The Contracting Trend Takes A Year Off Going Into Planting

J. Tyron spearman

J. Tyron Spearman
Contributing Editor

It’s planting time and decisions on what to plant have been made by now. The decision was easy for some producers, especially contract growers, who plant for rotation and pray for a good crop. But for many, it’s the market price that dictates planted acres.

USDA predicts an acreage decline of 18 percent for peanuts. Most industry insiders agree that unless prices for farmer-stock peanuts increases, the estimate is right on target and could even be lower if cotton prices increase to more than 80 cents per pound by planting time. With the seed cotton program now eligible for the Price Loss Coverage (PLC) program, cotton acreage should increase. Meanwhile, prices for farmer-stock peanuts have not changed as of early planting time.

Uncertainties In The Market

Other uncertainties have also stalled any market movement. Issues include the severe drought in Argentina and the threat of tariff caused by the near trade-war between the United States and China. Delays in the Farm Bill, with a one-year extension in the discussion, and excess peanuts in the loan from the 2017 crop are on the mind of key traders.

Shellers have offered $400 per ton for 2018 farmer stock, with some contracts lower at $380 per ton and some as high as $500 per ton for high oleic peanuts and seed premiums. Recently, the price for 2017 peanuts increased from $375 per ton to $400 per ton. With all the uncertainties, farmers did not respond much, and shellers are probably the least contracted for the next season this close to planting.

Cool Start

The kick-off for the new crop has not been favorable weather wise. The Southwest peanut region, which is also known for its cotton production, recently received its first rain since last Christmas. The Southeast has been under a moderate drought, but has received more rain recently, which has allowed for land preparation. However, temperatures in the Southeast have remained on the cool side. The V/C region has experienced extreme cold and wet conditions. Planting time is critical for this northern growing region.

Shelled market prices have stayed low with no pressure from manufacturers and a little response from farmers. Manufacturers saw no need to forward contract as they eyed the heavy volume in the government loan program that will have to be sold to shellers to avoid forfeitures to the government.

Peanut Stand Off

leading market indicatorsThe peanut market is stalled. What will be the catalyst for change? Depending on the deliveries of shelled peanuts under European Union (EU) specifications from Argentina, EU customers should be looking to the United States for quality-approved supplies.

China is still a player and has emerged as a major buyer. Strong domestic demand in China is expected to continue in shipments from the United States. China already charges 15 percent import duty and 13 percent Value Added Tax to peanut shipments, but so far, peanuts have not been targeted with more tariffs.

Importance Of Exports

Canada, at 26 percent, and Mexico, at 23 percent, continue as major buyers of U.S. peanuts. The continuous rhetoric concerning renegotiation of the North America Free Trade Agreement also adds uncertainty to the market. Farmers have to realize export of peanuts is approaching 30 percent of the production, and demand is growing.

Domestically, markets continue strong. According to USDA, peanut usage is up again 3.3 percent for the first 7 months of this marketing year with peanut candy and snacks leading the way. Marketing plans targeting millennials, consumers aged 18-38, appear to be working as peanut consumption is rising. Per capita peanut consumption exceeded 7.19 pounds last year…the only nut showing consistent gains in per capita consumption since 2012.

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It all starts on the farm. Keeping the farmer optimistic through hope for a good year is what makes agriculture a great profession. But, all these uncertainties in the peanut world are dimming their enthusiasm for 2018.