LUBBOCK, Texas - Peanut farmers, faced with uncertainty in the marketplace, will do well to spread their sales options to “be in a position to take advantage of price rallies,” says Marshall Lamb, economist with the USDA National Peanut lab in Dawson, Georgia.

Lamb, on hand in Lubbock recently for a marketing and production symposium sponsored by the Texas Cooperative Extension Service and the Texas Peanut Producers Board, recommended growers forward contract a portion of the 2004 crop, “spot price a portion across the scale at harvest, and use the loan for some production. Do everything possible to protect the counter-cyclical payment,” he said.

Lamb compared peanut marketing to a baseball game. “You don’t want to score 10 runs in the first inning and then give up the rest of your at-bats,” he said. “But you don’t want to wait for a last inning rally either. Look for a balanced attack.”

Lamb said four factors will affect peanut prices for the 2004 crop: prices for other commodities, price for peanuts, production estimates from Argentina and China, and market options.

“Corn prices have rallied this year. Recent rallies for soybeans pushed them above $7. Cotton had a recent drop.”

He said rallies for those crops help push up peanut prices. “Buyers will offer what’s necessary to assure they get the acreage to fill demand.”

Consumption is up, so buyers will be looking for peanuts. “It’s been a bullish market,” Lamb said. “Usage was up 13.7 percent in December compared to usual December figures. U.S. peanut usage for the 2003 market year, through five months, registered a 7 percent increase. That’s good news for the peanut industry.”

Lamb said the price increase offers a classic good news-bad news scenario. “For every dollar the national posted price goes up, the counter-cyclical payment goes down a dollar on base acreage.”

Lamb said a national posted price of 19.5 cents a pound equals $390 per ton and a counter cyclical payment of $69 per ton.

Lack of a futures market hamstrings peanut farmers to some extent. “Farmers need to own some of their peanuts when prices go up so they can take advantage of the rallies.”

Lamb said decreased production from competitors will stimulate prices. Argentine and China have small crops. China’s production is off some 2 million tons, about what the United States grows. “China currently needs to import peanuts and Europeans are moving back into the market for U.S. peanuts.”

He said Argentina’s crop is also smaller than usual. “And they have some quality problems.”

He said peanut production provides farmers a potentially profitable enterprise option for 2004 but urged growers to consider all their sales options carefully. “It’s too early to predict what the market factors will do to peanut prices, so growers need to devise a balanced sales strategy.”

e-mail: rsmith@primediabusiness.com