What a Peanut Crop

Georgia has a whopper of a peanut crop on our hands.

The growing season was one of the best ever and the new varieties showed their potential.

The state average yield will bust the previous average by over 600 pounds to the acre if current predictions hold.

Farmers who have not yet marketed peanuts and who have no contract would be well served to wait until after January 1 to put peanuts in the loan. This allows until the end of October to make marketing decisions and the 2013 situation will be evident by then.

Anticipate few if any contracts at planting and if alternatives are available with other commodities expect a sharp decline in acres in Georgia for 2013.

Marketing is Critical

Farmers producing peanuts under the old program never had to pay much attention to marketing. Even under the new program marketing was never a really big deal prior to this year because there seemed to be a pretty significant quantity of peanuts covered by pre-plant and for sure pre-harvest contracts.

This year is different. We will produce too many peanuts for the 2012 market if we can have a decent harvest. And our quality will be exceptional in most cases given a good harvest.

So a pessimist would look at this and see no opportunity.

The loan maturity under the current program is 9 months, beginning the first of the month after the date peanuts are put in the loan. So for instance if I can get my banker happy with waiting until January to put my peanuts in the loan and I get my loan January 3rd then the loan clock starts ticking February 1st. That means I have until the end of October 2013 to redeem the loan and market my peanuts.

Now you need to have a clear understanding what you are going to get back from the warehouse when you make this decision  Regulation would only require a like dollar value to come out as has gone in. If you desire something different it would be good to have a firm understanding.

Here is why marketing is critical.

I don't anticipate, with a pretty significant carry over, contracts which will be competitive with the pricing opportunities for corn and soy in 2013. So we will likely under plant peanuts for the market in 2013. We will need the 2012 crop to meet 2013 demand.

Don't think the rest of the industry is ignorant to this fact and therefore farmers need to have a two year vision and try to market accordingly.

Some of the most savvy marketers may even choose to consider toll shelling, putting kernels in cold storage and then perhaps make an orderly marketing over time through a reputable peanut broker. Sadly, you need to be able to handle your own financing because there are not loan provisions for doing so. Perhaps USDA needs to reconsider this.

We are in a new ballgame this year and we need to be throwing strikes and hitting home runs if we are to survive.

Hurricane, What will it do?

We are faced with the prospect of a hurricane right here as harvest begins. What would be the impact?

Probably if it came, rained a bit and went the impact may be slightly positive because it would saturate the ground and the crop could sort of coast to completion in most cases.

That is if it gets out of here and we have a perfect harvest.

My greatest fear is a wet harvest. In some cases vine conditions are deteriorating, especially in some of the March planted peanuts.

If we get rain and not more than a couple inches the effect will largely be positive.if it goes away and fairs up until after harvest. Daily rains like some areas have had will do more harm than good after next week.

I think it is fortunate we have had a bit cooler temps because the harvest will not be as pressed to the front as in the past couple years. Also, we have had less photosynthesis the past few weeks with it being more overcast and that may have some impact on maturity.

All said the hurricane does not bother me but what comes after may be a different issue if it is not good weather.

Certified Acres

Georgia's certified acres when adjusted for green peanuts and for anticipated abandoned acres will still be about 715,000 acres. I also think there is a real prospect of the average yield exceeding 3600 pounds per acre and frankly would not be shocked at the end of the day with a Georgia production of 1,400,000 tons when harvest is done.

I would anticipate really good quality and lower aflatoxin numbers than recent years because the night time temperatures and even daytime temperatures of recent have been really low.

I saw six rows of some March planted peanuts in Crisp County dug and they look pretty darn good so I would say harvest has begun if at a slow pace for now. I was suspect the peanuts had a pretty heavy pod load because they would get rain and then in a day they were wilting back down.

One Sheller has sent out letters saying he cannot honor the contracts he has with farmers. This will have a pretty serious ripple through the industry in the future because it has brought in to consideration the lack of sanctity of a contract. Contracts are essential in the absence of a futures market.

I anticipate the 2013 acres to drop like an atom bomb. We will have a potential shortage of peanuts by the end of 2013 if manufacturers and therefore shellers follow suit of what has been the history of failure to meet competition in the market place for acres.

Corn and soy will be the crops of choice with cotton inching up since India has pulled out of the market. Problem with soy is it kills peanut rotation for the next couple years on those acres. Soy is just like peanuts in rotation. The potential profit from corn and soy for 2013 look to exceed what the potential seems to be for peanuts.

Get on the roller coaster and ride. Farmers need to remember that if they can hold out until January to put peanuts in loan then the loan does not mature until the end of October. There may be some stronger pricing opportunities as we get close to the 2013 harvest and for sure should be some after planting.

We are in a two year market cycle and farmers and bankers are going to have to learn how to deal with this.

Drought, Hurricanes, and Congressional Recess

Well the drought continues with spotty rains but in some areas the rains were pretty heavy. I personally know of several March planted peanuts which seem to have gotten rain all year in adequate quantities. Wednesday night they had water standing in the rows and power lines were down in the area. I think those peanuts have adequate water to fill the rest of pods and get them to harvest.

There is a tropical storm which is predicted to become a hurricane in the gulf. If it was to turn northward and drop some serious rain across the Southeastern peanut belt...what a blessing. This would take us a long way toward breaking the drought.

Congress recessed for the five week August recess. They failed to pass a farm bill or even drought relief so somebody is going to have to work on their vacation to get something done or they may all get a permanent vacation. The drought relief package in the House covered livestock and a few specialty crops. Odd argument from Congress...if we don't do this there will be a rise in food prices. That is all sound bite because if you ain't got it you ain't got it and prices are going to rise. That is the way the free market works and we have no policy to build government owned reserves so somebody will just have to go hungry unless China opens their reserves and ships them here.

General Update

Well the Commission started its fifty first year today and it is in a new very efficient building which has an educational center designed to work for the farmer. We had our first out of state visitors today.

We had the ribbon cutting for the building yesterday and had about 300 folks here.

The drought continues to persist and promised rain never materialized yesterday.

The Midwest drought is about to impact us next year.

Chances are good we will fill the pipeline this year and no contracts will come close to those which will be offered for corn and soybeans. So next year we will likely short the market at planting.

My advice to a farmer is to put uncommitted peanuts in the loan after January 1 and wait the market out. I really think we are in a two year cycle and have to have vision further than the current marketing year.

Planted Acres Estimate

NASS released its planted acres report earlier and after some review this is one man's idea of what it means.

When everyone including the folks in Texas were thinking their industry would crawl under a rock and die, their farmers showed everyone and increased acres over last year. So much for the need to get new production areas. Still we have new production areas like those in Arkansas and Missouri.

If you don't have a contract then I am a bit doubtful there will be one before harvest which is much better than the loan rate so I wouldn't be in a hurry to sign a nothing contract if I was a farmer. The loan will pay you $355 plus or minus on grade.

This crop is a long way from done and there is a lot which can happen between now and harvest. Some areas are suffering from extreme heat and drought as I write this. As a rule the Georgia crop looks pretty good but it is far from perfect and far from done.

Drought can lessen yields, high nighttime temps can increase aflatoxin, a rainy harvest can reduce both yield and quality.

If you produce peanuts in excess of your contract there is no sense now asking why the market is not better. We had urged caution before planting but hindsight is 20/20 and some folks got a thousand a ton last year. If you do find yourself in that situation then you have an option...wait until after January 1 to put your peanuts in the loan and that gives you until October 31 to redeem peanuts from the loan. If the market is at $355 at the end of harvest then it may stand to reason there will not be any decent contracts offered next year and plantings will decline. If they decline enough then loan peanuts may increase in price especially after we plant and as the 2013 harvest approaches.

We cannot any longer look at a crop year when making marketing decisions.

And remember, the pipeline from 2011 is about empty so they do need some peanuts in excess. This makes patience a virtue as we market uncommitted peanuts. If there is any significant disruption in supply of 2012 peanuts then the market could well respond.

What a Year of Diversity and Perhaps Adversity

Peanuts were planted from Mid March to June this year. The market was terribly uncertain at planting but other markets were as bad or worse. Some farmers had 20/20 hindsight and planted without a contract. In Georgia and the Southeast there are a lot of peanuts planted. Stands range from bad to excellent. Today we are feeling a tropical rain in June which will be especially beneficial to those March planted peanuts. The peanut industry seems to have varying opinions as to what happens with a large crop and frankly it is a long way from being done. A large crop and low prices at harvest will take care of itself with lower plantings in 2013. It is the roller coaster of the free market.

Couple all this with the uncertainty of a farm bill which is still largely unknown and hopefully will end up with a safety net for southern farmers which is non-existent in the Senate version of the bill which passed last week...the ride will get to be interesting.

Beneficial rains came to most of the peanut belt in Georgia over the past two weeks but we are still in a drought situation because subsoil moistures are limited.

Still with the apparent increase in acres the market is sluggish and is counting on the new varieties performing beyond expectations for another year. The reality is the new varieties have not been tested under more normal conditions as a whole so if the rainfall were to continue we might see the full potential.

Baker County, Georgia last year had a county average of about 5200 pounds which heretofore has been unheard of.

The shelled good market will not currently support a $750 which many growers got a piece of early on so contracting was a good decision. Shellers who have not sold forward to cover those positions may be wishing the crop would be tight again this year.

Stands as a rule were pretty good which is unusual given the difficult situation finding quality seed. The Georgia Department of Ag seed lab in Tifton had record numbers of peanuts sampled and apparently the shellers found enough quality seed to meet the demand for their customers.

Farm Bill and Weather Top the News

Well the Senate version of the 2012 Farm Bill is a real dog for southern producers. Our farmers need to be crying bloody murder on this one. It is nothing more than a food stamp bill. Research funded by the Commission through the National Center for Peanut Competitiveness has demonstrated the lack of a safety net for southern producers and now FAPRI which is the Food and Ag Policy Research Institute in Missouri has confirmed our worst fears.

For the first time ever in my recollection, the House has a much better deal for us than the Senate if we can just finally get out of Committee and through the House floor.

Meanwhile, at home east of I-75  in most areas Beryl dropped some much needed rain and an isolated cell moved from the northwestern GA belt southward but rainfall amounts were limited. For the heart of the Georgia belt drought conditions still continue. In the eastern production areas where acres were up the condition is better but this will not fix the ills of the drought on the final outcome. What we need is a tropical storm to come in from the Gulf and sweep across the entire GA peanut belt.

Everybody Talks About the Weather

We can talk about the weather but it is what it is. Experts had said a three in a row LaNina was not heard of but it sure is hot and dry right now. Soil moisture is down to 7% and that is not going to be solved by occasional showers. We need a major rain event.

We had peanuts planted in March and irrigated peanuts going in now and if the dry weather persists we may have peanuts planted as late as mid-June so it could be a long drawn out harvest.

I am pretty sure nobody knows what to do at this point as far as marketing so we seem to be in a hold tight mood. Chances are pretty good it will either be better or worse than we think right now which proves what Frank McGill told me when I first came to the Peanut Commission, "only a fool would predict a peanut crop before the Fourth of July."

On another note seed testing on peanuts was far higher than years past which tells me there is a search for something of adequate quality to put in the seed market. Some folks have mis-read this as an indicator of excess acres but I would lay odds everything tested will not end up in seed.

Origin Discussions from International Peanut Forum

What I heard at this year's International Peanut Forum from other origins seems to follow what I hear from our growers...cost has risen and we cannot grow peanuts much cheaper than they are now. That is a new attitude from what used to be a cut-throat business only a few years back. It seems farmers worldwide have decided they need a profit, too.

On other notes, China suggested they would be using more of their peanuts for edible oil and will likely at some point become an importer of edible peanuts. India suggested a similar trend at some future point.

Meanwhile, it is hot and dry in the Southeast. A Bermuda High has set in and is keeping us from getting much needed rain to plant non-irrigated peanuts. Some models suggest it to weaken and the chance or rain to become more prominent. The problem is until we have a major rain event we are so dry a few tenths will not make the moisture meet. This has been complicated by an April filled with Summer temperatures and March like winds.

This is shaping up to be another very interesting year. Farmers without a contract at planting should watch the markets closely and keep an eye on conditions.

A Year of Variables

Not in my twenty six years as Executive Director of the Peanut Commission have I seen peanuts planted in the third week of March...until now that is.

For the past two years I have told farmers who asked, the downside potential of price was pretty limited. I am not sure that is the case for 2012. Cotton prices have softened and the Corn decision is already made and done by farmers.

Early on contracts for the two big shellers were conservative but adequate to get some acres planted. When there were not enough peanuts contracted a slight upward blip in the next wave of contracts got more acres. At least two shellers offered $750 contracts when $650 was about as good as it got from the big boys and while I applaud them for that I hope this is not a situation where they "should have been selling when they were buying."

So where are we now? Currently, the weather is the variable. We have never had LaNina years thrice in a row. Yes I spelled that correctly, thrice. Were that to happen we would likely continue disruptive market behavior and that would not at all be good. Some of the major manufacturers actually made decisions to try to quiet demand for peanut products. Remember we were showing record growth when the disaster in supply hit last year.

So let me get to the point. The variables this year are the greatest they have been in my 26 years in the position and we will have to watch things closely as the season progresses.

Wow Someone Reads This

I had a request to update my blog.

We have taken on a few new initiatives with two retirement later last year and I had pretty much put the blog on the back burner but with an email request I have been shaken out of hibernation.

Looking at what is going on in the peanut world right now could not even be done in one posting so I will make this a serious effort of regular updates to finally get through the issues.

I will be posting more after my board meeting today and we will look at the vagaries of supply, seed supply, seed quality, march plantings, rainfall deficits, well you get the picture. There are more variables to juggle this year than in any of my 26 years at the peanut commission.

Quietly Waiting

Well once again the peanut shellers and manufacturers are in a gaming mode and think they will be able to pull the trigger the last minute and get plenty of peanuts planted.

What are the facts?

Seed quality is questionable at best to stinks. How well can we do with poor stands? Will we at some point test the resolve of the Tomato Spotted Wilt Virus?

Corn is a better use of irrigated acres for most farms because you can make more money and your risk ends with the August harvest.

Cotton is a better option on non-irrigated acres because there is revenue coverage which peanut farmers do not have from USDA's Risk Management Agency. Plus you can book cotton and at this point there is no contract at all for peanuts. Peanuts offer the greatest risk to a southern producer.

All the experts are taling about having to quiet consumption. It is sad to see the industry again setting itself up for contraction rather than expansion but that is the decision of the shellers and manufacturers at this point.

There is so much uncertainty now, I would never personally consider peanuts without a contract because the risk is too great. And, that is a contact on everything and not on some portion of the production on a farm.