What will we do with a 3 million ton crop?
BY J. TYRON SPEARMAN
Peanut farmers will harvest the largest crop in history. Couple an ideal growing season with new, higher yielding varieties and little disease and insect pressure and you’ve got the recipe for a good crop.
Excitement About 2012 Crop When peanuts hit $1,000 per ton last year, farmers got excited, and it continued when contracts opened at $750 per ton. The real market was not that high, but manufacturers wanted coverage after paying $1.20 per pound for shelled peanuts the previous season.
Shellers were excited, too, as seed was selling for $1.10 to $1.20 per pound, while the regular shelled market was at $1.00 per pound.
Excitement has turned to disappointment. The entire industry can be blamed for major over-production. Farmers were advised to secure contracts before planting excess acres, but many planted anyway. Acreage jumped 45 percent, with Georgia increasing 56 percent. Now, production is expected to be 2,959,750 tons, up 63 percent, and could total more than 3 million tons.
There is no market except month-tomonth manufacturer orders. At some point, they will start buying again, but probably not until after using up higherpriced peanuts purchased earlier.
The farmer’s only market is the $355 per-ton loan. Estimates are that 50 percent of Southeast peanuts are contracted. Shellers can purchase from the loan at any time. Farmers have nine months to sell uncontracted peanuts or forfeit to the government for the loan rate. Shellers should return with an offer around February or March as prices stabilize.
What price will the farmer accept? Anything above $355 per ton is better than nothing. That would be an insult to a farmer if the sheller wants him back next season. Farmers may reject the offer and forfeit to the government after nine months. Storage and handling will be paid, and the sheller is not likely to buy without a market.
What will USDA do with the peanuts? They could crush them for oil, barter for production into peanut butter for the hungry or for school lunches or keep them in storage.
In the past, USDA has lowered the repayment rate below $355 per ton and sold out in a “fire sale.” The CCC and USDA do not want peanuts to sell.
Help From The Farm Bill
The Farm Bill expired Sept. 30, but the law authorized the Market Loan for the 2012 crop, which applies until it is sold. Congress should extend the Farm Bill for 2013. Base holders will receive $36 per ton in October for 2012 crop and, if extended, another $36 per ton in October 2013. The average price is too high for a counter-cyclical payment.
In the House and Senate Farm Bills, the Market Loan is continued, but not direct payments. The House has a higher target price at $534 per ton instead of the current $495 per ton.
Reporting errors last season wiped away a perceived 6 to 8 percent increase in usage. After corrections, peanut usage was down one percent for the year. Edible sales for this year have peanut candy down .2 percent, snacks down 1.3 percent, peanut butter down 1.3 percent and inshells down .3 percent. Higher prices and poor economies have export markets dropping 37 percent.
Recovery With Excess Peanuts
Excess peanuts means lower prices across the board. USDA predicts peanut demand to increase 4.8 percent and exports to bounce back up 36 percent. USDA predicted a carry-forward next season of one million tons, about a halfyear supply, so farmers will need to grow peanuts next season, just not as many. Crop competition will impact contract offers. Farmers selling loan peanuts may want to talk with shellers about contracting not only the 2012 crop, but possibly a portion of the 2013 crop.
Sell More Peanuts
U.S. farmers have produced the largest, best quality crop ever. Every buying point and sheller should have rawshelled peanuts for the holidays. Everyone in the business should give peanuts for the holidays. It’s time for all segments to sell more peanuts.
Leading Market Indicators (as of Oct. 5, 2012)
• 2012 Crop Acreage (est.) – 1,594,000 acres, up 43%
• 2012 Crop Production (est.) – 2,959,750 tons, up 63%
• 2012 Average Yield (est.) – 3,714 lbs/A
• 2011 Crop In Loan – 58 tons
• 2011 Domestic Usage (12 mo.) – dn .9%
• 2011 Exports (12 mo.) – dn -37%
• National Posted Price (per ton):
Runners $549.65, Spanish $533.91,