Thursday, August 5, 2021

Rotational Crop Prices Bring Market Positives

J. Tyron spearman
J. Tyron Spearman
Contributing Editor

The 2021 season opens with lots of positive trends. The pandemic is winding down as vaccine distribution continues. Row-crop farm prices have increased going into planting season with cotton near 85 cents per pound and corn over $5 per bushel. Both are crop rotation partners for peanuts and offer the producer options to plant the most profitable crop for the land.

Peanut and peanut butter consumption has increased more than 8%, an unbelievable increase that has plants operating around the clock to keep shelves stocked. Some processors say that once schools and restaurants reopen, peanut butter demand will fall, and the market will have some slack. Brokers are concerned that if peanut producers reduce acres, the peanut supply will be short before the 2022 crop. A leveling of average yield per acre also factors into production totals.

The U.S. peanut market is firming with thin trading. Blanched material for current crop is more difficult to source. Crop quality is so good that little blanching is needed unless a buyer wants it that way.

Competition

Shelled goods have not gone up much, despite shellers offering $500 for 2021 crop farmer stock in the Southeast. Buyers are refusing to either believe it or support it so far. Farmers may be reluctant to sign because for the first time in many years, there is competition from two crops, corn and cotton, for new-crop acres. Both are trending upward.

As prices for alternative crops increase, farmers can hedge, and, if this continues, we will possibly have a decrease in planted peanut acres for the 2021 crop. Shellers are unaggressive to sell current crop. With little new crop contracted, shellers are unwilling to sell much quantity for 2021 crop and be short with most contracting still to come.

Contracts

Peanut buying points are reporting some action on peanut contracts. In the Southeast, the offer is $475 per ton for runner-type peanuts. Each buying point has an allocation to be distributed to customers. Premiums include an additional $25 per ton for seed production and $25 or $50 per ton for high-oleic peanuts. Some contracts are limited to 50% of last year’s production.

Options include the runner pool at $425 per ton now and dividends that will be determined at the end of the season. The min-max runner pool offers $400 per ton minimum and $500 per ton maximum.

In the Virginia-Carolina region, the offer is $520 per on Virginia-type peanuts with limits. Some areas are offering a $25 per-ton premium for irrigated peanuts. For runner type, contracts are at $475 per ton, plus $25 for high oleic, if available. A premium of $25 more per ton goes to the seed producer.

Crop Size

The U.S. Department of Agriculture reports that peanut acreage in 2020 rebounded by 16% to 1.66 million planted acres. Georgia, alone, accounted for 59% of the increase. In contrast, the national average yield declined to 3,796 pounds per acre from 3,934 pounds in 2019.

The combination raises U.S. production to 6.13 billion pounds or 3.06 million tons, the third largest harvest ever. This is up 12% from 2019. However, lower beginning stocks for 2021 would moderate the gain in total supplies.

Feb. 1, 2021, market reportUSDA believes there is a good supply of peanuts available to support demand this season. Growth in domestic use of peanuts is anticipated to increase 14% to 4.87 billion pounds. In contrast, exports may decline moderately from 1.6 billion pounds in the 2019-2020 marketing year to 1.5 billion in 2020-2021. That would still represent the third-largest export amount on record.

Season-ending peanut stocks could end up 6% lower at 1.99 billion pounds, which will help provide support for prices.
New numbers on supply have been posted, and disappearance shows domestic food use up 3.4%.

Exports declined from 804,000 tons to 750,000 tons, a 7.2% drop. At present, peanut usage is 7.6% (four months) and exports are down 1.3% after three months. The industry still has 1.13 million tons in ending stock per USDA’s Economic Research Service.

Domestic Market

December showed peanut usage continuing to rise. Shelled edible grade, season-to-date utilization, was up almost 7.8% from last year. Peanut stocks in commercial storage totaled 4.37 million pounds, down 5%.

peanuts in candy
Peanuts used in candy continued at a record pace, up 31%. Peanut snack use was up 7%, and even peanut butter showed a 4.7% increase and a 3.8%

Peanuts used in candy continued at a record pace, up 31%. Peanut snack use was up 7%, and even peanut butter showed a 4.7% increase and a 3.8% increase in one month. Government purchases were down 68% for the month and down 70% for the year as processors did not have time to bid for production.

Export Market

China keeps buying U.S. peanuts. They are the leader of in-shell peanuts, up 67.4% over last year for the four-month marketing year. Shipments of raw-shelled peanuts are down 22%; however, Chinese shipments are up 95% versus November.

Canada and Mexico led buying for raw-shelled and peanut butter. Exports of peanut butter were down 11.1% for the first four months, but held steady compared to November. Peanut exports are up 3.7%.

In addition to the non-tariff barriers, the European Union has imposed 25% tariff on peanut imports. The U.S. Peanut Federation has asked U.S. Trade Representative Robert Lighthizer and USDA to assist in resolving these trade issues with the EU.
The EU imported nearly $180 million in U.S. peanuts and peanut products. Nearly all of these exports are in-shell and shelled peanuts. U.S. exports were $168 million in 2019.

Peanut Program Is Working

Corn and cotton prices give farmers competitive alternatives to planting peanuts; therefore, farmers will want more money to contract peanuts for the 2021 crop. The dilemma for the sheller is paying the farmer a higher price if the buyers are unwilling to purchase at those levels.

The Price Loss Coverage payment helps pick up the slack in times of low prices. The next PLC payment will be paid in October because of low prices this past year. The estimated PLC payment is $115 per ton. If shellers buy low, the government will pay more, as manufacturers and consumers are eventually the recipients of a nutritious product at an inexpensive price.

It is nearly time to kick off this season, and pregame conditions are looking good.

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