The 2010 crop is off to an excellent start with good germination, more rain in the Southeast and V-C region than normal and little or no early disease and insect pressure. In fact, crops look so good this spring, commodity prices have declined.
Producers are worried about the Farm Bill. Just as many were getting comfortable with the 2008 Farm Bill, politicians want to make changes, but they do want producers to survive and maintain profitability. The food supply of this country is a national security issue.
The Administration and USDA have agreed that crop subsidies aren’t enough to revitalize rural economies, so efforts are underway for the federal government to do more. Secretary of Agriculture Tom Vilsack says the Obama Administration plans to create jobs in rural areas by pushing for new biofuel plants, installing high-speed Internet connections and bolstering tourism.
Rep. Collin Peterson, House Ag Committee chairman, says it makes more sense to subsidize farmers based on fluctuations in their revenue, rather than with fixed payments. He says that all subsidies may eventually be folded into some form of crop insurance, a system already heavily underwritten by taxpayers but with more public support.
USDA’s peanut acreage estimate, due June 30, is the next influence on the market. Early indications are that acreage is up 8 percent to 1,201,000 acres. Based on those figures, USDA’s first tonnage estimate is for a crop of 1,972,500 tons, a 7 percent increase over last year. The question is, “Can producers maintain an average yield of 3,400 pounds per acre as in the past two years?”
USDA shows domestic consumption of peanuts up only 1.5 percent for 2010-2011 after posting an amazing 4 percent increase earlier this year. Peanut butter continues to lead, up 8.9 percent during the past 10 months. Peanut candy is up only .5 percent, and peanut snacks continue down 9.3 percent.
The good news for producers is the carry forward has dropped from 1,664 billion pounds to 1,387 billion pounds, which could boost prices depending on this year’s acreage and crop size.
In the Southeast, most producers signed option runner contracts for $450 per ton. Some amenities were added such as seed premiums and hauling fees. Those who did not sign are waiting, and individual negotiations involve prices similar to early options.
Southwest producers refused to sign at early contract prices. Shellers were facing higher cotton prices, and shelling plants can only process peanuts and not cotton. Many producers signed option contracts at $500 per ton.
Will shellers need uncontracted peanuts? If the peanut butter craze continues and the acreage is down, it is likely they will return with offers.
The 2009 crop is still being redeemed from the loan. Prices received by farmers last season were low, mainly because of the buildup of stocks from the 2007 crop. USDA is finally picking up these numbers, and it is evident in the prices paid to farmers.
Peanut base owners have already received $9.20 per ton or 40 percent of the estimated counter-cyclical payment for 2009 peanuts in March. After May, the average price received by producers is $432 per ton. Producers could receive an additional $17.20 per ton in October after all 2009 peanuts are redeemed.
Exports Still Sluggish
U.S. peanut exports are down 16.3 percent with the category of raw shelled down 24.8 percent. Argentina, who reduced acreage 24 percent and experienced a drought, will still be the dominant exporter to Europe. The United States markets mainly to Canada and to Mexico somewhat. All buying economies have troubles, and the dollar keeps getting stronger against the Euro, increasing the price of U.S. peanuts.
Keep The Faith
Farmers are hoping the U.S. and world economy will keep improving, but that consumers will keep buying their product. Records were set in the peanut butter market and even government purchases are up over 24 percent. We are a long way from a year ago. PG
Leading Market Indicators
(as of June 5, 2010)
• 2010 Acreage (est up 8% ) - 1,201,000 acres
• 2010 Crop (est up 7%) - 1,927,500 tons
• 2009 Crop in market loan - 1,674,160 tons
• 2009 Crop redeemed - 987,974 tons
• 2009 Crop remaining in loan - 686,186 tons
• 2009-10 Usage (9 mos.) - up 3.0%
• 2009-10 Exports (8 mos.) - dn 16.3%
• National Posted Price (per ton): Runners $431.40, Spanish $427.11,