A modest acreage increase would ensure a profitable 2016

The U.S. peanut industry is poised for disaster if farmers plant wall to wall peanuts. All the talk is that peanut acreage will be back to 2012 levels or above, a 25 to 30 percent increase. Peanut prices are already dropping from $400 per ton in the Southeast to a floor of $380 per ton with limits on poundage per acre for runner-type peanuts.

J. Tyron Spearman Contributing Editor, The Peanut Grower

J. Tyron Spearman
Contributing Editor, The Peanut Grower

That’s less than the cost of production, but farmers hear $535 per ton and think the miracle Market Loan peanut program is supposed to drop a $100-per acre government check in their lap that will save the farm. Supply and demand still rules, and the first segment to be targeted is the farm price.

Restraint Needed

Farmers and other industry leaders are going to have to show some leadership to slow this train from disaster.

Comments you hear are as follows, “I’m not worried about this year; we stored that many peanuts in 2012. I’m worried about next year!” Other comments are, “I’ve already sold more seed this year than two years ago!” or “Does a buying point have to take my peanuts and give me a Market Loan? What if their warehouse is full?” By the way, the total approved warehouse storage, per  Kansas City, is over 3,300,000 tons and more can be approved, if needed.


Leading Market Indicators (Jan. 15, 2015)
•2014 – Acreage estimate – up 27% – 1,325,000 acres
•2014 – Production estimate – up 25% – 2,605,050 tons
•2014 -Average yield estimate – 3,932 lbs/A – dn 69 lbs/A
•2014 – Market Loan – 2,071,754 tons in storage
•2014 – Market Loan – 234,129 tons redeemed
•2014-14 Domestic Usage (4 mo.) – + up 5.4%
•2014-15 Exports (Jan.-Oct.) – dn – 17.6%
•National Posted Price (per ton): Runners $424.86, Spanish $403.91, Virginia/Valencia $427.79.


Farm Bill Planning

USDA and the Office of Management and Budget (OMB) estimated during the Farm Bill that farmers would be smart and in 2015 would plant about 1,225,000 acres. In 2014, farmers produced 2,605,050 tons averaging 3,932 per acre. The Congressional Budget Office (CBO) predicted an average price of 25 cents per pound in 2015 coupled
with a loan frozen for five years at $355 per ton and a reference price at $535 per ton. Total outlay would be $84 million on 1,476,000 base acres or $57 per acre. With a steady growth in all markets, Congress liked the peanut program, the stability and protection for the farmer and everyone was happy, happy, happy.

Then came the reality that cotton, corn and soybean prices fell well below production costs. Another curve, cotton base was converted to “generic base” and could be applied to any program crop with a planting requirement, although pro-rated based on plantings.

If a payment was triggered due to low prices for peanuts, the government would make the payment on the farm base next October. A base payment will be made in October 2015 for the 2014 peanut crop on 85 percent of the base since the national average price will average less than $535 per ton.

2015 Peanut Market

The domestic market is strong for peanut butter, up 9.8 percent for the first four months, but sluggish for other categories. Snacks are down 1.3 percent, candy is down six percent and in-shells are about the same as last year. Manufacturers are busy with some plants expanding to make more peanut butter.

Export markets for peanuts shows January through October 2014 numbers to be down 17.6 percent. However, China is reportedly showing interest with the market reporting higher-than-normal prices. The top five export markets: Canada, Mexico, European Union, Japan and Russia are involved in promotions and remain steady. Trade agreements may open some peanut markets and lower import taxes, especially in China.

Worth Repeating: $535 Is Not $535

Some peanut farmers have in their mind that peanuts will pay back $535 per ton in the new Farm Bill. WRONG! The new reference price of $535 per ton for peanuts will be factored by subtracting the national average price, which is figured in a price discovery period, making a PLC rate. This rate, times your payment yield in tons, times the base
acres, times 85 percent will be the estimated payment per base acre. Some farmers may have generic cotton base that can be made into an annual peanut base to collect the payment.

Prospects

USDA said this week that abundant supplies of peanuts are available to support demand this year. Slow but steady growth is anticipated for the domestic use of peanuts. In contrast, peanut exports for 2014/15 may decline moderately from the previous two years to 1.05 billion pounds. That would still represent the thirdlargest
export amount on record. Season-ending stocks could be five percent higher than last year’s carryout of 1.96 billion pounds, that’s 980,000 tons and will keep the market quiet.

Be Cautious

A 10 to 15 percent increase in acreage coupled with the heavy carryforward is a good target this year and would ensure another profitable year for peanuts in 2016. A 30 to 40 percent increase in acreage will push prices lower and trigger a government payment October 2016. That’s a long time and the banker may not want to wait. Team with your buying point to make certain peanuts can be handled and stored properly. Just be cautious, most farmers have a payment to make next season.


Planning For 2015

Look for a profitable contract and a buying point that has federally approved storage to secure a market loan, at $355 per ton, and order approved, certified seed.

1) Don’t Delay. Go by your FSA Office, secure base information and update bases and yields. One official reports only seven percent of farmers have completed this step, and it must be completed by February 27. FSA is already stretched thin for the amount of work they do and waiting will not help. Get with the owner, make sure that you have yield data for the past five years. Powers of Attorney papers suffice for land owner
approval.

2) Decide on PLC or ARC. The deadline is March 31. Price Loss Coverage appears the best option for peanuts since the reference price on peanuts might generate a payment next October on base acres.

3) Meet with a Crop Insurance Agent. Learn more about the new revenue-based insurance program to determine what protection is needed for dryland and irrigated peanuts by type. The deadline is February 27.

4) Decide What to Plant. When bases are set, decide exactly what to plant for current markets that will support program crops or non-program crops like cotton. If a farmer has cotton base, which is now known as generic base, to apply it to another program crop, the crop must be planted. Remember, a good rotation program is necessary to maintain yields and help lessen disease problems.


OLAM Acquires McCleskey Mills

Olam International has announced the acquisition of McCleskey Mills, the third largest peanut sheller in the United States for $176 million. McCleskey Mills has a peanut shelling market share of approximately 12 percent and an annual capacity of about 250,000 farmerstock tons.

McCleskey Mills owns processing facilities in two locations in Georgia, Smithville and Rochelle, and owns or manages 20 buying points and farmerstock storage assets in the Southeast region. McCleskey built a long-standing relationship with a diverse set of customers in the snack, peanut butter and confectionery industries. Officials said
the acquisition is consistent with Olam’s strategy to invest in specific production,
including edible nuts.

Anupam Jindel, president of Olam’s peanut business said, “We see a steady rise in production and exports in the future to meet the increased demand in emerging markets such as China and India. This provides a clear rationale to invest in U.S. peanut shelling operations and close out an existing gap in our supply chain.”

Olam International is a leading seedto-shelf agribusiness operating in 65 countries, supplying food and industrial raw materials to more than 13,800 customers worldwide. A team of 23,000 employees has built a leadership position in many businesses including cocoa, coffee, cashews, rice and cotton. The company owns and operates Olam Edible Nuts in Blakely and Sylvester, Ga., Dublin, Texas and Edenton, N.C.

Alabama-Florida Peanut Trade Show

The annual Alabama-Florida Peanut Trade Show is scheduled for Thurs, Feb. 12, 2015, at the National Peanut Festival Fairgrounds, located on Hwy 231 South, Dothan, Ala. Sponsored by the Alabama and Florida Peanut Producers Associations, the one-day event gives producers a view of the products and services of more than 70 exhibitors, plus education sessions. The show will be open from 8:30 a.m. until noon, with
a seed seminar following the luncheon.

Seed seminar topics and speakers are as follows: Farm Saved Seed – Know the Law, Jim Bostick, Alabama Crop Improvement Association; Varieties Currently in Production and on the Horizon, Bill Branch, University of Georgia peanut breeder, Corley Holbrook, USDA-ARS peanut breeder, Barry Tillman, University of Florida peanut breeder; Breeding Research Update, Marshall Lamb, National Peanut Research
Lab.

For more information, contact Teresa at 334-792-6482 or email teresa2@alpeanuts.
com.

 APC Elects New Officers

The American Peanut Council, which represents all industry segments, has announced
the new officers for 2014-15. The Chairman is Hugh Nall, Southern Ag Carriers (Allied); Chairman Elect is Otis Lee Johnson, Texas Peanut Producers Board (Grower), Secretary-Treasurer is Amy Duffy of Hormel (Manufacturer) and Immediate Past Chairman is Joe West, McCleskey Mills (Sheller).

The new board adopted a domestic budget for 2015 of $766,806.

The 2015 USA Peanut Congress is June 13-17, at the Omni Grove Park Inn, Ashville, N.C. In 2016, USA Peanut Congress will be in Charleston, S.C. For information on Peanut Congress, go to www.peanut-shellers.org.

APRES Meeting Scheduled For July

The 47th Annual Meeting of the American Peanut Research And Education Society will be held July 14-16, 2015, at the Francis Marion Hotel in Charleston, S.C. Make your hotel reservations early and get the special APRES rate of $129 per night. For more information, go to the APRES website at www.apresinc.com.

Don Self Scholarship Established

The Don Self Memorial Scholarship has been established by the Mississippi Peanut Growers Association in memory of peanut grower and former National Peanut Board member Don Self. Don was integral in establishing Mississippi as a major peanut producing state on the National Peanut Board in 2008 and served on the board until he lost his life in a farming accident October 1.

The scholarship will be managed by the Mississippi State University Foundation
and contributions are tax deductible. The goal is to raise $25,000 to make this an endowed scholarship and to generate at least an annual $1,000 scholarship in perpetuity. Contributors may make a one-time donation or make an annual pledge for
up to five years. Any individual or entity wishing to donate should make the check to “MSU Foundation, Inc.” and note that it is in memory of Don Self.

The mailing address is:

MSU Foundation, Inc.,
P.O. Box 9760,
Bost Building, Rm 204A,
Mississippi State, MS   39762

The New Peanut Crop Insurance Program

At the recent National Peanut Buying Points Association convention, Keith Schumann,
AgriLogic Consulting LLC, spoke about the new insurance program available beginning with the 2015 peanut crop.

As with the previous policy, producers can elect to use their contract prices for the insurance price election in the yield protection policy. If the contract price is used, the price will be a weighted to the average projected price.

If no contract is used, insurance program peanut prices will be determined using a formula that relates shelled peanut prices to prices of the following: December wheat, cotton, soybean oil and soybean meal contracts and other factors. Also considered is price of shelled peanuts to that of in-shells using the loan rate and National Ag Statistic Service survey prices. All these factors will be developed into a formula to determine the price for the four peanut types.

Projected prices will be determined in the spring prior to planting and harvest prices will be determined in the late fall. Peanut producers who elected one of the revenue insurance options may receive an insurance payment if the combination of price losses calculated by the program’s methodology and/or yield losses experienced by the grower’s operation, results in financial losses in excess of the deductible on their
insurance policy.

Other program points are that a grower can opt to insure on an “enterprise unit” resulting in lower premiums by almost half. If an insured grower has to replant, there is a fixed value of $95 per acre, which is up $15. A quality adjustment will start after 10 percent of the value has been lost as a result of quality problems.

Peanut types include: Runner, Southeast and Southwest Spanish, Valencia and Virginia. Practices include irrigated or non-irrigated; spring, fall or not-specific; conventional or organic. Coverage levels will be 50 percent to 80 percent in five percent increments.

Sales close for most peanut states is Feb. 28, 2015, with others being March 15. To find out the deadline for your state and other program details, contact your local crop insurance agent. Need to find an agent? Use the RMA Online agent locator tool at www3.rma.usda.gov/apps/agents.

Peanut Leadership Academy Begins Class IX

Twenty-two peanut growers and sheller representatives from across the Southeast, Texas, North Carolina and Virginia began Class IX of the Peanut Leadership Academy hosted by the Southern Peanut Farmers Federation, Dec. 15-17, 2014, in Panama City Beach, Fla.

The Peanut Leadership Academy is a cooperative effort between Syngenta Crop Protection, the American Peanut Shellers Association, grower organizations and agricultural extension. The program began in 1998 with the first class of 14 peanut growers from Alabama, Florida and Georgia. Since then, the academy has continued to grow to include growers from Mississippi, North Carolina, Texas, Virginia and sheller representatives.

Lyle Stewart, Syngenta district manager, says, “Syngenta is proud to support the Peanut Leadership Academy. We recognize the significance of the program and the importance of educating young peanut farmers who will become strong leaders in the industry.”

Activities in the leadership program are structured to give participants a thorough understanding of the U.S. peanut industry. The leadership sessions range from field trips, meetings with industry leaders and professional development training.
Also, each class has one leadership session in Washington, D.C., where class members have an opportunity to visit with their congressmen about issues affecting the peanut industry.

The Peanut Leadership Academy Class IX members are: Alabama – Brian Byrd, Ariton; Jeremy Sessions, Grand Bay; Marshall Speake, Eufaula; and Russ Walters, Andalusia; Florida – Levi Findley, Jay; Jeremy Rolling, Westville; and Trey Sanchez, Old Town; Georgia – Bubba Curry, Shellman; Justin Harrell, Nicholls; Jeffrey Heard, Newton; Zack Thaggard, Leesburg; and Austin Warbington, Pinehurst; Mississippi –
B. Jones, Ridgeland; North Carolina – Wade Stanaland, Bladenboro; Texas – Kelton Coleman, Lamesa; and Rusty Strickland, Wellington; Virginia – West Drake, Newsoms; sheller representatives – Colton Farrow, Golden Peanut Co.; Paul Huber, Birdsong Peanut; and Japheth Saecker, Birdsong; National Peanut Board – Dexter Gilbert, Cambellton, Florida; and Meredith Rogers, Camilla, Georgia.

For more information on the Peanut Leadership Academy, contact one of the state peanut associations, the American Peanut Shellers Association or visit www.southernpeanutfarmers.org.