What is in this article?:
- Peanut growers hold good hand, but caution advised
- Financing could be a problem
- 2011 was a good year overall
• The cards look good! Contracts in the Carolinas and Virginia are for $700 a ton for Virginia types and $650 a ton for runners, with a $25 premium for high oleic varieties.
• The big concern is that U.S. growers will plant a record number of acres of peanuts without having a contract in hand and turn the supply versus demand ratio from favorable for good peanut prices to one that will insure a return to low prices in future years.
THE 2012 PEANUT crop may be the most valuable in history.
Financing could be a problem
The second is finding a banker to loan money, because all new growers are likely to have is the guarantee of a contract for $355 a ton.
It’s a good bet not too many $300,000-plus self propelled peanut pickers are going to be bought based on the government loan guarantee on peanuts.
Drought in Argentina is another good indicator of a big increase in peanut production in the U.S. As of late January and near the end of the growing season in the Southern hemisphere, Argentina, the main export competitor for U.S. grown peanuts, is facing one of its worst droughts in history.
Unless rains come by harvest time peanut yields may be down on a scale similar to what happened to production in Texas last year.
Lower production in South America, likely accompanied by dry harvest season weather and subsequent aflatoxin problems is bad for growers there, but could be good for U.S. growers.
The peanut export market is dicey at best and basing huge acreage increases on what may or may not happen in the export market is high risk.
The rapid fall in the price of cotton is another indicator of an increase in peanut acreage in the Southeast. Well publicized comparisons of $700 a ton peanuts being more profitable than $1 a pound cotton are a little misleading.
For one thing, don’t sell King Cotton short. As of late January, cotton prices have flat-lined at somewhere between 95 cents and a dollar a pound. The risk associated with growing cotton is significantly reduced by availability of better crop insurance options.
Comparing $700 a ton peanuts and $1 a pound cotton can be a little like comparing apples and oranges.
The big concern is that U.S. growers will plant a record number of acres of peanuts without having a contract in hand and turn the supply versus demand ratio from favorable for good peanut prices to one that will insure a return to low prices in future years.
The up and down cycle of peanut prices that has followed the end of the federal peanut program is remarkably consistent. Prices go down, acreage goes down, fewer peanuts are produced and prices go up.
Then growers over-plant and over-produce and they are right back in the cycle of up and down prices.
Every time the industry goes through one of these up and down cycles someone in the industry gets hurt financially. And, over the past few years getting an economic slap in the face has caused growers, shellers, blanchers, buyers and people up and down the line to leave the peanut business.
Dell Cotton, director of the Peanut Growers Cooperative Marketing Association, says 2012 is not a typical year in which the U.S. peanut industry faces an over-production problem.
In the past most of the up and down nature of peanut production has been based on weather-related peanut shortages.