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Market Watch

Carry-forward could reach a three-year low going into 2011

By Tyron Spearman
Contributing Editor
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With U.S. commodity prices rising and demand increasing for food around the world, one would think that the agricultural community would be happy.

The struggling U.S. and world economy is causing uncertainty. Banks have tightened credit requirements. Productions costs continue to squeeze profits. Record heat and weather problems hurt yield and quality. Peanuts were left out of disaster funding.

If a farmer did not have faith and friends, agriculture could get just depressing at times. But the eternally optimistic farmer knows that spring is coming soon, and the good feeling about planting peanuts will return.

Wrapping Up 2009 Peanuts
USDA estimates the 2009 average price of peanuts at $434 per ton, a price below the Farm Bill target price of $495 per ton. Producers with peanut base qualified for a counter-cyclical payment of $25 per ton. Base owners also received $36 per ton direct payment.

In 2008, producers received no counter-cyclical payment since the average price was $460 per ton, one dollar above the minimum.

The market loan assistance program had almost 1,675,000 tons of peanuts in 2009 and, as the 2010 crop developed, shellers optioned to redeem all but 2,955 tons. Therefore, the peanut program will have only the cost of counter-cyclical payments and a direct payment as almost all peanuts moved from government storage into the trade.

Contracts For 2010
In January, contracts opened at $425 per ton for runners in the Southeast. By February, the option contract had increased to $450 per ton.

Another offer was a flexible contract marketing the peanuts in three different dates with a floor price of $415 per ton and for each one-cent increase over 49 cents per pound in the shelled price, the farmer contract price would increase $13.50 per ton. Peanuts recently traded for 52 cents per pound, which calculates to a three-cent per pound increase or a $40.50 per ton adjustment for a total of $455.50 per ton, higher than the $450 per ton offered earlier.

Virginia-type contracts in the V-C region and the Southwest were $500 to $525 per ton with limited tonnage.

Supply And Demand
The 2010 peanut crop is estimated at 1,958,000 tons, up 6.2 percent over last year. Heat and drought will likely reduce delivery below 1,900,000 tons or about the same as last year at 1,844,000 tons. Domestic and export demand is predicted at 2,120,000 tons, about 200,000 tons short from the 2010 crop. Domestic demand is predicted to increase another two percent, and exports should increase seven to 10 percent, depending on the world economy and production in Argentina.

The carry-forward last year was more than 900,000 tons, and 2010 carry-forward should be less than 750,000 tons – a three-year low. Another factor impacting volume is the shellout and re-processing that may be required on the 2010 crop with the increase in Segregation 2s and 3s.

Usage The Real Bright Spot
Peanut usage is setting records. Peanut butter was up 8.1 percent again this year through July after an 8.9 percent increase last year. That makes peanut butter one of America’s fastest growing foods. Peanut candy and snacks were down slightly. However, snack companies are increasing advertising, and peanuts continue to be a good buy.

Government purchases, including food nutrition programs and the military, totaled over 44.2 million pounds, a 28 percent increase. As USDA seeks to improve nutrition programs for breakfast and lunch at schools and other institutions, peanuts and peanut butter continue to be in a good position.

Optimistic About Next Year
With cotton booking for $1 per pound, corn for $5.25 per bushel and soybeans near $12 per bushel, peanut contracts should be above the $450-per-ton level next season. The 2010 crop will be difficult to process and supplies will tighten. Sales of peanut butter and peanut products should continue to increase even as the economy improves.

Be active this winter in grower meetings, shows and events, and stay positive for the good of all. PG


Leading Market Indicators (as of Oct. 13, 2010)

• 2010 Acreage (est up 17% ) - 1,261,000 acres
• 2010 Crop (est up 6%) - 1,958,100 tons
• 2009 Crop in market loan - 1,674,395 tons
• 2009 Crop redeemed - 1,672,761 tons
• 2009 Crop remaining, forfeited - 1,634 tons, 2,955 tons
• 2010-11 Usage (1 mo.) - up 13.6%
• 2009-10 Exports (12 mos.) - dn 16%
• National Posted Price (per ton): Runners $449.54, Spanish $441.68,
  Virginia/Valencia $453.06.

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