To Market, To Market
Bull market on grains puts fierce competition on acres.
By Amanda Huber
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
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
“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
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
“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.
Source: Nathan Smith, University of Georgia Extension economist.