Past Production And Yield Pressure Prices

J. Tyron spearman

J. Tyron Spearman
Contributing Editor

The 2019 peanut market for farmers was already weak because of a large carry-over from the 2017 and 2018 crops. Production in 2018 was estimated at 5.46 billion pounds, (2,730,800 tons) down 23 percent from 2017.

Planted area was estimated at 1.43 million acres, down 24 percent from 2017. Farmers were cutting back, trying to do the right thing to get peanut prices back to a profitable level.

Harvested area was estimated at 1.37 million acres, down 23 percent from 2017. The average yield was estimated at 3,991 pounds per acre, down 16 pounds from 2017. Planted area for peanuts was estimated at its lowest level since 2014. Harvested area decreased in all states from last year.

Production in 2018 was also down from the previous year in all estimating states. In Georgia, growers realized the lowest production since 2016. Yet, USDA estimates a carry forward of 1,191,000 tons as of February 2019. Production has increased by 39 percent over the past 7 years (2012-2018) and demand by only 10 percent. Eventually, the acreage and yield result in production increases pressuring prices downward.

Selling Old Crop

Don’t forget about the 121,684 tons forfeited from the 2017 crop, now in warehouse storage awaiting the Commodity Credit Corporation and USDA to announce their plans for what to do with it.

The 2018 peanut crop is moving from the $355 per-ton loan to the shelling plant. The Market Loan Program has received 2,324,582 tons, that’s 85 percent in the loan. Because of the government shutdown, the final date for placement in the loan was extended to Feb. 28.

Since loans can remain in storage for 9 months, calling for a November maturity, storage may become a problem in the 2019 harvest season.

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Farmers in the Southeast were being offered $400 per ton for peanuts not contracted with routing through the Market Loan.

Farmers with a peanut base will get some assistance because of lower prices.

USDA projects the 2018 average price received by farmers to be $430 per ton. The October payment would be the peanut reference price of $535 per ton minus $430 per ton or a payment of $105 per ton. That level would apply to 85 percent of base acres times yield.

Payment Yield

Under the new Farm Bill, the landowner can update payment yield on the farm if located in a county affected by drought. If the owner decides to update the payment yield, the new payment yield will be 90 percent of the average yield per planted acre for the crop years 2013-1017. There are some limits to updating opportunity.

Trade Mitigation

The United States is serious about helping farmers who have been impacted by unjustified trade tariffs. Although peanut farmers did not get a direct payment like cotton, soybeans and others, peanuts are receiving indirect help that may trickle down to farmers.

The Trade Promotion Program provided $1,922,015 to be utilized in the next three years in Japan, Columbia and Europe to promote exports of peanuts. The program is being coordinated by the American Peanut Council. USDA approved $12 million in purchases of peanut butter, already buying $5 million of that for delivery to school lunch programs and food banks in April, May and June.

There are disaster bills in Washington D.C. and in Georgia to help farmers and businesses hit with hurricanes. Distribution may be a problem when trying to be fair and equitable.

2019 Farmer Contracts

march 1, 2019, peanut pricesThe first peanut farmer-stock contracts for farmers are being offered at buying points in the Southeast. Other regions have yet to receive offers. A limited number of tons are being offered at each buying point. In summary: A peanut farmer would need to sign the first ton of production at a $400 fixed price contract.

After the first ton of production, the grower has three options to choose from:1) sign up more tons at $400 fixed price contract, 2) sign up more tons at a $375 pool contract, 3) sign up more tons at a $375 to $450 min/max contract that will be priced from October ’19 until March ’20.

Farmers have the opportunity to participate in the markets as the weekly prices will be quoted by the sheller. Other shellers have matched the $400 per ton with limited tonnage.

Peanut Demand At Home

The disappointing trend on utilization continues, down over 1 percent from last year. All categories were down for the four-month period with peanut candy down 9.3 percent, snacks down 2.9 percent and even peanut butter down 2.2 percent year to date.

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Most reports are indicating an increase in peanuts and peanut butter in snacks; however, Stocks and Processing did not verify those reports. Government purchases will change next month as the Trade Mitigation agreed to buy $5 million in peanut butter.

Many companies are reporting using peanut butter as an ingredient in new products. With the nutritional powerhouse of peanuts and peanut butter, the entire peanut array of products needs advertising. November usage declined only 0.2 percent. It is clear that this slowdown in demand is impacting movement and prices at all levels.

Peanut Demand Abroad

Argentina is looking at a great crop for both quantity and quality. With current favorable growing conditions, high temperatures and abundant precipitation, today it is projected a yield as high as 3,500 to 4,000 kilograms per hectare and possibly more.

China continues to be weak with slow demand and low prices. It is unclear at this time how this will impact the new crop plantings. It seems that at best we will have similar plantings as last year and possibly a decline. Domestic demand would be impacted by the potential economic slowdown.

For the United States, exports are up 3.69 percent January through November. With all the tariff talk and trade unrest, that is good.

2019 Market Factors

I am afraid cotton prices dropping to 72 cents per pound will cause row-crop farmers to plant peanuts to survive. However, a 10 percent reduction in peanut acreage next season would reduce the 1.17 million ton carry-forward, and that makes sense.