The peanut industry will be better
in the future

By Tyron Spearman
Contributing Editor

 

The difficulty in today’s farming environment is to be optimistic about anything. The entire peanut industry has been battered about the recall. All segments are searching for ways to improve markets and remain optimistic.

The National Peanut Board is tracking consumer opinion, and early results show that almost all consumers are aware of the Peanut Corp. of America and the salmonella outbreak, that people have gotten sick and died and that products containing peanuts have been recalled.

The survey also shows that almost 20 percent of consumers have stopped eating peanut butter, even though it was not part of the recall.

While consumers might be confused for a time, the industry can be proud of the proactive team that has worked around the clock to be sure media report the facts and to get the facts to consumers and the industry. Farmers invested in check-off programs and associations and when the battle cry came, they were ready.

It’s The Economy
Usually an economic downturn sends peanut butter markets soaring. That’s the case this year as sales were up over 12 percent until the recall. Remarkably, peanut butter sales remained up 8.1 percent in January.

Producers knew a 2,550,000 ton crop would mean a decline in prices. USDA estimates the total supply, counting the carry forward, at 3.1 million tons of peanuts for 2009. On disappearance, usage is estimated at 1,795,000 tons, up 2.9 percent before the recall. Peanut crush is the same, with seed and residual is up 15.3 percent (not likely).

Peanut exports were predicted to increase 10 percent for a total disappearance of 2,229,500 tons. That means the industry will have 880,000 tons carry forward to the next crop. Pipeline takes about 300,000 tons, so excess is about 580,000 tons or about 26 percent of the demand for peanuts. Overall, a 30 percent acreage reduction is recommended.

Market Contracts
Farmers may not receive contract offers this season, except to get a few Virginias planted in the V-C region. Runner contracts will be hard to find as the most recent report shows edible stocks at 369 million pounds, up 25.1 percent from the same time last year.

From the Ag Outlook, cotton acres are expected down, corn is struggling to remain above $4 per bushel and soybeans, which are not a good rotation for peanuts, are still above $8 per bushel. Competition for land is not the same as a year ago.

Market Movement
Shelling has mostly stopped as cold storage has filled up, and orders are delayed. Shelled prices have dropped from 70 cents plus to the low 40s. Prices can’t drop further because of what was paid to the farmer in 2008.

Manufacturers are advertising. Legislators are introducing food safety laws, and inspections at all locations have increased. Food and Drug Administration agents are looking at peanuts in the field, at buying points and in warehouses to determine if agricultural practices have increased any bacteria on crops.

Market Loan Assistance And Budget
With no contract, the only guarantee is the market loan of $355 per ton plus $36 per ton direct payment. President Obama’s budget in 2010 phases out direct payments to farms with sales over $500,000 annually over a three-year period. He also proposed eliminating storage credit for cotton stored under CCC loan and that could impact storage and handling paid on forfeited peanuts.

With prices low, the counter-cyclical payment could approach the maximum of $104 per ton, but that comes after the season is over, and calculations are difficult to make.

What’s A Farmer To Do?
We’ve got too many peanuts and even world supplies are up as the world economy worsens. The salmonella issue will linger, and consumers will be slow in returning. A 25 to 30 percent acreage reduction is needed, even though some buying points/shellers may get orders from manufacturers. And then there’s the weather, still dry in most locations as irrigation moves to corn production.

Plant conservatively to survive this crisis, and the peanut industry will be better in the future. Keep up with the markets and try to be optimistic.

PG


Leading Market Indicators (as of March 2, 2009)

• 2008 Crop predicted at 2,496,650 tons
• 2008 Crop tonnage - 2,549,594 tons
• 2008 Crop sold commercial - 393,283 tons
• 2008 Crop in market loan - 2,156,311 tons
• 2008 Acreage (up 25 %) - 1,494,000
• 2008-09 Usage (6 mos.) - up 0.3 %
• 2008-09 Exports (5 mos.) - up 19.4%
• National Posted Price (per ton) Runners $449.75, Spanish $443.95, Virginia/Valencia $452.32.