With only so much crop land to go around, the bull market in grains means there is a lot of competition for those acres. The market wants to keep corn acres, but increase soybeans acres. What can be expected this year, and where does that leave peanuts?

Corn, because of demand “fueled” by the ethanol craze, has been on the rebound since a short crop in 2006, said Nathan Smith, University of Georgia Extension economist recently at the Georgia Peanut Farm Show.

Ethanol “Fuels” Corn Demand
“Back at harvest 2006, we started seeing a bull market in grains, particularly corn, when they realized there was going to be a shortfall with lower yields than expected,” Smith said. “Also, on the demand side, corn being used for ethanol production has ‘fueled’ this reality, partly because of ethanol.”

Smith said there is a world shortage of wheat, and soybeans lost nearly 12 million acres to corn last year.

“This year, we are looking at going from record stocks in soybeans to down to being real tight, not as low as 2003, but still tight,” he said.

Smith said cotton has reasonable stocks, but they are losing acres in cotton so that has gotten them into the game recently.

Plant Enough, Not Too Much
As for peanuts, Smith said supply has been worked down, and there is still a decent carryover, “But it’s down to the point that if we have a bad year or we don’t get enough acres planted, then it’s a concern.”
Smith said the “new” news in peanuts was that yield for 2007 was higher for the U.S. crop by nearly 200 pounds.

“That 200 pound higher yield translates into a 1.87 million ton crop, that’s 8 percent higher than last year,” he said. “Supply was maybe a little better than what we thought it was.”

Essentially, Smith said farmer stocks in storage are down, shelled stocks are down, and the pipeline is less full. However, consumption is also flat, but exports were up last year.

“Basically, there is room for a few more peanut acres if we are going to keep things where they are right now,” Smith said. “Weather and yields will be key.”

Consumption Flat, Exports Up
Better weather is certainly something producers in Virginia and the Carolinas are hoping for.

Dell Cotton, Executive Director of the Peanut Growers Cooperative Marketing Association, located in Franklin, Va., says growers in the V-C area are hoping for a much better season, as weather negatively affected not only yields but grades for most producers.

“We will have to overcome a few obstacles in order to have a successful season that has begun with higher contract prices to growers,” he says. “The first of these, of course, is the weather.”

Cotton says they have recently had good rains, and they are hoping it will continue recharging last year’s deficits.

“Secondly, growers know that the seed quality will not be what they are used to,” Cotton says. “Last year’s weather has also had the effect of lower germinations.

“Finally, while Virginias are at a comfortable carryout level heading into planting season, demand as evidenced by recent Stocks and Processing Reports is down for Virginias. We hope that consumption will recover.

Manage According To The Market
Cotton says there are also signs of some export opportunities that would help with existing supplies. However, growers are reminded that acres need to be managed according to the marketplace.

“As we have seen before, excessive plantings can quickly come to haunt growers in negatively affecting subsequent years’ contract prices.”

Foreign competitors also bear watching. Jimmy Dorsett, President of Golden Peanut Company, says he will be watching the crop size in both Argentina and China, and the “willingness of the Chinese to export to western Europe.”

Other elements that can affect the 2008 crop, Dorsett says, are: 1)crop plantings, 2)final crop size, 3)domestic & export demand and 4)peanut oil demand.

“Increased plantings with normal yield should result in a larger crop than in 2007,” Dorsett says, “but considering less than normal inventory carryout, the carryover going into the 2009 crop could still be normal.”

A report on planting intentions will be released by USDA on March 31.

PG

Overall Crop Market Situation:
• Grain markets in rally mode since 2006 harvest after real- ization that corn crop had largest shortfall since drought of 1988.
• Ethanol demand and speculative fund buying "fueled" the rally.
• Soybeans expected to go from record surplus last year to tight situation by end of 2008.
• World wheat ending stocks lowest in 25 years.
• Peanut supply has tightened, but demand is slow.
• Reasonable stocks of cotton on hand, but U.S. and World stocks expected to drop next year.

Peanut Market Situation:
• 2007 Crop Production Summary revised total production to 1.87 million tons, 8 percent higher than November estimate and 8 percent higher than 2006.
• Farmer-stock peanuts in storage are down 14 percent, shelled stocks are down 33 percent and oil stocks are up 11 percent.
• U.S. acreage was down 1.1 percent in 2007. Georgia was down 8.6 percent.
• Ending stocks forecast at 675,000 tons.

Source: Nathan Smith, University of Georgia Extension economist.