Wednesday, March 30, 2011

Peanut Prices

Well the peanut market is certainly in flux at the moment based on a lot of things but there seems to be at least some imbalance to me when I look at the price being offered to farmers and the price being charged for seed. I put our staff to work and sought out information on peanut prices and medium runners are currently being traded around 80 cents and one report was as high as 83 cents. Well now if you look at tradition seed has typically been 10 cents over medium runner price but for the sake of discussion lets even say 12 cents is within normal. That would be reasonable justification for seed prices being 91 to 94 cents per pound. Well if that is the case then lets look at the other end of the spectrum and see what we find. 80 cent mediums should yield a farmers stock price with at the least an 8 as the first number. So then we took in to account that the 10 crop had some quality concerns so we did a few calculations. Considering blanching cost of 5 to 6 cents and adding 10% more to our normal shrink considerations the price should still have a 7 in front for any uncommitted farmers stock from the 10 crop. I can understand how shelled good prices have escalated because of quality concerns and the concern we could see acres for 2011 in a very tight situation. What is not understandable is how it is farmers stock offerings for uncommitted 10 crop peanuts has held at $550 while the medium price has escalated. Farmers know this, too and in the meeting the other night in Coffee County GA I had a lot of farmers who are really mad at the shellers right now. I have heard the same across the state but it was very vocal in Coffee County. Be they the culprit or not shellers are not currently on the list for growers to send an Easter Basket. I know the best way to change farmer attitudes is with money. If that doesn't happen then I am pretty certain shellers may need to hire a good PR firm.

Friday, March 18, 2011

Shocking Revelation

At our board meeting this week the preliminary budget was set based on 450,000 acres for Georgia. This is the lowest acreage since 1980 and the rest of the country seems to be following this trend in cutting acres and planting other crops like cotton.

The board also agreed to a projected yield of 3150 which looked at the yield potential of the new varieties but also the belief that irrigated acres would be dedicated to cotton because cotton contracts have to be delivered with no accounting for any act of God.

If all this comes to pass and given the serious quality problems in the 2010 crop causing the crop to sustain heavy blanching loses to clean it up and this will be an interesting year in the peanut market.

I have always thought seriously that contracting some of your peanuts was a good idea but this year I wonder if that is true. I think the most recent contracts of $600 is really not even a floor given the market fundamentals.

I am pretty bearish on price for farmers who have uncontracted peanuts for the 11 crop and even the 10 crop may move up if a farmer has them in the loan and can wait until later in the year.

I think it is becoming a more safe bet that the 10 crop will all be needed to satisfy current demand given the significant kernel loss suffered in the blanching plants.

One early season concern is that many areas are dry and temperatures seem to be warming in a hurry. The current weather pattern is much similar to I believe the 2008 crop when it seemed that the rain angled in from the northwest and played out before it got to very much of the peanut belt.

One hope is that the ENSO currents will move to more neutral as the year progresses but as of yet no one has made that prediction.

Tuesday, March 1, 2011

Do You Hate Earmarks?

I am gravely concerned that there is a mood in America today that government is bad and we would do better with no government. There is a mood to cut to the bone in Washington in many areas. One of these areas is Agriculture.

There also seems to be a great deal of pride that they have killed earmarks in Washington. You know the bridge to nowhere was an earmark.

So then lets ask the question are all earmarks a bridge to nowhere?

I asked my Chairman today as we went up the Interstate toward Atlanta what we did without cell phones. We both conducted business as we went on our way. Sunday, week, our pastor emeritus gave the sermon and he talked about finding our way and told of his Garmin recalculating when faced with an errant turn. And on our TV there is discussion of the Da Vinci robotic surgeon. Where in the world did all this technology come from?

The better question is from where out of this world did all this come. Thanks to earmarks and the space program our lives are laced with technological advances which have added to the quality of our lives.

In Agriculture we find much the same story. Cuts were sustained in our Ag research over time and the only way to get critical research funded was to seek earmarks. Today fewer farmers than ever before feed America and the world for less than in our history even given current spikes in commodity markets.

Think about this, in 2040 we will need to feed almost twice the population of what we feed today. There is no more land and no more water, fertilizer, fuel, or any of the other inputs. So we will have to do more for less. It takes twelve years to bring a new peanut variety to commercial use. This mood to stick a long jagged dagger in the heart of Ag Research will at some point and it will be in our lifetimes come back to bite us. With a growing world population and a burgeoning middle class in China just imagine our children going without food because we cannot afford to pay what others can.

Just one last thought; I hope when we dismantle government my share of the infrastructure can be on I-75 where I can put up a toll booth.