Kyle Dean, Host: Back here on this Monday morning on the Kyle Dean morning show. It's time for our UGA Tifton Farm Chat and joining me in studio is Nathan Smith. Nathan, good morning to you.
Nathan Smith, UGA Tifton Peanut Economist: Good morning Kyle.
Kyle Dean, Host: Good to have you here once again. It's your turn in our Market Monday series. We had Don Shurley on last Monday talking about cotton. You are here to talk about peanuts. And, what do we see? I understand that a report came out just recently.
Nathan Smith, UGA Tifton Peanut Economist: That's right, Kyle. Thursday was the USDA monthly reports on what we call the WASDE – World Supply And Demand Estimate. The bigger commodities like corn, soybeans and wheat are typically what folks are watching there. But, we will have new supply and demand estimates, too, for peanuts. The report didn't have too many surprises. It was, some say, a little bullish for corn, about neutral for soybeans and a little bit bearish for wheat. The main change there for corn and soybean was that world stocks were lowered a little bit because of what the market already knows is that South America is having a little bit of a production issue with La Nina; lowered their production estimates on corn which increases the potential for more exports for the U.S. So, not a lot of price response immediately after that. Peanut wise, demand is looking still good. The first 5 months of use is still showing an increase over last year’s.
Kyle Dean, Host: What are we seeing, before we move into the peanuts, here locally and domestically with corn and soybeans and the others?
Nathan Smith: UGA Tifton Peanut Economist: Corn, right now…we planted almost 92 million acres in the U. S. last year and expectation is we'll bump that another 2 or 3 million. So, that would indicate that we are going to increase production. Last 2 years on corn, yields have been below average, actually trended down. Georgia yields have trended up. We’ve set record yields the last 2 years. So, we've been kind of going the opposite on the yield side. But the thought is what's the chances of having a 3rd year in a row of having below average yields on corn for the U.S.? On the other hand, it's gotten dry up in northern Iowa and about all of Minnesota which are big corn producing states. The weather is going to play a big factor this year on where corn prices go. I still think they are going to be volatile, maybe not as high as last year. If you average $6.00, that might be pretty good for an average price in 2012.
Kyle Dean, Host: I know a lot of times we fail to mention those 2 commodities just because they are not as big as the peanuts and the cotton because they are so big in the mid-west.
Nathan Smith, UGA Tifton Peanut Economist: Yes. We are just an error term as far as production. I think I've said that before. What happens in Georgia on soybeans and corn doesn't really impact. It impacts our local market very much, but because we bring in 6 to 7 times more corn into the state than we actually produce. So, we are a big user of corn and soybeans, but not as big a producer. Soybeans, they didn't change anything as far as stocks on the carry over. But on the world side, they did lower stocks a little bit. So that bears watching. I think we have got little more negative news on soybeans in the near future, but right now that's kind of where we see it.
Kyle Dean, Host: One place where we are a huge producer, number 1 in the southeast, is peanuts. And, remind folks that are maybe new to the program or haven't heard that number in a while, how many acres that we produce annually?
Nathan Smith, UGA Tifton Peanut Economist: Yes. We probably, if you want to say, average over last 5 - 6 years, 550,000 acres maybe 575,000. You throw in two big years where we were over 670 and 750,000 acres in the state (Dean: Wow) We produce about 45% of the total acres and production in peanuts in the U.S., so, it is a big crop. And this past year, just to remind everybody, we were at the lowest acreage for these planted in 30 years, going back 3 decades and it's only happened, probably 3 times, it was that low in 100 years. So, we were down last year in peanut acres.
Kyle Dean, Host: Where we were down, and a lot of people fail to remember that upwards of 75% of the total acreage in Georgia is produced in just this little area right here in southwest Georgia, and where the market was down last year and where the acreage was down, the yields were actually high.
Nathan Smith: UGA Tifton Peanut Economist: That's right. We saw peanuts being the high value crop. A lot of them were under irrigation and the irrigated peanuts were just record yields and dry land not so good. But yes, it was this area and southwest corner, kind of the showcase of peanut production, I guess you would say. From a buying side, if you are not buying from this part of the country, you're not getting the best peanuts quality wise.
Kyle Dean, Host: Amen to that. We talk about the different things that go on with the weather that impacts the peanuts. What are we expecting this year and what can farmers expect as they move forward in 2012?
Nathan Smith, UGA Tifton Peanut Economist: Well, back a little more than a month ago, back in December, we were talking about possibilities $700 a ton peanuts and some contracts came out that offered $750 on half and maybe $750 on a quarter of last year’s production. A lot of different contract provisions that were out there. But now, a lot of talk after having $1000 peanuts last year that we are going to plant all the available acres in peanuts. I'm not so sure we'll do that. I think we probably need to slow down and look at what the net price is going to be on the contracts. Because the contracts weren't for all year production, they were on just part. If we do, let's say we bump acreage up about 1.4 million, 1.5 million and we have better than an average yield, we'll see prices like 2008. Where we had $380 a ton peanut and that will drop your average down to 550 - 575 a ton. So, I don't think farmers will over do it if they are looking at what their net price is right now.
Kyle Dean, Host: With those prices and with the extreme heat that we are expecting again this year, farmers really need to go ahead and start getting their crop insurance and those things in order.
Nathan Smith, UGA Tifton Peanut Economist: Yes. That is a good point. February, the end of February, February 28th is the deadline for signing up for crop insurance. And right now price discovery mode for your crops, other than peanuts and I think corn, is a little above $5.50 per bushel, soybeans is a little more than $12.00 per bushel projected price and cotton is at $0.94 projected price per pound. So, you compare that to $5.76 is what the price guarantee is on peanuts. And when we say price guarantee, folks probably think you're getting that price on all. With crop insurance, you’ve got a high deductible and most growers got a 25% - 30% deductible. So, they have to have a loss before it even starts to trigger on crop insurance or revenue insurance whichever one they choose. But, that can play a big role in your planting decisions as where prices are. What can I help insure against? A bad loss. That is one thing farmers don't have control over is weather (Dean: Yes.). And, we are in a really dry situation. I think that's the biggest worry on everybody’s mind. So, insurance is at the top of everybody’s thought process.
Kyle Dean, Host: Risky business, this farming. Nathan, it is good to have you here to talk about the different things in the economy. And, I know there are a lot of people that lean on your support and lean on the rest of your colleagues out there at UGA Tifton. We appreciate you dropping by.
Nathan Smith, UGA Tifton Peanut Economist: Thank you, Kyle.
Kyle Dean, Host: And, we will be back right after this on WTIF.