Market looks better with increased prices
and decreased inventories

By Tyron Spearman
Contributing Editor

 

Farmers marvel at markets and wonder what’s next. For peanuts, attitudes are good at planting, although the weather has switched to an early drought in the West and plenty of water in the Southeast. The media, harping on the housing market, has talked everyone into a mini-recession. Agriculture has alternatives and a profit potential, if inputs are kept respectable.

Planted Acres
Estimated planted acreage was no surprise as the market had predicted a 16 to 18 percent increase. Markets can use the peanuts and should remain firm. Some officials doubt a 32 percent increase in Texas if water supplies stay tight and cotton prices improve. Increased input costs have farmers reconsidering peanuts, yet some credit lenders are skeptical of farms with low yields and farmers that are poor risk.

Seed Supplies
Seed supplies are ample in most areas. The Virginia-Carolina region reports some germination problems, and farmers will need a warm spring to keep problems to a minimum. Seed prices for runners are around 83 cents per pound for certified, with about a two-cent increase for registered seed. Short supplies on new cultivars will cause some prices to be as high as 93 cents per pound.

Getting A Handle On Supply
The 2007 crop has been perceived as short, pushing up prices for jumbo runners as high as 70 cents per shelled pound. Federal-State Inspection shows 1,812,000 tons inspected. The January crop estimate posted 1,870,325 tons. The reported acreage of 1,230,000 acres averaging 3,130 pounds per acre (estimated) would yield 1,924,950 tons. That’s a major difference. Federal-State inspections are likely closer to the real numbers, and that spells tight supplies.

Contracts
Analysts estimate that 60 to 65 percent of runners are contracted at $500 to $525 per ton. Virginia type had contracts for $525 to $600 per ton, depending on distance. Contracts were mostly for acreage and estimated tonnage. Shellers quickly moved into the market, selling the promised goods for medium runners at 58 cents per pound, a discount from the present 68 to 70 cents per pound from 2007 crop. An acreage contract is firm, and shellers expect it to be honored. A peanut contract is like a corn contract: binding. Breaking a contract cannot go unchallenged in today’s market.

Future Contracts
Contract prices, $500 per ton for runners and $550 to $600 per ton for Virginias, remain available at buying points. Unsigned farmers, and those that booked only a portion, need to keep up with offers. Farmers may option to store under market loan assistance ($355) and retain the warehouse receipt for future sales. All shellers with warehouse storage are public storage warehouses with tariffs on storage and handling that must be posted at each location. This may be a good year to consider marketing your own peanuts in warehouse-stored loans.

Domestic Markets
Peanut was up 4.8 percent in February, pulling to about even for the year after being down over 5 percent. Peanut butter, an economic savior during the mini-recession, and even snack peanuts are showing an 8.4 percent increase. Watch for an increase in shelf prices as raw peanut prices are passed to the consumer, especially on peanut butter.

Export Markets
Exports are up only 3.9 percent for the year. With the value of the dollar vs. the euro, anyone would think U.S. sales would be booming. U.S. prices are lower than Argentina, and Chinese prices are high because of demand at home. Argentina’s harvest starts in May, and the region faces a farm strike due to government export tariffs on farm products. If Argentina has harvest problems, U.S. exports could soar.

Down On The Farm
Most farmers have already decided what to plant. Better prices, though not as good as once thought, and lower inventories have the peanut market looking better. Prices should remain strong all season. The heavy early contracting will keep excitement down, but keep your ears open for prices on uncommitted farmer stock.


Leading Market Indicators (as of April 7, 2008)

• 2007 Crop - 1,811,688 tons
• 2007 Crop Sold Commercial - 365,085 tons
• 2007 Crop In Market Loan - 1,362,760 tons; remaining - 745,915 tons
• 2008 Acreage - unknown
• 2007-08 Usage (7 mos.) - down 0.6 %
• 2007-08 Exports (6 mos.) - up 3.9 %
• National Posted Price (per ton): Runners $475.19, Spanish $467.61, Virginia/Valencia $475.32.