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Market Watch

A consistent, high quality, affordable supply is needed

By Tyron Spearman
Contributing Editor
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A combination of factors worldwide, including strong cotton markets, poor quality from 2010 crops and record consumption, has caused peanut prices to dramatically increase in the last six months. While some analysts predict a shortage of peanuts next season, numbers from USDA do not support this, unless Mother Nature deals an extremely hot, dry summer and producers reduce acreage 20 to 25 percent. It all boils down to the acreage planted to peanuts for 2011. That will set future pricing.

Acreage has never been so important in setting the price. It is hoped that shellers and manufacturers have a better handle on acreage because USDA says a 4 percent reduction overall, while others say Texas is down 50 percent; Georgia could be down 24 percent, and Alabama will be down 15 percent.

On the other hand, more seed tags are being requested, and some buying points report increases in acres. As an industry, we need to ensure a consistent, high quality and affordable supply of healthy peanuts.

National Posted Price
USDA posted the highest price ever. The National Posted Price is supposed to reflect the average price a farmer should expect from an average ton of quality peanuts on this date. It does not mean the market will pay it. Instead, it is more of a “suggested retail price.”

With most peanuts already sold and quality problems reported in the Southeast, shellers were trying to find un-contracted quality peanuts from the 2010 crop, preferably irrigated, which could fetch $700 per ton plus. It is highly unlikely that any peanuts sold for the national posted price, unless it was a few bright-hull Valencias in the Southwest.

Contracting For 2011
Option contracts are all over the board. With the first offers at $550 per ton in the Southeast and $650 per ton in the Southwest for runners, the response was so positive in the Southeast that shellers have been reluctant to increase the price and make farmers mad. Some areas report a $600 per ton contract is still available. There is some resentment that Southeast producers were offered $550 per ton, yet $650 per ton and higher was offered in the West.

Although the cotton market has cooled off, shellers may have to return to the farmer in June seeking more acres with higher prices, but that could be too late if the land is already planted. Some farmers have even threatened not to plant the $550 per ton contracts, planting cotton instead. That could spark a fire storm that might eliminate the non-delivery privilege in the future.

Usage
Peanut usage continues to set new records. Although prices for raw shelled peanuts continue to rise, peanut usage increases continue. In March, peanuts in candy were up 33 percent, posting a 23 percent increase for the year. Peanut snack usage was up almost 30 percent in March and 21 percent for the year. Peanut butter slipped 7 percent but remains up 2 percent for the year. The big concern is that price increases will turn consumers away and slow the surge in usage, which was on line to hit 10 percent in 2010-11. That’s a good reason to plant more peanuts.

Exports
U.S. peanut shellers are having difficulty meeting EU quality standards, which opens the door for Argentine peanuts that are reportedly better than expected. The American Peanut Council was fortunate to secure $2.4 million for export promotion and will help to keep some buying U.S. peanuts. A health claim for peanuts in Europe will be a valuable promotional tool.

New Usage Category For Peanuts
A new category is emerging for peanut-based products – malnutrition-related food supplements that are known as RUTF or Ready to Use Therapeutic Foods. A new factory in Fitzgerald, Ga., called MANA, will provide the peanut supplement through foundations, government agencies, schools and churches. Another reason to plant peanuts is to possibly donate a ton for world hunger.

Summary
The peanut market is yet to be settled. Commitments have been made, and all segments need to honor those agreements. Good rains are needed for seed germination. The stage is set for the entire industry to prosper and to make money. PG


Leading Market Indicators (as of May 4, 2011)

• 2010 Peanut Crop (final) - 2,077,800 tons
• 2010 Crop Inspections - 2,073,208 tons
• 2010 Crop In Loan (4/6/11) - 1,810,624 tons
• 2010 Crop Redeemed (4/6/11) - 1,062,255 tons
• 2010-11 Usage (8 mo.) - up 8.4%
• 2010-11 Export (7 mo.) - up 11.9%
• National Posted Price (per ton): Runners $849.54, Spanish $841.68,
  Virginia/Valencia $853.06.

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