Current Peanut Situation
How did we get here.......Firstly we have an ethanol erection in the USA which convinced us to plant more SE corn acres on good, irrigated peanut land and we put more peanut land into dryland acres. Then we decreased peanut plantings to plant more corn and cotton and now, we have delayed planting our dryland acres hoping for enough rain to soften soil and allow balance of crop plantings. Here we are at the end of May and farmers must plant NOW in order to qualify for crop insurance....and still no rain. A further worry is that some farmers will plant strictly for insurance only and thus instead of planting 160LBS of seed per acre may plant just 50 or 60 LBS and decrease input costs in order to limit expenses and not throw good money after bad. Obviously this would severely cut dryland acre yields and even if the rains do come later, yields are adversely affected in the SE. Wow, what a mess.Condition of the USA crop is mixed. SW and V-C is OK, but the SE is the real problem. The drought conditions in Georgia are the worst in 50 years. Of 159 counties in the state, last week 74 were rated in extreme drought and 79 in severe drought. Our irrigated crop in the SE is planted and getting at least 13$ per acre costings of water every week and concerns are that irrigation ponds are being drained and we still have all Summer to water. One farmer last week mentioned he had already watered 5 times this year (5 X 13$ per inch of water=65$ per acre extra cost) so far as opposed to none this time last year. Farmers are not interested in contracting 2007 crop with the sheller so the market is at a standstill with no sellers. Lets look at numbers and make a very conservative estimate.....................if we look at dryland acres in Ga(65%), Fla(70%) and Ala(95%) and calculate vrs. planted acres 2007 crop estimate in these states we are at 780,000 planted with 553,000 dry and 227,000 irrigated. Plug in 2006 yield on irrigated acres for these 3 states(2874LBS per acre) and lets just conservatively deduct 25% yields on dryland this year we come up with 922,198,075 tons SE short tons produced. Add balance of States at 2007 projected acres and last year yield comes to 528,816 ST for total USA crop of 1.451 short tons vrs. 1.737 last year( decrease of 16.5% from last years crop which was the smallest since 1930.) Now you see why we have no sellers and I think my numbers could be high. Dont forget with seed needs, the USA needs 1.7 just for domestic usage, so we leave nothing for Europe to buy and possibly open up the USA to imports from other origins.We are in a new era in World supply vrs. demand for peanuts. In 2 years we have gone from surplus to deficit for world needs. Argentina will supply Europe because the USA cannot and China will grow a huge crop, but use most of it internally. I look for firm markets to continue for at least 18 months or more.
Hope this does not confuse you even more.
Stewart Parnell
How did we get here.......Firstly we have an ethanol erection in the USA which convinced us to plant more SE corn acres on good, irrigated peanut land and we put more peanut land into dryland acres. Then we decreased peanut plantings to plant more corn and cotton and now, we have delayed planting our dryland acres hoping for enough rain to soften soil and allow balance of crop plantings. Here we are at the end of May and farmers must plant NOW in order to qualify for crop insurance....and still no rain. A further worry is that some farmers will plant strictly for insurance only and thus instead of planting 160LBS of seed per acre may plant just 50 or 60 LBS and decrease input costs in order to limit expenses and not throw good money after bad. Obviously this would severely cut dryland acre yields and even if the rains do come later, yields are adversely affected in the SE. Wow, what a mess.Condition of the USA crop is mixed. SW and V-C is OK, but the SE is the real problem. The drought conditions in Georgia are the worst in 50 years. Of 159 counties in the state, last week 74 were rated in extreme drought and 79 in severe drought. Our irrigated crop in the SE is planted and getting at least 13$ per acre costings of water every week and concerns are that irrigation ponds are being drained and we still have all Summer to water. One farmer last week mentioned he had already watered 5 times this year (5 X 13$ per inch of water=65$ per acre extra cost) so far as opposed to none this time last year. Farmers are not interested in contracting 2007 crop with the sheller so the market is at a standstill with no sellers. Lets look at numbers and make a very conservative estimate.....................if we look at dryland acres in Ga(65%), Fla(70%) and Ala(95%) and calculate vrs. planted acres 2007 crop estimate in these states we are at 780,000 planted with 553,000 dry and 227,000 irrigated. Plug in 2006 yield on irrigated acres for these 3 states(2874LBS per acre) and lets just conservatively deduct 25% yields on dryland this year we come up with 922,198,075 tons SE short tons produced. Add balance of States at 2007 projected acres and last year yield comes to 528,816 ST for total USA crop of 1.451 short tons vrs. 1.737 last year( decrease of 16.5% from last years crop which was the smallest since 1930.) Now you see why we have no sellers and I think my numbers could be high. Dont forget with seed needs, the USA needs 1.7 just for domestic usage, so we leave nothing for Europe to buy and possibly open up the USA to imports from other origins.We are in a new era in World supply vrs. demand for peanuts. In 2 years we have gone from surplus to deficit for world needs. Argentina will supply Europe because the USA cannot and China will grow a huge crop, but use most of it internally. I look for firm markets to continue for at least 18 months or more.
Hope this does not confuse you even more.
Stewart Parnell
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