Cool weather late affects early planting decisions, crop acreages
By J. Tyron Spearman
The U.S. peanut industry seems to be in a state of flux, waiting for markets to signal the next move. Farmers are poised to plant another peanut crop after Old Man Winter delivered water and filled reserves for a change, especially in the Southeast and Virginia-Carolina states. The Southwest continues to suffer, but some rain has come to the region. There are so many “issues” involving the market that a farmer has trouble getting his head around them all.
USDA predicted acres to be down 27 percent over last year to 1,190,000 acres. Peanut specialists estimated a 31.4 percent decline in acres planted to peanuts. The big question is will the new varieties “do it again” and load the wagons with a bumper crop. The five-year average yield is 3,253 pounds per acre, but 2012 average yield was 4,192 pounds per acre. That is a significant difference. The issue remains how many acres to plant and what to expect in yield.
The Export Factor
The chatter on peanut exports has fueled the rumor mill. It is true that when U.S. peanut prices dropped to the mid- 40-cent-per-pound range, Chinese buyers discovered they could buy peanuts cheaper from the U.S. and use Chinese peanuts for export or other products. The Chinese grow four times the United States’ production. Then, Chinese Customs discovered rules were being violated on re-importing blanched peanuts and trans-shipments through Vietnam, and the curtain dropped.
The question is, “Will the Chinese return to the United States for peanuts priced at above 50 cents per pound?”
The Chinese factor buoyed the peanut market as shelled peanut prices increased from mid-40s to low 50s. Farmers theorized that the Chinese might help reduce peanuts in storage and open the door for better prices for next season. The surge likely helped the sheller more than the farmer, as continuous rock-bottom prices could have spelled disaster.
Will the Chinese be back? That depends on the price and if the trade issues get resolved. The Chinese already rule the cotton market, but farmers can hedge those prices. There is no futures market for hedging peanuts.
Peanut farmers were poised to deal. In January, corn was $7 per bushel, cotton was 80 cents per pound and soybeans were $16 per bushel. Peanut farmers reasoned that peanuts had to be competitive to prevent them from switching to an alternate, more profitable crop. By April, corn had dropped to $6.50 per bushel, soybeans had dropped to $13 per bushel and cotton had inched up to 85 cents per pound.
Late winter changed the dynamics in the Southeast as irrigated corn land will now be switched to later-planted crops such as peanuts, cotton or grain sorghum, even watermelons.
Peanut contracts were disappointing as well with only $450 per ton offered for runners, $550 per ton for Virginias. Some premiums were offered in regions for high oleic peanuts and premium varieties of Valencia and Spanish.
Now the issue is, “What crop will give me a profit?” All the farmer has to do is change the seed plates in the planter and call the seed truck for delivery. The boom and bust peanut market is not a favorite of farmers, but it could be the new normal. Some long for the stability of the old quota system.
It’s show time now and decisions have to be made. Farmers have to secure financing and lenders are more cautious than ever before. If it doesn’t cash flow, no money approved.
The domestic peanut market has been slow to recover to the plus side. USDA says usage is down five percent over last year, but they expect the industry to be on the positive side by three percent by August. Candy usage was positive last month, but remains down 11 percent; snacks are down six percent and peanut butter is down 2.6 percent.
Shelf prices have moved very little after the 30 percent increase of last year. Growers are investing in a promotion and marketing program being developed with key manufacturers, anticipating a major launch of the marketing program by the end of the year.
Exports are exciting again, up almost 60 percent, and USDA expects total peanut exports to be over 600,000 metric tons. Argentina has suffered from a major drought, and with the lower prices of top quality peanuts from the United States, U.S. farmers should regain a major portion of the European market. Economies need to improve in all foreign markets for peanuts and peanut butter to be on the menu.
Then There’s The Farm Bill
Farmers are just like many consumers who will hold onto surplus money during trying times until a clearer, more trustworthy picture of the future develops. Don’t expect investment on the farm until Congress moves on a five-year Farm Bill that will offer direction and some stability. They keep talking a good game, but farmers are not optimistic that the Farm Bill will be very helpful.
Market loan prices are below the cost of production and target prices are low enough that assistance is not likely. It is hard to reason that leaders want farm production to double by 2050, yet cut support of the Farm Bill and farmers by billions, especially agricultural research.
With all these issues, most of them unknowns, this will be a truly interesting year.
Leading Market Indicators (April 11, 2013)
• 2012 Acreage (est.) – up 44%, 1,608,000 acres
• 2012 Production (est.) – up 84%, 3,370,700 tons
• 2012 Average Yield – up 806 lbs/A, 4,192 lb/A
• 2013 Acreage (est.) – dn 27%, 1,191,000 acres
• 2012 Market Loan (4-11-13) – 2,639,759 tons
• 2012 Market Loan Redemptions (4-11-13) – 995,113 tons
• 2012-13 Usage (7 mo.) – dn 5.0%
• 2012-13 Exports (6 mo.) – up 50%
• National Posted Price (per ton): Runners $424.65, Spanish $408.91,