Buyers anxiously await month-end
acreage estimate

By Tyron Spearman
Contributing Editor

 

The season approaches with some optimism. Dust has not settled on the Farm Bill, and neither have figures of acreage planted to peanuts, which should set the market for any old or new crop peanuts that are uncommitted.

Option contract prices are up, but so are inputs. Everything needed to produce a ton of peanuts has increased from seed to equipment. Unless growers make an excellent yield, profits may not be as big as first thought.

Seed Supplies
New varieties are slowly building up ample volumes to put prices reasonable, but look for 80 cents per pound plus this season. Varieties with shortages could be 85 cents per pound. Newer varieties, sporting resistance packages, could save on chemicals. However, know what manufacturers are demanding from shellers. Flavor, blanching and other processing traits are important to all segments. Germination appears good in the Southeast, with some potential problems in the Virginia-type in the V-C.

How Many To Plant?
Increasing acreage 15 percent would net 1.374 million acres. Averaging 3,000 pounds per acre or 1.5 tons nets a crop of 2.061 million tons. That level of production would keep the prices about normal, allowing some expansion into the export market and keeping everyone competitive at home. A 25 percent increase in acreage with the same yield would give the industry more than 2.24 million tons, and again the industry would be in surplus as offers would likely drop to the unadjusted $355 per ton. Remember, carryforward is reported at 675,000 tons by USDA.

Be warned: if you want to grow peanuts next season for a profit, don’t overdo it. Shellers cannot resist selling a producer an 80-cent-per-pound seed when jumbos are netting 62 to 65 cents per pound in the edible trade.

The New Program
The new Farm Bill offers little outside support from the government. Most producers feel they have been deserted. There’s an economic crisis in many segments, but the leaders don’t say much about the most important item: the country’s food supply.

The 10,000 peanut growers remain at the mercy of the market composed of competing buying points, shellers and manufacturers. The Market Loan Assistance Program may be more of a burden than an asset in the future if production is at or below U.S. and export demand. The MAP is designed to help growers during over-production and low prices.

All the prices being announced by USDA are supposed to help the grower, but there is no transparency as each type – runner, Virginia shelled and in-shell, Spanish and Valencia – has different markets in different regions.

With no adjustment in loan or target price in the new bill and contract options above the target price, farmers will receive no counter-cyclical payments. There is talk of lowering the direct payment of $36 per ton and even eliminating it in some years. The idea of paying the farmer $50 per acre for implementing a special rotation program has been eliminated in the Farm Bill’s compromised version.

Demand Home And Abroad
Peanut demand continues flat to slightly down. December was a comeback month, according to Stocks and Processing. Usage was up 3 percent, with peanut butter up 2.2 percent. For the year, peanut usage is down 4.3 percent.

Demand is increasing in the European Union and Mexico. Shellers are slow to release peanuts, keeping the market tight. The declining U.S. dollar has made U.S. peanuts cheaper in the world market. Look for increased sales, depending on the Argentine crop in a hot, dry summer. China’s lack of exports and some imports are factors that will impact the world trade. Many buyers are anxiously awaiting March 31 for the predicted U.S. acreage.

Bring On A New Year
The Southwest would like another year just like 2007. Winter rains are giving the V-C and Southeast a better start. Congress will likely agree on a Farm Bill, and the President will sign it because there is an election in November. Getting USDA and farmers to agree on Congress’ intent in the Farm Bill will be another adventure as agriculture continues to change.
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Leading Market Indicators (as of Feb. 20, 2008)

• 2007 Crop - 1,802,622 tons
• 2007 Crop Sold Commercial - 353,458 tons
• 2007 Crop In Market Loan - 1,362,569 tons
• 2008 Acreage - estimate due 3/31
• 2007-08 Usage (5 mos.) - down 4.3 %
• 2007-08 Exports (5 mos.) - up 3.2 %
• National Posted Price (per ton): Runners $452.19, Spanish $444.61, Virginia/Valencia $452.32.