Why is there Peanut shortage? As of June 2023, there is still a shortage of about 200,000 MT of edible peanuts. This is according to the outlook for the global market for high-quality peanuts. Due to the reduced supply from Argentina, which is predicted to produce fewer splits, smaller kernels, and jumbos, prices are projected to rise. It is a result of the increased demand.
Due to Argentina’s decreased supply, the outlook and condition for the global peanut market in June 2023 still state a shortage of high-quality peanuts.
Due to the problems that Brazilian shippers are still having with aflatoxin and pesticides, buyers are drawn to the U.S.U.S. and India as alternatives. Buyers now have access to the U.S.U.S. as a source of premium peanuts, even if costs are predicted to rise. Let’s take a closer look at the situation in this article.
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Peanut Market Outlook for 2023
In 2022, the amount of peanuts produced in the United States fell due to poorer yields and fewer harvested acres. 1.46 million fewer acres of peanuts were planted nationwide, a decrease of 8%. National yields decreased by 2.7% from 2021 to 4,019 lb per acre. Due to the tomato spotted wilt virus, Georgia, the state that produces the most peanuts, saw yields decline to 4,250 lb. per acre, 200 lb. per acre decrease.
The drought-stricken state of Texas was the biggest contributor to the lower overall yields. It had a 21.6% fall in yield to 2,800 lb. per acre, its lowest level since 2011. In addition, Texas’ planted land lost 25% of its harvest due to the drought. An estimated 2.8 million metric tonnes of peanuts will be produced in the United States, down 12% from 2021.
On the demand side, it is anticipated that fewer people will use peanuts during this marketing year. Mainly because exports are expected to decline by 7%, food, which accounts for most peanut disappearances, is anticipated to increase by 1% in 2021.
There were declines in consumption of peanut snacks, peanut butter, in-shell peanuts, and other edible peanut products during the 2021–2022 marketing year. Despite this fact, there was a 13% increase in the intake of peanut candy.
In the first five months of the 2022–2023 marketing year (August–December), a record amount of peanuts were used to make peanut butter. In comparison to the same time last year, it is up 2.9%. This is important since peanut butter is made from more than half of the peanuts used in cuisine.
At the end of the marketing year, the carryover of peanuts is anticipated to fall by 8% to 1.1 million metric tonnes. Peanut prices are anticipated to stay high. Despite the anticipated decline in peanut stocks, even if variables affecting supply and demand are not the primary drivers of peanut pricing.
The anticipated price is $540 per tonne for the 2022–2023 marketing year, which would be the pinnacle in ten years. This occurs as competition for peanut land and high prices for several alternative crops intensify this Spring.
With fewer peanuts being produced, the 2023 peanut market gets off to an unexpected start. Prices tend to rise whenever there is a shortage or even a rumored shortage. When production reaches its height, the producer of peanuts wants to set the price. The producer seeks to offer a competitively priced, high-quality product. Also, they tend to maintain the same cost of raw materials as their rivals.
As of January 6, 2023, the Federal-State Inspection Service had recorded 2,764,389 metric tonnes as having been examined at peanut-buying sites for the 2022 harvest. That is 416,276 metric tonnes less than the previous season and 121,000 metric tonnes less than the U.S.U.S. projection. This represents a huge 13.1% decline in farmer-stock peanut production.
More than 250,000 tonnes have been bought directly from farmers. They were deemed commercially viable. One million seven hundred thousand more tonnes are stored as loans, with 806,000 of those being considered received.
As cotton prices increased and farmers competed for available land, acreage decreased by 8.5% in 2022. To guarantee enough land was planted, shellers had to pay higher contract rates. Prices were going up, and inflation was out of control. Before prices rose, manufacturers strove to meet their customers’ needs fairly.
Some farmers wait instead of accepting the $500 per tonne price offer. The majority of producers who waited eventually accepted $600 to $650 a tonne, and some even accepted $700. Shelled prices kept increasing. While 2022 was the year to hold off, averaging things out often pays off in the long term. When a lucrative contract is provided, and it has the potential to increase, we can either reserve some of it now or reserve more later. Otherwise, we can join the sheller/farmer pool and ride the market up.
Increase in Price
The farmer’s harvest is over, and the sheller is now busy selling and shelling. Most of the peanuts were sold based on the early farmer-stock contract price of $450 to $500 per tonne.
Before, the price of raw, shelled peanuts for runners climbed from 53 to 55 cents per pound to 62 to 66 cents today. Although most of the peanuts were delivered at lower costs, a supposed shortage drives prices up.
For over a year, producers and buyers will set the prices and divide the profits. Recently, a sheller declared a reward of $22 per tonne, in addition to contracts and additional incentives from irrigation or seed. The farmer will receive an extra $10 per acre from the new ReGeneration cover crop plan.
Sheller and farmer pools should pay an additional premium or bonus over the standard contract terms when shelled prices rise. In the year following the sale of peanuts, co-ops use a different economic method to distribute dividends.
Positive Market Factors
There are a few advantages to the market worth highlighting. Two million five hundred sixty-eight thousand four hundred fifty-three metric tonnes were redeemed by the market loan for the years 2021–2022. Thus entering the market without the need for the government to purchase them. Both the overall and per-person consumption of peanuts are at all-time highs. For fiscal year 2023, the U.S.U.S. House of Representatives Appropriations Committee has approved more than $4 million in funding. This is to reduce aflatoxin in peanuts.
Another positive sign is the acceptance of $2,498,000 in Market Assistance Programme funds for the American Peanut Council. Also, an extra $470,000 for Foreign Market Development is needed to promote peanuts and peanut products in a few key markets in 2023.
The Peanut Institute keeps releasing studies. It demonstrates how eating peanuts lowers blood sugar, protects against certain cancers like colorectal, stomach, pancreatic, and even lung cancer, and increases lifespan. Another benefit is the high caliber of the 2022 harvest.
In terms of food, the United States is a relatively independent nation. We generate much of our food here at home and don’t rely heavily on other nations to feed us. Only approximately 15 percent of the nation’s total food supply is imported.
It’s excellent that we aren’t dependent on other nations to feed ourselves. But this self-reliance can have drawbacks if we cannot produce enough food or cannot import food in large quantities.
In addition, although the bulk of our food is grown here in the United States, we import a lot of pesticides and fertilizers. They are used to help us grow these crops in other nations, such as the European Union and Russia.
The conflict between Ukraine and Russia is currently posing challenges for U.S.U.S. farmers. This is particularly true given the scarcity of fertilizers. U.S.U.S. food production is in difficult circumstances due to the impending fertilizer crisis.
Rice and strawberry shortages, among other recent food shortages, have been influenced by climate change. Modifying agricultural practices can decrease the risk of future food shortages caused by climate-related events. This can be done to withstand extreme weather events better.
Alternative sources of nutrients must be considered when certain foods are limited. For instance, you would want to investigate different grains to maintain a balanced diet amid a rice shortage.