An anticipated bumper crop will keep the peanut market quiet during the growing season and could put a damper on farmer contracts this fall.
Still, the industry displays an attitude of “guarded optimism,” say peanut industry experts.
Marshall Lamb, research leader, USDA’s National Peanut Laboratory, Albany, Ga., says some areas of the Peanut Belt remain dry, “but we hope they get rain soon. Optimism is in the air and we hope to deliver a good supply of high quality peanuts and maybe recapture some lost markets,” Lamb said in an interview at the recent Southern Peanut Growers Conference.
Tyron Spearman, editor of the Peanut Farm Market News — an industry online newsletter — and executive director of the Peanut Buying Points Association, says the USDA crop estimate of 2.5 million tons “could go higher with a couple more rains. We have a bigger crop than usual.”
Spearman said expected lack of contract activity this fall may mean farmers should store peanuts after harvest. “We expect to have about a three- to four-month over-supply. That will take us about four months into next year. The market will drop,” he said. “We hope it doesn’t hit the bottom, $355 per ton.”
Lamb said growers should expect no movement on peanut prices during this growing season as buyers wait “to see where this crop goes. Growers should not hesitate to use the loan as a marketing option,” he advised.
The drought that covers much of the country, including a big portion of the Midwest, may “bring the market to us,” Spearman said. The drought will push up corn and soybean prices and that “will buffer up peanut prices.”
He said peanut buyers will need acreage to meet demand next spring.
The case for a bumper crop is a strong one, he said. “We have isolated pockets of drought, but prospects from the Virginia/Carolina area into south Georgia are good, even with some isolated dry pockets in Georgia. Also, the Southwest is getting some rain, and with a couple more rains Southwest growers could make a good or at least a fair crop.”
The drought spreading over much of the country could affect peanut markets in a few months as buyers next spring compete with grain for available acreage, Spearman said. That could create a situation for good spring contract offerings.
Randy Griggs, executive director, Alabama Peanut Producers Association, agrees growers have a better outlook this year.
He says Southeast peanut farmers may be off to the best start in the last several years, and producers in other parts of the country appear to be in better shape as well as they look toward the last half of the 2012 growing season. That good start accounts for a positive industry outlook, he says.
He was also high on the 2012 conference, which set an attendance record with more than 630 registrants.
“A strong program,” he said, played a role in attracting growers and industry representatives to the annual conference. “We were not looking for solutions to problems for the next six or seven months,” Griggs said. “We wanted to offer a long-term outlook, something to help growers in planning.”
He said growers report good crop prospects, despite some areas with production problems. “If it’s dry on a grower’s farm, it’s dry all over the world as far as he’s concerned,” Griggs said. “But the Southeast crop got off to a better start this year. We had a little more moisture, but the last few years started off poorly.”
That good start, he said, “is the reason for optimism.”
Griggs says even the Southwest has a bit more rain than they received last year. “But Southwest growers have issues with water and are concerned. They are likely to continue to be for quite some time.”
The peanut industry displays a “feeling of guarded optimism compared to the last two years,” Lamb says.
He said 2010 and 2011 were hard years for peanuts, “more about devastating drought and heat. And the 2011 drought stretched all across the Peanut Belt.
“This year we have increased acreage and have a good start across all growing regions.”