W30 2024: Peanut Weekly Update

Published Aug 2, 2024

In W30 in the peanut landscape, Indian peanut prices declined by approximately 9% since May-24, influenced by expectations of a large crop and substantial carry-over stock. Despite potential crop damage in Uttar Pradesh, demand remains low from key markets, with weak demand from China. In the US, a proposed 17.5% increase in the peanut reference price is being debated in the 2024 Farm Bill, with current challenges, including the presidential campaign season, impacting the bill's passage. In Arkansas, 49% of the peanut crop is rated excellent, with 88% pegging amidst primarily dry conditions, allowing significant fieldwork. The increased peanut acreage in the Southeastern US, driven by farmers shifting from cotton, may result in an oversupply, potentially lowering future prices. In India, peanut sowing has surged to 1.82 million ha, surpassing previous averages and reflecting a shift from cotton due to pest and economic issues. The government has increased the MSP for peanuts, which could mitigate some price declines despite potential oversupply. Brazil's peanut prices have risen due to adverse weather, global demand, and higher production costs. Analysts anticipate price stabilization by year-end, depending on favorable weather for the upcoming crop.

1. Weekly News

Global

Indian Peanut Prices Decline Amid Large Crop Expectations and Low Demand, US Regions Face Mixed Weather Conditions Impacting Production

Indian peanut prices declined by approximately 9% since May-24, driven by expectations of a large crop this season and substantial carry-over stock from 2023. Despite the potential crop damage in Uttar Pradesh, demand from key markets such as Thailand, Malaysia, and the Philippines remains low, with only moderate interest from Indonesia and Vietnam. Meanwhile, demand from China is weak, while Algeria has shown increased interest due to a poor crop in Brazil. In the United States (US), peanut-growing regions in the Southwest have experienced heavy rains, but parts of Texas continue to face drought and water shortages, potentially impacting production.

United States

Oklahoma Representative Advocates for Increased Peanut Reference Price in 2024 Farm Bill Amid Rising Production Costs and Political Challenges

In developing the 2024 Farm Bill, a US Representative for Oklahoma's 3rd congressional district highlighted the need to increase the reference price for peanuts due to significantly higher production costs. The proposed bill from the House Agriculture Committee suggests a 17.5% increase in the reference price. The ongoing presidential campaign season complicates the bill's passage, with differing priorities between parties, particularly around the Supplemental Nutrition Assistance Program (SNAP). The US Representative expressed confidence that a farm bill, including provisions for both farm and nutrition programs, will eventually be passed and signed by the president, emphasizing the importance of a comprehensive approach.

Arkansas Experiences Favorable Conditions for Fieldwork, USDA Reports Positive Ratings for Peanuts and Other Crops

Arkansas farmers had a mostly dry week, enabling significant fieldwork. The United States Department of Agriculture (USDA) reports that 49% of the state's peanut crop is rated as excellent, with 42% rated as good. The peanut crop is 88% pegging. The data also covers other crops, noting that 50% of the corn and 53% of the soybean crops are in good condition, while 45% of the cotton is rated good and 34% excellent. Hay production is progressing, with 46% of the second crop completed. The region's topsoil and subsoil moisture levels indicate adequate and dry conditions.

Significant Increase in Southeastern US Peanut Acreage May Lead to Oversupply and Lower Prices

As discussed during the Southern Peanut Growers Conference, peanut acreage has significantly increased across the Southeastern US. Alabama's peanut acreage rose from 172.50 thousand acres in 2023 to 185 thousand acres, Florida's from 155 thousand to 165 thousand, and Georgia's from 770 thousand to 850 thousand acres. This increase is due to farmers shifting from cotton to peanuts due to lower cotton prices and the need to reduce fertilizer costs. The region, including Alabama, Georgia, and Florida, is expected to have 1.2 million acres of peanuts. However, this increase may result in an oversupply, with production predictions for the four states, including Mississippi, reaching 2.439 million tons. This could lead to lower peanut prices in the future despite current challenges in the agricultural sector.

2. Weekly Pricing

Weekly Peanut Pricing Important Exporters (USD/kg)

* All pricing is wholesale * Varieties: Argentina (unshelled), India (with shell), the US, and Brazil (overall peanut average)

Yearly Change in Peanut Pricing Important Exporters (W30 2023 to W30 2024)

India

Peanut prices in India remained stable at USD 0.72 per kilogram (kg) in W30, and a 4.35% month-on-month (MoM) increase from 0.69/kg in W27. Peanut sowing in Gujarat has surged to 1.82 million hectares (ha) by July 22, surpassing the 1.63 million ha from the end of the 2023 Kharif season and exceeding the previous three-year average of 1.74 million ha, marking the first time since 2021 that peanut sowing has surpassed 1.80 million. The increase is due to farmers shifting from cotton, whose sowing area has dropped from 2.62 million ha in 2023 to 2.23 million ha, influenced by pest issues, low yields, and economic factors. Peanuts are a more viable option due to their shorter growing season and lower labor needs. The government has raised the minimum support price (MSP) for peanuts to USD 81.01 per quintal (IDR 6,783/q) for the 2024/25 season, up from USD 76.16/q (IDR 6,377/q), with a similar increase for cotton. This rise in peanut production could lead to an oversupply, potentially driving down prices despite the higher MSP.

United States

Peanut prices in the US stood at USD 2.65/kg in W30, marking a 1.15% week-on-week (WoW) increase but a 24.50% year-on-year (YoY) decline. According to the USDA, peanut acreage has increased significantly across the Southeastern US, with Alabama, Florida, and Georgia expanding their peanut plantings due to lower cotton prices and reduced fertilizer costs. The region projects 1.2 million acres of peanuts, potentially leading to an oversupply, with production expected to reach 2.439 million tons. This anticipated oversupply could result in lower peanut prices.

Brazil

Brazil's peanut prices increased to USD 2.65/kg in W30, experiencing a 1.15% WoW rise but a 24.50% YoY from USD 3.51/kg in W30 2023. The Brazilian peanut industry is experiencing a significant price increase due to adverse weather conditions, rising global demand, and higher production costs. Due to severe drought, crop yields in Brazil, mainly in São Paulo, have declined. Analysts predict potential price stabilization by year-end, contingent on favorable weather conditions for the next peanut crop.

4. Actionable Recommendations

Diversify Export Markets and Enhance Marketing Efforts

To mitigate the impact of declining demand from key markets such as Thailand, Malaysia, and the Philippines, Indian peanut exporters should diversify their target markets. The focus should be on strengthening trade relationships with Algeria, which has shown increased interest, and exploring new markets where demand may emerge.

Prepare for Market Volatility through Strategic Reserves

To manage the impact of fluctuating peanut prices and potential oversupply, industry stakeholders should consider establishing strategic reserves or buffer stocks. This approach can help stabilize prices during periods of market volatility and ensure a steady supply of peanuts to meet domestic and international demand. For example, creating a reserve fund to purchase peanuts during peak production periods can help mitigate price drops and support market stability.

Sources: Mundus Agri, Farm Progress, Brownfield, Southeast AgNet, the Indian Express, Chem Analyst