Skip to Content

Marketing posts

Reported Peanut Acreage in Georgia: Implications from USDA Reports

Aug 14, 2019

by Adam N. Rabinowitz and Walter Scott Monfort

Click to download a PDF version of this publication.

The United States Department of Agriculture (USDA) National Agricultural Statistics Service (NASS) released their Crop Production report on August 12, 2019. Their report forecasts 2019 harvested acres in Georgia at 590,000, down from 650,000 in 2018. The basis for this forecast comes from the Crop Acreage report on June 28, 2019 and a survey of plantings and planting intentions from early June. The NASS reported 2019 Georgia acres are 600,000 for peanuts. If in fact, 600,000 acres of peanuts were planted in 2019 in Georgia, this would represent a 10% decline from 2018 when 665,000 acres were planted. While initial forecasts are prone to error and actual behavior may differ from plantings, the current NASS estimates are substantially lower than what is seen in other available data. This has substantial implications for expected marketing for farmers as there are likely more peanut acres in Georgia headed to market this harvest than what is currently forecast by the USDA NASS.

The USDA Farm Service Agency (FSA) also reports acreage data based on producer self-reporting for participation in government programs including the Price Loss Coverage, Marketing Assistance Loans and Market Facilitation Program (trade assistance). On August 12, 2019, FSA reported acreage data as of August 1, 2019. FSA reports 663,000 acres of peanuts in Georgia. Thus, one must ask which number is best representative of the current peanut situation.

To help answer this question, let’s take a look back at prior years. In June of 2018, NASS reported 700,000 planted acres of peanuts. The August 2018 report indicated a forecast of 690,000 harvested acres. At the same time, FSA reported 657,000 planted acres with their first release of data in August 2018. Subsequently, FSA reported the final acreage for peanuts in 2018 was 659,000. Meanwhile, NASS ended with a planted acreage of 665,000. This discrepancy is rather common as NASS will update their forecasts and FSA will not include producers who do not report acreage since they do not participate in the government programs. Therefore, one expects FSA reported acres to be lower than actual planted acres and NASS estimates to improve throughout the season. Based on this reasoning, which is commonly seen during prior years, FSA acres would be expected to be lower than NASS acres. In other words, FSA acres can also be thought of as a minimum number of acres that were actually planted during a given year.

So, for 2019, we are left with NASS reporting 600,000 planted acres and 590,000 harvested acres. While FSA is reporting 663,000 planted acres. It is highly likely that the FSA reported acreage is closer to reality and the NASS figures need to be revised upwards by more than 10%. If this holds true, we are looking at planted acres in 2019 that are very similar to the number planted in 2018. Furthermore, production estimates need to also consider about 63,000 additional acres of peanuts planted in Georgia. NASS has forecast yields for Georgia at 4,400 pounds per acre. We expect this may also be a little high at this time, although we will save the debate on yield forecasts for another time. If for now we assume the NASS yield estimates, then an additional 138,600 tons of peanuts should be expected to be available this fall. In other words, there would have been no change in production between 2018 and 2019 in Georgia. Given the continued high levels of peanut stocks, this is not going to help prices during the current growing season and any expectation of rising prices due to lower acreage in Georgia should be tempered.

References:

U.S. Department of Agriculture, National Agricultural Statistics Service, Crop Production, August 12, 2019.

U.S. Department of Agriculture, National Agricultural Statistics Service, Acreage, June 28, 2019.

U.S. Department of Agriculture, Farm Service Agency, Crop Acreage Data, August 12, 2019.

Dr. Rabinowitz is an Assistant Professor and Extension Economist in the Department of Agricultural and Applied Economics at the University of Georgia. Dr. Monfort is an Associate Professor and Extension Peanut Agronomist in the Crop and Soil Sciences Department at the University of Georgia.

Publication: Surviving the Farm Economy Downturn

Mar 16, 2018

by Levi Russell

A new publication entitled “Surviving the Farm Economy Downturn” is now available online free of charge. The publication provides a general farm economy outlook as well as discussions of topics such as risk reduction, cost control, alternative crops, livestock sales during drought, crop insurance, ARC and PLC payment forecasts, stress and suicide, and other issues. Please follow the link below to check out essays on these and other topics:

https://afpc.tamu.edu/extension/resources/downturn-book/

Reports: Beef Demand and Cattle Inventory

Feb 3, 2018

by Levi A. Russell

A couple of recently-released reports provide some interesting observations about the state of the beef industry and some good news for the long run as well.

Beef Demand

First, a few of my colleagues at Kansas State and Purdue Universities have written an extensive report on many drivers of beef demand. Below I reproduce the Executive Summary, but the rest of the report is also informative:

Several key findings are of elevated importance:

1. Over the past decade, the quantity of beef consumers purchase has become less sensitive tochanges in beef prices yet more sensitive to consumer incomes. This could be a result of record high retail beef prices in recent years that resulted in loyal beef consumers, who are less price sensitive, having the strongest presence in the market. As consumer incomes have grown, more consumers who might have been priced out of the beef market, have allocated some of that income growth to purchase beef again thus increasing beef demand response to growing income.

2. The relative impact of pork and chicken prices on beef demand is economically small relative to other factors. This does not imply individual beef, pork, and chicken products are not substitutes, rather the substitutability in aggregate is just not as strong as traditionally thought.

3. Print media and medical journal coverage of topics around beef changes notably over time in areas of focus and volume of coverage. Certain types of media coverage are found to affect meat demand, and an emerging area of negative impact focuses on climate change. Having an impactful presence in the media is immensely important as it shapes perceptions.

4. Some demographic trends are favorable for beef demand including anticipated growth of Hispanic and African-American populations within the U.S.

Cattle Inventory

On January 31, the 2018 cattle inventory report was published by the USDA. This report compares inventory levels on January 1, 2018 to those of January 1, 2017. This report is a great opportunity to see what is happening on the national scale for cow-calf producers and in the feedlots.

This year’s report tells a familiar story: slow herd expansion. Nationwide, the herd has been expanding since hitting a bottom in 2014. The previous several years saw a decline due in part to serious drought in the western U.S. Expansion in the herd overall was only 1%, significantly slower than the previous few years. This was expected, as we’ve seen slaughter rates for beef heifers and cows pick up significantly in the last couple of years. This year’s report showed a 4% reduction in the number of heifers currently held as beef cow replacements, indicating that during 2018 we will likely see very little to almost no growth in the herd. Finally, the calf crop increased 2% relative to last year and the number of cattle on feed increased 7%. This pre-report commentary provides additional context to the report.

As we continued to see slower herd growth and some bright spots for beef demand, I’m cautiously optimistic that we will be able to maintain profitable calf prices and stocker margins through 2018. If you have questions, please don’t hesitate to contact me at lrussell@uga.edu.

How big is this peanut crop?

Oct 19, 2017

by Adam N. Rabinowitz

The 2017 peanut harvest is well underway with over 70 percent of the Georgia crop dug and over 50 percent harvested.  While Hurricane Irma negatively impacted the cotton crop, there was no widespread negative impact on peanuts.  Both irrigated and dryland peanuts are looking good.

Peanut yields in Georgia and the rest of the peanut producing states will be up from last year with the big question being by how much and whether new records will be set.  USDA forecasts for the U.S. are for a yield of 4,257 pounds per acre with the GA yield at 4,700 pounds per acre, both of which would set new records.    With 1.9 million acres planted in the U.S. and 840 thousand acres planted in GA, this crop also has the potential to set a new record level of production.

A few questions have surfaced that are worth discussing as we wait for the harvest to be completed in the coming weeks.

  • Is there sufficient warehouse capacity to store the expected crop?
    As of mid-September there were 3.8 million tons of approved warehouse capacity in the U.S. with 1.9 million tons in GA.  At first look, this has the potential to create a shortage of warehouse space of about 118 thousand tons in the U.S. and about 12 thousand tons in GA.  However, expectations are that a worst case scenario would be a logistical issue and not a question of where to store these peanuts.  Coming into this harvest, warehouses have been basically empty and shellers are prepared to start moving the current crop through the system.  Combine that with a longer than typical planting season and the industry should have little problem in finding space for these peanuts.
  • What is the size of this crop going to do to market prices?
    This becomes a question of supply and demand.  Basic economics tells us that as the supply increases prices will be driven down.  There is little anyone can do to prevent the supply situation at this point, so one must look towards demand.  The industry needs to continue to look for opportunities to expand demand in order to maintain or increase prices.  We have seen domestic use of peanuts for food increase in recent years but there are few opportunities to impact consumer demand in a short period of time.  The greatest opportunity for finding a market for this crop is through increased exports.  Through August, total U.S. exports have been down compared to last year, and this is likely due to prices that increased late last year.  While it is likely that exports will pick up, there is little indication that it will be without a drop in price.  Right now the market is waiting to see how large this crop will be and that will determine how low the price will go to move this crop.  Even with exports forecast to increase from last year, the ending stock created by this crop is expected to reach the heights of 2012.  The industry needs to find a home for these peanuts as prices will be impacted until this surplus can be moved.

So the big question of course is whether the crop will meet these yield expectations.  We really won’t know until the harvest is complete but we can look at some of the historical USDA projections to get an idea of how accurate they have been in forecasting yields.

As can be seen in the figure above, the blue line represents the actual yield in GA and the orange line represents the October forecast yield released by the USDA.  This graph starts in 2006 which was when Georgia-06g was released.  This variety currently represents about 80 percent of the peanuts planted in GA.  We can see that every year, except the last two years, the USDA October forecast was less than the actual final yields.  Generally this would project a very favorable expectation on the USDA forecast model as typically underestimating yields.  There is further evidence of underestimating in 2012 when there was a big spike in yield such as is expected this year.  The two most recent years when the USDA overestimated yields were during a period of a downward trend from the peak.  It will be interesting to see what the final yield number is for 2017 and how that compares to the current forecast of 4,700 pounds per acre.  This is certainly a big spike in yield from our actual 2016 yield of 3,900 pounds per acre, but with no major crop and weather issues this year it might just be achievable.

Southern Outlook Conference Presentations Available

Oct 3, 2017

by Levi Russell

Last week in Atlanta Extension economists, lenders, and ag media met in Atlanta to discuss the market and policy outlook for agricultural commodities in the Southeast in the coming year. UGA economists presented the outlook for peanuts, timber, turfgrass, the green industry, cotton, poultry, and hogs. All presentations are available here. Feel free to contact us with questions about the presentations.

First Shipment of Beef to China

Jun 14, 2017

I’ve been getting a lot of questions lately about opportunities for the US beef industry in China. Given the way these deals can go, I was hesitant to put a lot of faith in the  possibility of re-opening this market (after 14 years). But today we received news that Greater Omaha Packing will be shipping beef to Shanghai starting today. This represents an opportunity for US beef producers; another source of demand is certainly welcome and could help boost our already-strong international trade numbers. However, there is

However, there is reason to be cautious: Chinese officials have placed a number of restrictions on imported beef. One of those restrictions is that the location of birth of each calf must be verified. While this practice is not mandated by the US government, it could become the norm if domestic and international consumers of US beef demand it. I still think it’s a long way off, but the fact that we are now shipping beef to China under this requirement is an important development in the broader conversation of traceability.

Now is a Good Time to Lock in Profits for Spring Calves

May 26, 2017

by Levi Russell

The recent run-up in wholesale beef prices has sent cash and futures prices through the roof in the past few weeks. This provides an opportunity for producers with spring-calving herds to lock in a profit. For instance, right now producers can buy a put option on the September feeder contract at a strike price of $135/CWT for $1,375. This is relatively cheap “insurance” since we’re likely to see calf prices fall again in the near future as wholesale beef drops back down or feedlot margins are squeezed.

Today’s cattle on feed report is a good example of bad news at the feedlot level affecting marketing prospects. So far today we’ve seen a significant drop in feeder futures due to the slow pace of marketing relative to placements in April. Now is a good time to lock in profit as we’ll probably continue to see some downward pressure on feeder prices in coming months.

For more information on hedging and options, check out the following publications.

Understanding and Using Cattle Basis in Managing Price Risk
Using Futures Markets to Manage Price Risk in Feeder Cattle Operations
Commodity Options as Price Insurance for Cattlemen