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Market Watch

The key to the market this year and next is planted acreage.

By Tyron Spearman
Contributing Editor
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It is hoped 2010 will be a profitable year. However, oversupply has quieted the market. Competitive commodities, which give producers a bargaining chip, have declined in price. The only competitor for land is cotton as prices have increased.

Contract Offers
With an 800,000 ton carry-over, manufacturers were not anxious for early orders. Producers said a contract was needed to get financing. Shellers offered a $425 per-ton option contract for runners. Farmers waited on a more profitable price. Shellers took a risk and offered $450 per ton. Many farmers, even those wanting a price starting with a five, signed. Response was so good, the contract was eventually pulled.

What about producers who waited? Will shellers return with $450 per ton or even higher, or will that farmer have only the $355 per ton guarantee?

Don’t look for any offers soon. The shelled-goods price has been under pressure. Manufacturers feel an abundance of peanuts will be planted, and plenty were contracted. Now, shellers and other segments have to get some sold. Unfortunately, the shelled market has dropped from 48 to 46 cents during the last month, which is not a good sign.

Acreage Estimate
USDA’s estimated peanut acreage is usually accurate. Last year, USDA predicted 1,124,000 acres. The final count was 1,116,000 acres. This year’s report showed acreage up eight percent, but several states had unusual numbers.

Southeast acreage was viewed as okay, but contracting indicates Georgia could be higher than six percent, especially in southwest Georgia. The market is not convinced South Carolina and North Carolina could increase 40 percent and 19 percent, respectively. Weak contracts in the region and an oversupply of Virginia types are not good indicators.

Another surprise, Texas was only down six percent. Producers there did not go for the $450 per-ton contract and may plant more cotton, depending on prices near planting.

With 74 percent of the 2009 crop concentrated in four Southeast states, a drought, which has been forecast, would be a real market changer. Financially able farmers might consider the market loan and hold the peanuts for nine months receiving only the $355 per ton.

Market Trends
Peanut butter is still a great buy but posted a three percent decline in February, the first drop in nine months. Advertising is helping the candy category. Peanut snacks are still down. In-shells showed a remarkable increase in February, up 9.3 percent, but still down seven percent for the year.

Export markets are disappointing. The low value of the dollar should be moving U.S. peanuts abroad. Maybe the International Peanut Forum can bring customers back to quality U.S. peanuts. Sales are down 17 percent for the year, with raw-shelled peanuts down 27 percent. In-shells were down 24 percent, and peanut butter was up 7.6 percent.

The Safety Net
USDA approved a counter-cyclical payment. Farmers with a peanut base received $9.20 per ton and expect the remaining 60 percent in September. Final price depends on the average. The direct payment of $36 per ton is being threatened by the administration, but ag committee members say not enough votes exist to open the Farm Bill.

Weather Market
Supply is adequate to keep buyers happy. If the present inventory suddenly decreases, shellers may be back with late offers. It will take a weather scare or major boost to get this market excited before harvest. The key to the market this year and next is planted acreage. With the present supply, hold the line with acreage similar to last year. That will improve contract offers for 2011.

Farm Bill Talk
Start thinking about the next Farm Bill. Should farm base be updated? Do you like the market loan assistance program or should peanuts consider a marketing order like almonds or walnuts? How about price? Should loan guarantees be increased? Remember, it takes industry unity to get something done in Washington, D.C.

PG


Leading Market Indicators (as of April 7, 2010)

• 2010 Crop (est.) - 1,201,000 acres
• 2009 Crop (est.) - 1,844,175 tons
• 2009 Crop inspection total - 1,822,918 tons
• 2009 Crop acreage - 1,081,000 acres (down 29%)
• 2009 Yield (avg.) - 3,412 lbs/A
• 2009 Crop in loan - 1,674,160 tons
• 2009 Crop not redeemed - 1,026,375 tons
• 2009-10 Usage (5 mos.) - up 2.3%
• 2009-10 Exports (4 mos.) - dn 17.2%
• National Posted Price (per ton) Runners $431.40, Spanish $427.11, Virginia/Valencia $435.26

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