Tuesday, November 30, 2010

Farmers Satisfied with Planting Cotton

At current market offerings and already strong commitments based on cotton contracts many farmers who would normally grow peanuts seem to be satisfied with parking the peanut planter in lieu of cotton.

It seems cotton fared better under the 2010 drought conditions and the continuation of the La Nina weather impact which has the Georgia State Climatologist predicting warmer and drier than normal conditions through the Winter and Spring at the least and farmers seem happy to stay the course with cotton.

It is hard to argue that kind of logic. We would all rather stay with what does the best for us.

So what does this mean for peanuts? A $550 contract didn't get much interest and time is running out for the peanut market to find new life. Farmers will have a hard time getting financing without a contract. Manufacturers seem to be satisfied that the supply will always be there. Farmers are no longer willing to sell below the true cost. Shellers are caught in the middle.

If no one blinks soon we could see some very interesting price spikes in the market. I remember one farmer selling for $1436 in 1990. With quality issues it is certain we don't have enough peanuts in the pipeline to carry us until harvest 2011 so things may get very interesting.

Complicate this with the fact that cotton has to be delivered under a final contract and once that acre is contracted there is not enough money to get it out of cotton and back in peanuts. Same goes for corn and soybeans. They all have trading markets and sufficient volume to attract speculators. Peanuts does not.

If we get past the first of the year with no sufficient offer to entice producers to contract peanuts and there is any spike in the cotton market at all and Katie bar the door where we will end up as far as price for peanuts in the 2011 crop. Frankly, uncommitted 2010 crop will have to go up to fill the gap created by short plantings for the 2011 crop.

Don't look for a last minute reprieve on acres after corn is planted in February and March.

Buckle your seat belts. This might be one heck of a ride.

Tuesday, November 23, 2010

Old Time Harvest in 2010

Tommy Hughes, the radiator repair man and antique tractor collector from Cordele gave us a trip to the past Saturday when he harvested his stacked peanuts with an old Turner stationery peanut picker.

Tommy found the picker in another man's shed and the man said he was about to burn it and sell the metal for scrap. Tommy rescued the picker and Saturday it ran like a well oiled machine.

There was also a stationery hay baler from the same era.

Watch for the video soon on the Peanut Commission You Tube page.

Monday, November 8, 2010

Will There Be Enough Peanuts?

Cotton prices for next year are approaching dollar cotton even after basis.

The National Center for Peanut Competitiveness has been comparing cotton and peanuts on the Representative Farms.

Discussions with many farmers seem to indicate that many farmers are not willing to plant peanuts at the current offering of $550.

Reports out of the VC indicate farmers are disheartened by this year's peanut crop and it may take $650 to get peanuts grown in that area in lieu of cotton.

Farmers are looking at booking cotton and once they have done that they will have to plant those acres in cotton. Remember cotton contracts are firm delivery contracts because there is a market where shortfalls can be made up.

Growers in Georgia to whom I have spoken seem intent on the fact that compared to cotton and other commodities, soybeans seem to be mentioned regularly, it will now take a contract with a 6 in front for peanuts to sufficiently compete for acres.

The quality and quantity of the 2010 crop has taken care of the pre-plant discussions of a peanut surplus.

For many producers planting decisions may be made by Thanksgiving and certainly by the first of December. If the manufacturers and shellers continue to hold at current offers we could face a shortage of peanuts in 2011-2012. This would make contracting peanuts a bad decision at current levels if we short the peanut crop.

Just one final note...State Climatologist has said hotter than normal and drier normal conditions will continue through a significant portion of 2011.

It may be an interesting year.

Wednesday, November 3, 2010

The Election is Over

Well the election is over and hopefully not too much will be taken for granted in the Republican landslide. Likewise the incumbent survivors need to not be in glee for their past record. The fact is the American people have sent the same message they sent two years ago...it is time for Washington to listen to the will of the people.

Gridlock and finger pointing is no longer acceptable and if it continues there will be a new bunch of folks in 2012 as well.

Now how does the sweeping change in Washington play for Agriculture and Peanuts?

With sweeping losses in the south, with those losses went seniority. Our new team will be spending a lot of time learning the system and frankly, the system will consume them if they are not careful. There has been somewhat of a power shift from the South to the Midwest. The South used to keep incumbents there forever and therefore we had power.

It is no secret the Midwest has always believed Southern Agriculture had it too good for too long. There is not a really great understanding of the higher cost structure farmers in the South face.

It will be interesting to see how this shift plays out.

Issues to keep an eye on include payment limits, direct payments, disaster assistance, and more.

It is pretty evident that over time if the market is going to have peanuts they are going to have to assume more of the responsibility.

I don't really see this happening right now.

It seems that no-one in the industry past the grower ranks has a clue that cotton for next year is almost a dollar a pound and soy is over eleven and corn at over five. Once financing is arranged and inputs locked in and forward sales contracted for those other commodities, there will be no turning back.

Currently, cotton prices would indicate from the representative farm model and with significant agreement from farmers, peanut contracts will need to be in excess of $550 to compete for acres. Dollar cotton would command a price in excess of $600 to compete for acres.

Complicate all of this with the fact that the 2010 crop had increased levels of damage and aflatoxin which will further reduce the supply and the prediction from the Georgia State Climatologist that the current weather pattern of hotter than normal and drier than normal conditions will continue through much of 2011 and the market should be exciting.

If the industry fails to make a reasonable offer before mid December farmers will have made their decisions and someone will do without peanuts before the 2012 harvest.