Thursday, August 30, 2012

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.


city said...

thanks for sharing.

Mace said...

Keep it coming. Rumor has it we forfeit the rest.