Peanut shipments seem to have slowed during the month, as we think price increases announced by many peanut manufacturers have allowed early orders from their customers, and an eventual slow-down of product movement. Many industry pros think industry consumption numbers will slow some, but will not show up until later.

The Southeast growing region continues to build back water reservoirs during the winter months. They had their third consecutive month of 5 inches or more of rain. However, some weather specialists still predict a warmer, drier Spring starting during the month of March.

The biggest talk over the past month has been "What will peanut acreage be for 2008 crop?" Recent commodity prices have seen Wheat increase to over $24 per bushel for a few days once limits were removed. We have seen Corn just short of $6 per bushel for new crop, Soybeans at just less than $15, and now even more critical, have just seen Cotton reach almost $1 per pound.

Peanut professionals reported last week that they had canvassed the specialists in all peanut states for their expected ranges of increased peanut acres, and we could expect 17.6 % maximum increase. However, this was using the specialists' highest number in their range for their state, and was prior to the commodity markets latest flurry. At the same time, Tyron Spearman, a respected Peanut analysist, reported in a recent industry newsletter that the current number of peanut producers is still declining in our country.

Peanut Corp does not think that we should question the "extra" acres of peanuts as the number of peanut producers continues to dwindle. They also think we will continue to "be alarmed" as other commodity prices increase, especially in relation to peanuts, and we will wrestle with this question right up until planting.

Growers today are way more versatile, and can be more diversified than many businesses. They are also required to be better businessmen than earlier years, and most are in it for the long haul. They will plant what makes sense, and they will normally plant some regular percentage of their farms with crop rotation demands in mind.

We think our South East peanut grower will plant a reasonable amount of peanuts in his mix. However, with cotton in the $.94-$.98 per pound range, many growers will put their "extra" acres in cotton. We believe this "extra" part can only be 15-25% of his acreage normally, that he can afford to sway from his regular rotation plans. And the grower's equipment and labor requirements have some affect on his decision, as well.

The real problem comes with peanuts, in that we think we all felt like our largest acreage increase might come from the SW. However, high cotton prices will also affect this peanut growing region, and maybe even more drastically than the SE.

The shelled market is too quiet to try to publish prices that we know to be true at this time. And we suspect that most shellers and buyers are too concerned about peanut acres for 2008 crop to talk much prior to peanut planting time is over. I will say though that we continue to see strength in many export markets.

The peanut market continues to be an unstable market. One thing for sure is that the Major Shellers are not going to let this market slide backwards and in fact continue to be buyers from smaller Shellers and currently are completely off the selling market ...again....

Briefly, the crop conditions (moisture wise) improved dramatically in the SE and the V/C areas. However, it is too soon to tell if the rainfall had a negative effect on the quantity and quality. Most acres dug and which took the brunt of the rain are just now coming in to the buying points. Other fields that had not been dug are in the early stages of field drying and combining. This should be a big week as far as digging and combining go as weather forecasters predict clear weather through the start of next week. The only possible trouble would be from the Tropical Storm Noel but predictions are for it to move out into the Atlantic. As of today the FSIS is reporting around 1.1 million tons delivered. The crop estimate is showing 1.7 million tons so there is still tonnage to go.

As for the S & P Report, the numbers are as follows:

Peanut Candy - Up 1.5% from previous month; Down 16.1% from same month last year; Down 17.7% for the year
Snack Peanuts- Down 5.7% from previous month; down 7.9% from same month last year; Down 2% for the year
Peanut Butter - Down 14.4% from the previous month; Down 9.3% from same month last year; Down 9.8% for the year
In Shell - Down 14.2% from the previous month; Down 20.1% from same month last year;; Down 10.5% for the year

Total - Down 10.8% from the previous month; Down 10.8% from the same month last year; Down 10% for the year

We believe this is yet another indication of higher prices coming into play or not being able to obtain peanuts on a timely basis. Probably a combination of both.

The peanut market has been at a stand still. The only difference between today’s market and the market of 2 months ago is that the supply is getting tighter and tighter, thus prices are increasing rapidly. It is no longer a matter of where the market is but now a matter of what one wants and what one can get.

Argentina still has some 2007 crop, but most probably up to 80% of the crop has been sold. Argentine shellers have not been offering any goods for quite some time. China did not have the bumper crop that everybody was expecting. Quality of the early peanuts is not good. Chinese exporters are worried about exporting to Europe because of tight export controls by CIQ. Prices on the Chinese domestic market have risen sharply. The US crop definitely seems better than once predicted but it is still a small crop that might be just sufficient to supply the US domestic demand and part of the export demand. Not only will there not be any carryover next year, but the market could end up short by midyear next year.

The market will not come down for the next year as there is barely enough supply for the demand. Prices can only go up. Not only are energy prices going up, but freight rates are going up. And if this was not enough, other competing crops’ prices are going up and they are at all time highs making it difficult to entice farmers in all major peanut producing countries to plant peanuts. History has shown that high prices mean dramatic increase in plantings, but because of the high prices on other crops, one can expect probably at best an increase of 10, maybe 15% on peanuts in the USA and Argentina. Plantings could easily be exactly what they were the previous year. Whatever increase Argentina and the US have, it will only cover the demand. It is very unlikely that stocks will be replenished. This means that prices will most probably remain firm for quite a while. It is unlikely that the market will see any relief in the prices for the next 12 to 18 months. After that, provided all major producing origins have bumper crops, prices could come down some. Don’t expect a big drop in prices. The other side of the coin is not to forget potential crop problems that obviously would be disastrous considering the lack of safety stocks anywhere in the world.

The Peanut Stocks and Processing numbers are as follows:

Peanut Candy - Down 9.4% compared to July 2006; Down only .8% for the year
Snack Peanuts - Down 17.1% compared to July 2006; Down 8.6% for the year
Peanut Butter - Down 8.2% compared to July 2006; Up 2% for the year
Inshell Peanuts - Up 17.8% compared to July 2006; Up 15.6% for the year
Total - Down 10.7% compared to July 2006; Down 1.4% for the year

The past month has shown a continued trend to rising prices so it is not surprising to see most categories down for the month. Peanut supplies became tight as shellers pulled off the market to ensure they could cover sales. There was an absence of any farmer stock contracting as the weather got drier and drier. Most of the month was spent with extreme heat and humidity in the SE and V/C areas with very little rain. Manufacturers needed peanuts but could get only limited supplies.

The cold storage report came out recently but only reflected a reduction of 7 million pounds. There was actually a 14 million reduction in the V/C and SE but a 7 million increase in the SW netting only a 7 million reduction. It appears there are enough peanuts to get the industry into the new crop but the question is whose hands are they in.

As for the weekly crop conditions, the most recent report reflected slightly worse conditions in the SE and the SW but an improvement in the V/C. However next weeks report should reflect a drastic improvement in both the SE and V/C areas with good rainfall reported falling in those areas.

While we did not get the general rainfall most were expecting over the Labor Day weekend, there were rain showers in the Southeast. More importantly, there were cooler temperatures and mostly cloud cover that gave a feeling of relief. New Crop Harvest is underway and although there has been very little harvested, the general feeling is what has come in looks good. What will really be the determining factor is if they can have a warm fall with plenty of rainfall to help the dryland acres that started so poorly. If that occurs they should have a very decent crop. The next concern will be the quality of the crop.

Rainfall seems to be drawn like a magnet this year to the Southwest. They could set records on yields if the sunshine returns.

In the V/C areas, everything is pointing to a good harvest. They have been a little shy on the rainfall but seem to get it just when they need it.

The industry enters this year (August) with 326,000 less Farmers Stock Tons available than last year. If the last crop estimate proves accurate then they will have another 27,000 fewer tons produced. Quality will be the key. If quality proves good, we should be able to make it to the 2008 crop. Prices will remain firm and may hurt consumption but we will have enough peanuts. Next year (2008) will be where we will need to get more acres planted, but the determining factor for that will be winter wheat, corn and beans. Prices still look good for those commodities so it looks like we are entering a period of much firmer prices for peanuts

Peanut Production is forecast at 3.37 billion, down 3 percent from last year’s crop and down 31 percent from 2005. Area for harvest is expected to total 1.16 million acres, unchanged from June but down 4 percent from 2006. Yields are expected to average 2,909 pounds per acre, 35 pounds per acre above last year. Planted acres, at 1.19 million, are unchanged from the June estimate but 5 percent below 2006.

Specifically by area, production in the Southeast States (Alabama, Florida, Georgia, Mississippi, and South Carolina) is facing extreme drought conditions throughout most of the States.   Virginia-North Carolina production is forecast up 9 percent from last year’s crop.  Southwest peanut production (New Mexico, Oklahoma, and Texas) is up 18 percent from 2006.

Peanuts historically moved pennies from crop year to crop year. This year we have seen it move dimes and quarters. This is happening for multiple reasons. Firstly the country has ethanol expansion which convinced farmers to plant more corn acres on good, irrigated peanut land and we put more peanut land into dryland acres. Then the industry decreased peanut plantings to plant more corn and cotton and now, they have delayed planting their dryland acres hoping for enough rain to soften soil and allow balance of crop plantings. Then the end of May came and farmers had to plant in order to qualify for crop insurance....and still no rain. A further worry is that some farmers will plant strictly for insurance only and thus instead of planting 160LBS of seed per acre may plant just 50 or 60 LBS and decrease input costs in order to limit expenses and not throw good money after bad. Obviously this would severely cut dryland acre yields and even if the rains do come later, yields are adversely affected in the SE. Wow, what a mess.

Condition of the USA crop is mixed. SW and V-C is OK, but the SE is the real problem. The drought conditions in Georgia are the worst in 50 years. Of 159 counties in the state, last week 74 were rated in extreme drought and 79 in severe drought. The irrigated crop in the SE is planted and getting at least 13$ per acre costings of water every week and concerns are that irrigation ponds are being drained and they still have all Summer to water. Farmers are not interested in contracting 2007 crop with the sheller so the market is at a standstill with no sellers.

Lets look at numbers and make a very conservative estimate.....................if we look at dryland acres in Ga (65%), Fla (70%) and Ala (95%) and calculate vs. planted acres 2007 crop estimate in these states we are at 780,000 planted with 553,000 dry and 227,000 irrigated. Plug in 2006 yield on irrigated acres for these 3 states (2874LBS per acre) and lets just conservatively deduct 25% yields on dryland this year a number can be calculated of 922,198,075 tons short tons produced. Add balance of States at 2007 projected acres and last year yield comes to 528,816 for total USA crop of 1.451 short tons vs. 1.737 last year (decrease of 16.5% from last years crop which was the smallest since 1930.) Now you see why the industry has no. Don’t forget seed needs, the USA needs 1.7 just for domestic usage, so that leaves nothing for Europe to buy and possibly opens up the USA to imports from other origins.

We are in a new era in World supply vs. demand for peanuts. In 2 years we have gone from surplus to deficit for world needs. Argentina will supply Europe because the USA cannot and China will grow a huge crop, but use most of it internally. Most in the industry look for firm markets to continue for at least 18 months or more.

A cold front swept across the Southeast Wednesday, May 16, but again the front died out before it reached peanut country in Georgia and Florida and now weather forecast say it could be a week before rains return. Meanwhile irrigated farmers have to irrigate with higher priced fuel to get the seed to germinate. Officials met today with Federal Crop Insurance Companies about the drought. Peanuts and cotton have a planting deadline of May 31, two weeks away. Farmers could get paid under the preventative-planting clause; however, officials said today that if any grower plants in the area, the preventative-planting clause is no longer a valid excuse. Irrigated peanuts are not eligible for preventative planting. Some farmers are considering dusting in the seed just before the deadline to keep crop insurance coverage. Some indicate they may use lower priced seed, No mention of extending the deadline so far. More info to follow.

U.S. peanut producers, responding this year to warnings of an over-supply, dropped production by almost a third, down to 3.37 billion pounds harvested from 1.21 million acres. This is down 31 percent from the 2005 crop.

The national average yield is forecast at 2,780 pounds per acre, down 209 pounds from last year’s peanut crop. Much of the yield drop is being blamed on drought conditions experienced throughout the U.S. Peanut Belt this year.

Production in the Southeast states, including Alabama, Florida, Georgia, Mississippi and South Carolina, is expected to total 2.36 billion pounds, down 30 percent from last year’s level. Expected acreage for harvest, at 924,000, is down 23 percent from 2005. Yields in the region are expected to average 2,550 pounds per acre or 258 pounds below 2005.

In Virginia-North Carolina, peanut production is forecast at 339 million pounds, down 4 percent from 2005. Expected acreage for harvest, at 101,000, is down 14 percent from last year. Yield is forecast at 3,352 pounds per acre, up 352 pounds from 2005.

The weather continues hot and dry in the SE and SW. Certified acres on the 2006 crop were reported down 29.1% vs. 2005. This combined with the fact that shellers are, at best 50% covered with priced farmer stock for the 2006 crop has heated the market. Shellers in an effort to hedge their 2006 position have decided to redeem all the good quality 2005 crop. (no big forfeitures for the SEAM to sell, cheap) Shellers got active in the market buying 2005 shelled goods. There are three main reasons for the concern on peanuts and in particular; Jumbos; 1) The stressed and immature crop will likely yield less Jumbos, 2) The reduced acres in Virginia type peanuts will likely increase demand for Jumbos, 3) Carry-in on Jumbos is tight. The Repayment Rate has worked its way up to $342.43/ton

The rate of redemption from the loan has increased. As of Aug 1, 2006, there are 464,279 tons in the Loan.

Certified acres have been reported at 1,175,500 down 29.1% vs. 2005 crop. This is down from the June 30 estimate of 1,298,000. This is the smallest acreage since 1915. Weather continues hot and dry in the SE and SW. In the process of correcting rotation problems, 60% of the peanuts in GA are not irrigated.

Alabama has already declared 49 counties natural disasters (drought and heat). This qualifies farmers for emergency loans. There are reports of cotton and peanuts being plowed under, after insurance claims were approved. Note: we know the certified “planted” acres, but how many will be “harvested”?

John Beasley, UGA, reported at the National Buying Point Meeting (8/2) that the rain patterns were tracking almost identical to 1986. In 1986 the average yield was 2450 lbs / ac. in GA and 2408 lbs/ac for the US. In 1986 there was no W. Tx. Peanut growing area. Let’s say they average 2500 lbs /ac. This would produce 1,469,375 tons. It all depends on the rains in Aug and early Sep. For the record, the Jumbo yield was 231 lbs/ton.

In the last few days, all the shellers have pulled off of the market for Jan ’07 forward, 2006 crop sales. They are uncertain of supply, quality and the price they will have to pay for the balance of the farmer stock they will need. Other than that, every thing is great.

Today, 2006 crop Jan forward, it would take $.43 JR, $.41 MR, $.40 R/S and $.38 #1’s for anyone to even listen. It is not believed that they would sell and buyers seem to be willing to wait at these levels. No offers on Virginia type peanuts.

For the 2007 Crop they are scheduled to loose the storage and handling payments. This is worth 3-cents per lb. on the shelled peanuts. There is still a possibility that this funding could be restored. For planning purposes, plan on a 3-cent/lb. increase in cost starting Jan ’08. More should be known by the end of the summer.

It looks like prices will most likely be higher for the 2007 Crop. Here are the main reasons:
- Reduced carry-in from the 2006 crop
- Farmers will demand higher premiums to plant ($25 +/ton). This is due to fuel cost, other input cost and losses incurred in the 2006 crop, due to poor yields.
- World demand continues strong.

In conclusion, lets hope for some rain. August is a critical month for putting on peanuts. Fill-in for 2006 crop could be expensive. We will monitor the crop and will know more in the next 30 days. It will be a good idea to be prepared with your needs if peanuts become available.

Over the passed few weeks, we have seen the major peanut market factors continue to firm. This market and indicators are moving in the BULL direction. Planted Acres down, maybe 30%. Why are 2006 acres down from 2005 crop?

1) Yields on cotton were much better than peanuts for the 2005 crop. Farmers assume that same factor for 2006 crop
2) Shellers had Spring Buying point meetings and discussed the large surplus of peanuts, talked about lower contract prices and the possible problem of warehouse space in the Fall. No warehouse space, no Loan.
3) Contracts were $10 per ton premium in the SE and SW only on the first ton per acre. Last year, SE had premiums of $20/ton and the SW had premiums of $40/ton.
4) Very dry during planting time. Many acres of dry land peanuts were not planted due to lack of moisture.
5) Concern for water supply, in the SW. Peanuts need about 28 inches of water and cotton needs about 19 inches. This is also a factor for the SE when fuel prices are so high.
6) Some of the land was out of proper rotation. Farmers made the decision to get land back into proper rotation, this year.

The following is our Market Report on the Peanut Market and the 2006 Crop estimate.

There are two spreadsheets on the 2006 Crop. Click on the links below . . .

Sheet One uses the NASS Planted Acre estimate and the same yield as last year. This has already been adjusted for the reduction in acres in Texas. This shows a Crop Estimate of 2,024,077 Farmer Stock Tons. This would be plenty of peanuts considering we will have about 800,000 tons of carry-in from 2005.

Sheet Two is adjusted for the possible further reduction in Acres in TX. Some have said it could be as much as 40%. The spreadsheet projects 38% reduction is TX and 20% reduction in GA and 24% in OK. This is due to low contract offers, dry weather and the shift to cotton. The reduction in GA is due to lack of contracts and getting the land back into proper rotation. The sheet also calculates about a 10% reduction in yields from the 2005 crop (which was excellent). The yield reduction is due to forecast of drought conditions through the growing season. This shows an estimated crop of 1,772,155 tons. This would be slightly below demand of 1,800,000 tons, but when you add in the 800,000 tons of carry-in there would be enough peanuts.

The carry-out from 2006 crop will depend on Export sales. Argentina is in the beginning of harvest and had some freezing temperatures last week. At a minimum, it will firm Argentina offers and if the US prices will come down 2 to 3 – cents/lb, we will see some sales into Europe.

Today, in Current Crop, there are two current crop markets; The first where Shellers that have inventory to sell (in cold storage or not balanced) The second where Shellers that must redeem to sell.

As the surplus is reduced, the current market will move to the higher levels (up about 2-cents). Therefore, if you see needs for May thru Dec. (2005 Crop) it may be a good time to fill-in. Now, it is possible that the repayment rate can come down and create lower prices, but it would have to drop $26 per ton, for a shellers to offer for less.

Today, for the NEW 2006 Crop (Jan – Sep or Dec ’07) Raw Med Runners are indicated at $.3450/lb. and Raw Jumbo Runners at $.36/lb. Tight spec may be ½-cent per pound higher. The rain this weekend in AL and GA will help ease the planting worries and we will again see a lot of planting this week.

The market for peanuts has firmed over the last 45 days. This has been caused by:

1) Sell-off of 2004 crop, where most of this tonnage is being shipped against 2005 Crop contracts with
    2004 crop options.
2) USDA increasing the Repayment rate from $330/ton on 9/13/05 to $343/ton. (most believe that this
    will go to $355/ton)
3) Reduced estimates of the 2005 crop to 2.459 mil tons. The general thought is that the actual
    harvest will be close to 2.2 mil tons.

Most shellers have cleaned up their 2004-shelled inventory. Some will be crushed for oil with the majority to ship against 2005 contracts.

2005 Crop

2005 Crop peanut pricing has firmed, as the 2004 crop is cleaning-up. This again is due to the increase in the Repayment Rate, reduction of the 2004 crop inventories and reduction of the 2005 crop estimate.

The harvest is in high gear with the South East 80% complete, Virginia/Carolinas 65% and South West approaching 50%. SE Growers are disappointed with the yields, which are off as much as 20%. They are also seeing some aflatoxin in the SE. Only a few acres were treated with Aflaguard, but it looks like this will be a good crop of peanuts to evaluate. Aflatoxin looks good in the SW.

2006 Crop

Yes, 2006 Crop. Talks have been going on with farmers and buying points about 2006 planting intensions. It looks like they could loose much of the increase in acres they got in 2005. Main reasons:

Production is forecast at 4.20 billion pounds, up 2 percent from last month and up 1 percent from 2003.   The area for harvest is expected to total 1.39 million acres, unchanged from October but up 6 percent from last year.  Yields are expected to average 3,027 pounds per acre, up 55 pounds from October but down 132 pounds from 2003.

Production in the Southeast States (Alabama, Florida, Georgia, and South Carolina) is expected to total 2.83 billion pounds, up 2 percent from October and up 2 percent from last year.  Expected area for harvest, at 968,000 acres, is unchanged from October but up 13 percent from 2003.  Yields in the 4-State region are expected to average 2,920 pounds per acre, 68 pounds above October but 318 pounds below last year.  Yield prospects rebounded from last month after producers were able to fully evaluate the effects of heavy rainfall received from September hurricanes.  A record high yield of 3,400 pounds per acre is forecast in South Carolina.  As of October 31, peanut harvest was 2 percentage points behind the 5-year average in Alabama and Florida at 87 and 94 percent complete, respectively.  Georgia peanut harvest, at 85 percent complete, lagged the 5-year average by 5 percentage points.

Virginia-North Carolina production is forecast at 459 million pounds, up 6 percent from October and up 11 percent from 2003.  Area for harvest is expected to total 137,000 acres, unchanged from October but up 3 percent from last year.  Yield is forecast at 3,353 pounds per acre, up 176 pounds from October and up 227 pounds per acre from last year.  The yields in Virginia and North Carolina are forecast at record highs of 3,200 and 3,400 pounds per acre, respectively.  Virginia's peanut harvest, at 98 percent complete, exceeded the 5-year average by 3 percentage points.  North Carolina's harvest, at 95 percent complete, exceeded the 5-year average by 16 points on October 31.

Southwest peanut production (New Mexico, Oklahoma, and Texas) is expected to total 916 million pounds, down 1 percent from October and down 4 percent from 2003.  The region's area for harvest, at 283,000 acres, is unchanged from last month but down 12 percent from 2003.   Yields are expected to average 3,236 pounds per acre across the region, down 47 pounds per acre from October but up 274 pounds per acre from 2003.  The Oklahoma yield, at 3,250 pound per acres, is forecast at a record high level.  Oklahoma harvest, at 76 percent complete, lagged the 5-year average by 3 points, while Texas harvest, at 39 percent complete, lagged the 5-year average by 10 percentage points at the end of October.

The peanut harvest remained behind the normal pace throughout the month, reaching 77 percent complete by month's end, 4 points behind last year and the average.  Harvest was nearly complete in the middle Atlantic Coast States, at 98 percent in Virginia and 95 percent in North Carolina, with both States ahead of the normal pace.  However, progress trailed behind normal elsewhere.  Even though Texas growers began the month 3 points ahead of their normal pace, persistent rainfall in the peanut-producing area of the State slowed harvest which caused progress to lag 10 points behind normal by the end of the month.