South Georgia’s economy is going crazy over nuts

Moderated by Rick Badie

Call us the Goober State. Peanuts, an economic engine in rural South Georgia, represent a value that exceeds $2 billion. Today’s topics deal with record crop yields, a slight decline in exports to China, and the potential for growth due in part to health-conscious consumers.

Nuts: The economic health of Georgia

By Don Koehler

In our developed economy, most of us find ourselves taking our needs and wants for granted. Save a weather disruption, we never worry about our food supply and, frankly, the supply of anything. We are fortunate to live in a state with a strong and growing economy.

In rural South Georgia, one of the drivers fueling Georgia’s economic engine resides beneath the ground.

In 2012, Georgia farmers produced more than half of the U.S. peanut crop, up from 45 percent. These amazing little peas are a legume, like a pea. Geographically, they are grown below a line from Augusta to Macon to Columbus. Once the farmer harvests his crop, they are further processed in manufacturing facilities that shell the peanuts and process the food consumers love. At the farm level, peanuts are worth just under a half-billion dollars. By the time that moves through the economy, the value exceeds $2 billion to our state.

The last two years have seen the two highest yields in the history of Georgia peanut production. New peanut varieties from University of Georgia breeders and the U.S. Department of Agriculture have been critical to this boost. The Georgia-06G variety led this list with the most acres planted in this single variety. An interesting note: Peanut varieties currently contribute the most annual royalty to the University of Georgia Research Foundation. Revenues are  generated, directly or indirectly, from farmers who pay a royalty for peanut seed of varieties that came out of the university’s Peanut Breeding Program.

In 2012, we achieved record consumption, with a slight decline in 2013 due to loss of exports to China. Even in light of this loss, good news appeared late last year in the New England Journal of Medicine. The article pointed out the positive health benefits of consuming peanuts on a regular basis; consumption is poised to continue to grow.

This growth will be good news for consumers, farmers and our state’s economy. As it now stands, our ability to produce has progressed more rapidly than our consumption. This is a blessing and a curse. We have been successful in the research that molds our production practices, perhaps less so in marketing what we grow. With this new and exciting message to bolster promotion, we can find a balance between production and consumption.

Peanuts have been shown to have a beneficial effect on individuals with adult onset diabetes. They are a heart-smart food, high in mono-unsaturated fat that has a positive impact on blood cholesterol. Peanuts contain antioxidants that help repair damaged body tissue. And peanuts are a powerhouse of nutrition with protein, vitamins and minerals.

Georgia’s 3,500 family farmers who grow peanuts hope you never look at peanuts and peanut butter the same way again. They form the foundation for a healthy body and the economic health of Georgia.

Don Koehler is executive director of the Georgia Peanut Commission.

Peanut prices drop

By Nathan Smith

In 2013, peanut growers in Georgia and the U.S. responded to lower peanut prices by shifting planted acreage to other crops. The U.S.’s peanut acreage dropped 35 percent to a 99-year low of 1.07 million acres. Georgia dropped from 735,000 to 430,000 acres for a 41 percent decline, the lowest since 1917.

A record 3.38 million tons of peanuts were produced in 2012; 1.4 million tons were carried over into the current year. The acreage reduction this past year resulted in a total production drop of nearly 40 percent. New varieties such as Georgia 06-G resulted in second-best average yields for Georgia at 4,430 pounds per acre, and 4,006 pounds per acre for the U.S. Overall, U.S. growers produced a larger crop than expected, reaching 2 million tons. The large supply will keep peanut prices down.

U.S. peanuts are consumed domestically and in the export market. Domestic edible use is the top market for U.S. peanuts and represents between 55 and 65 percent of total use. Exports range from 15 to 20 percent. Crush for oil and meal makes up 10 to 13 percent of use. The rest of total consumption is for seed.

Demand for peanut butter was slowed in 2012 when shelled peanut prices rose in response to a short supply before the record crop was produced. The effects carried over into 2013. However, candy and snack use of peanuts has grown. Exports also grew, as India had a peanut shortage in 2013 and briefly suspended exports to China.

China looked to the U.S. to fill a short-term shortage. That market is based on oil production, not edible kernels. Thus, low price is a major factor for China, and the timing was favorable for the U.S. China’s purchases helped reduce some of the surplus.

China purchased more than 70,000 tons, slightly more than the United States’ No. 1 export market, Canada. As quickly as China appeared in January 2013, it exited the market. India produced a large crop, and exports to China resumed.

Growth of domestic peanut use expected in 2013-14 will be led by candy and snack consumption. Peanut butter consumption should rebound, too. Domestic food use is projected to rise by 3 percent. Exports will fall back without China’s presence but still be strong in the traditional markets of Canada, the European Union and Mexico. Crush and seed/residual categories are expected to shrink; the net effect will be a drop in total consumption.

The biggest difference in 2014 from last year is the prices offered for other spring crops that compete for acres and are in rotation with peanuts. Corn, cotton and soybean prices are projected to be lower for 2014. Expansion of peanut acreage will need to be limited to avoid another carryover and lower prices.

Nathan B. Smith is a UGA associate professor and extension economist.

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