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Market Watch

Will contracts return? Will usage continue up with double-digits?

By J. Tyron Spearman
Contributing Editor
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Marketing peanuts at the farm level this season has been a wild ride, ignited when a perceived peanut shortage from the 2011 crop caused shellers to increase shelled prices almost 85 percent, from 70 cents per pound to $1.30 per pound, resulting in farmer-stock contracts of $1,000 per ton and more. The big concern is that overplanting will generate a greater supply than is needed, and the market will return to low prices and even loan rate of $355 per ton.

In an effort to temper the excitement and predicted overplanting, shellers offered option contracts that contained limits, such as the same acreage as 2011 or irrigated peanuts only. Lower-priced peanut seed was offered to some when limiting acreage. Buying points were not allowed to offer to new growers. Other contracts were limited to poundage per acre and, in some cases, no contracts were available at all.

Acreage Estimates

The USDA peanut planted acreage estimated 1.42 million acres in 2012, up 25 percent from the previous year. However, industry experts did not agree with figures from the Southwest, which shows Texas up 33 percent as the drought problems continue. A different estimate on acreage was placed at 1,328 million acres, a 16.4 percent increase with the Southeast up about 20 percent. Average yields would produce about 2.2 million tons and keep prices profitable.

Contracts

Option contracts for runner-type peanuts started with about 20 percent at $750 per ton, another 70 percent at $650 per ton. Later, most contracts were at $650 per ton dropping to $600 per ton by early April.

Some contracts offered a floor price of $550 per ton allowing the peanuts to be priced by harvest up to $700 per ton.

In the Southwest, contracts were $650 per ton for high oleic runners, Spanish at $745 per ton and Virginias at $775 per ton. In the V-C, the market was a $700 total option contract on Virginia-type peanuts, $675 per ton for high oleic runners and $650 per ton total contact for regular runner-type peanuts.

Will contracts be back? Not likely, unless acreage is lower than expected. Shellers will evaluate the limits imposed for effectiveness.

Solving The Shortage Problem?

Will the U.S. peanut market have a shortage before harvest? Analysts had predicted the U.S. would run out of peanuts in July before the September deliveries of new crop. Apparently that will not happen. Manufacturers are selling to each other and imports are filling the void. Most of the farmer-stock peanuts not contracted in the loan have been sold, so look for the loan to clear before new crop. Early planting means peanuts in shelling plants earlier.

Consumers Keep Buying

Even with a 30 to 40 percent increase in prices at retail, U.S. peanut usage posted another positive month in February with all categories showing an increase in peanut usage.
Peanut candy posted an unbelievable 36 percent increase in February and is now up 15.7 percent for the year. Peanut butter remains strong up nine percent for the month and now up five percent for the year. Even snacks recorded a 15.3 percent increase in February, up 3.6 percent for the year. Consumers are positive about peanuts and, as new nutrition information favors a vegetable protein, the trend of loving peanuts will continue.

Export Markets And Competition

Argentina increased hectares, but the crop suffered a drought in January and February. Argentina will continue to capture the export market with lower prices. The U.S. industry has fought hard to keep export markets, down only 16.5 percent from last year. As prices worldwide increase, India increased summer plantings and China is back on the scene with peanuts.

New Crop

Analysts say the chances of over-production are slim at this time. Georgia and Alabama remain extremely dry, and Texas’ drought continues. Producers are more optimistic since prices have improved. Now, we just have to get a good stand, and then we can worry about the Farm Bill. PG


Leading Market Indicators (as of April 9, 2012)

• 2012 Crop (est.) - 1,422,000 acres, up 24.7%
• 2011 Crop Sold Commercially - 310,620 tons
• 2011 Crop In Loan - 1,402,033 tons
• 2011 Crop Remaining In Loan - 608,154 tons
• 2010 Crop In Loan (at same time last year) - 943,429 tons
• 2011-12 Usage (7 mo.) - up 6.5% - February - up 9%
• 2011-12 Exports (6 mo.) - dn -16.5%
• National Posted Price (per ton):
  Runners $1,224.52, Spanish
  $1,115.87, Virginia/Valencia
  $1,128.26.

 

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