Peanut Situation & Outlook Southern Outlook Conference Atlanta, GA September 22, 2008 Nathan B. Smith, Amanda R. Smith

Current Situation Improved Production Prospects –2007 production 1.87 M tons, 8% higher than (Federal State Inspection Service shows 1.81 M tons inspected) –2008 production estimate pegged at 2.38 million tons, 3 rd largest on record if realized. –US Acreage is up 25% in 2008 Stocks down from this time last year: –Farmer stock peanuts in storage are down 52%, –Shelled stocks are down 16%, –Roasting stock up 37% and –Oil stocks are up 18%. Exports increasing, up ~60% from Domestic food use projected to increase less than 1%.

Peanut Planted Acreages (1,000 acres) * AL FL GA MS SC SE NM OK TX SW NC VA V/C US1,4301,6571,2431,2301,533 *Source: NASS Crop Production Report, Sept 12, 2008

Peanut Yields * AL FL GA MS NM NC OK SC TX VA US Source: NASS Crop Production various issues, *September Estimate

US Peanut Yield ( )

Total US Peanut Supply 2007 Estimate 1.1% decrease in US acreage, 3,130 lb yield, M tons use 2008 Forecast 25% acreage increase, 3181 lb yield, M ton use

Peanut Disappearance by Use

Shelled Edible Use in Primary Products 1,000 lbs Aug 07’ to Jul 08’ % Diff from 06/07 Candy425, % Peanut Butter1,012, % Snacks320, % Total2,141, % In-Shell150, %

US Peanut Exports Exports = 18% of total disappearance in 2008

Input Costs on the Rise

Impact of Fuel & Fertilizer Prices on Cost of Crop Production ($/acre) * Does not account for changes in technology.

Non-Irrigated Crop Comparison September 9, 2008

Irrigated Row Crop Comparison September 9, 2008

Outlook Current prices favor peanuts compared to cotton and corn (dryland). Bumper crop will cause prices to back off of $500 per ton at harvest plantings will depend on contracts: –Growers are saying will take $600+ per ton price due to higher input costs, –However, growers will be tempted to grow, same or more peanuts if cotton does not rally, –Should consider the possibility of $355 per ton on non-contracted peanuts if have record crop.

Crop Rotations (GPAC % Growers Applied)

Years Between Peanut Crops (GPAC % Growers Applied)

Tillage (GPAC % Growers Applied) Bottom plow Disc harrow Field cultivator Rip & Hip V-Ripper-6-- Hydro-Till66819 Rototill/Tillovator

Conservation Tillage (GPAC % Growers Applied)

2008 Farm Bill Subtitle C - Peanuts Peanuts were able to remain a separate title (distinguished from “covered commodities”) Maintains a separate payment limit for peanuts –$40,000 Direct Payment Limit –$65,000 Counter-Cyclical Payment Limit Direct Payment same at $36/ton Target Price same at $495/ton Advances and timing of DCP same as “covered commodities” Payment level changes to 83.3% for

Peanut Market Assistance Loans $355 National Loan Rate 9 month loan beginning first day of the first month in which loan is made. Marketing loan may be obtained thru: –FSA county office, –Designated Marketing Association, –or Cooperative Marketing Association

Marketing Loan Changes Change in Storage, Handling and Associated Cost Rules –Handling and associated costs (other than storage) will be paid by the Secretary (CCC) incurred at the time peanuts are placed under loan to be repaid at redemption of peanut loan. –Pay for storage, handling, and other associated costs for all forfeited. Adjustments of loan rates? “The Secretary may make appropriate adjustments in the loan rates for peanuts for differences in grade, type, quality, location, and other factors.”

USDA Proposal White paper sent out to peanut industry proposing to adjust loan rates by type to reflect price differentials by type. Based on NASS prices since 2005 would result in lowering the 2007 loan rate for runners from $355 to $348 per ton. –Also would raise virginia ($382) & spanish ($377) Looking a phasing in the loan differentials beginning with 2009 crop.

Peanut Stewardship Peanut eligible under new CSP program for stewardship payments for “adopting” a resource-conserving rotation (4-year?). 5-year contract. Originally proposed as PERS program for peanuts.

Georgia Cotton & Peanut Average Yield:

* Source: NASS Crop Production, Various Issues, UGA Preliminary Estimate

US Dollar Index

Total Cost of Crop Production, 2002 and 2008 ($/acre) CottonPeanutsCornSoybeans