UK food manufacturers are facing soaring peanut prices as tightening supply from Argentina heaps pressure on a market already hit by global supply problems.
Harvest-related issues have pushed peanut prices up by 30% since March in Argentina, which accounts for 25% of global peanut exports and is one of the largest suppliers to the European market alongside the US and China.
This year’s production in Argentina has been estimated by Cordoba Grain Exchange at 928,000 tonnes, down 22% year on year, following a decrease in planted area and a decline in yields due to adverse weather during the harvest.
The reduction in planted area is a result of falling prices, prompting farmers to switch to more profitable crops such as corn. Prior to the latest increase, Argentine peanut prices were down 12% year on year, and 14% below the 10-year average.
Concerns over lower production in Argentina intensified during the harvest earlier this year. Over 47,000ha (14% of total) were abandoned due to unseasonably heavy rains from April to June, delaying harvest in the main growing regions of Cordoba, La Pampa and San Luis. Initially estimated at one million tonnes in April, production was revised down 9% in August.
Argentina’s supply issues coincided with last year’s lower crop in China, which created supply shortages. In a bid to make up for the shortfall, China switched to importing from other markets such as Argentina and the US, causing prices to rise globally.
Production issues in India and drought in South Africa have also been a problem, with weakening sterling following June’s Brexit vote putting further upward pressure on prices in the UK.
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