Some peanut farmers will be tempted, because of economic reasons, to skew their rotations this year, but they need to know at what cost they do.
1,340,210 million tons is the U.S. peanut supply that will carry over into the 2016-2017 marketing year. That’s a substantial amount sitting around before the majority of the 2016 crop even gets planted over the next month.
U.S. farmers harvested 1.57 million acres of peanuts in 2015. Even though the peanut market faces an oversupply situation with low contract prices (or no contract offers) being given now, pre-season indications show peanut farmers will plant and harvest again in 2016 at least as many acres as they did last year. Why would farmers do this?
This year and at this time, the peanut is the least-ugliest dance partner standing against the wall to choose from. Other crops will get dance partners, but nobody’s racing across the dance floor to get to them because they are uglier than peanuts, economically speaking.
“Even at these low peanut prices, peanuts are still the most profitable alternative (at this time) relative to corn, cotton or soybeans, and that does not include any provisions from the farm bill; that’s just comparing crop to crop to crop from a production standpoint,” said Marshall Lamb, research director for the National Peanut Research Laboratory and advisor for the Farm Press Peanut Profitability Awards.
To plant as many peanut acres again in 2016 as 2015, growers will shorten rotation in fields, or plant peanuts in a field with only two years out of peanuts, one year out of peanuts, or go back-to-back on a peanut crop.
“Peanut farmers know 100 percent the impact rotation has. They know it, but it comes down to a calculated decision they are making if they shorten their rotation. But with corn prices and cotton prices and soybean prices where they are, they feel like they have little option left,” Lamb said.
Make a calculated decision
There is a way to better balance a shift or shortening of rotation, but it requires knowing field history well and choosing not to shorten rotation in a field or location with a checkered past when it comes to disease pressure.
For example, let’s say farmer Lamb has a 100-acre irrigated field on a three-year-out rotation for peanuts with an average yield with that rotation of 5,792 pounds per acre. If Lamb shortens the rotation in that field to two years out, his yield potential drops by 450 pounds. If he goes with just one-year out, his yield potential drops by almost 1,400 pounds per acre, according to the analysis by Dr. Lamb the USDA research director. (Dr. Lamb comes from a family farm in southwest Georgia, family land his brother still works. Marshall helps out at planting and other times as needed. So, this example ain’t fantasy.)
How will farmer Lamb’s rotation decision in that field impact his profit potential?
Let’s continue with this example and use these prices: Peanuts at $380 per ton. Cotton at 65 cents per pound. Corn at $4 a bushel. Soybeans at $8.75 a bushel. This example does not include any government payment provisions.
On a three-year-out rotation under this example, peanuts rank #1 in profit potential over cotton, corn and soybean. On a two-year out rotation, peanuts drop to #2 in profit potential with 65-cent cotton going to #1 for profit potential. With a one-year-out rotation, peanuts drop to the #3 rank for profit potential and 65-cent cotton stays at #1 with $4-corn moving to the #2 rank, according to research director Dr. Lamb’s analysis.
“There is no blame for the overproduction we face as an industry right now because each individual farmer is going to try to make the best crop they can deliver. But as a group when that happens, and we have everybody making these good yields (as the last few years have shown), it can turn into a situation we have now. Again, there is no blame to be had or shared with this current supply we have. In fact I think credit needs to be given to U.S. farmers and the industry on just how well they can produce quality peanuts now,” Lamb said.