Peanut Prices Surge Amid Concerns Over Supplies From Argentina

Spend Matters welcomes this guest post from Jara Zicha, market analyst at Mintec.

The peanut market has seen an uptick in pricing lately, caused by the severe drought Argentina has been experiencing, which has also had an impact on other major crops, as reported in our previous post. Prices for Argentinian peanuts delivered to Rotterdam have increased from $1.26 per kg in February to $1.49 per kg in mid-April, up 18%, quickly approaching levels seen last year when prices were in a free-fall slide due to large global supplies.

In 2017/2018, prices were weighed down by a bumper harvest in Argentina, a large crop in India for two consecutive years and a record crop in the US. US production reached 3.28 million tons in 2017/2018, an increase of 30% compared with previous season, following a large increase in production area. Overall, global output in 2017/2018 is estimated at 44.1 million tons, up slightly 2% year-over-year but almost 10% above 2015/2016 production levels.

For the upcoming season, the market sentiment has changed considerably, as global players are bracing themselves for reduction in exports from the major exporter, Argentina, while lower acreage in the U.S. is also adding further pressure on the prices.

Argentina has been suffering from severe drought, which has affected the entire central peanut area. The drought started in late November last year and the precipitation in the first quarter of 2018 was well below average of the past decade. Production as estimated by Argentine Peanut Chamber on March 31 is projected to decline by 21% year-over-year to 690,000 tonnes (kernel basis), despite an increase in production area. However, as the weather has not improved since this report was written, the total production could fall by as much as 35%.

Adding to the concerns over lower output are quality issues which global importers might expect this year. The size of the kernels will most likely fall due to the lack of moisture during the growing season, while aflatoxin levels could be a problem as well, as Cordoba saw some localised heavy showers during the harvest in recent weeks.

In the U.S., area planted for peanuts has been projected to fall by 18% in 2018 as farmers are moving to a more profitable crop, cotton. This has also played on the minds of importers, adding upward pressure to prices.