The U.S. peanut industry seems
to be in a state of flux, waiting
for markets to signal the next
move. Farmers are poised to plant another
peanut crop after Old Man Winter
delivered water and filled reserves for
a change, especially in the Southeast and
Virginia-Carolina states. The Southwest
continues to suffer, but some rain has
come to the region. There are so many
“issues” involving the market that a
farmer has trouble getting his head
around them all.
USDA predicted acres to be down 27
percent over last year to 1,190,000 acres.
Peanut specialists estimated a 31.4 percent
decline in acres planted to peanuts.
The big question is will the new varieties
“do it again” and load the wagons with
a bumper crop. The five-year average
yield is 3,253 pounds per acre, but 2012
average yield was 4,192 pounds per acre.
That is a significant difference. The issue
remains how many acres to plant
and what to expect in yield.
The Export Factor
The chatter on peanut exports has fueled
the rumor mill. It is true that when
U.S. peanut prices dropped to the mid-
40-cent-per-pound range, Chinese buyers
discovered they could buy peanuts
cheaper from the U.S. and use Chinese
peanuts for export or other products.
The Chinese grow four times the United
States’ production. Then, Chinese Customs
discovered rules were being violated
on re-importing blanched peanuts
and trans-shipments through Vietnam,
and the curtain dropped.
The question is, “Will the Chinese
return to the United States for peanuts
priced at above 50 cents per pound?”
The Chinese factor buoyed the
peanut market as shelled peanut prices
increased from mid-40s to low 50s.
Farmers theorized that the Chinese
might help reduce peanuts in storage
and open the door for better prices for
next season. The surge likely helped the
sheller more than the farmer, as continuous
rock-bottom prices could have
Will the Chinese be back? That depends
on the price and if the trade issues
get resolved. The Chinese already rule
the cotton market, but farmers can
hedge those prices. There is no futures
market for hedging peanuts.
Peanut farmers were poised to deal. In
January, corn was $7 per bushel, cotton
was 80 cents per pound and soybeans
were $16 per bushel. Peanut farmers reasoned
that peanuts had to be competitive
to prevent them from switching to
an alternate, more profitable crop. By
April, corn had dropped to $6.50 per
bushel, soybeans had dropped to $13
per bushel and cotton had inched up to
85 cents per pound.
Late winter changed the dynamics in
the Southeast as irrigated corn land will
now be switched to later-planted crops
such as peanuts, cotton or grain
sorghum, even watermelons.
Peanut contracts were disappointing
as well with only $450 per ton offered
for runners, $550 per ton for Virginias.
Some premiums were offered in regions
for high oleic peanuts and premium varieties
of Valencia and Spanish.
Now the issue is, “What crop will
give me a profit?” All the farmer has to
do is change the seed plates in the
planter and call the seed truck for delivery.
The boom and bust peanut market
is not a favorite of farmers, but it
could be the new normal. Some long
for the stability of the old quota system.
It’s show time now and decisions have
to be made. Farmers have to secure financing
and lenders are more cautious
than ever before. If it doesn’t cash flow,
no money approved.
The domestic peanut market has been
slow to recover to the plus side. USDA
says usage is down five percent over last
year, but they expect the industry to be
on the positive side by three percent by
August. Candy usage was positive last
month, but remains down 11 percent;
snacks are down six percent and peanut
butter is down 2.6 percent.
Shelf prices have moved very little after
the 30 percent increase of last year.
Growers are investing in a promotion
and marketing program being developed with key manufacturers, anticipating a
major launch of the marketing program
by the end of the year.
Exports are exciting again, up almost
60 percent, and USDA expects total
peanut exports to be over 600,000 metric
tons. Argentina has suffered from a
major drought, and with the lower prices
of top quality peanuts from the United
States, U.S. farmers should regain a major
portion of the European market.
Economies need to improve in all foreign
markets for peanuts and peanut butter
to be on the menu.
Then There’s The Farm Bill
Farmers are just like many consumers
who will hold onto surplus money during
trying times until a clearer, more
trustworthy picture of the future develops.
Don’t expect investment on the farm
until Congress moves on a five-year Farm
Bill that will offer direction and some
stability. They keep talking a good game,
but farmers are not optimistic that the
Farm Bill will be very helpful.
Market loan prices are below the cost
of production and target prices are low
enough that assistance is not likely. It is
hard to reason that leaders want farm
production to double by 2050, yet cut
support of the Farm Bill and farmers by
billions, especially agricultural research.
With all these issues, most of them
unknowns, this will be a truly interesting
Leading Market Indicators
(April 11, 2013)
• 2012 Acreage (est.) - up 44%, 1,608,000 acres
• 2012 Production (est.) - up 84%, 3,370,700 tons
• 2012 Average Yield - up 806 lbs/A, 4,192 lb/A
• 2013 Acreage (est.) - dn 27%, 1,191,000 acres
• 2012 Market Loan (4-11-13) - 2,639,759 tons
• 2012 Market Loan Redemptions (4-11-13) - 995,113 tons
• 2012-13 Usage (7 mo.) - dn 5.0%
• 2012-13 Exports (6 mo.) - up 50%
• National Posted Price (per ton): Runners $424.65, Spanish $408.91,