Author: Wendiam Sawadgo

As we proceed through the 2023/2024 marketing year, crop prices are expected to decrease generally compared to the previous marketing year. While prices of corn, cotton, soybeans, wheat, sorghum, and rice are expected to drop this marketing year, peanut prices are expected to increase to a marketing-year average of $550 per ton, reaching their highest level in over a decade according to the USDA (Figure 1). This would be the fourth straight year of increased peanut prices and a $14 per ton increase from 2022/2023. While the other crops are seeing increases in their ending stocks, peanut stocks look to remain stable. 

Figure 1: Peanut Prices by Marketing Year

On the production side, yields are projected at 3,740 lb. per acre, which would mark the lowest level since 2016. This would fall well below the 10-year average of 3,942 lb. per acre. Severe drought in 2023 across the predominant peanut-producing regions of Alabama and Florida — two of the top-four peanut-producing states— has led to forecasted 24% and 26% yield decreases compared to 2023 for those two states, respectively. This comes in a year that was expected to achieve a significant boost in peanut production, due to a 16% increase in planted acres. Now, peanut production is only projected to increase by 8% over last year and reach 2.99 million tons.

Accompanying the bullish production estimates, peanut demand is also looking strong. This is driven by a 4.5% projected increase in peanut exports and a 3.7% increase in domestic food use. If production and disappearance projections are realized, this would mean carryover at the end of the 2023/24 marketing year would remain almost unchanged at 1.02 million tons, providing support for continued strong peanut prices. 

Figure 2: Peanut Production, Disappearance, and Ending Stocks by Year

Sources:

USDA Economic Research Service. Oil Crops Outlook: November 2023. Available at: https://downloads.usda.library.cornell.edu/usda-esmis/files/j098zb08p/8g84p626f/hx120116v/oiltables.xlsx

USDA. World Agricultural Supply & Demand Estimates: November 2023. Available at: https://www.usda.gov/oce/commodity/wasde/wasde1123.pdf

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Sawadgo, Wendiam. “Why are Peanuts Bucking the Declining Crop Price Trend?” Southern Ag Today 3(49.1). December 4, 2023. Permalink

U.S. cotton is historically in relatively poorer shape this year. According to the USDA Crop Progress report, only 41% of cotton acreage is rated to be in good or excellent condition as of the first week of August, which ranks 5^th worst over the past twenty years. This is driven by Texas – the largest producing cotton state – which has 55% of its acreage in poor or very poor condition. Therefore, it is not a huge surprise that the USDA lowered its cotton production forecast this year. As of the August Crop Production report, U.S. average upland cotton yield for 2023 is projected at just 773 lb. per acre, which if realized would be the fourth lowest yield in the last twenty years. The USDA also forecasts 8.5 million upland cotton acres to be harvested, which would suggest the abandonment rate – or percentage of planted acres that go unharvested – to equal 22%. Let’s look into the accuracy of the USDA’s August cotton acreage and yield forecasts in recent years to further understand where cotton production might end up.

Figure: Final Cotton Yield and Abandonment Rate with August Forecast Errors by Year

a) Final Cotton Yield and August Forecast Error

b) Final Abandonment Rate and August Forecast Error

Where is cotton production likely to end up? The above figure (panel a) shows annual ending cotton yield and the difference between the final yield and the August forecast, or the August forecast error. Cotton yields have been within 10% of the August prediction in fourteen of the past nineteen years, averaging a miss of just 2%. On average, cotton yield has ended up 20.9 lb. per acre higher than what was forecast in August. Abandonment was more difficult to predict, with the average year seeing the abandonment rate two percentage points higher than forecast in August, an 11% miss (panel b). Abandonment rates ended up higher than predicted in fifteen out of nineteen years, meaning that harvested acreage wound up lower than forecast.

Now what can history tell us about where production might end up in 2023? Let’s consider some low- and high-production scenarios from the previous nineteen years. Consider storm-plagued 2020 as a low-production year, which forecast 929 lb. per acre yields and a 24% abandonment rate in August but wound up with 841 lb. per acre and a 33% abandonment rate. As a result, production fell over 3 million bales short of what was forecast. An identical error to 2020 would result in yields 11% lower and an abandonment rate 6 percentage points higher, resulting in 11.0 million bales of production in 2023 (see table below). On the other hand, two years (2005 and 2022) both saw one-percentage point decreases in the abandonment rate and 11% increases in yield over what was forecast, and 2 million bales of unexpected production. A similar scenario this year would result in 15.4 million bales of production. This large range in potential outcomes could lead to additions or reductions to the forecast 2.99 million bale ending stocks, ultimately affecting the 79 cent per lb. marketing year price forecast. However, it is important to note that cotton use would likely be adjusted downward primarily through exports in a low-production scenario which would prevent cotton stocks from cratering.  

Table 2: 2023/24 Cotton Production Scenarios Given Recent Forecast History

	2022/23E	2023/24F
		August WASDE	Low Production	High Production
Planted Acres	13.6	11.1	11.1	11.1
Harvested Acres	7.1	8.5	7.6	8.7
Yield per Harvested Acre (lb. per acre)	942.0	773.0	695.7	858.0
Production (million bales)	14.0	13.7	11.0	15.4

Sources

USDA-NASS. Crop Production. August 11, 2023.  Available at: https://downloads.usda.library.cornell.edu/usda-esmis/files/tm70mv177/2227p6419/w3764r31w/crop0823.pdf

USDA-NASS. Crop Progress. August 7, 2023. Available at: https://downloads.usda.library.cornell.edu/usda-esmis/files/8336h188j/f7624v982/ff366p28b/prog3123.pdfUSDA. World Agricultural Supply and Demand Estimates. August 11, 2023. Available at: https://downloads.usda.library.cornell.edu/usda-esmis/files/3t945q76s/8c97n5538/6w925t710/wasde0823.pdf

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Sawadgo, Wendiam. “How is the Cotton Crop Looking in 2023?” Southern Ag Today 3(34.1). August 21, 2023. Permalink

In 2022, the U.S. had a sizable decrease in peanut acreage, as farmers shifted cropland to more cotton acres across the region. This was likely due to price pressure from other crops around planting time in 2022, most notably cotton. However, with the average peanut price received by farmers projected to reach a ten-year high for the 2022/2023 marketing year – at an estimated $540 per ton – what is peanut acreage expected to look like in 2023?

The USDA projects planted peanut acres to increase by 7%, reaching 1.547 million acres nationwide in 2023 (figure 1).^[i] This increase in projected peanut acreage comes as prices for other crops have dropped. As of April 20^th, December 2023 cotton futures closed at 80.58 cents per lb, which is 40.44 cents per lb less than what December 2022 cotton futures were traded at on the same date last year. The rise in peanut acreage is driven by forecasted increases in two of the three peanut-producing regions – the Southeast and Virginia-Carolina. None of the peanut producing states in these two regions are expected to see declines in planted acreage compared to last year. Georgia is projected to lead the way with 740 thousand planted peanut acres, which would mark an 8% increase from 2022. Conversely, the three peanut-producing states in the Southwest region are all expected to decrease acres planted to the crop in 2023, which has possibly come at the expense of their large increases in wheat acreage this year. 

Figure 1. 2023 U.S. Intended Peanut Planted Acres Compared to Previous Year, by State

Now, how accurate have peanut planted acreage forecasts been in recent years? Over the past decade, the error in peanut projections has been relatively small. The final peanut planted acreage estimate has exceeded the intended planted acres forecast in four out of the last nine years, by an average of 2.2%. For example, peanut planted acreage ended up being 7.7% lower than was predicted in 2022, as shown in figure 2. The accuracy of the intended peanut plantings is similar to those for rice and cotton – two other predominantly Southern crops – which are typically less accurately predicted than nationwide crops, such as corn and soybeans.^[i]

Figure 2. U.S. Peanut Intended Planted Acres vs. Final Estimates, 2019-2023

With peanut prices elevated for last year’s crop, it remains uncertain how increased planted acreage would affect peanut markets moving forward. Last year’s decrease in peanut acreage led to an almost 400-thousand ton drop in peanut production.^[i] While peanut acreage is expected to be above last year’s level, the forecasted mark would fall short of what was planted in 2020 and 2021. Coupled with the lower expected peanut consumption this current marketing year, a bumper crop could see peanut stocks soar and prices decline during the 2023/2024 marketing year, whereas a more moderate crop could see stocks remain at a similar level to where they are currently. In all, combining the projected higher peanut production with the lower competition from other crops, it is likely that peanut contract prices for this year’s crop will decrease.

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^[i] Sawadgo, Wendiam. “2023 Peanut Market Outlook.” Southern Ag Today 3(8.1). February 20, 2023. Permalink

^[i] Biram, Hunter, and William E. Maples. “Key Takeaways and Reliability of the 2023 Prospective Plantings Report.” Southern Ag Today 3(14.1). April 1, 2023. Permalink

^[i] USDA-NASS. Prospective Plantings. March 31, 2023.  Available at: https://downloads.usda.library.cornell.edu/usda-esmis/files/x633f100h/rv044597v/gx41nz573/pspl0323.pdf

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Sawadgo, Wendiam. “Peanut Acreage Projected to Increase in 2023.” Southern Ag Today 3(17.1). April 24, 2023. Permalink

Photo by Marina Leonova: https://www.pexels.com/photo/close-up-shot-of-peanuts-7717463/

U.S. peanut production decreased in 2022, driven by both lower acres harvested and lower yields. Peanut acres planted were down by 8% nationwide, to 1.46 million acres. Yields dropped by 2.7% from 2021 to 4,019 lb. per acre nationwide. Georgia – the largest producing peanut state – saw yields fall to 4,250 lb. per acre, a 200 lb. per acre drop, as its crop was affected by the tomato spotted wilt virus. The main driver of the lower nationwide yields came from drought-stricken Texas, which had a 21.6% decline in yield to 2,800 lb. per acre, its lowest value since 2011. Furthermore, Texas saw 25% of its planted acreage go unharvested due to the drought. Total peanut production in the U.S. is estimated at 2.8 million tons, a 12% decrease from 2021 (orange line in Figure 1). 

On the demand side, peanut use is expected to decline by 4% this marketing year (bars in Figure 1). This is primarily due to a 7% forecasted decrease in exports. Food – which makes up the largest portion of peanut disappearance – is projected to increase by 1% from 2021. A 13% increase in peanut candy consumption kept peanut food use from falling much during the 2021-2022 marketing year, despite decreases in disappearance for peanut snacks, peanut butter, in-shell peanuts, and other edible peanut products. Over the first five months of the 2022-2023 marketing year (August through December), the quantity of peanuts used for peanut butter is at record levels, up 2.9% over the same period last year. This is crucial because over half the peanuts used for food end up as peanut butter. 

Peanut carryover at the end of the marketing year is expected to decrease by 8% to 1.1 million tons. While peanut supply and demand factors are not the main drivers of peanut prices, peanut prices are expected to remain high amid the projected lowered peanut stocks. The expected price for the 2022-2023 marketing year is at $540 per ton, which would be the highest level in ten years. This comes as high prices for several alternative crops boost competition for peanut acreage this Spring.

Figure 1. U.S. Peanut Production, Stocks, and Disappearance by Year

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Photo by Marina Leonova: https://www.pexels.com/photo/close-up-shot-of-peanuts-7717463/

Sawadgo, Wendiam. “2023 Peanut Market Outlook.” Southern Ag Today 3(8.1). February 20, 2023. Permalink

The U.S. has been the world’s fourth-largest peanut producer over the past five years, averaging 3.1 million tons produced annually. Over that time, the U.S. has exported over one-fifth of its total produced peanuts, making it the third-highest exporter of peanuts globally. However, the magnitude of U.S. peanut exports and the quantity sent to its primary export partners have fluctuated year-to-year.

While the main peanut export destinations from the U.S. have been its North American neighbors, Canada and Mexico, China has played an increasing role in recent years. After accounting for just 5% to 19% of U.S. peanut exports during the 2017/18 and 2018/19 marketing years, 2019/20 and 2020/21 saw China increase to receive 43% and 40% of U.S. peanut exports, respectively. In particular, China bought a large portion of in-shell peanuts which were used to produce peanut oil during those high-import years. However, China’s imports of U.S. peanuts dropped during the 2021/22 marketing year as China saw overall imports decrease, and Mexico once again overtook China as the largest importer of U.S. peanuts. Increased opportunities could remain to export lower quality peanuts for oil as has occurred recently. 

U.S. Peanut Exports by Destination and Marketing Year

Now, what should we expect this marketing year? One month into the 2022/23 marketing year, U.S. peanut exports are down 8% relative to the same period last year. While China’s imports of U.S. peanuts might not return to the levels seen in 2019/20 and 2020/21, it is worth mentioning that the USDA projects China to increase its peanut imports during the 2022/23 marketing year by 350 thousand tons over its 2021/22 level. Peanut demand in China had fallen in part because consumers switched to cheaper vegetable oils instead of the more-expensive peanut oil as they cut food expenditures during the COVID-19 pandemic. Another factor at play this year is the drought in China, which has raised concerns over how large their peanut and overall oilseed crop will be at harvest. In addition, insufficient or excess precipitation across different regions in India – a major peanut exporter to China – could subdue yields in a country that already saw decreased planted acreage this marketing year, potentially further reducing its production. These factors could increase opportunities for U.S. peanut exports to China this marketing year.

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Sources:

USDA-FAS. China: Oilseeds and Products Update. September 8, 2022. Available at: https://www.fas.usda.gov/data/china-oilseeds-and-products-update-29

USDA-FAS. Oilseeds: World Markets and Trade. October 12, 2022. Available at: https://www.fas.usda.gov/data/oilseeds-world-markets-and-trade

USDA-FAS. India: Oilseeds and Product Update. September 8, 2022. Available at: https://www.fas.usda.gov/data/india-oilseeds-and-products-update-23

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Sawadgo, Wendiam. “Who’s Buying U.S. Peanuts?“. Southern Ag Today 2(46.1). November 7, 2022. Permalink