Disappointing Production, Weak Demand, and Low Prices Cause Uncertainty for Argentinean Peanut Exporters

Published 2022년 3월 23일

Argentinean peanut exporters, and producers alike, will be disappointed by the outlook for the 2022/23 MY. Dry conditions over Argentina for most of the growing season mean peanut production could drop to 1.3 million mt, from earlier estimates of 1.4 million mt. Demand from the world’s largest peanut consumer and importer, China, has been weak since the end of last year. The conflict in Eastern Europe will complicate exports further, as Russia is the fourth-largest buyer of Argentinean peanuts. Input and shipping costs have soared for the better part of a year, while peanut prices have been flat, meaning peanut exporters will have a hard time turning a profit under current market conditions.

Argentinean peanut exporters, and producers alike, will be disappointed by the outlook for the 2022/23 MY. Recent estimates reported lower production, as dry conditions took their toll on the crop. Weak demand is coming from China, the world’s largest consumer of peanuts, and the Russia-Ukraine conflict means exports to Russia will be impacted. On top of that, peanut prices are weak compared to other commodities.

Lower Production Estimates

Dry conditions over Argentina’s peanut areas for most of the growing season mean production could drop to 1.3 million mt. This is lower than initial estimates, made at the start of the year, of 1.4 million mt. Peanuts are fairly drought tolerant, but the consistent dry conditions negatively impacted production. Initial yield estimates were around 3.7 mt / ha, but newer estimates peg yields at around 3.4 mt / ha. The harvest will start next month, and bring clarity to the extent of the damage caused by the drought.

Lackluster Demand

Global demand for peanuts has been lower than expected, especially from the world’s largest consumer, China. According to the International Nuts and Dried Fruit Council, Chinese demand for peanuts and peanut oil was not as good as expected at the end of last year, as well as during the Lunar New Year. This has resulted in large supply inventories and subsequent weak import demand. China is both the world’s largest producer and importer of peanuts. While China normally imports from Asia and much less from Argentina, the effect on global peanut prices will be felt in Argentina.

Meanwhile, Argentinean exporters will be monitoring the situation in Eastern Europe. Russia is the fourth-largest buyer of Argentinean peanuts. Russia imported just under 40,000 mt of peanuts from Argentina in 2021, valued at USD 52 million. While exports from Argentina peak in November, peanuts are exported throughout the year. The situation is thus expected to impact peanuts destined for Russia. Already, according to Southeast Agnet, Argentina is having difficulty delivering peanut shipments to Russia.

Comparatively Low Prices

Peanut prices have not shown the vigor of other oilseeds as the world recovers post-Covid. After a slight increase at the end of 2021, on the back of other commodities, prices retreated to around USD 1,500 / kg landed in Rotterdam. In fact, February peanut prices were 20% lower than a year ago, where the Food Price Index, as measured by the FAO (FFPI) has increased by 21% over the same period.

Export Volumes Could Remain Decent, but Profit Margins Will be Thin

Argentina’s peanut exports smashed all records in the 2019/20 MY, at 988,0000 mt, and 2020/21 was another excellent marketing year, with 960,000 mt exported. In 2022, low prices could counter weak demand to some extent. Buyers could buy peanuts to stockpile their inventories, meaning large export volumes, in excess of 900,000 mt is again a possibility in 2022/23. Input and shipping costs have soared for the better part of a year, while peanut prices have been flat. This means that peanut exporters will have to contend with very thin profit margins. Producers will also be disappointed by the comparatively low global peanut price, but with the harvest is about to start, they will have few options in terms of marketing their product.