Sky-High Peanut Prices a ‘Lucky Deal' for Arkansas Planters

by Kate Knable  on Monday, Nov. 19, 2012 12:00 am  

In 2010, peanut buyers courted Arkansas farmers as prospective peanut planters and then bought at steep prices all the peanuts Arkansans planted.

The following year, more Arkansans planted peanuts and their crops sold at prices “in reach of the highest they’d ever been,” Phillips County farmer Michael Taylor said. Prices sprang up to around $1,200 per ton in 2011, and farmers harvested roughly two tons per acre.

Travis Faske, who worked with peanuts in Texas and is now a plant pathologist with the University of Arkansas Cooperative Extension Service, said he had never seen such high peanut prices nationally.

“That was just a one time, lucky deal,” Taylor said.

Taylor was an eager participant, buying four used peanut harvesters at $50,000 a pop and nearly doubling his peanut acreage to 900 acres in 2012. The prices from 2011 already made the equipment purchases worthwhile, he said.

Peanut processors Birdsong Peanuts of Suffolk, Va., Golden Peanut Co. of Alpharetta, Ga., and Clint Williams Co. of Madill, Okla., got interested in Arkansas’ areas of sandy soil and contracted with farmers because growers in major peanut-producing states like Georgia and Texas were struggling to combat peanut diseases and water shortages.

At the time, the companies were scrambling to diversify their peanut sources, and they succeeded. Peanut acreage in Arkansas jumped from 2,000 in 2010 to about 18,000 acres this year, mainly in Randolph and Lawrence counties.

Meanwhile, crops improved in Georgia and Texas. A combination of higher yields and increased peanut acreage nationwide have pushed prices down enough that the Arkansas peanut honeymoon is waning.

Contract prices dropped to $750 per ton earlier this year, and companies only contracted to buy about half of Arkansas farmers’ crops, Taylor said, so the other half might sell within the next few weeks at just break-even prices. “Nobody expects it to be a great price,” he said.

And while $750 was still a good price, with up to a 45 percent profit, if the rest of the crop sells for $350, then peanuts will be comparable in net income to corn — but with more labor required for harvesting, Taylor said. Harvesting is a two-step process, requiring digging and threshing, he said.

And, unlike with corn and soybeans, farmers selling peanuts are reliant on only a handful of companies to set the prices, buy the crops and determine when they do both.

“It’s going to be just like any other crop. It’ll have its higher acreage and its lower acreage,” Taylor said. “The ‘new’ has worn off of it.”

Peanut Futures

That doesn’t mean, however, that peanuts are going away.

“I think they will compete well with cotton and rice,” said Jeremy Baltz, who owns Ag Headquarters Peanuts in Pocahontas (Randolph County). “And for our area, probably do better than soybeans and corn, on average.”

Further, two companies invested this year in constructing peanut-buying points, which are structures used for drying and storing peanuts.

“Establishing a buying point really says to the grower that they’re in it for the long haul,” said Faske, who works for the Cooperative Extension Service.

Baltz’s company built a 67,000-SF warehouse in Pocahontas for use by Clint Williams Co.,and Birdsong Peanuts constructed a peanut-buying point in Portia (Lawrence County).

“They’ll be in Arkansas long-term,” Baltz said of Clint Williams. “They are recovering short-term [in Texas]. They cannot irrigate as many peanuts in that area as Clint Williams needs to buy.”

Birdsong representatives declined to be interviewed for this story, but Lawrence County farmer Greg Gill said Birdsong’s new facility was a $10.4 million investment.

“I think Birdsong wouldn’t have spent over $10 million here if they didn’t see a good future here,” Gill said. “We hope that Birdsong puts in a shelling plant.”

Gill plans to increase his peanut acreage from 1,500 in 2012 to 2,500 in 2013.

“All markets are cyclical. They go up; they go down. Eventually, you have to find some middle ground somewhere,” Gill said. “When you farm, you have to be an optimist. I’m being an optimist. … If you farm, you’ve got to take a chance on something. One way or the other, you’re dependent on the market and the weather, regardless of which crop you choose to grow.”

Last year, when peanut prices were sky-high, L.J. Bryant, director of economic development for the Lawrence County Chamber of Commerce, thought the legume could make Lawrence County “the mini Stuttgart of Arkansas.” And he still thinks so.

Lawrence County leaders are talking with a peanut butter producer about relocating to the area, and they hope for continued expansion of the existing peanut operations, he said.

“Now that they’ve invested that kind of money, there’s no going back,” Bryant said of Birdsong. “All commodity prices are going to move around. … You don’t see folks making this investment for fun. They’re not making random business decisions where they won’t make money.”



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