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Peanut butter market strong, but large crop means heavy carryover By Tyron Spearman
Contributing Editor |
What on earth is happening? Gas and diesel prices are lower, but early crop prices are approaching record lows for modern times. Input prices remain high, but are starting to fall. The stock market and the economy are depressed and awaiting a bailout. Farmers and those in agribusiness are having difficulty grasping all of this. Farm income is up from 2008, says USDA, and peanut farmers have produced a record peanut crop. It is hard to get a banker’s attention to talk loans or next year’s crop. One fact is certain, things have got to turn, and turn soon, or agriculture will be in trouble in 2009. Farmers Still Blessed The USDA Economic Research Service predicts an ending stock of 700,000 to 800,000 tons. About 300,000 tons are needed to bridge the seasons. A 500,000-ton carryover is not too abnormal. It means manufacturers will need some peanuts in 2009, but not quite as many. Contracts Direct and counter-cyclical payments return to the economic picture for base owners. Producers without base will only have minimum price support for collateral. Base owners will receive $36 per ton direct payment and two counter-cyclical payments up to $104 per ton. With lower average prices, base farmers are likely to receive a major portion of the $495 per ton target price. That’s not a guarantee because USDA uses some funny ways of getting the numbers. A record peanut crop means lower prices for un-contracted peanuts. Some peanuts from the 2008 crop are likely to be forfeited, but the new program gives the farmer free handling until someone buys them. If a farmer forfeits the peanuts to the government, costs of storage and handling will be paid by the government so there is little or no risk in waiting the nine months. Markets Remain Fairly Strong The export market is up 34 percent for the first two months of the marketing year, with shelled peanuts up 20 percent and in-shells up about 500 percent because of major buys in Germany and Italy. Imports keep impacting the market, up 32 percent this year, mostly as crude peanut oil from Argentina. At planting, Argentine farmers experienced problems securing financing since world market prices have dropped. Their acreage is down, and now they are in a major drought with about 60 percent of the crop planted. Does Change Offer Hope? Working with the Obama team will be an important step in building trust and a more friendly, fair and open Department of Agriculture. Just think, in three years we will be writing a new Farm Bill, and peanuts have a special section that needs nurturing, improving and protecting. Producers need a seat at the table with an educated, planned strategy that is a united force, not a regional split voice. Even so, we have hope and faith in the future for peanuts because the American farmer is an eternal optimist. PG Leading Market Indicators (as of Dec. 1, 2008) • 2008 Crop predicted at 2,496,650 tons
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