What is in this article?:
- Peanut growers facing serious acreage cut decisions
- Getting quality product
- Protects against risk
- Weather problems
• “We need to get back to a reasonable carryout level, which would equate to production this year of about 1.5 million farmer stock tons. With an average 3,400 pound U.S. yield, that would suggest 900,000 acres for 2013, or about a 38 percent decrease from last year and a 30 percent decrease from the 2008-12 average.”
OE CAMPBELL, from left, Golden Peanut Company, Camilla, Ga., visits with producer Keith Driskell, Grand Bay, Ala., and Kris Balkcom, Auburn University Extension agronomy and soils research associate, at the annual meeting of the Mississippi Peanut Growers Association.
Getting quality product
“We’re hoping that as they crush our U.S. peanuts, they will see how good the resulting meal is, and may realize it’s not all about price, but also quality, which we deliver. Hopefully, they will remain a more stable customer, although I have a feeling price may drive their buying decisions ahead of quality.”
Also helping boost demand, Lamb says, U.S. manufacturers are introducing new product lines for peanuts and are expanding existing product lines.
“We need to move out as many peanuts as possible so shellers don’t have to store them too long. Our shellers are working as hard as they can to get these peanuts shelled, but they may not be able to have them all shelled by the time we start delivering the 2013 crop this fall.”
At the time of the Mississippi grower meeting, no contracts had been offered for 2013 peanuts, Lamb said, and there were still uncontracted peanuts in the loan.
“Given prices for other crops, we should be able to reduce peanut acres in order to get supply and demand back in balance, and hopefully attractive prices for other crops will offer farmers some economic stability with reduced peanut acreage.
“With corn at $7 per bushel, that equates to about $500 for non-irrigated peanuts, or $700 for irrigated. Cotton at 75 cents equates to $518 non-irrigated peanuts and $609 irrigated. For soybeans at $14, that equates to $601 for non-irrigated peanuts and $667 for irrigated.
“We do not, and we will not, ever have a trading floor for peanuts, as other commodities do with the futures markets. There aren’t enough consistent round turn sales for a liquid peanut futures market, which prevents you from hedging to manage risk, or forward contracting on a daily basis off the board.
This “puts risk into every aspect of every segment of the U.S. peanut industry,” Lamb says.
“In 2010 and 2011 shellers bore the majority of the risk from the quality problems. They couldn’t get full utilization of the peanuts they were buying because they had to push a lot of them into the oil market.
“And with the short crop that occurred in 2011, farmers who had completely contracted all their production in advance weren’t able to take advantage of the $1,000 offers at the end of the year.
“In 2012, some farmers who didn’t contract for the good prices early now have their peanuts sitting in the loan because of the huge production.”
The amount of volatility in production creates risk for growers, Lamb says, and “frankly, I don’t think there’s much that can be done about it.
“What I recommend — and what I’ve said for years — is to take a balanced approach to marketing. You should almost always have some of your peanuts contracted up front, but also have some open at the end of the year to take advantage of any higher prices that may occur if there are crop problems.