Although the peanut market enjoys good quality crops from both Argentina and Brazil and despite positive news about the upcoming crop in the US the peanut market seems very unstable.
Market news from Argentina
News from Argentina about shipments that are fully or partially cancelled and/or rolled to the next vessel(s) and with freight charges continue to increase (in some cases with more than 250%) is putting a lot of pressure on shippers and are making European buyers insecure and nervous.
The spot market has become very active and Argentina basically has to ship 40,000 to 50,000 mtons monthly to satisfy the demand in the EU and right now we are lucky if 60 to 70% leaves in time. Even if goods are shipped in the month contracted for we see that some shipments take more than 8 weeks to arrive at destination.
From shellers we hear that October shipments are either cancelled or not confirmed yet. Some shipping lines are offering much higher ocean rates for October shipments after cancelling existing bookings first. What this means for shipments after October is unknown but it seems this will not be back to normal soon if at all.
New offers from Argentina (and in some cases from Brazil) all include a freight clause which basically means that if the freight goes higher the contract price also increases. The same if freight rates will go down but this seems unlikely to happen in the months to come.
The same, although to a lesser extent, we see happening in Brazil, but of course the EU is mainly depending on shipments from Argentina where 70 to 80% of the peanuts consumed in the EU have to come from.
In regards to new crop plantings in Argentina the situation seems not very optimistic. Although it is still early it is expected that plantings will decrease with 5 up to 20% !!! 20% is hard to imagine knowing that shellers plant peanuts in order to use the shelling capacity to the maximum if possible. Let us see what the first estimate will tell us.
Main reasons for this expected decrease in plantings are :
1) High rent prices for the land. (up to even USD 1350 per hectare with last season 900/950 being the most expensive)
2) Slowdown of the exchange rate against inflation which causes a reduction in margins because costs in pesos are increasing and it costs more and more in dollars.
3) Competition from alternative crops that maintain good prices (soybean, corn).
4) This year it was more complicated than in previous years to obtain land with good aptitudes for peanut planting.
On top of this we understand that a dry season (La Nina) is expected for the next 6 months affecting the whole peanut area.
Market news from Brazil and USA
Plantings in Brazil are expected to be the same or slightly up (5%) as a result of firm domestic prices and as a result of drought and frost damages in sugar cane which will make more areas suitable for crop rotation. Sofar it has been too dry but recent rainfall brought some relief but more rain is needed without a doubt.
From the USA sofar only positive news to report. Although the September crop estimate was lower than the one from August the good weather of the past few weeks should contribute to a good quality and higher yields than expected. This past season we have seen a very tight market especially on Inshells, Virginia’s XL and Spanish. It is expected that the demand for these grades will continue to keep the market tight and at a higher price level.
As far as runners are concerned we feel that raw USA runners will be competitive with Argentine or Brazilian origin but not so much on blanched peanuts. Sofar ocean rates from the SE have not changed (as much) as we are now experiencing in Argentina and Brazil; not to speak of Asia of course.
Market News from China
Earlier reports about the crop in China were quite positive but lately it seems the sentiment has changed. See below from one of our oldest friends in the industry (though young at heart):
“The 2021 peanut crops had been progressing well (with more than usual pods formed ）by early August over all the major origins in China including Henan, Shandong, Hebei and particularly northeastern provinces. But the weather seems to have been uncooperative when entering harvest period. At first the central regions such as Jiangxi and Hubei (which are not major origins),then Henan, the largest peanut origin in China, producing nearly 30% of China’s total peanut output. The big issue/concern so far for the earlier-planted spring crops in Henan is more on quality side.
The farmers have been saving no effort to minimize yield loss but cannot do much about quality since drying of peanuts over China still relies on sunshine. But for the summer Hsuji crop (mostly over southern Henan), planted during June, to be harvested mostly during Oct., lower than average – rather poor yield is estimated.
Shandong may manage to harvest a quite good crop in spite of negative impacts from wet weather during harvest period, thanks to rather small-scale farming and hilly fields of sandy soil that dry off quickly. But over northeastern China where peanut crops are planted by each farmer in relatively large scale so peanut harvest may last longer while the optimum harvest window is narrow , there is a rather high risk of quality damage (frozen damage inparticular) and yield loss as well during harvest period.
Because of weather issue over Henan and uncertainty over northeastern origins, Graded Hsujis of old crops (ex. cold storage) have gained on average RMBY600/MT during recent weeks. However, peanut oil and oilstocks remain very depressed, first of all, because of the large carryover and secondly, the weather issue during harvest proves a bullish factor for the edible market but not really for the crushing market since a lot of edible Hsujis may be downgraded to oilstocks, I’m afraid”
