Peanuts and Products

Peanuts are the edible seeds of a plant member of the pea family. Although called a nut, the peanut is actually a legume. Ancient South American Inca Indians were the first to grind peanuts to make peanut butter. The peanut originated in Brazil and was brought to the US via Africa. The first major use of peanuts was as feed for pigs. It wasn’t until the Civil War that peanuts were used as human food, when both Northern and Southern troops used the peanut as a food source during hard times. In 1903, Dr. George Washington Carver, a talented botanist who is considered the “father of commercial peanuts”, introduced peanuts as a rotation crop in cotton-growing areas. Carver discovered over 300 uses for the peanut including shaving cream, leather dye, coffee, ink, cheese, and shampoo.

Peanuts come in many varieties, but there are four basic types grown in the US: Runner, Spanish, Valencia, and Virginia. Over half of Runner peanuts are used to make peanut butter. Spanish peanuts are primarily used to make candies and peanut oil. Valencia peanuts are the sweetest of the four types. Virginia peanuts are mainly roasted and sold in and out of the shell.

Peanut oil is extracted from shelled and crushed peanuts through hydraulic pressing, expelled pressing, or solvent extraction. Crude peanut oil is used as a flavoring agent, salad oil, and light cooking oil. Refined, bleached and deodorized peanut oil is used for cooking and in margarines and shortenings. The by-product called press cake is used for cattle feed along with the tops of the plants, after the pods are removed. The dry shells can be burned as fuel.

Prices – The average price received by farmers for peanuts (in the shell) as of December 2003 was very depressed at 18.9 cents/pound. That was just 0.1 cent above the 2002/3 average of 18.8 cents, which was the weakest average price seen since 1974/5. Peanut prices were hurt in 2003 by an oversupply situation due to a 10% boost in production. That led to a 25% increase in stocks as demand failed to keep up with supply.

Supply – Peanut production in 2003/4 was forecast by the USDA at 33.45 million metric tons, up 10.4% from 30.31 million in 2002/3. The big boost in production led to a 25% increase in stocks in 2003/4 to 640,000 metric tons from 510,000 in 2002/3. The world’s largest peanut producer is China with 45% of world production in 2003/4, followed by India with 22% and the US with 6%. India saw a sharp 44% jump in production to 7.50 million metric tons in 2003/4 versus 5.20 million in 2002/3, whereas Chinese production was only slightly higher by +1.3% to 15.10 million. World peanut oil production in 2003/4 rose by 13% to 4.91 million metric tons from 4.34 million in 2002/3. Peanut oil accounted for only about 5% of world vegetable oil production in 2003/4.

US peanut production in 2003/4 rose sharply by 23% to 1.86 million metric tons from 1.51 million in 2002/3. The largest peanut producing states in the US are Georgia (with about 44% of US production), Texas (19%), Alabama (13%), Florida (8%), and North Carolina (7%).

Demand – Of world peanut production, 47% of that production was forecast to go towards crushing of peanuts into oil and meal in 2003/4. Specifically, crush demand in 2003/4 was forecasted 15.82 million metric tons, up 13% from 14.04 million in 2002/3. World consumption of peanut meal in 2003/4 was forecast at 6.05 million metric tons, up 12% from 5.40 million in 2002/3. World consumption of peanut oil was forecast at 4.86 million in 2003/4, up 11% from 4.36 million in 2002/3.

There are three main types of peanuts grown in the US. The most popular type is Runner peanuts with 82% of US production, followed by Virginia peanuts with 15% of production, and Spanish peanuts with 3% of production. The primary use for both Runner and Virginia peanuts is the production of peanut butter (55% for Runner and 46% for Virginia). The second largest use for Virginia peanuts is for peanut snacks (42%), while the second largest use for Runner peanuts is candy (24%). The main use for Spanish peanuts is for candy (44%).

Trade – World exports of peanuts in 2003/4 was forecast at 1.54 million metric tons, up 16% from 1.33 million in 2002/3. Exports accounted for only 4.6% of overall world production, showing that peanuts are generally consumed where they are produced. US exports of peanuts in 2003/4 fell sharply to 141,000 metric tons from 269,000 in 2002/3.