The most common contracts that have been offered are about $30 per ton above the loan rate plus the shrink, which equals roughly $12.43 per ton at base grade.

“That would be $385. Is that a good price? It depends on where the shelled prices are. With this large crop, it’s probably better than what most thought it would be. But where is it going to go? Shelled mediums have been at about 45 cents per pound.”

Before growers saw the big yields with the 2012 crop, the thinking was that maybe 50 to 60 percent of the crop was contracted, says Smith.

“If it is 50 percent, that would be six months worth of peanuts. If they start taking delivery early on that first 50 percent, then it might be March or April before they need non-contracted peanuts.

“There might be some upside potential if you want to hold out your peanuts, but you may have to hold them for the duration of the loan — the nine-month period from when you put the peanuts into the loan.”

Considering the current situation, the expectation is that peanuts probably will stay at the current price for a while in terms of price for shelled peanuts, says Smith.

“Manufacturers would like to see prices pushed lower, but if there’s interest from China, the market probably will be around 45 cents per pound for a while.”

In the big production year of 2008, shelled prices were pushed down to 40 cents and then back up to 45 cents and the high 40s, with $375 to $400-per-ton peanuts, he says.

“This fits with what the market currently is doing. Later in that year, as the new crop came in, we hit a bull-run with cotton and that helped to bring up peanut prices, causing the supply to go down in 2010 and 2011.”

Smith says he feels as though this year is similar to 2009, in terms of prices and where planted acres might end up.

“Shellers and manufacturers will try to get acreage down to 1.2 or 1.1 million acres. With the amount of peanuts out there, will farmers be willing to forfeit into the loan?”

Exports should increase with lower prices and with the excellent quality of the 2012 crop, he adds.

“It really is a guess, but we might see $400-per-ton at the beginning on the first contracts. They’ll offer it for a little while on a certain amount of tons and then gauge the reaction from growers.”

The peanut market might go back to a pattern of seeing a better price at harvest, depending on how the season goes, says Smith.

Compared to other crops, he says, Extension enterprise budgets show that with $400-per-ton and a 4,500-pounds-per-acre irrigated peanut yield, income is still less than soybeans at $12 and 60-bushel yields, 1,200-pound cotton at 75 cents, and 200-bushel corn at $6.

“Corn looks the best, followed by soybeans and cotton. Prices will have to go higher to create more interest in peanuts this year.”


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