What is in this article?:
- Peanut Futures Series: Will farm bill ease peanut's boom-bust cycle?
- Back-of-the-envelope price competition
- The U.S. peanut market has been since the end of the quota system on a boom-bust cycle, leaving farmers in a state of oversupply and suppressed prices or responding too much in acreage following a high-price season.
Under this farm bill, wise growers will market their peanut planting by responding to market indicators with the benefits of keeping a solid rotation of crop acres in mind,
Back-of-the-envelope price competition
Each farmer or peanut operation differs, but back-of-the-envelope numbers paint a broad picture of peanut prices related to other crops going forward:
To compete against peanut prices averaging between $460 and $470 per ton, cotton prices would need to go 90 cents per pound and corn $6 per bushel on non-irrigated land. On irrigated land, though, to compete against peanuts at that prices, cotton would need to hit 83 cents to 85 cents per pound and corn to $5.50 per bushel. Soybeans will need $14 per bushel non-irrigated and $13 per bushel irrigated, Smith said.
If $490 to $500 per ton peanuts, then 95 cent cotton and $6.55 to $6.75 corn for non-irrigated and $5.85 to $6 for irrigated. Soybeans will need $17 and $15.50 respectively. That’s assuming better irrigated yields than in the budgets, or 1,300 pounds of cotton per acre, 5,250 pounds of peanut per acre and 225 bushels of corn per acre, adjusting costs on peanuts and corn to reflect current seed prices and more fertilizer for corn.
“This might give peanuts a stronger incentive to not fluctuate as much in acres unless cotton and the other crops can really bid them away,” he said.
Under this farm bill, he said, wise growers will market their peanut planting by responding to market indicators but always with the benefits of keeping a solid rotation of crop acres in mind -- and not plant for the programs in the bill.
The program payments use the marketing year average price which carries into the summer of the next year. If price lose coverage payments are triggered under PLC, the payments will be made Oct. 1 or after; same timeframe under ARC, too. It’s important to remember that peanuts grown for the ’14 season, if payments are triggered, will not receive payment until after Oct. 1, 2015.