Sunday, May 26, 2024

Payment Limitations Will Affect Larger Producers

The real peanut market has been quiet as industry players strive to determine their future in the U.S. peanut business. Farmers have been studying the new Market Assistance Loan program and the new rules that were issued from the 2014 Farm Bill. USDA has done an excellent job in interpreting the new Farm Bill and smoothing out the explanations so farmers can understand and make decisions that will impact them the next five years.

J. Tyron Spearman Contributing Editor, The Peanut Grower
J. Tyron Spearman
Contributing Editor, The Peanut Grower

Farmers that have grown peanuts over the years and retained peanut base acreage are pleased they will have some payback and protection season after season. However, new farmers with no peanut base and especially with no generic cotton base remain disappointed. They know they are at the mercy of the supply/demand balance, and when the peanut program encourages an oversupply, prices are certain to be lower and chances of failure increase.

Farmer Preparedness

To be eligible for a Market Assistance Loan, a farmer must comply with conservation and wetland protection requirements. (AD-1026 Certification). Visit your FSA office to submit an acreage report to account for all cropland and update yields on those acres. A farmer may retain current yields or update using the average yield from 2008 through 2012 times 90 percent.

February 27 is the final date to update base and yield, and March 31 is the final date to select Agricultural Risk Coverage (ARC) and Price Loss Coverage (PLC). Any cotton base acres become generic base. Generic base acres may receive payment under ARC or PLC for the acres planted to a covered commodity, but it must be planted.

Each year, the generic base acres can increase the covered commodity base acres or add a new base to the farm, but again, it must be planted. Generic base to a covered commodity is prorated based on plantings. If no decision is made by a grower or owner, the farm will retain current base acres and yields.

Peanut Crop Insurance

Peanut crop insurance sales closing is February 28 for the Southeast and Virginia- Carolina area and March 15 for the Southwest region. Crop insurance coverage levels will be 50 to 80 percent increasing in five-percent increments, and growers are encouraged to insure as an enterprise unit resulting in much lower premiums (about half ). Contact your crop insurance agent for details and whether you have selected yield protection or revenue protection.

Peanut Contracts Early

Southeast contracts for $400 per ton were withdrawn with rumors of major acreage increases. To allow the farmer to ride the market, one sheller has announced a new peanut “flex” contract, The Option Contract, offered at $355 per ton plus $20, or $375 per ton, on non-high-oleic runner-type peanuts. The floor price of $375 per ton is equal to a 47 cents per pound raw-shelled market price. The sheller will publish weekly a shelled-market price and for each onecent that the shelled-market price increases, the farmer can add $13.50 to the contract price. The farmer may option to price the peanuts anytime in the season up to two weeks prior to forfeiture.

For high-oleic peanuts, the floor price is $400 per ton with the same market advances. The contract has a maximum payout of $500 per ton. Some shellers agreed to match this contract to keep their customers. No mention of Virginia- type contracts as of mid-February.

Seed Prices

Some shellers offered seed prices when contracts were issued as part of the contract. Later, runner prices were announced at 67 cents per pound certified non-high oleic cash to grower and 70 cents per pound fall payment. Registered seed is 69 cents per pound, nonhigh- oleic, cash to grower and 72 cents per pound fall payment. High-oleic certified varieties are priced at $.70 lb. cash to grower and 72 cents per pound fall payment. Registered high-oleic seed is 72 cents per pound cash to grower and 75 cents per pound fall payment.


Leading Market Indicators
(Feb. 11, 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 – 2,121,235 tons in storage
•2014 – Market Loan – 433,340 tons redeemed
•2014-14 Domestic Usage (5 mo.) – + up 5.9%
•2014-15 Exports (Aug.-Nov.) – dn – 1.7%
•National Posted Price (per ton): Runners $424.86, Spanish $403.91, Virginia/Valencia $427.79.


2015 Peanut Acreage

The Congressional Budget Office predicts for 2015 the program will have 1,476,000 base acres, estimating that plantings will be 1,500,000 acres producing 3,838 pounds per acre leaving a carry-forward of 2,089,000 pounds, and the estimated average price is $.2065 per pound or $413 per ton. Peanut program costs in 2014 were $65 million.

The U.S. peanut crop for 2014/15 is estimated at 2,605,959 tons based on harvesting 1,325,000 acres averaging 3,932 pounds per acre. The supply chart shows ending stocks of 980,000 tons, 40,000 tons more than last month.

If farmers increase acreage 25 percent, as some have predicted, that’s 1,600,000 acres, and with an average yield of 3,800 pounds per acre, that’s a 3,040,000-ton crop. With that, the industry has a storage problem and lower prices for 2016.

Payment Limitations

Many larger producers will face payment limits. The total amount of payments received by a person or legal entity for PLC is limited to no more than $125,000 annually. If a producer exceeds this limit, the farmer can still receive a market loan but must repay at principal plus interest. Also remember that if USDA lowers the price below the $355 per-ton loan rate creating a market gain, the gain will be applied to the payment limit. Farmers may request that loan peanuts be purchased early to prevent a potential market gain.

Peanut Market Potential

December was another good month for peanuts, with usage up 9.9 percent for the month, increasing usage almost six percent for the year. Peanut butter continues to lead the way, up 12.1 percent in December, now up 9.6 percent for the year. All categories showed an increase except in-shells with December information withheld. Keep up the promotion efforts because the domestic market for peanut products is excellent.

November exports from the U.S. were up 1.2 percent and down for August through November, only 1.7 percent. China is back buying in-shells, making in-shell exports up 30.2 percent versus last year. After four months, raw shelled is now up three-fourths of a percent. Peanut butter is down 22 percent after heavy buying last year. The 2014 crop in China is down in quality and quantity because of area reduction and drought, then rain at harvest. India reduced plantings when U.S. peanuts became the lowest- priced peanut in the world trade.

Other Potential Income

Peanut farmers with a base are expecting a PLC payment for the 2014 crop. Farmers will sign-up for the PLC prior to March 27 for 2014 and 2015. The payout will be determined by the national average price of peanuts. However, some experts are predicting $80 to $100 per ton based on an average price of $425 per ton.

Exciting Time

With an acreage increase, more expansions are underway. More shelling and blanching capacity and more buying points are needed to handle the 2015 peanut crop. Lower prices will help regain market share, but, remember, a profit for each segment is the only thing that will sustain growth.


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