The Georgia Agricultural Experiment Stations
College of Agricultural and Environmental Sciences
The University of Georgia

Research Bulletin Number 437
May, 2002
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	World Peanut Market: An Overview of the Past 30 Years
	Cesar L. Revoredo and Stanley M. Fletcher Post-Doctoral Research Associate and Professor and Coordinator, National Center for Peanut Competitiveness, Department of Agricultural and Applied Economics, College of Agricultural and Environmental Sciences, University of Georgia

Abstract

Despite the increase in its total global production, since the 1970s, peanuts' share in the total production of vegetable oil and meal has decreased following the emergence of soybeans. In addition, an increasing share of the total production of peanuts has been devoted to food purposes. World-harvested area has changed very little since the 1970s; however, there have been regional and sub-regional shifts. Asia, and especially the People's Republic of China, has significantly increased its share, while Africa's share has decreased, affected by the decline of the peanut oil and meal markets. America also has seen a decrease in its share in the world peanut production. On the other hand, since the early 1990s, China, the United States, and Argentina have led the exports of edible peanuts (i.e., peanuts not used for crushing for oil and meal production). The European Union and Asia have remained as the major world importers of peanuts. In addition, while concentration of the export market seems to have increased (when considering the six major exporters), import markets appear more fragmented. Finally, world real peanut prices have continued their decreasing trend since 1995 showing lower variability.

Table of Contents

Introduction
World Peanut Production, Harvested Area and Yields
Production by Regions and Major Countries
Area Harvested by Regions and Major Countries
Yield by Regions and Major Countries
World Peanut Utilization
Utilization by Regions
Utilization by Major Countries
World Trade in Peanuts
Policy Changes Related to the International Trade
Evolution of the Principal Price Indicators
Final Remarks
References

Peanuts are one of the principal oilseeds in the world. According to USDA estimates for the crop year 1999/2000 (FAS, 2000), from a world total oilseeds production of 286.7 million metric tons, peanuts' share was approximately 10 percent, behind soybeans (53 percent), rapeseed (15 percent), and cottonseed (12 percent). Until the mid-1980s, peanuts ranked third in terms of production among oilseeds; however, changes in consumer preferences in industrial countries due to growing health concerns fostered the production of rapeseed and sunflower seed. Peanut production can be found on all the continents, although four of them (i.e., excluding Europe) account for the majority of production (99 percent). Furthermore, according to USDA data (ERS, 2001), on average for the 1972-2000 period, 90 percent of the world production was accounted by developing countries. As shown in figure 1, developed countries' share in total world production of peanuts has steadily decreased from approximately 12 percent during the 1970s to about 6 percent during the 1990s.

Figure 1: Proportion of Peanuts Produced in Developed Countries

In terms of consumption, while peanuts have been steadily substituted by soybeans for oil and meal purposes, their utilization for food purposes has been increasing. In addition, since the early 1990s international trade of peanuts has gone through a number of changes. China, the United States, and Argentina are the major peanut exporting countries, although their share in world total exports has been decreasing. It should be noted that if we account for the six major exporters, their share has increased since the 1970s. An opposite view is offered on the import side. Thus, while EU and Asian countries are still the main importers, the trend observed on the import share by country is decreasing (i.e., toward a more fragmented market). Finally, international prices of peanuts in real terms have continued their declining trend, showing also since 1995 a lower volatility.

The purpose of the publication is to provide an overview of the world peanut market based on information for the last three decades, updating the Carley and Fletcher (1995) report, which reviews the situation based on information up to 1991. Therefore, the emphasis will be on the events of the past decade. The data source for this study is the Production, Supply, and Distribution database from the Economic Research Service (ERS, 2001), which provides time series data for peanut production and consumption from 1972 to 2000. The information about international prices was compiled from The Public Ledger. In addition, in order to capture the major trends, we have divided the series by five-year averages: 1972-75, 1976-80, 1981-85, 1986- 90, 1991-95, and 1996-2000. Furthermore, the analysis is conducted at three levels: global (i.e., world), regional and by major countries.

World Peanut Production, Harvested Area and Yields

The world average in-shell peanut production averaged 29,108 thousand metric tons during the 1996-2000 period, growing between 1972 to 2000 at an annual rate of 2.5 percent. The production increase was due both to an increase in the harvested area and in peanut yields. However, the latter played a more fundamental role in the production growth. During the period 1972-2000 yields steadily grew from 0.8 to 1.37 metric tons per hectare (i.e., 1.9 percent increase per year). During the same period, the area harvested remained approximately stable, with an annual growth of 0.1 percent, averaging 18.9 million hectares, and with a coefficient of variation of 7 percent. Furthermore, most of the growth in harvested area occurred during the 1990s. In fact, the annual growth rate during the period 1972 to 1990 was only 0.1 percent, while between 1991 and 2000 the annual growth rate was 1.2 percent.

As seen in table 2, in order to capture the main trends, following Fletcher et al., (1992), the world peanut market is aggregated into four geographic regions (considering only the major countries in each region, which constitute above the 80 percent of the production in each continent): America, Africa, Asia and the Rest of the World. America, Africa, and Asia were further divided into sub-regions. Thus, America was divided into North America and South America. Africa was divided into three regions: Eastern Africa, Southern Africa and Western Africa. Asia was divided into Eastern Asia, Southeast Asia and Southwest Asia. In addition, to give a better view of the market, we analyzed the behavior of major producers, consumers, and exporter and importer countries.

Production by Regions and Major Countries

While the aggregate world production of peanuts has increased, there has been significant regional variation (see tables 3 and 4). Most of the world growth in production occurred in Asia. Comparing the average production for the 1996-2000 period with that for the 1972-75 period, Asian production grew by 127.3 percent, followed by the production in Africa, which grew by 18.6 percent, and by North America with a growth of 7.31 percent.

It is important to note that the variation observed among regions is also present when we consider the productive behavior of sub-regions. Thus, Asia's impressive growth in production was mostly located in the Eastern Asia sub-region, which grew by 382.7 percent when comparing the average production for 1996-2000 with the average for the 1972-75 period. As shown in table 4, most of this growth is explained by the dramatic increase in the Chinese production (420 percent for the same period), which reached an average production of 11.5 million metric tons during the 1996-2000 period. This important boost in the Chinese production, which took place during the 1990s, made China rank first among world peanut producers, with a share of 39.4 percent (computed based on the average production for the 1996-2000 period). This may reflect the reform in the Chinese agricultural sector (see Lin, 1992).

The other Asian sub-regions also presented substantive growth in their peanut production, though less impressive than the one observed in Eastern Asia. Southeast Asia grew by 65.6 percent and Southwest Asia by 30.9 percent, when comparing the average production for 1996-2000 with the average for 1972-75.

Africa's production growth is mainly explained by the 52.6 percent growth in West Africa production for the 1996-2000 period with respect to 1972-75. During the same period, the other two regions (Eastern and Southern Africa) showed decreases in their production. Eastern Africa decreased by 40.3 percent and Southern Africa by 25.9 percent. This regional pattern seems to indicate that production of peanuts in Africa is becoming concentrated in the Western Africa sub-region, which has steadily increased its share in total African production from 60.7 percent for the 1972-75 period to 78.1 percent during the 1996-2000 period. Within this region and for the same period (see table 4), significant increases of production were also observed in Chad (516.8 percent) and Nigeria (122.9 percent). Nigeria's growth is especially important, since it represented approximately 30 percent of the Western Africa production during the period 1996-2000.

The production growth observed for the American region when comparing the average production for 1996-2000 with the one for the 1972-75 period, is also mixed. Production in the sub-region of North America grew by 7.31 percent, while production in the South America region decreased by 28.4 percent. The decrease in the South American production is mainly explained by the decline in the Brazilian peanut production by approximately 68 percent.

Area Harvested by Regions and Major Countries

The distribution of area harvested of peanuts closely resembles the distribution observed for the peanut production (see table 5). Asia was the region with the greatest increase in harvested area, led within the region by Eastern Asia. Comparing the average harvested in the 1996-2000 period with that of the 1972-75 period, Eastern Asia's harvested area grew 108.4 percent, most of which is explained by China. As shown in table 6, during this period China multiplied by four its harvested area, which represented on average for the 1996-2000 period 19 percent of the world harvested area and about half of India's harvested area, the country with the greatest harvested area in the world (37 percent).

Comparing the average for the 1996-2000 period with the one for 1972-75, both Africa and America showed a decrease in their harvested areas but with regional variation. In Africa, the Eastern Africa and Southern Africa sub-regions both reduced harvested area by approximately 20 percent while Western Africa's increased 16.9 percent. In the case of America, the decrease in total harvested area is explained by the contraction in South America's harvested area, where it was reduced to almost half its historical size. This reduction is mainly explained by the contraction of the Brazilian peanut sector. On the other hand, North America's harvested area remained approximately constant.

Yield by Regions and Major Countries

As shown in table 7, the three regions America, Asia, and Africa have presented steady increases in yields since the 1970s. On aggregate when comparing the average for the 1996-2000 period with the average for 1972-75, Asia showed the greatest growth in yields (74.9 percent), followed by America (24.9 percent), and by Africa (15.2 percent).

In Asia, excepting the case of Southwest Asia, the increase in production was accompanied by a substantive increase in yields. The Eastern Asia region presented the most dramatic increase in yields, starting from 1.22 metric tons per hectare for the 1972-75 period, which was approximately half of North America's yields (the region with the highest yield in the world), to reach a yield of 2.84 metric tons per hectare during the period 1996-2000, 5 percent above North America's yield. This growth is explained by China's peanut yields, which have increased at an average annual rate of 3.3 percent since 1972. In the case of Southwest Asia, most of the increase in production is explained by the increase in the number of hectares, since the yields remained approximately stable during the period. This is especially evident when looking at India's peanut production (see table 8), where yields have grown since 1972 at an average annual rate of 0.1 percent.

A closer look to the America region shows an in-crease in yields in the South America region, although their yields are still below the North America yields. However, observing the 5-year averages (see table 7), both yields in North and South America present a decline at the end of the period. In the case of North America, the peak in yields occurred during the 1981-85 period, reaching 2.91 metric tons per hectare, while South America's peak occurred during the period 1991-95 with average yields of 1.76 metric tons per hectare.

Yields in Africa remained approximately stable, slightly increasing in West Africa during the late 1990s. African peanut yields remained below America and Asian yields (African yields are approximately half of the Asian average yields and one third of American yields). However, it is important to note that Nigeria's yield, the main producer from West Africa, showed an increasing trend in yields.

World Peanut Utilization

On average during the 1996-2000 period, world total utilization of peanuts reached 29 million metric tons, increasing by 77.4 percent with respect to the average during the period 1972-75 (see table 9, page 15). Even if crushing for oil and meal remains as the most important use for peanuts, with an average share of 49.2 percent during the 1996-2000 period, the share of peanuts used for food products (i.e., different than oil) has steadily increased over time. Thus, on average during the 1972-80 period the share of peanuts used for food products was 31.3 percent while during the 1996-2000 period, the share reached 41.1 percent.

Figure 2 presents the ratio of the world production of soybean oil to peanut oil, and a similar ratio for meal. Both ratios present an increasing trend, reflecting the emergence of soybeans as the main oilseed for the production of oil and meal. Also, this trend is clear in the case of meal.

Figure 2: Soybean Oil and Meal to Peanut Oil and Meal Ratios

Utilization by Regions

Trends in utilization were variable among regions (see tables 9 and 10). Within the America region, North America kept increasing its total use of peanuts while South America has reduced usage by about 60 percent during the past 30 years. The North America increase in peanut utilization is due to a steady rise in the use of peanuts for food purposes (excluding oil), which grew by 40 percent when we compare the average for the 1996-2000 period with the average for 1972-75. On the other hand, although South America's utilization of peanuts for food also increased, this did not compensate for the contraction in the production of oil and meal, which on average in 1996-2000 was one third of that during the 1972-75 period.