Recent data from the National Crop Estimate Committee indicates that in the 2015/16 production year, South Africa produced 18 850 tons of groundnuts (peanuts). This is the smallest crop in 71 years—down three folds from the 2014/15 season production—caused by a decline on area planted to approximately 22 600 hectares. This figure is also a record low area (hectares), according to South African Grain and Information Services (SAGIS) dataset dating back from 1936, due to 2015/16 El Niño induced drought event.

It is also worth noting that South African groundnuts production has in fact been on the decline since mid-1980. Industry participants attribute this trend to a number of factors, the most notable one being high labour costs – groundnuts is a fairly labour intensive crop. In addition, slow development in seed-breeding is also seen as a key factor behind this trend of declining production. In fact, a study by the Bureau for Food and Agricultural Policy (BFAP) highlighted that South Africa is being left behind by a number of major groundnuts exporting countries in terms of cultivar development.

Regardless of the decline in South Africa’s production over recent years, the country has remained a net exporter of groundnuts due to relatively low domestic consumption level. South Africa’s groundnuts consumption is approximately 63 000 tons per annum. About 37% of this is consumed directly as “peanuts”, with the balance processed into peanut butter, oil and other products.

During periods of lower production, the key supplier of groundnuts to South Africa is Argentina, China, Mozambique and Malawi. South Africa’s 2016/17 groundnuts import estimates vary between 30 000 and 50 000 tons – a record import level on a dataset stretching as far back as 1998. At the end of August 2016, South Africa had already imported 20 734 tons of groundnuts for the year. About 64% of this came from Argentina, 19% from Brazil, 12% from Mozambique and the rest from China, Malawi and Zambia.

Contrary to the aforementioned production challenges in the domestic groundnuts market, global production for this commodity is set to reach a six year high, with 2016/17 production estimated at 29.59 million tons (according to Oilworld’ s data).

China is the leading groundnuts producer in the world, with 2016/17 production estimated at 12.00 million tons— 41% of global production. India happens to be the second biggest producer of groundnuts in the world, with 2016/17 production estimated at 4.2 million tons –14% of global production. The United States is also amongst the key global groundnuts producing countries, with 2016/17 production estimated at 2.2 million tons— 7% of global production. In South America, Argentina is the largest groundnut producer, with 2016/17 production estimated at 81 000 tons.

Africa is also a crucial player in global groundnuts production, with overall 2016/17 production estimate at 7.53 million tons, – 25% of global production. Moreover, this is a 2% year-on-year increase. The largest producers are Senegal, Mozambique and Malawi amongst others.

Finally, the 2016/17 global groundnuts stocks are set to reach a 4 year high of 1.87 million tons, up by 16% from the previous season. All of this will potentially keep global groundnut prices under pressure over the medium term, which could benefit South African groundnuts importers.

With the previously discussed dynamics at hand, there is growing optimism that domestic groundnuts production could recover in the next season (2016/17). This view is based on the forecasted improvement on weather conditions, as well as attractive market prices. Overall, additional information will unfold as the season progresses.

*This article first appeared on Farmer’s Weekly Magazine, 21 October 2016 issue.