With the 2012 crop still being shelled and a 2013 crop stored and ready for shelling, supply has caused a lull in any excitement. Other commodities seem to be experiencing the same problem.
Farmers are hoping markets get better for all commodities before planting. Populations will double by 2050, but if a farmer can’t produce at a profit, he may not be around then.
Farmers are less optimistic about the ag economy as lower crop prices have collided with hefty input bills. A survey of 500 farmers says that income is taking a hit as cash rentals and costs per acre have increased and market prices are not profitable for next season.
Farm Bill Delays
The Farm Bill reminds a person of the promise “your check is in the mail.” Farmers are planting crops (winter wheat) that may have to operate under the old Farm Bill until USDA has time to develop rules and regulations.
The Peanut Market Loan appears ready to continue without interruption. However, the new Cotton Stacked Income Protection Plan (STAX ) program, which is tied to crop insurance, will need time and education to implement. The delay could influence peanut acreage.
USDA’s Farm Service Agency is reminding farmers to plan for automatic spending reductions. FSA is implementing sequestration on 2014 crop marketing assistance loans and loan deficiency payments; 2013 direct and counter-cyclical payments; 2013 Average Crop Revenue Election Program and storage and handling. FSA announced a 7.2 percent reduction level. Price support remains the same at $355 per ton with an advance of $329 per ton, which should not impact total contracts.
The 3.3 million-ton crop of 2012 may haunt the U.S. peanut industry for years. The influence will continue until demand catches up with supply. Most buyers want current, fresh crop.
The industry reduced acreage by 35 percent last season, but that crop was larger than expected, yielding 2.1 million tons. Average yield was 4,006 pounds per acre, the second highest in history. Carry-forward from 2013 to 2014 is estimated at 1,200,000 tons.
The pipeline requires about 450,000 tons, leaving a 750,000-ton pile of peanuts with no market. That’s why markets are in a lull; there is no urgency.
Peanut usage continues strong and that’s good news. USDA reports a five percent increase in domestic demand with peanut candy and peanut snacks posting double-digit increases month after month. Peanut butter has leveled some; however, the most recent month was up 10.2 percent over same month last year. Government purchases have held steady, up 12 percent for the year even with budget restrictions.
Export demand is up 76 percent through October as U.S. prices were the most competitive. China and India are reporting huge crops, which is slowing U.S. peanut sales. Shellers had hoped to move 2012 crop into the export market; however, the mild winter in Europe and large crops have slowed sales.
Argentina’s new crop has suffered an early and severe drought but recently received rains in most of the region. Acreage was reduced about 6.4 percent.
Shellers opened in the Southeast with market loan option contracts on runner- type peanuts at $425 per ton limited to 3,000 pounds per acre on dryland and 4,000 pounds per acre on irrigated. Buying points have a tonnage limit.
Another option contract was offered on high oleic peanuts at $475 per ton. High oleic seed are limited and breeders report a two point lower grade than regular runners. High oleic peanuts must be kept separate, similar to seed, and some buying points are not equipped to handle two varieties.
At press time, no Virginia-type contracts had been announced.
Market Strategy For 2014
Be patient. Pray that other commodities will recover. A strong cotton market could help peanuts. As long as supplies of peanuts are excessive at home and abroad, aggressive contracting with farmers is not likely. Keep up the good work on domestic market expansion. Hopefully, 2014 will be the year for a Farm Bill.
Leading Market Indicators (Jan. 10, 2013)
• 2013 – Peanut Production – 2,087,090 tons
• 2013 – Harvest Acres – dn 35% – 1,042000 acres
• 2013 Average Yield – 4,006 bs/A
• 2013 Market Loan – 1,417,698 tons
• 2013 – Loan Redemptions – 58,759 tons
• 2013-14 Usage (4 mo.) – up 4.6%
• 2013-14 Exports (3 mo.) – up 76%
• National Posted Price (per ton): Runners $464.74, Spanish $444.93, Virginia/Valencia $468.38.