What does this mean for peanuts?
The weather man says we will continue in a hotter and drier weather pattern at least through the Winter. Well we don't grow peanuts in the winter so who cares at this point?
We should all care. Winter is typically the time we charge ponds for irrigtion and recharge subsoil moisture. Many of the ponds are empty and for sure the subsoil moisture is depleated in many areas of the peanut growing belt.
My best advice to farmers is be making plans as soon as you see a price on commodities which can make you money. If the peanut industry fails to get a decent contract out early and I do mean something good before Christmas then do the prudent thing and try to lock in some profit opportunities.
I hope 2011 taught the rest of the industry a lesson but I am concerned they still have not figured it out.
It might be a good time to remember pigs get fed but hogs go to slaughter. Don't get greedy but be sure to look at the market fundamentals of everything.
Monday, October 24, 2011
Friday, October 14, 2011
Food for Thought
I learned fairly early in my professional life that when I pointed a finger at
someone else my remaining three fingers were pointed back at me. I write this
not to point a finger but to give food for thought.
For several years we have worked with the National Center for Peanut
Competitiveness to build representative farms which would help us direct
farmers in making planting and marketing decisions. Last year at the American
Peanut Council December meeting, Dr. Fletcher presented a prognosis of what it
would take to have enough peanuts planted to meet demand. They look at cost
structures and then at commodities which may compete for acres. Some of the
folks at the table with me sort of scoffed at Dr. Fletcher’s numbers.
We let farmers contract cotton and to some extent corn early and well before
peanut contracts were ever offered. Because those contracts have to be filled
farmers put their most productive land in those commodities. We saw this by the
sharp decline in irrigated peanut acres in Georgia.
You may argue, just make peanut contracts a mandated delivery, but it is not quite
that simple. Cotton and Corn have a futures market and there is a source to
correct an error in contracting. It may be costly but it is at the least
doable. For peanuts there is no futures market and therefore if production is
not there you have no place to go to fix the situation.
Add to this the bad taste some farmers have toward peanuts right now and the
situation becomes more tenuous. Farmers who had extra production because they
irrigated or those who decided not to contract because the price was not high
enough found themselves in the unfortunate situation of indemnifying the poor
quality of some of the peanuts delivered under contract. For the first time in
history peanuts at the farmers stock level didn’t reflect a $200 shelling
margin but instead reflected at least a $400 margin. These farmers were less
than happy with this redistribution of cash.
Now, for 2012 some experts in the livestock feeding business are studying the
prospect of corn prices as high as $10 per bushel. I discussed this prospect
with one broker and with several farmers and the broker seemed concerned but
not alarmed. The farmers see this as an opportunity.
Corn, cotton, and peanuts have a relatively similar cost structure. Farmers are also
struggling with resistant weeds which a corn rotation would allow some very
good management for those weeds. Corn is planted in March and harvested by
August which certainly reduces the producers risk in terms of the calendar.
Irrigated producers in Georgia can anticipate corn yields in excess of 200
bushels per acre.
Farmers, just as any businessman, have to make good economic decisions now more than
ever. The banks are demanding it.
Nothing would make me happier than for Georgia to produce a million tons of peanuts in
2012 and we can do that on 650,000 acres and not bust our rotation under normal
conditions. Still, I can’t fault farmers for choosing their best options. Maybe
we need Dr. Fletcher to come back and tell us what the numbers are to buy back
some of those irrigated acres we have lost.
someone else my remaining three fingers were pointed back at me. I write this
not to point a finger but to give food for thought.
For several years we have worked with the National Center for Peanut
Competitiveness to build representative farms which would help us direct
farmers in making planting and marketing decisions. Last year at the American
Peanut Council December meeting, Dr. Fletcher presented a prognosis of what it
would take to have enough peanuts planted to meet demand. They look at cost
structures and then at commodities which may compete for acres. Some of the
folks at the table with me sort of scoffed at Dr. Fletcher’s numbers.
We let farmers contract cotton and to some extent corn early and well before
peanut contracts were ever offered. Because those contracts have to be filled
farmers put their most productive land in those commodities. We saw this by the
sharp decline in irrigated peanut acres in Georgia.
You may argue, just make peanut contracts a mandated delivery, but it is not quite
that simple. Cotton and Corn have a futures market and there is a source to
correct an error in contracting. It may be costly but it is at the least
doable. For peanuts there is no futures market and therefore if production is
not there you have no place to go to fix the situation.
Add to this the bad taste some farmers have toward peanuts right now and the
situation becomes more tenuous. Farmers who had extra production because they
irrigated or those who decided not to contract because the price was not high
enough found themselves in the unfortunate situation of indemnifying the poor
quality of some of the peanuts delivered under contract. For the first time in
history peanuts at the farmers stock level didn’t reflect a $200 shelling
margin but instead reflected at least a $400 margin. These farmers were less
than happy with this redistribution of cash.
Now, for 2012 some experts in the livestock feeding business are studying the
prospect of corn prices as high as $10 per bushel. I discussed this prospect
with one broker and with several farmers and the broker seemed concerned but
not alarmed. The farmers see this as an opportunity.
Corn, cotton, and peanuts have a relatively similar cost structure. Farmers are also
struggling with resistant weeds which a corn rotation would allow some very
good management for those weeds. Corn is planted in March and harvested by
August which certainly reduces the producers risk in terms of the calendar.
Irrigated producers in Georgia can anticipate corn yields in excess of 200
bushels per acre.
Farmers, just as any businessman, have to make good economic decisions now more than
ever. The banks are demanding it.
Nothing would make me happier than for Georgia to produce a million tons of peanuts in
2012 and we can do that on 650,000 acres and not bust our rotation under normal
conditions. Still, I can’t fault farmers for choosing their best options. Maybe
we need Dr. Fletcher to come back and tell us what the numbers are to buy back
some of those irrigated acres we have lost.
Monday, October 10, 2011
Looking to 2012
I am pretty well convinced the peanut industry has not yet learned the complete lesson of supply and demand.
There are good options for farmers at this time so there is absoutely no need sign a cheap contract for 2012. Why plant peanuts for $1500 per acre when you can make $2200 per acre on corn? That may well be the question for 2012.
Of recent, shelled goods have traded at $1.20 and yet all the farmer is being offered is $1000. It has always been a rule of thumb that the farmer should get about $100 for every ten cents of shelled good price. USDA's posted price would have normally been pretty accurate but the farmer is not receiving what has long been an industry norm.
It might be that for 2012 farmers should consider cutting acres ten percent and not contracting and they might find their bottom line in better shape because of it.
Sadly, just as the rest of the industry has not totally learned the lesson many farmers will sign contracts which are far too low. I guess we all need a primer on supply and demand.
There are good options for farmers at this time so there is absoutely no need sign a cheap contract for 2012. Why plant peanuts for $1500 per acre when you can make $2200 per acre on corn? That may well be the question for 2012.
Of recent, shelled goods have traded at $1.20 and yet all the farmer is being offered is $1000. It has always been a rule of thumb that the farmer should get about $100 for every ten cents of shelled good price. USDA's posted price would have normally been pretty accurate but the farmer is not receiving what has long been an industry norm.
It might be that for 2012 farmers should consider cutting acres ten percent and not contracting and they might find their bottom line in better shape because of it.
Sadly, just as the rest of the industry has not totally learned the lesson many farmers will sign contracts which are far too low. I guess we all need a primer on supply and demand.
Wednesday, October 5, 2011
Why Aren't Shellers Paying The Market
Shelled goods hit $1.20 and if by any strange chance you have any 2010 price later peanuts they are worth $1300 give or take a little per ton.
So why was the market at $800 to $850 and suddenly jumped to $1000. $1000 is $300 below the market and if the tariff at the buying point is not too bad it might behoove a farmer to seek a toll sheller and maximize his value. I am still convinced we see a situation not unlike 1990 when prices went to a high of $1436 and I really believe when somebody has to shut the factory down next year farmers stock could well be $500 higher than the current offer of $1000.
Farmers need to be patient. The lack of competition in the shelling industry can only be managed by a strong resolve, a willingness to be creative, and using the calendar to your advantage.
Right now the sellers are reeling from quality issues and because PAC is gone and there is no indemnification fund sheller would almost seem to be indemnifying crop quality issues by offering farmers prices below the market.
So why was the market at $800 to $850 and suddenly jumped to $1000. $1000 is $300 below the market and if the tariff at the buying point is not too bad it might behoove a farmer to seek a toll sheller and maximize his value. I am still convinced we see a situation not unlike 1990 when prices went to a high of $1436 and I really believe when somebody has to shut the factory down next year farmers stock could well be $500 higher than the current offer of $1000.
Farmers need to be patient. The lack of competition in the shelling industry can only be managed by a strong resolve, a willingness to be creative, and using the calendar to your advantage.
Right now the sellers are reeling from quality issues and because PAC is gone and there is no indemnification fund sheller would almost seem to be indemnifying crop quality issues by offering farmers prices below the market.
Subscribe to:
Posts (Atom)