What is in this article?:
- Contracting looks like good move with 2012 peanut crop
- U.S. needs at least 1.3 million acres
• If you plant peanuts without a contract, you run the risk of getting lower prices because the production is likely to be greater this year.
• Interest in peanut production is high for 2012, thanks to recent production shortfalls and resulting higher prices.
U.S. needs at least 1.3 million acres
The United States needs at least 1.3 million acres in 2012 — using a 3,350 pound-per-acre yield — to keep carry-over at current levels, he says.
“That’s an increase of about 13 percent or about a 160,000-acre increase in the U.S. I think we could see about a 100,000-acre increase in Georgia, especially if contract prices continue to stay where they are.”
If U.S. producers plant 1.3 million acres and have a 3,500-pound yield, it would push ending stocks up to 645,000, which means more peanuts in the pipeline but not a big surplus by any means, says Smith.
“If we have bad year with a 3,200-pound yield, we’ll have a really tight situation in the peanut market. If we increase acres by 20 percent or up to 1.4 million acres, with a 3,350 yield, then we’re talking about a 650,000-ton carryover.
“If we increase acres by 25 percent and start seeing 650,000 to 700,000-ton carryovers, we may see prices like we saw in 2007-2008.”
The U.S. needs at least 1.3 million acres and it could see 1.5 million acres, says Smith. Seed prices are expected to be up 4 to 10 percent, depending on the situation.
“That’ll be the main increase in cost this year. Depending on your yield, you could see a $24 to $45 per-ton increase in your production costs.”
Costs will be higher, he says, and weather is a concern as La Niña could keep prices up.
“But the question is, can you afford not to contract peanuts in 2012? Peanut prices will probably be competitive because the market won’t let what happened last year happen again this year.”
University of Georgia 2012 budgets show that for dryland peanuts at 2,900 pounds per acre and $700 per ton, a grower will have about $111 left over after all costs, including land rent of $65 per acre.
“We did a risk analysis comparing peanuts, corn, cotton and soybeans. Peanuts compare better, and the risks are not as high as you might think.
“There’s a 62 percent chance of having a positive return.
“On irrigated land, at 4,200-pound peanuts and estimating costs at $1,150 per acre using a $175 per-acre rental rate, you have about a 72 percent chance of making a positive return. Peanuts, because of the risks involved, need to have a premium.”
Smith advises peanut producers to look at their contract terms closely.
“What is the net price you’re being offered? Contracts have different terms. If you’re offered $750 on 25 percent of your pounds, and we end up with a $500-per-ton price at the end of the season, you’ll end up with only a $560 net contract.
“Some contracts have been tied to locking in seed price, which allows you to lock in part of your input cost. This may be the year of the contract. If we plant a lot of acres, the probability is that prices will go down from there.”