Peanuts may be risky in 2009

By the end of March peanut farmers in the Southeast are usually sitting on go, contracts in hand and looking forward to the challenge of producing a good crop. In 2009, they were sitting on wait, hoping things would change — quickly.

Contracts for $485 were offered in Virginia in mid-March, but were taken off the table. Whether these limited contracts were filled or removed because of a lack of takers is uncertain. Instead of going higher, the second round of contracts were for $440-450. Needless to say that didn’t excite many growers either.

In South Carolina, the same $440-$450 contracts were offered on a limited basis, but again few farmers were quick to jump at the offer. Farmers simply can’t wait much longer to make planting decisions in the upper Southeast. In the largest peanut producing state, Georgia, some of the planting decision deadlines have come and gone and some acres designated for peanuts have already been planted to corn.

South Carolina grower Dean Elmore says the land he had planned for peanuts may go into cotton. “We had planned to not plant any cotton this year, but we have some of our best land set aside for peanuts and we can’t let it sit there,” he says.

Elmore, who farms with his father near Bishopville, S.C., is already planting corn. Increasing dryland corn acreage, he says, is not a real good option. Soybeans are an option, but that interferes with future peanut rotations.

Surry, Va., grower Steven Pittman has an even bigger dilemma with the delay in peanut contracts. The Virginia grower bales all his peanut hay and feeds the highly nutritious hay to cattle in his brood cow operation.

Not only does he have to figure out what he will plant to replace the high value peanut crop, he also has to come up with a substitute for the highly nutritious peanut hay used to feed his cattle.

He plans to replace about half his peanut acreage with spring oats and is rolling the dice on the remainder of his peanut acreage in hopes peanut prices will go up due to a shortage of peanuts.

Capron, Va., grower Lewis Everett is in a similar position to a number of North Carolina-Virginia growers in deciding whether to wait for a peanut contract or shift peanut acreage into cotton. “Cotton prices are not good right now, but for us to grow peanuts, we need a contract that starts with a ‘5’ in front,” he says.

Long-time peanut analyst Tyron Spearman says a number of factors have come together at exactly the wrong time to create a bad situation for the entire peanut industry. Too many peanuts is the big problem, but that problem is compounded by a number of other factors.

The economic recession worldwide has caused people in most industries to cut back — agriculture is not an exception. Getting financing for buying large quantities of peanuts is a problem these days, he says. And, the increase in the value of the U.S. dollar has slowed peanut exports to a trickle.

Spearman says the over-supply problem would be solved if U.S. peanut producers reduced acreage by 30 percent or so to bring production to around 1,800,000 tons.

Lynchburg, S.C., grower Britt Rowe says he may opt to sit on the sidelines and watch peanut production this year. Rowe who has won the South Carolina Peanut Growers Yield Championship and consistently produces high peanut yields, says he just can’t make it work economically with the contract prices that are being offered.

“At $90 above the loan price for Virginia type peanuts and $40 above loan value for runners, it’s going to be hard to generate a lot of interest in growing peanuts,” Rowe says.

As President of the South Carolina Peanut Growers Association, Rowe talks to a number of growers. He says some farmers in the state have taken the $445 per ton contracts, but not many. Most, he says are looking at other options — some not so traditional.

The South Carolina grower is planning to put some of his land in corn and may increase grain sorghum acreage. He says soybeans make some economic sense, but grain sorghum is a much better option for future peanut rotations.

How much impact reductions in peanut acreage have on cotton acreage remains to be seen. Growers can wait longer to plant cotton than corn or grain sorghum, but it appears bigger peanut contract prices aren’t going to be issued.

Long-time Virginia/North Carolina Crop Consultant Wendell Cooper says a number of his clients face a low or no contract peanuts versus low cotton price dilemma. Cotton, he says, for most will be the best option.

Cooper says the problem isn’t so much that growers can’t make a profit with contracts under $500 per ton. If they can grow two tons per acre, they can come out all right, he says. The problem is they cannot properly insure their crop. Crop insurance doesn’t include variable costs for high intensity farmers.

“By comparison, soybeans are a much lower risk. If you have a decent yield in soybeans at $8.80 a bushel. You can insure that crop well past your variable cost — almost to the point of insuring the crop to profit,” he contends.

USDA estimates are projecting reduction in cotton acreage in 2009. Cooper contends cotton acreage is still hanging in the balance as of the end of March. He says the USDA cotton acreage estimate in Virginia is low.

“I think they are being too pessimistic for two primary reasons: First, several thousands acres are going to come out of peanuts — growers just can’t afford to invest in high input peanuts based on current contract prices.

“Secondly, if soybean prices go on a downward trend — much below $9 per bushel, I think you will see a fair amount of soybean acreage slide into cotton. Dryland corn is not a good option in Virginia, and most of it will be planted before final decisions are made on soybeans and cotton,” he contends.

Taking peanuts out of a three or four year rotation creates some real long-term problems for growers, and in many cases reduces their cropping options. Subtle changes, like last summer’s spike in fertilizer prices will have some impact on who will and who won’t grow peanuts in 2009.

A fair amount of the wheat planted in the upper Southeast will not be harvested in 2009 because fertilizer prices were too high and wheat prices were falling, so many farmers left the wheat as a cover crop, but didn’t apply needed fertilizer to get seed head development.

While this situation gave farmers the option of cutting the wheat early and planting corn or peanuts, it also gave them the option to wait and plant other crops. Planting crops that need the residual fertilizer from wheat becomes more risky because the residual is not there.

Across the region the attitude seems to be wait. Waiting to plant is typical in the spring, waiting to determine what to plant is not.

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TAGS: Peanuts
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