Monday, November 26, 2012

What a Peanut Crop

Georgia has a whopper of a peanut crop on our hands.

The growing season was one of the best ever and the new varieties showed their potential.

The state average yield will bust the previous average by over 600 pounds to the acre if current predictions hold.

Farmers who have not yet marketed peanuts and who have no contract would be well served to wait until after January 1 to put peanuts in the loan. This allows until the end of October to make marketing decisions and the 2013 situation will be evident by then.

Anticipate few if any contracts at planting and if alternatives are available with other commodities expect a sharp decline in acres in Georgia for 2013.

Thursday, August 30, 2012

Marketing is Critical

Farmers producing peanuts under the old program never had to pay much attention to marketing. Even under the new program marketing was never a really big deal prior to this year because there seemed to be a pretty significant quantity of peanuts covered by pre-plant and for sure pre-harvest contracts.

This year is different. We will produce too many peanuts for the 2012 market if we can have a decent harvest. And our quality will be exceptional in most cases given a good harvest.

So a pessimist would look at this and see no opportunity.

The loan maturity under the current program is 9 months, beginning the first of the month after the date peanuts are put in the loan. So for instance if I can get my banker happy with waiting until January to put my peanuts in the loan and I get my loan January 3rd then the loan clock starts ticking February 1st. That means I have until the end of October 2013 to redeem the loan and market my peanuts.

Now you need to have a clear understanding what you are going to get back from the warehouse when you make this decision  Regulation would only require a like dollar value to come out as has gone in. If you desire something different it would be good to have a firm understanding.

Here is why marketing is critical.

I don't anticipate, with a pretty significant carry over, contracts which will be competitive with the pricing opportunities for corn and soy in 2013. So we will likely under plant peanuts for the market in 2013. We will need the 2012 crop to meet 2013 demand.

Don't think the rest of the industry is ignorant to this fact and therefore farmers need to have a two year vision and try to market accordingly.

Some of the most savvy marketers may even choose to consider toll shelling, putting kernels in cold storage and then perhaps make an orderly marketing over time through a reputable peanut broker. Sadly, you need to be able to handle your own financing because there are not loan provisions for doing so. Perhaps USDA needs to reconsider this.

We are in a new ballgame this year and we need to be throwing strikes and hitting home runs if we are to survive.

Friday, August 24, 2012

Hurricane, What will it do?

We are faced with the prospect of a hurricane right here as harvest begins. What would be the impact?

Probably if it came, rained a bit and went the impact may be slightly positive because it would saturate the ground and the crop could sort of coast to completion in most cases.

That is if it gets out of here and we have a perfect harvest.

My greatest fear is a wet harvest. In some cases vine conditions are deteriorating, especially in some of the March planted peanuts.

If we get rain and not more than a couple inches the effect will largely be positive.if it goes away and fairs up until after harvest. Daily rains like some areas have had will do more harm than good after next week.

I think it is fortunate we have had a bit cooler temps because the harvest will not be as pressed to the front as in the past couple years. Also, we have had less photosynthesis the past few weeks with it being more overcast and that may have some impact on maturity.

All said the hurricane does not bother me but what comes after may be a different issue if it is not good weather.

Friday, August 10, 2012

Certified Acres

Georgia's certified acres when adjusted for green peanuts and for anticipated abandoned acres will still be about 715,000 acres. I also think there is a real prospect of the average yield exceeding 3600 pounds per acre and frankly would not be shocked at the end of the day with a Georgia production of 1,400,000 tons when harvest is done.

I would anticipate really good quality and lower aflatoxin numbers than recent years because the night time temperatures and even daytime temperatures of recent have been really low.

I saw six rows of some March planted peanuts in Crisp County dug and they look pretty darn good so I would say harvest has begun if at a slow pace for now. I was suspect the peanuts had a pretty heavy pod load because they would get rain and then in a day they were wilting back down.

One Sheller has sent out letters saying he cannot honor the contracts he has with farmers. This will have a pretty serious ripple through the industry in the future because it has brought in to consideration the lack of sanctity of a contract. Contracts are essential in the absence of a futures market.

I anticipate the 2013 acres to drop like an atom bomb. We will have a potential shortage of peanuts by the end of 2013 if manufacturers and therefore shellers follow suit of what has been the history of failure to meet competition in the market place for acres.

Corn and soy will be the crops of choice with cotton inching up since India has pulled out of the market. Problem with soy is it kills peanut rotation for the next couple years on those acres. Soy is just like peanuts in rotation. The potential profit from corn and soy for 2013 look to exceed what the potential seems to be for peanuts.

Get on the roller coaster and ride. Farmers need to remember that if they can hold out until January to put peanuts in loan then the loan does not mature until the end of October. There may be some stronger pricing opportunities as we get close to the 2013 harvest and for sure should be some after planting.

We are in a two year market cycle and farmers and bankers are going to have to learn how to deal with this.

Friday, August 3, 2012

Drought, Hurricanes, and Congressional Recess

Well the drought continues with spotty rains but in some areas the rains were pretty heavy. I personally know of several March planted peanuts which seem to have gotten rain all year in adequate quantities. Wednesday night they had water standing in the rows and power lines were down in the area. I think those peanuts have adequate water to fill the rest of pods and get them to harvest.

There is a tropical storm which is predicted to become a hurricane in the gulf. If it was to turn northward and drop some serious rain across the Southeastern peanut belt...what a blessing. This would take us a long way toward breaking the drought.

Congress recessed for the five week August recess. They failed to pass a farm bill or even drought relief so somebody is going to have to work on their vacation to get something done or they may all get a permanent vacation. The drought relief package in the House covered livestock and a few specialty crops. Odd argument from Congress...if we don't do this there will be a rise in food prices. That is all sound bite because if you ain't got it you ain't got it and prices are going to rise. That is the way the free market works and we have no policy to build government owned reserves so somebody will just have to go hungry unless China opens their reserves and ships them here.

Wednesday, August 1, 2012

General Update

Well the Commission started its fifty first year today and it is in a new very efficient building which has an educational center designed to work for the farmer. We had our first out of state visitors today.

We had the ribbon cutting for the building yesterday and had about 300 folks here.

The drought continues to persist and promised rain never materialized yesterday.

The Midwest drought is about to impact us next year.

Chances are good we will fill the pipeline this year and no contracts will come close to those which will be offered for corn and soybeans. So next year we will likely short the market at planting.

My advice to a farmer is to put uncommitted peanuts in the loan after January 1 and wait the market out. I really think we are in a two year cycle and have to have vision further than the current marketing year.

Friday, July 6, 2012

Planted Acres Estimate

NASS released its planted acres report earlier and after some review this is one man's idea of what it means.

When everyone including the folks in Texas were thinking their industry would crawl under a rock and die, their farmers showed everyone and increased acres over last year. So much for the need to get new production areas. Still we have new production areas like those in Arkansas and Missouri.

If you don't have a contract then I am a bit doubtful there will be one before harvest which is much better than the loan rate so I wouldn't be in a hurry to sign a nothing contract if I was a farmer. The loan will pay you $355 plus or minus on grade.

This crop is a long way from done and there is a lot which can happen between now and harvest. Some areas are suffering from extreme heat and drought as I write this. As a rule the Georgia crop looks pretty good but it is far from perfect and far from done.

Drought can lessen yields, high nighttime temps can increase aflatoxin, a rainy harvest can reduce both yield and quality.

If you produce peanuts in excess of your contract there is no sense now asking why the market is not better. We had urged caution before planting but hindsight is 20/20 and some folks got a thousand a ton last year. If you do find yourself in that situation then you have an option...wait until after January 1 to put your peanuts in the loan and that gives you until October 31 to redeem peanuts from the loan. If the market is at $355 at the end of harvest then it may stand to reason there will not be any decent contracts offered next year and plantings will decline. If they decline enough then loan peanuts may increase in price especially after we plant and as the 2013 harvest approaches.

We cannot any longer look at a crop year when making marketing decisions.

And remember, the pipeline from 2011 is about empty so they do need some peanuts in excess. This makes patience a virtue as we market uncommitted peanuts. If there is any significant disruption in supply of 2012 peanuts then the market could well respond.