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Is Shelled Use of Primary Peanut Products Softening?

The National Peanut Board recently reported that per capita peanut consumption in the U.S. reached an all-time high of 7.9 pounds in 2021 (National Peanut Board, 2021). This is an increase from a record 7.6 pounds per capita in 2020.  Peanut consumption has increased domestically since the beginning of the pandemic led by peanut butter use.  The industry faced challenges of restocking grocery shelves after shoppers emptied them of peanut butter.  The JM Smucker Company reported 7.1% growth in peanut butter consumption in 2020 (JM Smucker Co., 2021). The growth was due to increased consumers working and schooling at home and an increased demand from food banks.  Peanut butter usage on a shelled raw basis was up 2.7% from August 2020 to July 2021 according to the USDA National Agricultural Statistics Service (2021).  This was above the six-year average of 1.93%.  Peanut butter makes up 58.9% of total shelled usage followed by snacks at 20.6%, candy at 17.6% and other uses at 2.95%.

Figure 1. Shelled Peanut Use (Raw Basis) of Primary Peanut Products, 2015-2020 Marketing Years.

Source: USDA/NASS. Available at: https://usda.library.cornell.edu/concern/publications/02870v87z?locale=en

The trends for shelled peanuts used domestically in primary peanut products is shown in Figure 1.  Peanut butter has increased at a rate of 1.9% over the last six years and averaged 2.6% since 2017.  Candy usage has grown at a rate of 2.5% over the last six years and averaged 3.5% since 2017.  Snack usage has remained flat over the same time period.  What about the 2021 crop marketing year beginning August 1, 2021?  The latest data shows usage for the first three months of the marketing year to be below last year by 2.9%.  Peanut butter usage is down 4.3%, candy up 2.7% and snacks down 5.7%.  The data suggest there might be a softening of shelled peanut usage.  The first three months of the marketing year represent old crop peanuts and a larger 2021 crop should start having an impact as we enter 2022.   Consumers have returned to the workplace and children are back in school.  Time will tell if shelled peanut domestic use has softened or if logistic challenges are impacting reporting.

Citations:

JM Smucker Co., (2021) “Peanut Butter and Jelly: The Ultimate Pandemic Comfort Foods”  Press Release.  December 17, 2020. https://www.jmsmucker.com/news-stories/stories/22876.

National Peanut Board, (2021) “Peanut Per Capita Consumption Breaks New Record for Second Year in a Row” Press Release. October 21, 2021,https://www.nationalpeanutboard.org/news/peanut-per-capita-consumption-breaks-new-record-for-second-year-in-row.htm.

USDA National Agricultural Statistics Service, (2021) “Peanut Stocks and Processing” ISSN: 1949-1875, August 27, 2021, https://downloads.usda.library.cornell.edu/usda-esmis/files/02870v87z/41688g448/9593vt44b/pnst0821.pdf.

Smith, Nathan. “Is Shelled Use of Primary Peanut Products Softening?“. Southern Ag Today 2(2.1). January 3, 2022. Permalink

January 3, 2022
More Cattle Placed and Marketed Expected

Against a backdrop of rising cattle and calf prices and falling wholesale beef prices, USDA is to release the final Cattle on Feed report of the year on December 23^rd.  Cattle producers in the South are significant suppliers of feeder cattle throughout the Plains and Corn Belt.

Both feedlot marketings and placements in November 2021 are expected to be about 4.5 percent larger than November 2020.  There was one more slaughter day this November implying slightly lower daily average marketings than last year.  If correct, these marketings would also be larger than in 2019.  While placements this year are expected to be larger than in 2020, if the estimates are correct, they would be fewer than in each November from 2017 to 2019.  Fewer feeder cattle were imported from Mexico during the month while slightly more were imported from Canada.  Placements in the expected range would follow the normal pattern of declining sharply from October’s placements.

The combination of marketings and placements leaves the number of cattle on feed slightly below last year.  On feed inventories typically increase from November to December and the December inventory is often the highest for the year.  December 2021 should be an exception to that with on-feed inventories in February being larger.  If the estimates are correct, this December would be the 6^th consecutive month with fewer cattle on feed than the year before.

Merry Christmas!

Anderson, David. “More Cattle Placed and Marketed Expected.” Southern Ag Today 1(52.2). December 21, 2021. Permalink

December 21, 2021
Getting to Know FLOID

Many associate the phrase “breakeven” as the point where revenue and operating expenses are equal.  But for ag producers, this breakeven point may leave significant cash needs unmet.  Producers will need cash for interest obligations, payments on long-term debt obligations and family living and income taxes in addition to operating expenses.  FLOID helps producers calculate their annual total cash requirements for the farming operation.

In the above example, the producer needs $1,160,000 of revenue to meet its whole farm cash requirements. If operating expenses are removed from FLOID, FL_ID remains, which totals $250,000 in this example.  FL_ID is the earnings (EBITDA-Earnings Before Interest, Taxes, Depreciation, and Amortization) required to fulfill all cash obligations.

FLOID can also be used to calculate breakeven cash prices for each commodity in consideration.  The table below provides a 2-step process for a hypothetical producer in the southeastern United States.

This information is useful to help determine the crops to grow by comparing current price expectations to actual prices being offered via futures, cash forward contracts or production contracts.  Producers also use this information to evaluate changes needed in production costs or yield to achieve breakeven commodity prices for their operation.

Consider attending the 2022 Executive Marketing seminar to develop your own pricing signals using FLOID.  Details can be found at www.clemson.edu/extension/agribusiness.

Mickey, Scott. “Getting to Know FLOID.” Southern Ag Today 1(52.1). December 20, 2021. Permalink

December 20, 2021
What is Preemption and How Might it Affect Glyphosate Litigation

Lawsuits involving plaintiffs who have alleged that exposure to glyphosate caused their non-Hodgkin’s lymphoma continue to make their way through the court system. Over the past year, the issue of preemption has become a focus of these lawsuits. Preemption occurs when a “higher” level of government reduces the authority of a “lower” level of government and may occur when a federal law and a state law conflict. In glyphosate lawsuits, the defendant Bayer has argued that the Federal Insecticide, Fungicide, and Rodenticide Act (“FIFRA”), the federal law governing pesticide regulation, preempts the state law failure-to-warn claims raised by most glyphosate plaintiffs.

FIFRA regulates the labeling of pesticides. A pesticide may not be distributed or sold in the United States until it has a label approved under FIFRA. Additionally, states may not impose any labeling or packaging requirements that are “in addition to or different from” those required by FIFRA. Plaintiffs bringing state law failure-to-warn claims are arguing that had the label included adequate warnings about the risks of glyphosate, then their injuries would not have occurred. So far, juries have found in favor of plaintiffs on these claims.

Bayer has appealed these jury findings, arguing that FIFRA’s prohibition on states imposing additional or different pesticide labeling requirements preempts failure-to-warn claims. If the state law claims are preempted by FIFRA, then Bayer argues that those claims should never have been raised in court.

Courts have split on the issue. A state court in California dismissed a plaintiff’s failure-to-warm claims, finding that the claims were preempted because the approved label for glyphosate does not require a carcinogen warning. However, both a California state appellate court and the Ninth Circuit have ruled the opposite. Those courts found that the failure-to-warn claims were not preempted because FIFRA prohibits pesticides from being “misbranded.” A pesticide is misbranded if its label does not contain a warning which may be necessary to protect human health. The Ninth Circuit concluded that FIFRA’s prohibition on misbranding was broader than the state law failure-to-warn and that such claims were therefore not preempted.

Bayer has appealed the Ninth Circuit’s decision to the Supreme Court. If the Court takes up the case, a ruling could impact not just glyphosate lawsuits, but any pesticide lawsuit where a plaintiff raises a state law failure-to-warn claim.

Rollins, Brigit. “What is Preemption and How Might it Affect Glyphosate Litigation.” Southern Ag Today 1(51.5). December 17, 2021. Permalink

December 17, 2021
The Rise in Shipping Costs and U.S. Agricultural Exports

The recent spikes in freight costs are having a significant impact on global trade. The average cost of shipping a standard large container (a 40-foot-equivalent unit) has surpassed $10,000 in recent months, more than four times higher than prices a year ago. Most of this is due to higher freight rates for routes out of China. For instance, container rates for shipments from Shanghai to New York increased from $2,500 to more than $20,000 in September 2021 (Freightos Data, 2021). To put this in context, an east coast buyer that spent $100,000 last year in freight costs when importing goods from China is now paying almost $1,000,000 in freight costs to import the same items. Given the high demand for containers out of China, there has been a shortage of containers at U.S. ports affecting exports. What does all of this mean for U.S. agricultural exports? Once consequence is that the bulk shipping rates have also increased from $1,000 to over $5,000 in October (now around $3,400) (Trading Economics, 2021), which affects commodities like soybeans and corn.

As we begin our research on the effects of shipping rates on U.S. agricultural exports, it is important to first understand the importance of different modes of shipping for U.S. agriculture. The figure shows the share (volume) of U.S. exports across product categories by different shipping modes (bulk, container, and air). To be expected, bulk commodities like wheat, corn, sorghum, and soybeans are most reliant on bulk carriers (more than 90% of all shipments by volume), whereas many products rely on both container and bulk shipping (e.g., poultry). U.S. exports of livestock products like beef, pork, and cheese are heavily reliant on container shipping (90% of all shipments). These products are likely to be the most affected by the recent spike in container rates and shipping costs.

Share of Commodity Export Volume by Shipping Mode: 2003-2021

Source: U.S. Department of Commerce, USA Trade® Online

Sources:

Freightos Data (2021) FBX Routes. https://fbx.freightos.com/freight-index/FBX03

Trading Economics (2021) Baltic Exchange Dry Index. https://tradingeconomics.com/commodity/baltic

U.S. Department of Commerce (2021). USA Trade® Online. U.S. Census Bureau. https://usatrade.census.gov/

Muhammad, Andrew, and Michael Adjemian. “The Rise in Shipping Costs and U.S. Agricultural Exports.” Southern Ag Today 1(51.4). December 16, 2021. Permalink

December 16, 2021