Like Nero fiddling while Rome burned, peanut buyers seem asleep at the switch this year and are about to run the train off the track.
Shellers blame it on the manufacturers and if that is true I wouldn't take the risk this year either so I cannot point a finger at the shellers too much on this issue.
I write this as I am sitting listening to reports on the research the Commission has funded this year on peanut production. What was most enlightening was what I heard before the meeting. The numerous farmers present say peanut acre are about to plummet. The economist who does comparative numbers of competition of peanuts, cotton, corn and so forth says acres will be at 2009 levels or lower which would mean a cut of 30 percent in acres, give or take.
The 2010 crop has serious quality problems with reports of shockingly dismal out-turns of usable kernels from peanuts which have had to go to the blancher for clean up. Blanching plants are running at capacity and reports are peanuts are even being trucked from the Southeast to Texas for blanching.
Cotton this week passed another barrier at $1.18 which nets to the farmer at about $1.15. Some cotton brokers say $1.35 cotton is a real prospect now. Note $1.15 cotton to the farmer needs a $685 peanut to be competitive.
What does all this mean. Many acres have been committed to cotton. Georgia cotton acres is already slated to be up over 200,000 acres from last year and that is coming from peanuts. Peanut acres will be down and the industry has done this to itself. Carry out of peanuts in to the 2012 crop year could well be far below the 1990 levels. For farmers if you are going to plant it don't get excited about these cheap $1436 for his peanuts.
For consumers...you better buy your peanut butter now.
For the shellers and especially the manufacturers be ready to watch the train run off the cliff because you were asleep at the switch.
Wednesday, February 9, 2011
Wednesday, February 2, 2011
When Time Runs Out
The real question right now is when does time run out to get peanuts planted in 2011.
I was riding with a farmer today who told me he just booked another 400 bales of cotton and 4000 bushels of corn which for him represents about 250 acres of corn. He still has no enthusiasm for peanuts and was offered a $600 contract. He says the price has to be at least $650 to compete with cotton and corn.
Another farmer made the comment the increase in cotton acres is a significant shift from peanuts.
Shellers tell me they can't make competitive offers because the manufacturers don't believe the 2010 crop is as bad as is being reported and much of the trading is still on 2009 crop.
One County FSA office reported shellers wanting to redeem all the peanuts out of the loan immediately. This is odd when you consider the government fronts storage and handling monies to be paid at redemption so the incentive to do this is not normal at this time.
Finally, a farmer from the Southwest part of the state told me at one time he believed $600 would get all the peanuts we need planted. Now he questions if there is any number which could cause that to happen but it certainly is not at $600.
Hold on because this is going to be a rough ride and you might need an oxygen mask to get past the highs in the market at year's end.
I was riding with a farmer today who told me he just booked another 400 bales of cotton and 4000 bushels of corn which for him represents about 250 acres of corn. He still has no enthusiasm for peanuts and was offered a $600 contract. He says the price has to be at least $650 to compete with cotton and corn.
Another farmer made the comment the increase in cotton acres is a significant shift from peanuts.
Shellers tell me they can't make competitive offers because the manufacturers don't believe the 2010 crop is as bad as is being reported and much of the trading is still on 2009 crop.
One County FSA office reported shellers wanting to redeem all the peanuts out of the loan immediately. This is odd when you consider the government fronts storage and handling monies to be paid at redemption so the incentive to do this is not normal at this time.
Finally, a farmer from the Southwest part of the state told me at one time he believed $600 would get all the peanuts we need planted. Now he questions if there is any number which could cause that to happen but it certainly is not at $600.
Hold on because this is going to be a rough ride and you might need an oxygen mask to get past the highs in the market at year's end.
Tuesday, January 25, 2011
Cotton Cotton Everywhere
Well my November 30 post said farmers are content with planting cotton.
I have been doing grower meetings and it seems farmers are still happy to plant cotton and forgo planting peanuts.
Cotton prices reached 113.74 yesterday and were a bit lower today so farmers had a decision to make and some went ahead and booked more cotton.
Except for a pitiful offer of $550 for southeastern producers back late in the Fall, there has been no activity in the peanut market so farmers are pretty much getting tired of waiting. There is a desire to continue rotations pretty much at previous levels but not at all cost.
In a meeting with two buying points yesterday the comment was made by one operator and agreed to by another that they don't know right now if acres will be off by 25 percent or 50 percent.
In a meeting 100 miles removed from yesterday's meeting farmers told me today that in the absence of a $660 contract they will plant no peanuts. Still another factor which is an indicator was a County Agent who worked through the numbers with one producer who had a cotton yield of 1100 pounds and a peanut yield of 3500 pounds and for that producer cotton and peanuts do not meet mutual profitability until peanuts got to $748 with cotton at $1.10.
Also, the carry out of peanuts in to the 2011 crop will be among the lowest in decades and perhaps as low or lower than the 1990 carryout. In 1990 market fundamentals pushed farmers stock prices to levels up to $1400 per ton with more common offerings being in excess of $1000 per ton.
So what does all this mean?
For farmers uncontracted peanuts, provided something doesn't change and we plant acres, seem very attractive. For shellers who contracted some peanuts, perhaps a up to a fourth of their needs, a $550 farmers stock peanut is increasing in value every day. I would hate to be a peanut product manufacturer this year because the calendar has about run out and decisions on the farm have in all too many cases been made.
My only regret is for the market itself and if we have $1200 peanuts based on the strictest fundamentals of supply and demand then we will likely see a repeat of the loss of market we realized after the 1990 crop.
I am quite optimistic for farmers in the short run because they have other choices and they are exercising their right to make those choices.
I have been doing grower meetings and it seems farmers are still happy to plant cotton and forgo planting peanuts.
Cotton prices reached 113.74 yesterday and were a bit lower today so farmers had a decision to make and some went ahead and booked more cotton.
Except for a pitiful offer of $550 for southeastern producers back late in the Fall, there has been no activity in the peanut market so farmers are pretty much getting tired of waiting. There is a desire to continue rotations pretty much at previous levels but not at all cost.
In a meeting with two buying points yesterday the comment was made by one operator and agreed to by another that they don't know right now if acres will be off by 25 percent or 50 percent.
In a meeting 100 miles removed from yesterday's meeting farmers told me today that in the absence of a $660 contract they will plant no peanuts. Still another factor which is an indicator was a County Agent who worked through the numbers with one producer who had a cotton yield of 1100 pounds and a peanut yield of 3500 pounds and for that producer cotton and peanuts do not meet mutual profitability until peanuts got to $748 with cotton at $1.10.
Also, the carry out of peanuts in to the 2011 crop will be among the lowest in decades and perhaps as low or lower than the 1990 carryout. In 1990 market fundamentals pushed farmers stock prices to levels up to $1400 per ton with more common offerings being in excess of $1000 per ton.
So what does all this mean?
For farmers uncontracted peanuts, provided something doesn't change and we plant acres, seem very attractive. For shellers who contracted some peanuts, perhaps a up to a fourth of their needs, a $550 farmers stock peanut is increasing in value every day. I would hate to be a peanut product manufacturer this year because the calendar has about run out and decisions on the farm have in all too many cases been made.
My only regret is for the market itself and if we have $1200 peanuts based on the strictest fundamentals of supply and demand then we will likely see a repeat of the loss of market we realized after the 1990 crop.
I am quite optimistic for farmers in the short run because they have other choices and they are exercising their right to make those choices.
Tuesday, November 30, 2010
Farmers Satisfied with Planting Cotton
At current market offerings and already strong commitments based on cotton contracts many farmers who would normally grow peanuts seem to be satisfied with parking the peanut planter in lieu of cotton.
It seems cotton fared better under the 2010 drought conditions and the continuation of the La Nina weather impact which has the Georgia State Climatologist predicting warmer and drier than normal conditions through the Winter and Spring at the least and farmers seem happy to stay the course with cotton.
It is hard to argue that kind of logic. We would all rather stay with what does the best for us.
So what does this mean for peanuts? A $550 contract didn't get much interest and time is running out for the peanut market to find new life. Farmers will have a hard time getting financing without a contract. Manufacturers seem to be satisfied that the supply will always be there. Farmers are no longer willing to sell below the true cost. Shellers are caught in the middle.
If no one blinks soon we could see some very interesting price spikes in the market. I remember one farmer selling for $1436 in 1990. With quality issues it is certain we don't have enough peanuts in the pipeline to carry us until harvest 2011 so things may get very interesting.
Complicate this with the fact that cotton has to be delivered under a final contract and once that acre is contracted there is not enough money to get it out of cotton and back in peanuts. Same goes for corn and soybeans. They all have trading markets and sufficient volume to attract speculators. Peanuts does not.
If we get past the first of the year with no sufficient offer to entice producers to contract peanuts and there is any spike in the cotton market at all and Katie bar the door where we will end up as far as price for peanuts in the 2011 crop. Frankly, uncommitted 2010 crop will have to go up to fill the gap created by short plantings for the 2011 crop.
Don't look for a last minute reprieve on acres after corn is planted in February and March.
Buckle your seat belts. This might be one heck of a ride.
It seems cotton fared better under the 2010 drought conditions and the continuation of the La Nina weather impact which has the Georgia State Climatologist predicting warmer and drier than normal conditions through the Winter and Spring at the least and farmers seem happy to stay the course with cotton.
It is hard to argue that kind of logic. We would all rather stay with what does the best for us.
So what does this mean for peanuts? A $550 contract didn't get much interest and time is running out for the peanut market to find new life. Farmers will have a hard time getting financing without a contract. Manufacturers seem to be satisfied that the supply will always be there. Farmers are no longer willing to sell below the true cost. Shellers are caught in the middle.
If no one blinks soon we could see some very interesting price spikes in the market. I remember one farmer selling for $1436 in 1990. With quality issues it is certain we don't have enough peanuts in the pipeline to carry us until harvest 2011 so things may get very interesting.
Complicate this with the fact that cotton has to be delivered under a final contract and once that acre is contracted there is not enough money to get it out of cotton and back in peanuts. Same goes for corn and soybeans. They all have trading markets and sufficient volume to attract speculators. Peanuts does not.
If we get past the first of the year with no sufficient offer to entice producers to contract peanuts and there is any spike in the cotton market at all and Katie bar the door where we will end up as far as price for peanuts in the 2011 crop. Frankly, uncommitted 2010 crop will have to go up to fill the gap created by short plantings for the 2011 crop.
Don't look for a last minute reprieve on acres after corn is planted in February and March.
Buckle your seat belts. This might be one heck of a ride.
Tuesday, November 23, 2010
Old Time Harvest in 2010
Tommy Hughes, the radiator repair man and antique tractor collector from Cordele gave us a trip to the past Saturday when he harvested his stacked peanuts with an old Turner stationery peanut picker.
Tommy found the picker in another man's shed and the man said he was about to burn it and sell the metal for scrap. Tommy rescued the picker and Saturday it ran like a well oiled machine.
There was also a stationery hay baler from the same era.
Watch for the video soon on the Peanut Commission You Tube page.
Monday, November 8, 2010
Will There Be Enough Peanuts?
Cotton prices for next year are approaching dollar cotton even after basis.
The National Center for Peanut Competitiveness has been comparing cotton and peanuts on the Representative Farms.
Discussions with many farmers seem to indicate that many farmers are not willing to plant peanuts at the current offering of $550.
Reports out of the VC indicate farmers are disheartened by this year's peanut crop and it may take $650 to get peanuts grown in that area in lieu of cotton.
Farmers are looking at booking cotton and once they have done that they will have to plant those acres in cotton. Remember cotton contracts are firm delivery contracts because there is a market where shortfalls can be made up.
Growers in Georgia to whom I have spoken seem intent on the fact that compared to cotton and other commodities, soybeans seem to be mentioned regularly, it will now take a contract with a 6 in front for peanuts to sufficiently compete for acres.
The quality and quantity of the 2010 crop has taken care of the pre-plant discussions of a peanut surplus.
For many producers planting decisions may be made by Thanksgiving and certainly by the first of December. If the manufacturers and shellers continue to hold at current offers we could face a shortage of peanuts in 2011-2012. This would make contracting peanuts a bad decision at current levels if we short the peanut crop.
Just one final note...State Climatologist has said hotter than normal and drier normal conditions will continue through a significant portion of 2011.
It may be an interesting year.
The National Center for Peanut Competitiveness has been comparing cotton and peanuts on the Representative Farms.
Discussions with many farmers seem to indicate that many farmers are not willing to plant peanuts at the current offering of $550.
Reports out of the VC indicate farmers are disheartened by this year's peanut crop and it may take $650 to get peanuts grown in that area in lieu of cotton.
Farmers are looking at booking cotton and once they have done that they will have to plant those acres in cotton. Remember cotton contracts are firm delivery contracts because there is a market where shortfalls can be made up.
Growers in Georgia to whom I have spoken seem intent on the fact that compared to cotton and other commodities, soybeans seem to be mentioned regularly, it will now take a contract with a 6 in front for peanuts to sufficiently compete for acres.
The quality and quantity of the 2010 crop has taken care of the pre-plant discussions of a peanut surplus.
For many producers planting decisions may be made by Thanksgiving and certainly by the first of December. If the manufacturers and shellers continue to hold at current offers we could face a shortage of peanuts in 2011-2012. This would make contracting peanuts a bad decision at current levels if we short the peanut crop.
Just one final note...State Climatologist has said hotter than normal and drier normal conditions will continue through a significant portion of 2011.
It may be an interesting year.
Wednesday, November 3, 2010
The Election is Over
Well the election is over and hopefully not too much will be taken for granted in the Republican landslide. Likewise the incumbent survivors need to not be in glee for their past record. The fact is the American people have sent the same message they sent two years ago...it is time for Washington to listen to the will of the people.
Gridlock and finger pointing is no longer acceptable and if it continues there will be a new bunch of folks in 2012 as well.
Now how does the sweeping change in Washington play for Agriculture and Peanuts?
With sweeping losses in the south, with those losses went seniority. Our new team will be spending a lot of time learning the system and frankly, the system will consume them if they are not careful. There has been somewhat of a power shift from the South to the Midwest. The South used to keep incumbents there forever and therefore we had power.
It is no secret the Midwest has always believed Southern Agriculture had it too good for too long. There is not a really great understanding of the higher cost structure farmers in the South face.
It will be interesting to see how this shift plays out.
Issues to keep an eye on include payment limits, direct payments, disaster assistance, and more.
It is pretty evident that over time if the market is going to have peanuts they are going to have to assume more of the responsibility.
I don't really see this happening right now.
It seems that no-one in the industry past the grower ranks has a clue that cotton for next year is almost a dollar a pound and soy is over eleven and corn at over five. Once financing is arranged and inputs locked in and forward sales contracted for those other commodities, there will be no turning back.
Currently, cotton prices would indicate from the representative farm model and with significant agreement from farmers, peanut contracts will need to be in excess of $550 to compete for acres. Dollar cotton would command a price in excess of $600 to compete for acres.
Complicate all of this with the fact that the 2010 crop had increased levels of damage and aflatoxin which will further reduce the supply and the prediction from the Georgia State Climatologist that the current weather pattern of hotter than normal and drier than normal conditions will continue through much of 2011 and the market should be exciting.
If the industry fails to make a reasonable offer before mid December farmers will have made their decisions and someone will do without peanuts before the 2012 harvest.
Gridlock and finger pointing is no longer acceptable and if it continues there will be a new bunch of folks in 2012 as well.
Now how does the sweeping change in Washington play for Agriculture and Peanuts?
With sweeping losses in the south, with those losses went seniority. Our new team will be spending a lot of time learning the system and frankly, the system will consume them if they are not careful. There has been somewhat of a power shift from the South to the Midwest. The South used to keep incumbents there forever and therefore we had power.
It is no secret the Midwest has always believed Southern Agriculture had it too good for too long. There is not a really great understanding of the higher cost structure farmers in the South face.
It will be interesting to see how this shift plays out.
Issues to keep an eye on include payment limits, direct payments, disaster assistance, and more.
It is pretty evident that over time if the market is going to have peanuts they are going to have to assume more of the responsibility.
I don't really see this happening right now.
It seems that no-one in the industry past the grower ranks has a clue that cotton for next year is almost a dollar a pound and soy is over eleven and corn at over five. Once financing is arranged and inputs locked in and forward sales contracted for those other commodities, there will be no turning back.
Currently, cotton prices would indicate from the representative farm model and with significant agreement from farmers, peanut contracts will need to be in excess of $550 to compete for acres. Dollar cotton would command a price in excess of $600 to compete for acres.
Complicate all of this with the fact that the 2010 crop had increased levels of damage and aflatoxin which will further reduce the supply and the prediction from the Georgia State Climatologist that the current weather pattern of hotter than normal and drier than normal conditions will continue through much of 2011 and the market should be exciting.
If the industry fails to make a reasonable offer before mid December farmers will have made their decisions and someone will do without peanuts before the 2012 harvest.
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