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Have a contract in hand before planting peanuts

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• Put all the factors in a box, shake them up good, and the message I keep getting is don’t over-plant and don’t plant many peanuts without a contract in your hand.

Every year around the first of February I attend the South Carolina Peanut Board’s annual meeting.

My time at Farm Press has paralleled the rapid growth of the peanut industry in the state, so we’ve kind of grown up together.

With prices projected to be $700 or more per ton for 2012, this year’s annual meeting was predictably packed with growers and venders, who participate in what has become an over-flowing exhibit hall.

The annual meeting started out at a steak house near Orangeburg, S.C., and has been held in the Family Life Center of the First Baptist Church there for the past few years. The Family Life Center and/or a Baptist church seems like an odd place for a peanut meeting, but it’s the only available space large enough to house a group of 350 or so farmers and another 100 or so venders.

The overflow crowd at this year’s event is indicative of the enthusiasm for peanuts this year in the Palmetto state. Projections for acreage run from a modest increase of 10 percent or about 84,000 acres up to 96,000 acres.

If the increase is closer to 20 than 10 percent, South Carolina will likely replace North Carolina as the Southeast’s fourth largest peanut growing state.

Without exception, every grower I talked with at the meeting was planning on increasing acreage and without exception each grower knows someone new getting into the peanut business in South Carolina.

And, why not! As reported in the Farm Press last year and subsequently in the main stream media, there is a real or perceived shortage of edible peanuts. How real or how severe the shortage, depends mostly on who’s doing the talking.

Talking aside, peanut growers in the Virginia-Carolina belt have gotten contracts for $700 per ton for Virginia-type peanuts. The incredible story is that few have signed these contracts and even fewer have taken the option of contracting part of their crop for $700 per ton and the remainder for $50 to $100 less.

Richard Rentz, who grows peanuts near Branchville, S.C., and is the multi-year president of the South Carolina Peanut Board took the risk last year.

“Last year I didn’t contract any of my peanuts, and it worked out real well. This year, I took the $700 contract — maybe that’s a mistake, maybe not, but it’s a fair price for my peanuts,” he says.

Drake Perrow, who is in the peanut business in Cameron, S.C., and is a consultant for a number of South Carolina growers, says most of his growers are sticking close to the acreage they planted last year. However, he says, there are lots of people planning to grow peanuts for the first time this year or who are getting back into production after being out of it for a few years.

There are some real good reasons to plant more peanuts and to hold peanuts this year: Supply is down, South America has a record drought in the peanut producing areas of the continent, shortage of winter water is threatening acreage in Texas, and demand for peanut products has remained high.

I think there are better reasons to not over-plant and to not plant without a contract in hand.

For starters, history is not on your side. Historically, since the government-supported peanut program ended short crops and/or low acreage has tightened demand and raised prices.

Subsequent over-planting and good crops has dramatically lowered prices. The rapid fall of prices over the years has taken a number of good growers, shellers and buyers out of the peanut business — the infrastructure doesn’t need any more attrition.

Second, thousand dollar a ton peanuts aren’t sustainable — $700 per ton peanuts may be.

Remember the recent cases of gasoline and cotton. Gas at more than $4 a gallon was certainly available a few years back, but people didn’t buy nearly as much of it. Likewise, cotton topped $2 a pound in May of 2010 and demand for cotton products fell dramatically, which will have a long-term and negative impact on cotton farmers for a few years to come.

Third, Dell Cotton and Tyron Spearman preach a slightly different sermon, but the message is basically the same: Don’t over-plant and don’t plant many peanuts without a contract in your hand.

Cotton is president of the Virginia-Carolina Peanut Growers Marketing Association and Spearman is Editor of the Spearman Report and a consultant for a number of peanut organizations. Or, as people in the peanut business in the Southeast call them: Mr. Peanut North and Mr. Peanut South. Make no mistake, these boys know the peanut business in and out and up and down.

It will be interesting to see how the USDA Planting Intentions Survey will turn out this year. How much peanut acreage will go up may or may not be reflected in results of the survey, which is scheduled to be released at the end of March.

Many growers will wait as long as they can to try and get a read on the relative prices of corn, cotton and peanuts and make adjustments on peanut acreage based on this information. Others will likely look at the dollars and plant as many peanuts as they can.

As is always the case, weather will also dictate how many peanuts will be planted.

A lack of water in the Southwest is already threatening peanut acreage there. Some of that shortage may be made up in new peanut producing areas in Mississippi and Arkansas, plus an increase in peanut acres in parts of Oklahoma.

Put all the factors in a box, shake them up good, and the message I keep getting is don’t over-plant and don’t plant many peanuts without a contract in your hand.

rroberson@farmpress.com

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