Balancing supply with demand is the key to sustained prices.
BY J. TYRON SPEARMAN
Water and balance are two keys to the 2012-2013 peanut market. The Southeast and Southwest are starting the season with moisture levels at record lows and rainfall during the season will be required to make the crop.
If rains occurs, then balancing supply with demand will be the key factor in prices of the produced peanuts.
Buyers know that a big increase in the acreage, predicted by USDA at 25 percent, coupled with high-yielding new varieties could destroy prices at a profitable level.
Kick-Off Of New Season
Seed supplies are short and germination is not up to par. The Southwest’s seed suffered extreme conditions in 2011. It could take the region years to recover. Why not import seed from the Southeast? Southeast supplies are tight and handlers do not want to mix higholeic production in the Southwest with non-high oleic from the Southeast. Further, seed from a certain region does not reproduce as well in other regions.
Balance is a key factor in seed treatments. With raw-shelled peanuts at one dollar per pound or more, the goal is to only treat needed seed and sell the remainder to the market.
Lack of moisture in April has potentially delayed the crop cycle. Farmers in the drought-stricken Southeast are having to wait for rain to plant. With the planting equipment in today’s farming operation, farmers can catch up, if it rains. High winds and early season record heat have added to their woes.
Buyers are betting on overplanting and that prices for raw-shelled peanuts will decline. Early contract offers had farmers optimistic about peanuts; however, as competitive crop prices declined, so did peanut contract offers. The possibility of overplanting was real and shellers tried to discourage it by limiting contracts to a certain acreage, some limited poundage and even seed became a factor. Balancing production of peanuts to equal demand is price driven.
Demand for peanuts remains strong. Although the volume dropped in March about five percent, peanut usage for the year is up 4.8 percent. By category, peanut candy is strong, up 15.7 percent, peanut snacks are even with last year and peanut butter is up 3.6 percent.
Supplies could get tight before the next crop with the loan holding only 400,000 tons in May compared to 750,000 tons last year. Most shellers report the $1,000-per-ton loan peanuts have all been redeemed. Imports of peanuts from Argentina and Nicaragua have been a factor in pricing.
Peanut specialists have estimated that acreage would increase about 16 percent, not 25 percent as predicted by USDA. Should farmers plant 1,328,000 tons, up 16.4 percent, production would be near 2,200,000 tons based on an average yield of 3,300 pounds per acre, and prices should remain strong. Carry forward has already dropped to 443,000 tons, about half of the carry-forward level last year.
Farm Bill Is Just Nuts
Within the next 90 days a new Farm Bill must be completed because all programs expire Sept.1, 2012. America needs to save money and farmers are the first to agree, preferring money from the market, not the government. Leaders in the Beltway better recognize that the affordable, abundant food supply is not only a matter of national security for the U.S., but also critical for a rebounding economy.
The peanut program has worked well. The commodity section of the Farm Bill costs less than one-quarter of one percent of the federal budget. We were just peanuts. Now it appears peanut farmers have lost the direct payment ($36 per ton), the counter cyclical payment and the only thing left is crop insurance, which in its present form has not worked. The market loan will help the shellers, but can the farmer borrow money on $355 per-ton peanuts?
It is show time…let’s show the world we can grow and deliver the best quality peanuts in the world. PG
Leading Market Indicators (as of May 3, 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 – 458,976 tons
• 2010 Crop In Loan (at same time last year) – 814,842 tons
• 2011-12 Usage (8 mo.) – up 4.8% – March – dn – 5.8%
• 2011-12 Exports (7 mo.) – dn -22.7%
• National Posted Price (per ton):