While reading your daily Ag news outlet of choice, you probably won’t see near as many stories about peanuts as you do about corn, soybeans, wheat, and cattle. Well don’t fret because you are about to get the down low on peanuts. Peanuts can be found throughout the U.S., but they are one of the most predominant crops found in the South. Now let’s talk about these beauties and all the fuss they are making!
For Those Wanting to Know About Peanuts:
First, and most importantly there is no such thing as a peanut tree!! Peanuts are legumes and grow under the ground. Georgia is the top producing peanut state in the country. There they are planted in Mid-May and harvested in Late October through Early November and sometimes later depending on the weather. Harvest consists of 2 parts – digging and thrashing/combining. The peanuts are dug (plant inverted) and laid on top of the ground for couple of days to dry, then they are thrashed/combined.
They are typically a part of a 2 or 3 year rotation plan. Heavy rains at harvest are exceptionally detrimental to peanuts due to them growing under the ground. If the vine rots they can’t be pulled/dug out of the ground. The typical yield for dry land peanuts is approximately 1.5-2 tons/acre and 2-3 tons irrigated. (This is for GA)
Now that you have some background, let’s talk about what all the fuss is about currently. Here in the South we have this term of the “Peanut Apocalypse” and you probably think how can a peanut cause an apocalypse? Well, you see the brilliant minds behind the 2014 Farm Bill started this mess. First, they set a reference price of $535/ton….want to know what price we are using in GA in projections? $370!! The national average marketing price will probably come in higher than that, some estimate $400. Therefore, ($535 (ref price) – $400 (NAMP) = $135) and further ($135 x 2 (yield) x 500 (acres) x 85% (cause the farm bill says so) = $114,750 PLC payment on 500 acres of peanut base.
It doesn’t stop there either! Peanuts have their own payment limit of $125,000…yep a separate limit just for peanuts. AND since cotton is no longer a covered commodity we got generic base AND GA has a lot of generic/old cotton base. All that added together gives farmers a lot of incentive to plant peanuts. A lot of farmers are restructuring their operation in order to qualify for multiple payment limits, because the payments are going to be so high some farmers are going to max out multiple payment limits!! This is what is giving us the apocalypse. Many peanut buying points are advising growers to not plant peanuts without a contract in fears they may not have anywhere to store them!
For Those Growing Peanuts:
If you are a current peanut grower the information above is probably not news to you. However; there are a few items I might can throw at you that you might not already know.
- The actual price (the price to use in your projections for the year) is likely to remain at around $370-$385 for the duration of the Farm Bill due to the possible “over production” as mentioned earlier. This is an estimate, as always you can’t take it as the gospel but it is the current thought.
- The National Average Marketing Price for the 2015 PLC payment (to be received in ~October 2016) is estimated at $400/ton by the University of Georgia. This would equate to a possible payment rate of $135/ton ($535 -$400) which after 85% (per formula) and 6.8% (sequestration if applicable) will equate to around $111/ton. In 2014 the payment was $95/ton and $75 after the reductions.
- Newest development/amendment to Farm Bill – Marketing Loan Gains (MLGs) and Loan Deficiency Payments (LDPs/Pop) are no longer subject to the payment limitations rule through the use of Commodity Certificates.
- If you do think you will “leave money on the table” because you have enough peanut or generic base to max out more than 1 payment limit, you might want to consider a General Partnership. In a GP each partner receives a separate limit…please talk this structuring over with your attorney and accountant!
So, everybody get ready to buy some peanut butter, because the peanut apocalypse is upon us! #peanutbutterjellytime
For even more information on peanuts check out the information found here on the University of Georgia’s website.
I must give credit to Ag Attorney Allen Olson for the term “peanut apocalypse” as I do believe he is the originator. His website found here.