The peanut market continues to be relatively quiet, although there has been some more activity and demand this past week for various reasons, delays in shipments and shipping issues are for sure amongst them. Argentina is about to start harvesting, and in general, the crop looks good. We see that shellers are worried about the lack of rain in certain areas and too much rain in other areas. Brazil still has to harvest roughly 30%, which is the more complicated part of the harvest. Read all about it in this peanut market report by Herman Driesens, manager at Rotterdam Commodity Trading.
Argentina is about to harvest their 2021 crop, which appears to be a normal to good crop with some very good areas; mostly average quality/yield areas, and some very poor areas. The Cámara del Maní recently published their first estimate, and if this becomes a reality, it would mean Argentina will have roughly 100,000 mtons less available for export compared to last season. This seems to be ignored by most of the market. Of course, you can question the numbers used by the Cámara, and the following weeks/months will prove if these numbers are correct. But without a doubt, the volume available for export will be greatly reduced.
We should not forget that last season was almost perfect in regards to weather circumstances during planting, growing, and harvesting, which resulted in very good yields. This season will be quite different, although we can still expect a normal to good crop. The weather during harvesting will be crucial, of course. For sure, the crop is going to be late, which can put pressure on spot material in Europe.
Brazil is having a very complicated season. Plantings were extended and delayed, and as a result, the harvesting will also be a challenge. The quality of the already harvested 60% is basically good, but the remaining 40% has been suffering from drought and will undoubtedly have quality issues and lower yields. The weather forecast shows no rains for the rest of this month which makes it even more difficult and worrying.
The strong demand from crushing factories has created a very firm domestic market with no chance of farmer stock prices going down with the demand (from China) for peanut oil still continuing. This situation puts a lot of pressure on shellers/shippers to make their business profitable, especially with the latest drought issues, which doesn’t help at all.
So far, offers for EU quality from Brazilian shippers are not competitive compared to offers received from Argentina, although prices have eased a little lately. For Brazil, the most important markets remain Russia and Algeria with less strict specs, and the majority of the Brazilian shippers are not even allowed to export to the EU.
The first 2021 USDA crop estimate came out on March 31 and basically confirmed what the market expected; a 2 to 3% decrease in plantings. This figure can still change, of course, but more important will be the weather once the peanuts are planted.
The 2020 crop was not as big as expected but at least of good quality. However, it seems rather impossible to find offers for inshells, Virginia type, and/or Spanish type kernels. The market for runners is stable at 56/57 cents per lb (EU specs) which is competitive compared to other origins on a raw basis. We do not expect this to change much in the coming months, but we need to keep an eye on the weather and the ongoing demand from China for USA farmer stock.
25% import duties on USA peanuts were postponed for four months, meaning they would return in early July. The EU has requested the US to suspend billions of dollars in import duties on each other’s products for at least six months. There is no further news on this yet.
From China, Rotterdam Commodity received the following update:
“The Chinese peanut market has changed dramatically in the past month, perhaps due to the arrival of imported crushing materials, which keep supply sufficient in the next few months. The price for crushing materials has remained at CNY9400-9500/MT in the first half of March, but today we see the price concluded at around CNY8800-9200/MT. Daily delivered volumes are also significantly reduced to reflect the position of crushing plants. We understand that crushing plants are well covered or are not in
a hurry to buy with increased imported peanuts.
Planting season will start from late April in Shandong and about one or two weeks later in northeast China. Some expect that the planted area will be much smaller when the Chinese government is emphasizing ‘Food Safety’, farmers will be encouraged to plant wheat and maize instead of others; we can’t tell if this will happen. Instead, we think that a sharp decrease may not be real due to land rotation and water supply.
The high price of Chinese peanuts has resulted in slow sales of export, which was helped by the crazy sea freight market. Demand for Chinese peanuts is mainly focused on Virginia raw and blanched, some red skins. Hsujis are mainly for local demand, as it is too expensive comparing with other origins. Freight to Europe started to hike again due to strong export and the recent accident at Suez Canal, but the key issue is still the shortage of containers. Taken as an example, freight to Felixstowe UK has temporarily touched USD5200-5300/TEU in late March/early April; today, we were quoted around USD6200/TEU with no shipping space until the end of April!”
From South Africa (where harvesting just recently started), Herman received the following update:
“Looking back at the season, we can report the following:
The peanuts were planted at the ideal time from the end of October until the end of November. We had above-average rainfall from November until the end of January. In general, the western part of the production area will have excellent yields.
In the eastern part, some damage occurred due to excessive rainfall. Except for slightly lower temperatures, we had an excellent season.
44,000 hectares were planted, which will yield roughly 65,000 tons. The quality of the crop should be good, and South Africa will be able to export excellent quality 50/60, 60/70, and 70/80.
Currently, we are experiencing an extreme shortage of peanuts in the local market. The big companies imported enough product from Brazil and Argentina to take them through to the end of May. However, the smaller processors and packers have no stock left. These smaller processors will take up the first available product in May. The first exports should be ready for shipping by mid-June.
The interesting numbers from the latest SAGIS report are the following when comparing 2020/21 with 2019/20:
Deliveries from farmers 50,356 ton vs. 19,517 ton
Imports 30,467 ton vs. 33,704 ton
Direct edible market 30,823 ton vs. 34,829 ton (down 11.5%)
Peanut butter market 38,699 ton vs. 28,704 ton (up 34.8%)
Exports 5,684 ton vs. 3,253 ton
The peanut butter production increased by 34.8% from 2019/20 to 2020/21. This is excellent for the local peanut butter industry. The 2019/20 production was slow due to difficult economic conditions for the end-user. However, nobody could predict that the production of peanut butter would then increase in 2020/21, where Covid caused big disruptions in most households and business.”
If you have any questions after reading this report, feel free to contact Herman Driesens via Rotterdam Commodity.