Producers are optimistic about this season. Improved prices make a profit possible, but input prices chip away at that potential. Consumers are responding to marketing investments by growers and manufacturers, and, hopefully, farmers will respond by planting a good supply of quality peanuts.
At the start of a new season, there is good news – prices are up and so is consumption. There are plenty of concerns as well. The loss of Temik will impact yield. Producers may get through this season, but sooner or later, the loss will cost growers several hundred pounds per acre and will require better rotation management.
It is normal to be concerned about water, especially in the Southwest, but this year is different. That region has not had a decent rain since last October, and the Southeast and V-C regions also did not get normal winter rains. Some irrigated land is being planted in corn and cotton. Georgia officials estimate that the 50 percent irrigated peanuts will drop to 30 percent.
When cotton prices were moving up and even peanut prices were climbing higher, USDA issued the acreage estimate for peanuts at only four percent less than last year. Georgia was thought to be down 20 percent and Texas down 40 percent by leading experts, but USDA says that farmers they interviewed showed only a four percent decline in Georgia, three percent in Texas.
The acreage estimate shocked the market. If USDA is right, prices will stay the same or go lower. Farmers holding 2010 peanuts in the loan were hoping for higher prices, but with the estimate, it is not likely. It may be June 30 before markets recover when USDA issues the peanut acreage planted.
Shellers struggle with quality from the 2010 crop, which does not meet minimum standards and has to be blanched. Buyers report shortages of top quality redskin peanuts. Prices have risen to 80 cents per pound, with blanched prices over 70 cents per pound.
Some farmers are holding a few tons of non-priced peanuts in the loan. Prices are $550 to $600 per ton for runners. Prices will be influenced by 2011 planted acres and growing conditions. Farmers have nine months to sell loan peanuts, pushing deadlines to September and October of 2011. Some farmers need to sell to finance the 2011 crop.
Early farmer-stock contracts traded for $550 per ton, and an estimated 30 percent of producers signed up. As cotton continued to climb, contracts rose to $600 per ton and another estimated 15 to 20 percent signed. Producers have been told that cotton at $1.35 per pound equals $700 per ton for peanuts, and they are waiting.
Southwest growers were offered $725 to $775 per ton for Virginia’s and $650 to $680 per ton for runners, but farmers sat out the offer watching cotton. The industry had the Southwest down 30 to 40 percent in acreage, while USDA posted a three to four percent decline. Somebody will be wrong.
Never before has the peanut industry seen usage numbers like these. For the month of February, peanuts in candy were up an amazing 25 percent, with peanuts in snacks up 42.8 percent and peanut butter up 7.2 percent for an incredible 17 percent increase. For the year, candy is up 21.7 percent, snacks are up almost 20 percent, peanut butter is up 1.4 percent and the industry can be proud of the 8.4 percent overall increase after seven months for edible peanuts.
Look for declines in exports, although early shipments were up about 12 percent. If the Argentine crop can avoid an early frost, the European market is poised to buy their crop as the United States will have trouble meeting minimum quality standards from old crop.
Peanuts are finally selling at prices similar to the old quota system, and it’s about time! Consumers like peanuts and peanut butter; manufacturers are now willing to invest in expanding the market. Producers need to be sensitive to industry needs for all segments. It would be nice to follow the market and not have to worry about the Farm Bill. PG
Leading Market Indicators
(as of April 6, 2011)
• 2010 Peanut Crop (final) - 2,077,800 tons
• 2010 Crop Inspections - 2,072,800 tons
• 2010 Crop In Loan (4/6/11) - 1,810,626 tons
• 2010 Crop Redeemed (4/6/11) - 863,293 tons
• 2010-11 Usage (7 mo.) - up 8.4%
• 2010-11 Export (6 mo.) - up 12.2%
• National Posted Price (per ton): Runners $649.54, Spanish $541.68,