UPDATE ON PEANUTS March 24, 2008

Supply
2005 Peanut Crop production 2,410,000 tons of farmer stock
2006 Peanut Crop production 1,737,000 tons of farmer stock - Down 28%
Tonnage was down due to 25% reduction in acres and poor growing conditions
Carry-in from 2006 is estimated at 585,000 tons. (Aug 1, 2007)
USDA final estimate (1/10/08) 2007 Crop at 1,870,325 FST. FSIS has only graded 1,811,228 tons, as of 3/18/08. (1,815,000 FST is going to be close)
Demand
Demand onUS Peanut crop 1.98 mil tons
Demand includes Peanut domestic usage 1.45, seed .13 mil, exports .40 mil tons.
Supply 2,520,000 = 1,815,000 ’07 Crop + 585,000 carry-in + 120,000 import
Demand – 1,980,000 = 540,000 FST carry-out (Aug 1, 2008)
This is a tight carry-out. (we need 475,000 to cover Aug – Oct).
There is an unusually high demand out of Mexico and EU at this time. This is due to China not offering and Argentina has sold out of the ’07 crop.
US demand is just seeing the price increases being put into effect Jan ’08. It will take a month or two for us to evaluate the impact on demand. P/B is usually a strong seller in a bad economy, so I would expect it to stay strong. Candy and Snack could take a hit as fuel cost take a big part of the consumers cash.
Market ’07 Crop
Very few offers on 2007 Crop - Peanuts with EU specs or Hi-Oleic specs would be higher.
’07 crop market going forward depends on 1) US demand – how does the consumer react to the higher prices and the weaker economy. 2) China - Recent reports indicate China will need all their peanuts for oil and consumption within the country. 3) Argentina – how will the crop be in Argentina? Acres were up 4%.
Jan ’08 export of peanuts is up 48% over Jan ’07. Shellers indicate significant export sales have been made going forward. We are just starting to see this in the Govn’t numbers. This will help keep the US market tight and prices firm.
’08 Crop
Farmer stock has been contracted at $500 - $550/ton. The majority was at $500 - $525. I would estimate that 65 -70% has been contracted. (more in the SE than SW)
Last week cotton prices fell along with other small grains. This has taken the pressure off of peanuts. Farmers seem to be complaining less about the $500 peanut contracts. Cheaper cotton may help us with peanut acres.
Shellers are withdrawn from the ’08 market until we see peanut acres planted.
I believe an increase in Peanut acres of less than 15% will be bullish on prices, 15 – 18% will be neutral and 18% + will be bearish.
Long range weather forecast are still calling for warmer and dryer in the peanut areas. In spite of this, we have had good rains in the SE over the last 2 months.
Stewart Parnell