staying up at all hours of the day or night to repair them.

The diesel engines that run his pumps burn $16,000 worth of fuel every 10 days, he said.

“That gets discouraging,” he said.

Armond Morris, the peanut commission’s chairman, said irrigation ponds that have always had enough water are running dry and farmers and rural homeowners are having to dig their wells deeper to continue drawing water from the aquifers.

“It’s an awful situation,” said Morris, who farms in south-central Georgia’s Irwin County. “It’s so sad to think that all this irrigation water and all this high-priced fuel is going to take any profits that any farmer could hope to have.”

Tyron Spearman, who publishes “The Peanut Market News,” an industry newsletter, predicts the short crop and growing concern about the drought will help reduce the huge stock of peanuts — 800,000 tons earlier this year — and eventually equalize supply and demand.

Drought concerns have already sparked a recent flurry of buying, including 123,000 tons sold last week, he said.

By helping to reduce the surplus, the drought also could put the government peanut program in a more favorable position when Washington lawmakers began drafting the new farm bill next year, Spearman said.

The program guarantees growers $355 per ton. Farmers who can’t sell for that amount can turn them over to the government. Agriculture officials then have nine months to sell them and if they don’t, the peanuts are crushed for oil, at considerable cost to the government.

“I think the smaller crop, the smaller acreage and now the drought crop are going to save the peanut program by using up the surplus,” Spearman said. “The government was fixing to take a beating, but along comes the drought and we are buying them at a record pace.”