T
he balancing act between production and global trade of the peanut is one that has been studied for more than 40 years by Stanley Fletcher, professor Emeritus with the University of Georgia and currently a research economist and professor of policy with Abraham Baldwin Agricultural College. Generally, Fletcher has noticed an increase in production of U.S. peanuts. In fact, since the 1980s the United States has had a growth rate of 137 percent on peanut production while the rest of the world has increased at 186 percent. “The world is out pacing the United States,” Fletcher says. Other countries showing an increase in production is due to their yield increase, such as Argentina at 187 percent, China at 147 percent, Brazil at 163 percent and India at 73 percent. In contrast, the U.S. yield increase since 1980 was only 139 percent. “The United States has human capital and management capability. Our peanut and cotton farmers know how to manage things and do it right,” Fletcher says. “However, the other countries use our knowledge and we actually export our knowledge to them through seed.” When reviewing overall demand for peanuts, Fletcher says there are three components to observe which include domestic consumer purchases, domestic
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government purchases and exports. “On edible use, we have had pretty good growth,” Fletcher says. “Especially starting in 2002 when the peanut program changed.” However, one problem area is government purchases of peanut products. When reviewing data since the 1990s, government purchases totaled around 15,000 farmer stock tons on average in a calendar year since 2002. However, in calendar year 2020, so far, the government has only purchased approximately 5,000 tons of total peanut product which is the lowest level in 34 years. Fletcher suggests a significant reason for the low level can be attributed to the COVID-19 pandemic. “Peanut butter was flying off the grocery store shelves. With consumer sales soaring, there was a lack of peanut butter and peanut products available for sale to the U.S. government,” Fletcher says. “To compound the problem, contract prices to peanut farmers were stagnant. Thus, when the U.S. government requested bids for peanut butter, there was a lack of interest. This points to the topic of whether the peanut supply chain can handle significant increases in demand.” When observing trade issues for forty years, Fletcher has observed two critical areas that hamper the United States, including what he calls the free
Southeastern Peanut Farmer January/February 2021
rider problem and transfer of technology. “One constant issue has been our general promotion of peanuts around the world; other countries come in on our coattails, undercut our price and capture the market share,” Fletcher says. Transfer of technology has not been a major problem in the past, but it is becoming a critical issue that is going to change what is going to happen, as well as the United States being able to compete in the global market. The main United States trade competitors are China, Argentina and Brazil, along with potential future competitors including Africa and India. “We are in a unique situation with our major competitors (i.e., China, Argentina and Brazil) and our potential competitors, Africa and India, since those countries are classified as developing countries and sometimes get a free pass,” Fletcher says. “They do not have the same stringent rules the United States has to follow dealing with the World Trade Organization.” Fletcher admits that when you review export numbers on a calendar year comparison, everything looks great especially if you go from a low year of exports to a high year. Therefore, he prefers to look at the overall trend line when reviewing export data. “Export data is consistently up and down,” Fletcher adds. “So, I review a continued on page 20