In 25 years as executive director of the Georgia Peanut Commission, I have never seen a perfect storm until now in the U.S. peanut industry.
It started brewing last year with less favorable growing conditions, which tightened the supply going into the 2011 crop year.
At the same time, consumption of peanut products was feeling a recessionary boost and consumption rose to record levels, leading to record demand. Also, the cotton and corn markets were on a steady rise.
Peanuts require crop rotation to maximize efficiency in production, and cotton and corn are the predominant crops used for this purpose. Farmers are in a position to shift production to these crops when the market dictates the decision. They already have the specialized equipment to plant, tend and harvest each of these crops, so it requires only a shift in resources.
Farmers told peanut buyers in the spring that prices were not high enough to compete for cotton and corn acres, but buyers were asleep at the switch. They assumed there would be enough peanuts.
Georgia farmers produce nearly half the U.S. peanut crop but planted the fewest number of acres since the early 1980s. Other states followed suit.
Farmers also made a fundamental shift on peanuts from irrigated to nonirrigated acres. Irrigated crop land was dedicated to more valuable crops.
Drought conditions started early in the spring of 2011 and continued through the bulk of the growing season. This was complicated by higher-than-normal temperatures. Conditions were less than adequate to produce a normal crop.
A tight supply carried over from last year’s crop, poor market prices at planting and the extended drought in the southern half of the state combined to create a shortage, which will be felt all the way to the dinner table.
Unfortunately, farmers will not be the beneficiaries of higher prices in most cases.
Farmers contracted at lower, pre-planting and pre-drought prices to be able to get financing to plant the crop. Beneficiaries of the disruption in supply will be neither farmers nor consumers.
The industry, it is hoped, has learned from this year and will not repeat it again for the 2012 crop year.
Then we can get back to worrying about the vagaries of weather and insects and plant diseases.
Don Koehler is the executive director of the Georgia Peanut Commission.
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