Researchers discuss peanut economics, marketing options

The sun may have made the beach sand too hot for bare feet outside, but inside the Edgewater Beach Resort, the air was comfortably cool for the recent Sixth Annual Southern Peanut Growers Conference in Panama City Beach. The “Economics and Marketing Options” session in particular drew a crowd of more than 70 growers, company representatives and researchers who settled in for refreshing ice water and sound marketing advice.

Nathan Smith, assistant professor of agriculture and applied economics at the University of Georgia, began the session with a look at trends in the production practices of top peanut producers in Georgia.

“Technology has provided farmers with a wide range of production alternatives,” Smith says. “Today, farmers use more of a systems approach to peanut farming.”

Smith’s overview of production practices included rotations, tillage, varieties, row patterns, fungicides, insecticides and herbicides, with data from the past 10 years.

“Results show that a rotation of peanuts following cotton has gained popularity, while corn has steadily gone down,” Smith says. “Also, one-year rotations have trended down, but the number of farms using four-year rotations is increasing.”

Strip-till usage is up more than 20 percent in 2003, Smith says. Georgia Green is still the most popular peanut variety, and the trend toward planting twin rows is increasing, he says.

Tim Hewitt, Extension economist and professor at the University of Florida, took the reins next with his presentation on cost management for peanut producers. “We’re looking for ways to reduce costs without sacrificing yields. We need to know what our inputs are and what our costs are.”

He says changing row patterns and tillage methods, such as planting twin-rows with conservation-tillage, may be a good way to increase yields while reducing labor and the risk of tomato-spotted wilt virus.

Hewitt says farmers also can reduce costs by utilizing a low-input pest management scheme. “We can reduce some pesticides and save money there,” Hewitt says.

The cost of land rent is also an economic concern, according to Hewitt. “We want to know if farmers are paying too much for land rent, and if they’re running the risk of not covering all costs.”

According to Hewitt’s model, a farmer will need to yield more than 2 tons per acre to cover land rent at $150 per acre to eliminate risks.

Hewitt says a sod-based rotation is another way farmers can increase their yields. “Bahia is the best rotation in terms of peanut yield. The increase in yields is economical, even if bahia is tough to sell,” he says.

Hewitt also says that having at least a four-year rotation would increase peanut and cotton yields substantially and increase revenue.

“Rotation studies and other research shows it’s important to reduce costs. There are ways to do that, but economic returns are the ultimate test of sustainability. Growers have to experiment to determine which situation is best in all these different types of schemes,” Hewitt says.

While Smith and Hewitt enlightened farmers on how to most efficiently grow their peanuts, Marshall Lamb, researcher with the USDA-ARS National Peanut Research Laboratory in Dawson, Ga., took listeners to the next level of peanut production: marketing.

“We need to know what the last two years under the new program told us so that we can position ourselves a little bit better. We’ve already put a lot of money into the 2004 crop, but we haven’t even started the 2004 marketing year yet.”

Lamb began with a look at how medium runner prices peaked in January and are now climbing again. “We’re seeing the same bullish prices that translated to offers for farmers. For farmers with peanuts in the loan that were not under obligation or option contract, offers started going up, and they were able to position themselves to take advantage of this.”

In 2002, farmers were able to make money by taking a marketing loan gain because the price stayed below the loan rate. The 2003-year was just the opposite, because the price never got below the loan rate, Lamb says.

Both strategies require possessing non-obligated peanuts during mid- to late-marketing season, Lamb says. “I’m not saying don’t forward contract, but don’t sell your whole crop before marketing season even starts.”

Other marketing options are available to farmers, such as the Georgia Florida Association (GFA) and the sheller pool option that allows farmers access to the sheller stock market. Lamb says to carefully consider the advantages and disadvantages of each before making a move.

He says one of the best advantages farmers have right now is the recent 9-percent increase in peanut demand. “We are selling and consuming more peanuts. Even the scan data at the grocery store reflects this trend. This is exactly the position we’ve been wanting to get in.”

The most important thing for farmers to remember is to take a balanced approach to marketing by spreading sales throughout the entire marketing year, Lamb says. “It’s a good way to spread your risks by spreading your sales.”

Rebecca Bearden is a senior at Auburn University majoring in agricultural communications. She is completing her internship with Southeast Farm Press.

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