peanut futures marketing strategies

DINWIDDIE, VA., FARMER and Upper Southeast Peanut Profitability Award winner Billy Bain has seen many changes in peanut marketing during his long and storied farming career.

Peanut Profitability Award winners know marketing

The 2014 Farm Press Peanut Profitability Award winners all did an exceptional job of marketing this past year's crop, averaging from $529 to $725 per ton. Peanut producers are advised to spread their risks when considering a marketing strategy.  

While efficiency is the name of the game with the Farm Press Peanut Profitability Award, this year’s winners were no slouches when it came to the fine art of marketing, averaging from $529 to $725 per ton for their 2013 peanut crops.

“All of these growers did a great job of marketing, getting well above the average price that most other growers received,” says Marshall Lamb, research director for the National Peanut Research Laboratory in Dawson, Ga., and advisor for the Peanut Profitability Award.

Lamb advises peanut growers to spread their risks when considering a marketing strategy.

“If a decent contract comes out – pre-plant or early summer – and you can cover a good portion of your crop, go ahead and take that. But leave some peanuts open in case bad weather does strike and the price increases,” he says.

Peanut Futures: Marketing for Profitability, an exclusive editorial series sponsored by DuPont Crop Protection, examines recent developments in U.S. and international peanut markets. This is the final story in the series.

As for the U.S. peanut market, oversupply remains a problem, says Lamb, and it’s still uncertain how this year’s planted acreage will shake out.

“There were a lot of farmers who were strongly considering not planting as many peanuts as initially thought because they didn’t want to go deep into June planting peanuts. And that’s not a bad thing as far as markets are concerned. Georgia was predicted to have a 53 percent increase in planted acres, but it won’t be anywhere close to that. A lot of growers kept their options open until the last minute this year,” he says.

What happens with the world peanut crop remains to be seen, says Lamb. “Argentina was in a period of cool, wet weather when they were struggling to get their crop out of the field. We’ve got an adequate supply of a high-quality, well-priced peanuts that we can enter the European markets with, and hopefully that’ll be an opportunity for the U.S. industry. China’s acres are down because the government there wants to increase their grain stocks.”

Efficiency should be the goal should continue to be the goal of peanut growers going forward, says Lamb. “Grow the best peanut you can at the lowest cost per unit.”

Covering costs

When it comes to marketing peanuts, Alabama farmer and Lower Southeast Peanut Profitability Award winner Owen Yoder says his primary goal is to cover his costs.

“I’ve done partial contracts to cover my costs, and then I leave part of it open. Last year, I contracted some peanuts and got offers at the end that were about the same as my contracted peanuts, so I just went ahead and sold them because I didn’t anticipate the market getting any better,” says Yoder, who markets through Birdsong Peanuts in Goshen, Ala., and farms in south-central Alabama’s Dallas County.

“I don’t play too much with the markets. There are certainly different options available, but I usually just go with a set contract price. I might not always get the best price possible, but the name of the game is to cover your costs.

“A farmer wears a lot of hats, and you have to make the best use of your time. You have to be aware of the markets. I was a little slow this year with contracts, but I like to get the most that I can. I like to spread it out a little bit – part of it in contracts and part of it cash sale,” he says.

Contracts aren’t looking as favorable this year as they were in 2013, says Yoder, and even though he realizes there’s a current imbalance in the peanut market, that’s not his primary consideration when deciding how many acres to plant.

“I don’t consider that as much as I do the rotation aspect. One crop complements another crop, and I try to look at the big picture rather than jumping from one crop to another based on the markets at the time. I stick pretty well to my established rotation. We use different chemistries with different crops, and that helps us to fight resistance.”

Many changes in six decades

Dinwiddie, Va., farmer and Upper Southeast Peanut Profitability Award winner Billy Bain has been through the peanut marketing wars and then some during his farming career.

Bain, who has grown and sold peanuts in parts of six decades, says changes in government programs have hurt peanut farmers in general, and Virginia peanut farmers more than most.

Bain started farming after graduating from high school and sold his peanuts through the federal government’s acreage program. “Basically, you sold your peanuts at 75 percent of parity. Prices rose along with parity. It was a good program for farmers and rarely cost the government any money,” he says.

In 1977, the quota system came into effect, he says. “Virginia-Carolina growers had a Grower Coalition at the time, and we had always worked in an informal market control system,” Bain says.  When the quota system came in, Virginia acreage dropped from 104,000 acres to 75,000 acres and stayed at that level for many years.

“We could make the quota system work in most years in Virginia. I remember in 1980, a bad drought year, the V-C Coalition put together a block of peanuts to sell above our quota and did real well in a year that put some peanut growers out of business,” Bain recalls.

“With the new system, Virginia growers haven’t been able to make it work economically. As a result, we have seen acreage drop to as low as 12,000 acres,” he notes.

 If there is a positive to come out of the new peanut marketing system, it has reduced acreage in some states enough to allow growers to get on a better rotation system and has helped to increase yield per acre across the Peanut Belt, the Virginia grower says.

“In Virginia, we are fortunate to have Dell Cotton, a long-time peanut marketing specialist and head of the Virginia Growers Association and our Peanut Growers Marketing Association. He is able to find niche markets and has been able to offer small acreage contracts to member growers that consistently beat the price we can get elsewhere,” Bain concludes.

Variety selection plays role

Variety selection is an integral part of the marketing strategy at I & J Farms in west Texas.

Brothers Isaac, John and George Guenther have grown peanuts on their own for seven years and have planted mostly Virginia-type peanuts during that time. The brothers share the 2014 Farm Press Peanut Profitability Award for the Southwest region.

“We have grown runners,” says George, “but we prefer Virginia peanuts because of price. We have gotten better contract offerings with the Virginia types.”

They don’t always take spring contracts and sometimes think they do better selling in the fall.

“It depends on what’s offered early,” John says.

They haven’t given up much on yield potential with Virginia peanuts. “We have made some good runner peanuts before,” George said, “but our highest yields have been from Gregory, a Virginia peanut.”

He says they have made more than 7,000 pounds per acre on some fields twice in the seven years they’ve been farming on their own. “Both of those yields were made with Gregory,” George said.

They averaged 6,680 pounds per acre on the 2013 crop, all Gregory, Virginia-type peanuts.

They also like the early maturing trait with Virginia peanuts. “We typically start digging in late September,” John said, “but that always depends on the weather.”

Earliness is an advantage for west Texas peanut farmers who often risk weather injury with late harvest. Temperatures often drop quickly in the Texas Panhandle and peanuts are vulnerable to freeze damage.

The Guenthers market their crop through South Point Peanuts in Seminole.

 

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