Wednesday, February 23, 2011

Ag Weatherman Murdered

Weather is by far the most influential factor Mother Nature has to throw at Ag producers. It impacts planting date and harvest. It influences diseases and the management of them. Chill hours or lack of can make or break a peach crop. Heat and drought can both affect peanut quality.

The list goes on and on.

The University of Georgia had an ag weather network which is used widely by farmers. It is also used as an indicator for golf course condition. Even Georgia Power uses it to determine peak usage.

The information found at the weather web site is not available in a usable form with prediction models and so forth at any other place.

So then why is it the University of Georgia would make the decision to kill this beneficial initiative? It cost far less than the benefit it has demonstrated.

All I can say is this is a heck of a way to spur the economy by destroying a valuable tool farmers use to maintain productivity and profitability.

Tuesday, February 22, 2011

$600 Contract Receives Mixed Reviews

Last week peanut contracts were offered at $600 and the response by farmers was mixed.

It seems that it may have gotten some peanuts in the SW part of the state which were already likely to be planted locked down by shellers. In East and Southeast Georgia it really didn't move the needle much. This area seems to have an advantage of cotton over peanuts and so it was going to take more than that to compete with cotton.

In Coffee County the County Agent did an informal survey of the growers in a local meeting and found that the $600 had no impact and that those growers are still leaning cotton. As the Agent told me $1.22 cotton is much better to my growers than $600 peanuts so they are going where the opportunity exists.

On a largely related note the local weatherman says our moisture situation right now is worse than it was this time in 2007. We are going in to this crop with a pretty serious rainfall deficit and with our ponds at low levels. Considering the requirement that cotton when contracted must be delivered cotton will compete greatly for irrigated acres and we could see dryland peanuts increase in percentage.

At this point we all know 2011 is going to be an interesting year but I am about to think that we can now anticipate the same of 2012, especially if cotton prices hold for another year.

Tuesday, February 15, 2011

A Little Fishing for Understanding

In this blog recently I have been asking a lot of what ifs and I wonder whys.

It is kind of like a fishing trip of sorts because it has offered dialogue with several in the industry.

Fact is there is more uncertainty in the peanut industry at a time when the rest of Agriculture seems to be doing fairly well. Not to say all is bad in peanut world. Last year's yield in Georgia set a record. Peanut consumption is at an all time high. Yet Mother Nature has proven to us she is still in control of things.

If anyone in Congress is listening you need only to look at what is happening in the peanut world right now and you will realize the vagaries of weather and the environment require maintaining some sort of stabilization program for a civilized society to assure an adequate supply of food for their citizenry.

Let's look at what happened last year.

We had the hottest and one of the driest Summer on record. Still consumption of peanut butter and now even snack nuts and candy continued to climb. Candy makers and snack nut roasters even brought new items to the market...take for instance the Snickers PB Squared and Planters new Five Alarm Chili Dry Roasted Peanuts. Both are big hits and even may be considered market movers.

The northern part of the Georgia Peanut Belt suffered from drought and heat and it was evident. If you saw un-irrigated peanuts around Plains at harvest they never got more than a hand wide and were never harvested.

Remember also the string of nights we had for about a month when the temps never dipped below 80 in many areas. Research many years back at the National Peanut Lab told us night time temps have a direct bearing on Aflatoxin contamination. This was predictable already before harvest and it is not just in un-irrigated peanuts. Mother Nature left her mark on the quality of the crop.

So now we have an adequate crop and maybe even a surplus if things were normal but they are not.

Complicate this whole issue with the reemergence of the Burrower Bug as a prominent pest in many areas and the damage it causes to quality and the situation just seems a bit more grim.

The only real way to deal with Aflatoxin of this magnitude and deliver a product that is safe and wholesome and meets both Government and even stricter industry standards is to run it through the blanching plant. This both costs to do in just the charge of the blanchers and also comes at a cost from lost pounds of usable kernels.

Because of the fact that Shellers bought from farmers and forward sold to manufacturers it is now their cross to bear. And, it is coming with a great deal of cost that there is no way to recoup.

Peanut blanchers don't build their business on bad crops but do normal blanching practices in normal years. This year is different. The burden put on blanchers is really being felt. Reports have the current blanching capacity stretched to the limit through some time in 2012.

Shellers cannot afford more risk at this time and as of now manufacturers are concerned but not in the mood to accept that risk in the future. Therein lies the lack of attractive peanut contracts to wrestle acres away from cotton.

I am worried that this is not a particularly good situation for the peanut market for the future. We could well run out of peanuts at some time during the year and factories will have to shutter their doors until the supply resumes. It is hard to continue a growth in consumption under that scenario.

Also, based on value of the commodities I feel certain we will see some shift from irrigation on peanuts to irrigation on cotton. This may or may not prolong the issue of Aflatoxin depending on the 2011 growing season. If you go outside the water rich areas of Southwest GA and look at the Southeastern Peanut Belt in general it is all feasible that irrigated acres of peanuts this year could be at a modern low of 25%. This may be further complicated by CRC insurance coverage on cotton which makes a crop disaster in cotton an easier loss than it does for peanuts which lacks a CRC type program.

So whose fault is all this? I guess you will have to blame Mother Nature for a lot of it. She has shown us our vulnerabilities as an industry under the current peanut program. With all the consternation over farm programs in Washington right now we have some challenges ahead so perhaps we need to have some pretty serious dialogue in the industry going forward. We certainly know where many of the pitfalls are.

Wednesday, February 9, 2011

Nero Fiddles as Rome Burns

Like Nero fiddling while Rome burned, peanut buyers seem asleep at the switch this year and are about to run the train off the track.

Shellers blame it on the manufacturers and if that is true I wouldn't take the risk this year either so I cannot point a finger at the shellers too much on this issue.

I write this as I am sitting listening to reports on the research the Commission has funded this year on peanut production. What was most enlightening was what I heard before the meeting. The numerous farmers present say peanut acre are about to plummet. The economist who does comparative numbers of competition of peanuts, cotton, corn and so forth says acres will be at 2009 levels or lower which would mean a cut of 30 percent in acres, give or take.

The 2010 crop has serious quality problems with reports of shockingly dismal out-turns of usable kernels from peanuts which have had to go to the blancher for clean up. Blanching plants are running at capacity and reports are peanuts are even being trucked from the Southeast to Texas for blanching.

Cotton this week passed another barrier at $1.18 which nets to the farmer at about $1.15. Some cotton brokers say $1.35 cotton is a real prospect now. Note $1.15 cotton to the farmer needs a $685 peanut to be competitive.

What does all this mean. Many acres have been committed to cotton. Georgia cotton acres is already slated to be up over 200,000 acres from last year and that is coming from peanuts. Peanut acres will be down and the industry has done this to itself. Carry out of peanuts in to the 2012 crop year could well be far below the 1990 levels. For farmers if you are going to plant it don't get excited about these cheap $1436 for his peanuts.

For better buy your peanut butter now.

For the shellers and especially the manufacturers be ready to watch the train run off the cliff because you were asleep at the switch.

Wednesday, February 2, 2011

When Time Runs Out

The real question right now is when does time run out to get peanuts planted in 2011.

I was riding with a farmer today who told me he just booked another 400 bales of cotton and 4000 bushels of corn which for him represents about 250 acres of corn. He still has no enthusiasm for peanuts and was offered a $600 contract. He says the price has to be at least $650 to compete with cotton and corn.

Another farmer made the comment the increase in cotton acres is a significant shift from peanuts.

Shellers tell me they can't make competitive offers because the manufacturers don't believe the 2010 crop is as bad as is being reported and much of the trading is still on 2009 crop.

One County FSA office reported shellers wanting to redeem all the peanuts out of the loan immediately. This is odd when you consider the government fronts storage and handling monies to be paid at redemption so the incentive to do this is not normal at this time.

Finally, a farmer from the Southwest part of the state told me at one time he believed $600 would get all the peanuts we need planted. Now he questions if there is any number which could cause that to happen but it certainly is not at $600.

Hold on because this is going to be a rough ride and you might need an oxygen mask to get past the highs in the market at year's end.