Spend Matters welcomes this guest post from Jara Zicha, market analyst at Mintec.
Peanuts are one of the most popular snack foods around. You may not know, however, that they are technically not nuts. They’re actually legumes similar to soybeans. In the U.S., peanuts are the most consumed and produced (fake) nut. The U.S. produces around three times more peanuts than almonds, and five times more than walnuts. Meanwhile, the consumption of peanuts by far exceeds other nuts, as they’re comparably cheap.
In 2016, however, peanut prices rose 33%. The marketplace is being heavily squeezed by multiple factors, driving the global price higher. Production dipped in China in 2015, creating supply pressures elsewhere, as Chinese buyers looked to source their nuts from other origins. In addition, production in Argentina fell substantially in 2016, due to adverse weather during the harvest between April and May. (To read more about why production fell in Argentina, please read our previous article “Heavy Rains Threaten to Reduce Peanut Production in Argentina” published August 2016.)
What’s more, earlier in 2016, production in the U.S. for 2016/2017 was initially estimated at 3.2 million tonnes, up 17% compared with the previous season. A combination of floods and drought, however, has reduced the output and the final volume for 2016/2017 is now expected at around 2.8 million tonnes, still up 4% year-over-year. In North and South Carolina, production has been affected by heavy rains and floods caused by Hurricane Matthew in October. While some of the crop was harvested on time just before the heavy rains started, a lot of peanuts remained in the fields and suffered from rot, leading to a decline in yields. In addition, drought in the southeast peanut belt severely affected peanut production in Georgia and Alabama, the main peanut growing states, which account for over 60% of total U.S. output. Reduced supplies are likely to impact global peanut markets, especially if Chinese importers continue to procure from the U.S. as they did in 2016, when exports to China surged.
This year, however, they look to face more challenging prices. Latest reports from China are mixed with regard to size and quality. A bumper crop has been expected in the current season, but persistent rains in the northeast provinces during the harvest reduced quality of some the crop, as the moisture levels are too high.