 The
market is improving, and that’s good news. With prices of all commodities
increasing, peanuts had to improve or be left out. Producers are nervous
as fuel and fertilizer costs continue to rise, and drought continues in
the Southeast and Virginia-Carolina regions. Then, there’s the Farm
Bill. Only a few folks in Washington D.C. seem to care about farmers and
the country’s food supply. Uncertainty has everyone jittery.
‘07 Crop Keeps Coming
Last year, U.S. production was down almost 25 percent. The 2007 crop was
also down 4 percent from last year with acreage down 2 percent. The September
estimate was 1,667,600 tons, still plenty of peanuts with the carry-over.
By November, the estimate rose to 1,733,200 tons. Federal-State Inspection
Service has reported 1,761,000 tons by Dec. 8, 2007, and the final numbers
could approach 1,775,000 tons. With demand estimated at 1,920,000 tons,
carry-over will decline and supplies tighten.
Shellers withdrew from the market in November and December awaiting
more deliveries and bidding for market-loan warehouse receipts that farmers
had not sold. Manufacturers, trying to keep supplies coming, bid offers
to over 65 cents per pound for medium runners. Earlier in the season,
medium runners were trading for 53 cents per pound.
Prices to farmers increased from $415 per ton, offered as an option contract,
to $500 per ton option contract for runner-type. Virginias were near $600
per ton. Some farmers continue to hold loan receipts that will mature
in nine months. Final 2007 crop volume will dictate prices. Stay abreast
of trends and prices being offered for ‘07 peanuts.
What’s Driving The Market?
A perceived crop shortage during the transition had manufacturers
wanting to cover needs as far in advance as possible. Domestic consumption
is expected to decline with the higher prices, and a 10 percent drop was
observed in August/September. By October, the decline was only 6.6 percent,
with October up 2.3 percent. Good news for the peanut butter market: in
October it was up 8.3 percent. Remember, when times are tough economically,
people stay home and eat more peanut butter.
Peanut exports account for about 18 percent of the U.S. production. Exports
of U.S. peanuts and peanut products are up 22 percent in the last 11 months,
ending in June 2007. Heavy demand is being reported by the European Union
and Mexico, as Argentine supplies are committed. China is keeping supplies
at home for peanut oil. With a growing demand, officials believe that
China could become an importer of peanuts or peanut oil. Peanuts trading
for $900 per shelled metric ton in Europe last season have jumped to $1,500
per shelled metric ton. The dollar exchange rate is also making U.S. peanuts
more attractive for European buyers.
Planning For 2008 Crop
Shellers wasted no time in getting farmers to commit to plant
peanuts in 2008. Prices opened at $500 per ton option contracts, and some
even offered $525 per ton for all acreage of runner type. Virginia type
opened at $600 per ton option contract in the V-C region with about $580
per ton in the Southwest. Some brokers estimate a 15 to 20 percent increase
in acreage is needed to cover demand and keep prices from spiking higher.
Response to offers was strong in new growing areas, but farmers in traditional
areas are yet committed.
Market Unknowns
How many peanuts are out there, and who has control from the
2007 crop are two major questions driving the market. Farmers still in
the game need to monitor the market and watch for opportunities. How many
will farmers plant next spring knowing that higher-priced corn, wheat
and soybeans require less inputs? Will it ever rain the Southeast where
69.6 percent of the peanuts are grown, or should they plan like West Texas
and not expect a rain?
Caution
Rising markets means less government involvement. Counter-cyclical
payments will decline, and farmers with peanut base will have about the
same money up to $495 per ton. Prices above that level increase cash flow,
but not necessarily income. If we plant too many next year, these exciting
times could be short lived. Be involved and keep abreast.
Leading Market Indicators
(as of Dec. 10, 2007)
• 2007 Crop - 1,761,667 tons
• 2007 Crop Sold Commercial - 338,189 tons
• 2007 Crop In Market Loan - 1,424,477 tons
• 2007 Acreage - (down 4%) - 1,190,000 acres
• 2007-08 Usage (3 mos.) - down 6.6%
• 2006-07 Exports (12 mos.) - + 22.1%
• National Posted Price (per ton): Runners $442.19, Spanish $434.61,
Virginia/Valencia $442.32.
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