Market Factors: With a big crop expected, make arrangements for storage prior to planting

The market situation for peanuts has been the talk of all winter meetings because the lack of competitive prices for other row crops. The result will likely be too many peanuts, a plunge in the price and continued volatility in the peanut market.

Peanut-Grower-March-2015-copy_Page_01_Image_0001Supply And Demand  

Nathan Smith, University of Georgia Extension peanut economist, says 2014 was a balanced year for production and use with domestic use increasing a little from the year before and exports being down a little.

“We are the low-cost producers with the best quality,” Smith says, which will help to keep the export market from dropping off.

“Our issue is not really demand, except that we really can’t grow demand enough to take up all the peanuts we could grow in the field,” Smith says.


Export Growth:
Inshell
$35.5 million in 2008
$82.3 million in 2013
Shelled
$197 million in 2008
$415 million in 2013
Peanut Butter
$ 53.3 million in 2008
$152.9 million in 2013


Tipping The Balance

“When supply and demand gets out of balance, it’s the grower that takes the first hit,” says Dell Cotton, Virginia Peanut Growers Cooperative Marketing Association executive director. “We are increasing acres and increasing pounds that come off those acres. We could decrease acres and still get the same poundage.”

The average yield has increased because of newer varieties and improved rotations, Cotton says, especially in Virginia, which is now close to four- or even five-year rotations on peanuts.

“2014 was a record year again, and we have had two of the biggest crops in the last three years,” he says.

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Peanut-Grower-March-2015-copy_Page_03_Image_0001Program Options, Limits

Smith says growers are leaning more toward PLC in peanuts and ARC-County on other covered crops. “If peanuts trigger a PLC payment, you can pretty much count on ARC-County triggering a payment,” he says.

Cotton base is available as generic base to be planted under another of the covered commodities. “We’ll have more peanuts, soybeans and some cotton,” Smith says. “The payment limit will come a lot quicker on fewer acres of peanuts, too.”

Mar-15-Table4Cotton says it is a mistake to be under the impression that you will receive $535 per ton. “The payments are there, but overplanting will catch up to us,” he says.


 

Peanut Situation:

  • U.S. Planted Acreage in 2014 – 1,354,000 acres
  • U.S. Yield – 3,932 pounds per acre
  • USDA projects overall peanut use down by 1.9 percent
  • Peanut butter use shows increase of 9.75 percent in first four months

Peanut Outlook:

  • Early contracts are not likely to go up much, if at all.
  • A premium on high-oleic varieties is unlikely.
  • Prices will be influenced by generic base plantings.
  • U.S. acreage is expected up at least 15 to 20 percent.
  • Expected 2014 PLC payment rate is $105 per ton.
  • Expected 2015 PLC payment rate is $120 per ton.
  • Yields will be affected by shortened rotations.
  • Fewer acres will be needed to reach a payment limit.
  • Overplanting leads to the risk of excessive program cost.

Where Will Your Crop Go?

Another primary concern should be storage availability. Many experts are urging producers not to plant without making arrangements for approved storage prior to planting. Don’t assume storage will be available in your area. Storage capacity two states away won’t help you very much at harvest.Peanut-Grower-March-2015-copy_Page_13_Image_0035

“Don’t plant if you do not have arrangements to store those peanuts,” Cotton says. “Know that before planting. Virginia types are very easy to over produce. There will likely be fewer Virginia-type contracts and for less than you’d like to see.

“Also keep in mind, contracts may be limited in poundage and you may not get anything for your extra peanuts,” he says.

Any number of situations can happen from now until harvest, but the expectation of a larger crop changes the dynamic for producers who need to be aware of poundage limits on contracts and storage in their area.