Farmers and ranchers are “Price Takers, Not Price Makers,“
…meaning they invest everything into their crops and livestock, then take what the market offers them.
That can go one of two ways. They can be offered substantially less than their cost of production because there is too much supply/not enough demand for that particular commodity. OR … they can be offered substantially more than their cost of production because of a shortage in that particular commodity.
And more often than not, the movement from loss to profit can happen in the blink of an eye. Case in point:
A year ago the outlook for the 2016/17 peanut marketing year was anything but bright: There was a global glut of peanuts and contract offers to growers for 2016 were less-than-attractive at $365/ton. The forecast for 2017 contracts as recently as October were even worse. There were so many peanuts on the world market, an effort was underway to organize a plowdown of U.S. peanut acres just to get rid of some production.
But, surprise! “Everything turned in our favor — and it turned fast!,” according to Marshall Lamb, research director of the National Peanut Research Laboratory at Dawson, Ga.
The turnabout came because of unexpected weather setbacks in other key producing countries that resulted in China coming to the U.S. for peanuts that it otherwise would’ve bought from someone else. “These are the sorts of things we really can’t predict,” Lamb says.
Massive rains in Argentina rotted the crop in their fields. The rain kept falling, which kept Argentinian farmers from being able to prep their fields for the next peanut crop. Then South Africa’s crop was completely wiped out, and India didn’t get enough rain … which reduced their export supplies by 32%.
China … the world’s largest consumer of peanuts … had a crop loss as well, and needed more from the world market than they normally do. And U.S. growers were the only ones with the supply to satisfy. Exports of American grown peanuts to China in 2017 are forecast at levels that will represent more than a 2000% increase in exports to that country over 2015 levels.
And contract offers for available peanuts … today … are in the $500 range. An increase of 40% in just the last few months. Forecasters are sitting on the sidelines, not even trying to predict where the ceiling could be. What they do agree on … the climb in farm gate peanut values is not going to end anytime soon.
Living here in the peanut growing state of North Carolina we are accustomed to seeing peanuts growing in the fields. Did you know that in North Carolina, Georgia, Texas, Alabama, Florida, South Carolina, Mississippi, Virginia, Oklahoma, New Mexico, Arkansas, Louisiana, and Missouri … there are roughly 8000 commercial peanut growers?
Next time you grab that jar of peanut butter for your PB ‘Naner sandwich send up a little prayer for the farmers around you and all over this blessed country busting their hump growing food to feed us all!