Nut Talk

UPDATE ON PEANUTS October 5, 2006

Supply2005
Crop production 2,410,000 tons of farmer stock
2005 Crop production 1,601,000 tons of farmer stock (USDA est.) Down 34%
Industry estimates closer to 1.5 mil tons. (Down 38%)
Tonnage is down due to 25% reduction in acres and poor growing conditions
Carry-in from 2005 is estimated at 700,000 tons.

Demand
Demand on US crop 1.85 mil tons
Demand includes domestic usage 1.4, seed .12 mil, exports .33 mil tons.
Supply 2,300,000 = 1,600,000 Crop + 700,000 carry-in
Demand – 1,900,000 = 400,000 carry-out
This is a normal carry-out


Market
The only reason we do not have 60-cent peanuts is the giant carry-in from 2005
Today, Oct – Dec ’06 shipments, ’05 crop:
JR $.4350/lb, MR $.3850/lb, Splits $.38/lb and #1’s $.36/lb.
No offers on 2006 Crop shipping Jan – Sep ‘07
Shellers have bought half of the crop at $365 / ton and sold, at least, this amount
Any future sales will be from farmer stock yet to be purchased. The word on the street is that it will take at least $400 / ton to buy, it may take $425. For a sheller to make his margins with $400 farmer stock, prices would be:
JR $.45/lb, MR $.41/lb, Splits $.40/lb and #1’s $.38/lb.
In the next 3 weeks we should know pricing on farmer stock
Note: Jumbo’s will likely be short and the differential may increase

2007 Crop

* We need to increase acres at least 10% to make sure we meet demand.
* 2006 acres 1,213,000 x 2640 lbs/ac. = 1,601,000 tons
* 2007 acres 1,334,300 x 2900 lbs/ac (5 yr. average yield) = 1,935,000 tons
* This would be a comfortable carry-out and hedge, if the yields are lower
* Talk is, with fuel cost and petro-chemical cost high, it will take $415 to $425/ton to increase acres. If storage and handling is not included in the 2007 crop, add $40/ton. Storage and handling should be settled by the middle of Nov ‘06
* Peanut Prices if farmer stock is:
$415/ton – JR $.46, MR $.42, splits $.41 and #1’s $.39/lb.
$425/ton – add 1-cent/lb.
$465/ton – JR $..48, MR $.45, splits $.44 and #1’s $.42/lb.