The prospective planting report, released by the USDA on 31st March, showed that US farmers intended to plant 1.55 million acres of peanuts in 2023, up 7% from the year prior and 2% above the five-year average (2018-2022).
The expansion in peanut acres came at the expense of cotton, the acres of which declined 18% year-on-year, to 11.26 million acres. Production costs for cotton remain elevated, while ICE cotton futures (nearby) have fallen 40% from the same period last year. Prices for competing crops, including corn and peanuts, have remained firm or declined at a slower rate, making them an attractive alternative to cotton for growers.
With peanuts and cotton still yet to be planted, the direction in which cotton prices move over the next month could alter current planting intentions. The USDA figure is below current industry expectations, with market participants expecting a further swing away from cotton into peanuts as planting gets underway.
The expected increase in the 2023 peanut area is weighing on prices, with new crop seen at a discount to current crop. Quotes for new crop medium runner peanuts were reported at 56-58 cents/lb, while the IOSCO-assured Mintec Benchmark Prices for spot medium runner peanuts FCA (FOB Factory) Southeastern US [Mintec Code: PNU2] were assessed at 62 cents/lb on 31st March and, at the time of writing, received prices were flat on the week in the first week of April.
There was scattered trading activity reported since the release of the prospective plantings report, but market participants reported buyers sitting on the side-lines in hopes that prices will move lower.
“We’ve seen some light volumes being locked in, but most buyers think the increase in acreage will be higher than the USDA is saying. As such, our customers are hoping for prices to settle in the low 50s [cents/lb] and are happy to wait and see if prices move downwards,” a US trader disclosed to Mintec.