ATLANTA — When U.S. peanut farmers grew a record-setting crop three years ago, they were left with more goods than they knew how to sell.

Then an unlikely new customer emerged.

China, the world’s leading peanut producer, suffered a drought that year and couldn’t turn to its usual back-up, India, which also had a bad crop.

Hard times and low peanut prices prompted Chinese buyers to cast a glance across the Pacific.

The Chinese bought 76,000 tons of U.S. peanuts — about a third of total U.S. sales during a three-month period – before quickly exiting the market.

But where some saw a fluke purchase born of necessity, others in the U.S. peanut industry say they glimpsed opportunity.

“There are people in the peanut industry right now who think we have too many peanuts,” said Don Koehler, director of the Georgia Peanut Commission. “I, for one, look at this differently. I think we just have too few markets, and we need to get off our butt and go to work.”

For Koehler and others, that has meant visiting China and preaching the gospel of American peanuts. He said they’re building relationships that will start to pay off big in the three to five years.

Jeff Johnson, however, said some opportunity exists now. Johnson is president and director of marketing for Virginia-based Birdsong Peanuts, which has shelling plants in Georgia.

“I think the time is here,” he said.

The Chinese covet the peanut for its oil — a kitchen staple that is highly valued for its rich taste and tolerance to heat. The majority of peanuts in China end up being crushed for oil.

“They think of peanut oil like we think of olive oil,” Johnson said. “Where we refine all of the taste and aromatics out of the peanut oil, they leave it in so the peanut oil has a very definite flavor and aroma in Chinese food.”

But Chinese peanut producers have a limited ability to keep pace with the demands of a ballooning population, especially as more millennials choose city life over farming. Meanwhile, Chinese incomes are also increasing.

The U.S. peanut industry sees this as a chance to complement China’s supply. China typically grows seven times as many peanuts as the U.S.

American industry leaders also hope to whet China’s appetite for the more valuable peanuts that are often found in snacks, candies and peanut butter.

Even when buying loose peanuts, Chinese shoppers tend to prefer the long kernel type found in Virginia, just because it’s more familiar, Johnson said. Work is being done to promote the round, squat variety that grows prolifically throughout Georgia.

But stimulating the Chinese palate isn’t the only requirement for a stronger trade between the countries.

Price will continue to be an important factor for China, said Nathan Smith, an extension economist with the University of Georgia’s Tifton campus.

A crop surplus, like the one in 2012, drives down prices and makes American peanuts more attractive to frugal Chinese buyers, he said.

More high-volume years are likely as American farmers increase efficiency and produce higher yields, he said.

This year’s harvest, for example, could turn into another “warehouse buster,” as Smith calls it.

American businesses must contend with shipping costs and a tariff, Smith said.

There are also risks associated with exporting — particularly to China, he said.

Shellers — the businesses that buy peanuts from farmers and sell to manufacturers — are “going to be looking for the most stable market first,” he said.

“In other words, they don’t want to have a load of peanuts end up in China and then be rejected or the sale cancelled and they’re left with peanuts that they have to bring back,” he said.

The American and Chinese industries are working through many of these issues as they “deepen relationships,” said Stephanie Grunenfelder, vice president of international marketing with the American Peanut Council.

Prompted by the buying frenzy three years ago, the U.S. Department of Agriculture supported an assessment of what attracted China to the U.S. market and the chances of it happening again.

Its $90,000 grant also paid for a trade mission last spring that included Grunenfelder, Johnson and Koehler.

The countries have signed a memorandum of understanding, pledging to share information. While not legally binding, the agreement makes a statement, Grunenfelder said.

“They’ve been accused in the past of price shopping around the world market,” she said. “They wanted the agreement to show that they’re interested in building a long-term trading agreement with our suppliers, which is really positive.”

 

Jill Nolin covers the Georgia Statehouse for CNHI’s newspapers and websites.