Planting Intentions???

I reviewed the planting intentions report and have a few observations on the stated intention of only a 4% reduction in Georgia: 1. Farmers do not believe this and think it will be a much larger reduction. There is some talk of conspiracy to suppress prices at the farm gate by padding the numbers. 2. It would appear we must be going to create some more land to increase other crops at the level they intend and still only reduce peanuts by 4%. 3. In conversations I have had with others in the industry many of them do not believe the report...but for some reason this has not caused them to offer competitive prices. 4. The industry better get ready to get off their pocket book for 2012 because many farmers have a bad taste in their mouth toward peanuts and cotton prices appear to be strong for next year, at least at this point. 5. This will be a good year to look at the FSA certified acres than speculative reports based on small sample surveys. 6. The anticipated reduction in irrigated acres and the loss of Temik will have some impact on yields...the question is how much?

Peanut Prices

Well the peanut market is certainly in flux at the moment based on a lot of things but there seems to be at least some imbalance to me when I look at the price being offered to farmers and the price being charged for seed. I put our staff to work and sought out information on peanut prices and medium runners are currently being traded around 80 cents and one report was as high as 83 cents. Well now if you look at tradition seed has typically been 10 cents over medium runner price but for the sake of discussion lets even say 12 cents is within normal. That would be reasonable justification for seed prices being 91 to 94 cents per pound. Well if that is the case then lets look at the other end of the spectrum and see what we find. 80 cent mediums should yield a farmers stock price with at the least an 8 as the first number. So then we took in to account that the 10 crop had some quality concerns so we did a few calculations. Considering blanching cost of 5 to 6 cents and adding 10% more to our normal shrink considerations the price should still have a 7 in front for any uncommitted farmers stock from the 10 crop. I can understand how shelled good prices have escalated because of quality concerns and the concern we could see acres for 2011 in a very tight situation. What is not understandable is how it is farmers stock offerings for uncommitted 10 crop peanuts has held at $550 while the medium price has escalated. Farmers know this, too and in the meeting the other night in Coffee County GA I had a lot of farmers who are really mad at the shellers right now. I have heard the same across the state but it was very vocal in Coffee County. Be they the culprit or not shellers are not currently on the list for growers to send an Easter Basket. I know the best way to change farmer attitudes is with money. If that doesn't happen then I am pretty certain shellers may need to hire a good PR firm.

Shocking Revelation

At our board meeting this week the preliminary budget was set based on 450,000 acres for Georgia. This is the lowest acreage since 1980 and the rest of the country seems to be following this trend in cutting acres and planting other crops like cotton.

The board also agreed to a projected yield of 3150 which looked at the yield potential of the new varieties but also the belief that irrigated acres would be dedicated to cotton because cotton contracts have to be delivered with no accounting for any act of God.

If all this comes to pass and given the serious quality problems in the 2010 crop causing the crop to sustain heavy blanching loses to clean it up and this will be an interesting year in the peanut market.

I have always thought seriously that contracting some of your peanuts was a good idea but this year I wonder if that is true. I think the most recent contracts of $600 is really not even a floor given the market fundamentals.

I am pretty bearish on price for farmers who have uncontracted peanuts for the 11 crop and even the 10 crop may move up if a farmer has them in the loan and can wait until later in the year.

I think it is becoming a more safe bet that the 10 crop will all be needed to satisfy current demand given the significant kernel loss suffered in the blanching plants.

One early season concern is that many areas are dry and temperatures seem to be warming in a hurry. The current weather pattern is much similar to I believe the 2008 crop when it seemed that the rain angled in from the northwest and played out before it got to very much of the peanut belt.

One hope is that the ENSO currents will move to more neutral as the year progresses but as of yet no one has made that prediction.

Do You Hate Earmarks?

I am gravely concerned that there is a mood in America today that government is bad and we would do better with no government. There is a mood to cut to the bone in Washington in many areas. One of these areas is Agriculture.

There also seems to be a great deal of pride that they have killed earmarks in Washington. You know the bridge to nowhere was an earmark.

So then lets ask the question are all earmarks a bridge to nowhere?

I asked my Chairman today as we went up the Interstate toward Atlanta what we did without cell phones. We both conducted business as we went on our way. Sunday, week, our pastor emeritus gave the sermon and he talked about finding our way and told of his Garmin recalculating when faced with an errant turn. And on our TV there is discussion of the Da Vinci robotic surgeon. Where in the world did all this technology come from?

The better question is from where out of this world did all this come. Thanks to earmarks and the space program our lives are laced with technological advances which have added to the quality of our lives.

In Agriculture we find much the same story. Cuts were sustained in our Ag research over time and the only way to get critical research funded was to seek earmarks. Today fewer farmers than ever before feed America and the world for less than in our history even given current spikes in commodity markets.

Think about this, in 2040 we will need to feed almost twice the population of what we feed today. There is no more land and no more water, fertilizer, fuel, or any of the other inputs. So we will have to do more for less. It takes twelve years to bring a new peanut variety to commercial use. This mood to stick a long jagged dagger in the heart of Ag Research will at some point and it will be in our lifetimes come back to bite us. With a growing world population and a burgeoning middle class in China just imagine our children going without food because we cannot afford to pay what others can.

Just one last thought; I hope when we dismantle government my share of the infrastructure can be on I-75 where I can put up a toll booth.

Ag Weatherman Murdered

Weather is by far the most influential factor Mother Nature has to throw at Ag producers. It impacts planting date and harvest. It influences diseases and the management of them. Chill hours or lack of can make or break a peach crop. Heat and drought can both affect peanut quality.

The list goes on and on.

The University of Georgia had an ag weather network which is used widely by farmers. It is also used as an indicator for golf course condition. Even Georgia Power uses it to determine peak usage.

The information found at the weather web site is not available in a usable form with prediction models and so forth at any other place.

So then why is it the University of Georgia would make the decision to kill this beneficial initiative? It cost far less than the benefit it has demonstrated.

All I can say is this is a heck of a way to spur the economy by destroying a valuable tool farmers use to maintain productivity and profitability.

$600 Contract Receives Mixed Reviews

Last week peanut contracts were offered at $600 and the response by farmers was mixed.



It seems that it may have gotten some peanuts in the SW part of the state which were already likely to be planted locked down by shellers. In East and Southeast Georgia it really didn't move the needle much. This area seems to have an advantage of cotton over peanuts and so it was going to take more than that to compete with cotton.



In Coffee County the County Agent did an informal survey of the growers in a local meeting and found that the $600 had no impact and that those growers are still leaning cotton. As the Agent told me $1.22 cotton is much better to my growers than $600 peanuts so they are going where the opportunity exists.



On a largely related note the local weatherman says our moisture situation right now is worse than it was this time in 2007. We are going in to this crop with a pretty serious rainfall deficit and with our ponds at low levels. Considering the requirement that cotton when contracted must be delivered cotton will compete greatly for irrigated acres and we could see dryland peanuts increase in percentage.



At this point we all know 2011 is going to be an interesting year but I am about to think that we can now anticipate the same of 2012, especially if cotton prices hold for another year.

A Little Fishing for Understanding

In this blog recently I have been asking a lot of what ifs and I wonder whys.

It is kind of like a fishing trip of sorts because it has offered dialogue with several in the industry.

Fact is there is more uncertainty in the peanut industry at a time when the rest of Agriculture seems to be doing fairly well. Not to say all is bad in peanut world. Last year's yield in Georgia set a record. Peanut consumption is at an all time high. Yet Mother Nature has proven to us she is still in control of things.

If anyone in Congress is listening you need only to look at what is happening in the peanut world right now and you will realize the vagaries of weather and the environment require maintaining some sort of stabilization program for a civilized society to assure an adequate supply of food for their citizenry.

Let's look at what happened last year.

We had the hottest and one of the driest Summer on record. Still consumption of peanut butter and now even snack nuts and candy continued to climb. Candy makers and snack nut roasters even brought new items to the market...take for instance the Snickers PB Squared and Planters new Five Alarm Chili Dry Roasted Peanuts. Both are big hits and even may be considered market movers.

The northern part of the Georgia Peanut Belt suffered from drought and heat and it was evident. If you saw un-irrigated peanuts around Plains at harvest they never got more than a hand wide and were never harvested.

Remember also the string of nights we had for about a month when the temps never dipped below 80 in many areas. Research many years back at the National Peanut Lab told us night time temps have a direct bearing on Aflatoxin contamination. This was predictable already before harvest and it is not just in un-irrigated peanuts. Mother Nature left her mark on the quality of the crop.

So now we have an adequate crop and maybe even a surplus if things were normal but they are not.

Complicate this whole issue with the reemergence of the Burrower Bug as a prominent pest in many areas and the damage it causes to quality and the situation just seems a bit more grim.

The only real way to deal with Aflatoxin of this magnitude and deliver a product that is safe and wholesome and meets both Government and even stricter industry standards is to run it through the blanching plant. This both costs to do in just the charge of the blanchers and also comes at a cost from lost pounds of usable kernels.

Because of the fact that Shellers bought from farmers and forward sold to manufacturers it is now their cross to bear. And, it is coming with a great deal of cost that there is no way to recoup.

Peanut blanchers don't build their business on bad crops but do normal blanching practices in normal years. This year is different. The burden put on blanchers is really being felt. Reports have the current blanching capacity stretched to the limit through some time in 2012.

Shellers cannot afford more risk at this time and as of now manufacturers are concerned but not in the mood to accept that risk in the future. Therein lies the lack of attractive peanut contracts to wrestle acres away from cotton.

I am worried that this is not a particularly good situation for the peanut market for the future. We could well run out of peanuts at some time during the year and factories will have to shutter their doors until the supply resumes. It is hard to continue a growth in consumption under that scenario.

Also, based on value of the commodities I feel certain we will see some shift from irrigation on peanuts to irrigation on cotton. This may or may not prolong the issue of Aflatoxin depending on the 2011 growing season. If you go outside the water rich areas of Southwest GA and look at the Southeastern Peanut Belt in general it is all feasible that irrigated acres of peanuts this year could be at a modern low of 25%. This may be further complicated by CRC insurance coverage on cotton which makes a crop disaster in cotton an easier loss than it does for peanuts which lacks a CRC type program.

So whose fault is all this? I guess you will have to blame Mother Nature for a lot of it. She has shown us our vulnerabilities as an industry under the current peanut program. With all the consternation over farm programs in Washington right now we have some challenges ahead so perhaps we need to have some pretty serious dialogue in the industry going forward. We certainly know where many of the pitfalls are.