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Market Watch

By Tyron Spearman
Contributing Editor
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The industry will long remember 2009, and although we have experienced some hard hits and remarkable recoveries in the past, peanut folks are looking for better times and hoping 2009 is a distant memory.

Over Production
A bumper crop in 2008 kept tonnage rising to more than 2,580,000 tons. Producers knew that 2009 would be a down year. Contract offers were low or non-existent, and farmers took the hint. Nationwide, acreage was reduced 28 percent with the Southeast cutting back 27 percent, the Virginia-Carolina region down 36 percent and the Southwest’s acreage down 38 percent.

Crop alternatives were not that great, but producers had issued the challenge to the industry, “If you want me to plant peanuts, you’ve got to pay me.”

Shellers were only drawing down from the bumper crop sitting in the market loan what the manufacturers demanded. They had paid producers top dollar for option contracts and offered minimum prices on tonnage not priced trying to blend prices and survive the depressed raw-shelled peanut market.

Salmonella Scare
Then came a Salmonella scare that almost brought the industry to its knees. The Food and Drug Administration traced Salmonella to a peanut butter ingredient plant in Blakely, Ga. The plant was closed, and a global recall began.

At first, FDA recommended consumers avoid eating any peanut butter products. Manufacturers of the major brands of peanut butter and other industry spokespersons worked long hours and spent millions trying to convince consumers that jarred peanut butter was not affected by the recall.

Although the media continued their onslaught of negative news daily for months, consumers did not desert the peanut industry.

Poor Economy
The decline of the U.S. economy seemingly plays into the hands of the peanut butter industry. With lower-priced peanuts, peanut butter remained reasonably priced and was a staple food for a struggling family. What had initially been a 20 percent decline in peanut butter usage, turned into a 10 percent increase and still climbing.

The poor economy was not favorable to snack peanuts, which declined 16 percent. Peanut candy also took a hit, down 10 percent some months, but down for the year only 4.5 percent.

While the industry wrestled with the Salmonella issue and a sick economy, the government tried to figure out how to get rid of about 800,000 tons of peanuts sitting in the market loan with four months until loan maturity.

Without warning, in late July, the government dropped the price of loan peanuts $92 per ton for two weeks. The move to lower the repayment rate was to reduce the likelihood of forfeitures from the 2008 crop.

Shellers got a deal, peanuts could be bought from the government for $23 per ton less than the minimum loan rate of $355 per ton. The plan worked. Shellers forward priced the peanuts leaving only 5,800 tons remaining as of October for forfeitures.

Exports
Peanut sales overseas have not been exciting. The decline of the U.S. dollar may open some markets for the new and old crop, but raw shelled peanut shipments are down about 12 percent, with in-shells up 20 percent and peanut butter up 2.4 percent.

Most of the products imported into the U.S. market have been crude peanut oil from Argentina and peanut butter from Canada.

The Year Ahead
This has been a miracle year. We’ve weathered the storm and with a 30 percent acreage reduction, we can get supply and demand back in balance. A crop of 1,850,000 tons with a demand of 2,150,000 tons means utilizing a major portion of the old crop. USDA predicts a carry forward of about 700,000 tons into next year. It is still a surplus, but not bad if peanut butter remains strong and exports return.

The weather is playing games with the 2009 crop and changes are likely. The farmer price of peanuts next season will be impacted by alternative crop prices. Stay tuned.

PG


Leading Market Indicators (as of Oct. 12, 2009)

• 2009 Crop (predicted) 1,819,200 tons
• 2008 Crop acreage (dn 28%) - 1,082,000 acres
• 2009 Average yield - 3,363 lbs/A
• 2008 Crop counter-cyclical pay- ment - $0/ton
• 2008 Crop in loan - 8,017 tons
• 2008 Crop forfeitures - 5,892 tons
• 2008-09 Usage (12 mos.) - up 1.5 %
• 2008-09 Exports (12 mos.) - dn 3.0%
• National Posted Price (per ton) Runners $424.40, Spanish $429.11, Virginia/Valencia $428.26

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