Monday, September 19, 2011

Downhill Slide Toward an Uphill Climb

The peanut crop continues on a downhill slide.

We are cooler but still dry and the rainfall predicted this week, if it does any good, will be more beneficial for digging than any other thing.

It is too late for anything to happen very good at this date.

So what about un-contracted peanuts for this year's crop. They will have to have them some time and they are going to pay if farmers are patient. Best marketing advice is to put in the loan after January first and then you have until October of 12 to market. All predictions are we run out of peanuts before the '12 harvest so some body will have to have peanuts at a premium price. Remember in 1990 peanuts went to $1436. Hold out for $1500 and sell when you can't stand to hold any longer.

So then what about next Spring?

Unless contracts get to somewhere between $850 and $900 we will not plant enough peanuts.

Compare two and a half bale cotton to two ton peanuts to 220 bu. corn. Those are comparable production prospects for a producer. Now look at the fact you have ended your risk on corn by July and Cotton and Peanut continue the risk to November. Cost of production is not terribly dissimilar.

Corn needs to be planted to irrigated acres to make the yield.

Considering basis on corn we could contract and receive about $8 per bushel for corn. at 220 bushels this is $1760 per acre. Two ton peanuts would have to be $880 per ton to compare. Cotton at two and a half bales is 1750 pounds of lint at a shade over a dollar a pound. Again to compare peanuts has to be $875 to compete with cotton.

A farmer is better off if there are not competitive pre-plant contracts for peanuts to load up irrigated acres with corn if the price holds near $8. Early marketing commitments are going to be critical this coming year on all commodities.

No comments: