What is in this article?:
• Dollar a pound prices buffed up the crown of King Cotton and just may bring it back to pre-ethanol acreage.
• Peanut contracts with more than one five in them seems to have rejuvenated interest in planting that crop.
• Corn at $5.50 a bushel is still a money-making proposition for most farmers, especially those in the upper Southeast.
Cotton equipment a challenge
Farmers who have been out of the cotton business for a few years are going to find the cost of cotton equipment, both new and used, to be a challenge. New cotton pickers with on-board module builders are going for more than $550,000. Perhaps more significantly, the price of used cotton pickers has gone up significantly, as has the price of custom picking — to pay for the higher investment in equipment.
A consensus among cotton growers and cotton marketing experts is that the recent increase in cotton prices will probably keep the price of 2011 and 2012 cotton crops high. After that, history doesn’t look so promising, but demand for cotton clothing and China’s reluctance to grow fiber over food seem to bode well for U.S. cotton.
After three consecutive years of decline (2007-2009) U.S. cotton acreage increased in 2010. In some areas in the upper Southeast, cotton production fell as much as 50 percent in the three-year period. This type up and down in pricing makes it tough for farmers to make long-term investments in cotton equipment.
The onset of glyphosate-tolerant cotton and broad scale minimum-tillage systems brought to the Southeast a perfect row crop combination — peanuts and cotton. Though tempered in more recent years by good corn prices and a return to more traditional corn-peanut rotations, cotton and peanuts became staple crops in the late 1990s.
At the turning of the millennium, North Carolina and Virginia produced over 200,000 acres of peanuts. By the end of the first decade of 2000, peanut production in the two states was a scant 78,000 acres. During that same time frame, peanut production in South Carolina climbed from less than 10,000 acres in 2000 to a projected 70,000 acres in 2011.
Like most crops, peanut acreage is driven by dollars. Unlike most crops, peanut acreage can also be driven by family tradition. Despite long-term family ties with peanuts, many growers in the upper Southeast just could not battle ever-increasing costs of production, especially disease management and perpetual uncertainty as to pricing.
In 2011 pricing won’t be an issue. In early December peanut contracts began coming out at better than $500 for runner types and up to $610 for Virginia types ($165-$175 above loan value of the crop).
Unlike cotton and higher acreage crops, peanut acreage will be tightly controlled by the peanut industry — or more accurately the peanut industry will try to control production. Though it seems fairly straight forward — no contract, no peanuts, it historically hasn’t worked like that.
Many peanut growers have not signed these 2011 contracts, which are in some cases $100 per ton better than 2010 contracts. Shellers have to insure there are enough peanuts to meet market demand and growers want to get as much as they can for their crop.
The bottom line is that carryover from the 2010 crop is likely to be in excess of 500,000 tons. That doesn’t exactly inspire buyers to rush out and buy 2011 peanuts that sold for $500-600 per ton, when they can buy cheaper peanuts from the 2010 crop.
A sharp drop in cotton prices in early November influenced some shellers to discontinue offering contracts. However, some shellers see the direct threat to peanut acreage from cotton and continued offering contracts well into December.