Peanut Economics and Education Program for Georgia

Georgia Peanut Commission Research Report Day

February 11, 2015

Project Objective

• Economics educational programming

– Analysis of cost of production and returns

– Market outlook and alternatives

– Policy education

Cost and Returns Analysis • Peanut Budgets updated annually

– Non-irrigated Peanut,

– Irrigated Peanut,

– Non-Irrigated Strip-Tillage Peanut and

– Irrigated Strip-Tillage Peanut

• Crop Comparison Tool

– Tool includes peanut price calculator and crop price comparisons to give equal returns.

• Machinery Cost Analyses at request from county agents.

Changes to 2015 Budgets

• Lower chemical and fuel costs ↓

• February update will show lower insurance cost due to lower projected price. $424/ton currently vs. $532/ton in 2014

SUMMARY OF SOUTH GEORGIA CROP ENTERPRISE ESTIMATES, 2015

By A.R. Smith, N.B. Smith and W.D. Shurley, UGA Extens ion Economists , Department of Agricultura l and Appl ied Economics

January 2015 Estimates

Conventional Tillage

EXPECTED YIELD per ACRE 4,700 lbs 3,400 lbs

EXPECTED SEASON AVG PRICE $400 /ton $400 /ton

GROSS RETURN per ACRE

VARIABLE COSTS per ACRE

TOTAL VARIABLE COSTS per ACRE

RETURN ABOVE VARIABLE COST per ACRE

TOTAL COST EXCL. LAND & MGT per ACRE

RETURN TO LAND AND MGT per ACRE

BREAKEVEN PRICE (Total Costs) $402 /ton $419 /ton

BREAKEVEN YIELD per ACRE 4,722 lbs 3,558 lbs

$712

-$4 -$32

$680$940

$130

$550

NON-IRRIGATEDIRRIGATED

Peanuts

$653

$287

$944

Peanuts

Does not include land rent, add $50 to $100 for Return to Management

Comparison of 2015 Estimated Net Returns, Georgia, Irrigated

Corn Cotton Grn Sorgh Peanuts Soybeans

Expected Yield 200 1,200 100 4,700 60

Expected Average Price1 $4.25 $0.70 $4.04 $386 $9.75

Crop Income $850 $840 $404 $906 $585

Variable Costs2 $662 $524 $349 $653 $294

Net Return Per Acre Above VC $188 $316 $54 $253 $291

Net Return per Acre Above VC & $185 Land Rent $3 $131 ($131) $68 $106

1/ Expected average price.

2/ Assumes Jan 2015 costs, Crop Comparison Tool, Department of Agricultural and Applied Economics, UGA

Comparison of 2015 Estimated Net Returns, Georgia, Non-Irrigated

Corn Cotton Grn Sorgh Peanuts Soybeans

Expected Yield 85 750 65 3,400 30

Expected Average Price1 $4.25 $0.70 $4.04 $386 $9.75

Crop Income $361 $525 $262 $656 $293

Variable Costs2 $313 $423 $349 $653 $294

Net Return Per Acre Above VC $48 $102 ($87) $3 ($1) Net Return Per Acre Above VC + $75 Land Rent ($27) $27 ($162) ($72) ($76) 1/ Expected average price.

2/ Assumes Jan 2015 costs, Crop Comparison Tool, Department of Agricultural and Applied Economics, University of Georgia

Covered Commodities Planted on Farms with Generic Base

• PLC for peanuts likely to trigger in 2015, resulting in roughly $100 per ton payment.

• ARC-County likely to trigger for corn, grain sorghum, soybeans and wheat.

• Estimated Average Maximum ARC-County payment in GA (using state yields):

–Corn $0.50, Soybeans $0.75, Wheat $0.40.

Comparison of 2015 Estimated Net Returns, Georgia, Non-Irrigated, Generic Base

Corn Cotton Grn Sorgh Peanuts Soybeans

Expected Yield 85 750 65 3,400 30

Expected Average Price1 $4.75 $0.70 $4.54 $475 $10.50

Crop Income $404 $525 $295 $808 $315

Variable Costs2 $313 $423 $349 $653 $294

Net Return Per Acre Above VC $91 $102 ($54) $155 $21 Net Return Per Acre Above VC + $75 Land Rent $16 $27 ($129) $80 ($54) 1/ Expected average price.

2/ Assumes Jan 2015 costs, Crop Comparison Tool, Department of Agricultural and Applied Economics, University of Georgia

Comparison of 2015 Estimated Net Returns, Georgia, Irrigated, Generic Base

Corn Cotton Grn Sorgh Peanuts Soybeans

Expected Yield 200 1,200 100 4,700 60

Expected Average Price1 $4.75 $0.70 $4.54 $475 $10.50

Crop Income $950 $840 $454 $1,116 $630

Variable Costs2 $662 $524 $349 $653 $294

Net Return Per Acre Above VC $288 $316 $105 $463 $336

Net Return per Acre Above VC & $185 Land Rent $103 $131 ($80) $278 $151

1/ Expected average price.

2/ Assumes Jan 2015 costs, Crop Comparison Tool, Department of Agricultural and Applied Economics, UGA

Don’t Overplant Peanuts

• Implications on rotation, hurt yield by shortening rotations.

• Overplant and drive price down leads to fewer acres to reach the payment limitation of $125,000.

• Risk of excessive program cost.

PLC Payment Rate $100 PLC Payment Rate $150

Payment Yield 3000 3500 4000 4500 Payment Yield 3000 3500 4000 4500

Payment $/Acre $150 $175 $200 $225 Payment $/Acre $225 $263 $300 $338

Acres to Reach Payment Limit 980 840 735 654

Acres to Reach Payment Limit 654 560 490 436

Peanut Market Outlook Presentations • 25 Local Meetings

• 24 Regional and Industry meetings • Ga Peanut Farm Show

• UGA Ag Forecast

• National Peanut Buying Points Association

• Ga Peanut Achievement Club

• Ga Peanut Tour Hot Topics

• Southern Extension Agricultural Outlook

• In-Service Trainings for County Agents – Farm Business Management Series

– Foundations Trainings for New Agents

– Peanut In-service Training for County Agents

– County Agent Field Day

– Farm Bill

Marketing Outlook • Local media outlets through county radio interviews and UGA

CAES news releases

• Peanut Perspective – Southeastern Peanut Farmer

• Ag Forecast

• Selig Center Economic Outlook – Terry College of Business

• Ag First

• Extension Southern Outlook Conference

• SE Farm Press

• WTIF Market Mondays

• 92.5 WZZK The Farm

Farm Bill Education • Feb 24 –Farm Bill and Peanuts Webinar with GPC (500)

• Feb 26, Nov 24-25, Dec 2-3, Dec 11 – County Agent Training

• Apr 4,7,8,10,11,14 - Regional Meetings – Base Reallocation and Yield Update decisions

– ARC PLC Program choice

– Generic Base

• Apr 24 - Southern Risk Management Education Center Webinar

• Sep 3 - Peanut Presentation at the National Farm Bill Extension Education Conference (150)

• Dec 12-19 - 10 Regional Meetings with FSA, RMA, GA Farm Bureau, Farm Credit (1,600)

• 25 county meetings (1,535)

Let’s Talk About Program Decisions 1. Yield Update is a no brainer… take advantage of this if you can

- 90% of the 2008 to 2012 yield/planted acre (Years where crop not planted don’t matter)

2. Base Reallocation – do you want to have your government safety net tied to current base or closer to what you are planting now? - weighted based on 2009 to 2012 covered crop plantings - operators with generic bases will have choices and plenty to do

3. ARC or PLC – Peanuts is pretty straight forward. PLC is projected to give higher expected net payments in most all cases.

Producer Price Outlook a Factor in ARC/PLC Decision (Peanuts Ex.)

557.33 557.33 557.33

535.00 535.00

350

400

450

500

550

600

650

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

$/t

on

Dec. 2014 FAPRI Prices

Benchmark Price

86%

76%

Ref Price

Economic Studies • New Cultivar, Row Pattern and Seeding –Tubbs

• Economic Assessment of the Peanut Replant Decision - Tubbs, Sarver

• Comparing Water Use Efficiency of Various Irrigation Methods Used for Peanut Production - Hawkins

• Alternatives for Thrips Control – Srinivasan

• Fungicide Treatment Trials

• Rotation - Tubbs

DEVELOPING AN ECONOMIC DECISION

AID TOOL FOR REPLANTING PEANUT

Carlos J Ruiz Master of Agribusiness University of Georgia Nov 21st - 2014

Predicting the cause of sparse plant stand and potential yield is challenging making replant decision uncertain.

Poor peanut emergence results in lower yield and loss of revenue.

Can recent research results help make better replanting decisions?

Replant or not

When to replant

How to replant

BACKGROUND

TOOL

Sparse crop Replanted crop

Yield (Pounds per acre) Yield (Pounds per acre)

Gross Revenue Cost of replanting

Net Gross Revenue from Replanted Crop

Net Benefit?

Gross Revenue from Initial Crop

DATA

Original Planting Model Data Replanting Model Data

Observations 490 351

Row Pattern 2 (Single - Twin) 2 (Single - Twin)

Locations Tifton, Attaplugus, Plains, Midville Tifton, Attaplugus, Plains,

Time 2008-2013 2009-2013

Variables

Yield Yield

Seed Rate (2-8.9) Seed Rate (1-6)

Plant Stand (1-6.9) Replanting Date (Early May –

Late June) Sarver and Tubbs Sarver, Tubbs, Beasley, Paulk

METHODS-Models

Plant stand density has a positive and statistically significant effect on peanut yield (p =0.0084)

𝑦𝑖𝑒𝑙𝑑 = 𝛼 + 𝛽1 ∗ 𝑠𝑡𝑎𝑛𝑑 + 𝛽2 ∗ 𝑟𝑜𝑤 + 𝛽3 ∗ 𝑙𝑜𝑐𝑎𝑡𝑖𝑜𝑛 + 𝜉

Seed rate is positively correlated to plant stand (σ = 0.692)

𝑦𝑖𝑒𝑙𝑑 = 𝛼 + 𝛽1 ∗ 𝑠𝑒𝑒𝑑 𝑟𝑎𝑡𝑒 + 𝛽2 ∗ 𝑟𝑜𝑤 + 𝛽3 ∗ 𝑙𝑜𝑐𝑎𝑡𝑖𝑜𝑛 + 𝛽4 ∗ 𝑟𝑒𝑝𝑙𝑎𝑛𝑡𝑖𝑛𝑔 𝑑𝑎𝑡𝑒 + 𝜉

(1)

(2)

RESULTS-Replanting Model Residual 255702781 340 752067.002 Prob > F = 0

Total 372401095 350 1064003.13 R-squared = 0.3134

Adj R-squared = 0.2932

Root MSE = 867.22

yield Coef. Std. Err. t P>|t|

seedr 164.5665 66.768 2.46 0.014 33.234 295.898

seedr>35 -647.268 199.467 -3.24 0.001 -1039.614 -254.922

row pattern -313.1974 137.416 -2.28 0.023 -583.491 -42.903

1st week May 3123.356 301.965 10.34 0 2529.4 3717.312

2nd week May 2499.144 447.805 5.58 0 1618.326 3379.961

3rd week May 3181.459 294.375 10.81 0 2602.433 3760.486

4th week May 2757.397 289.265 9.53 0 2188.421 3326.373

1st week June 2989.193 307.988 9.71 0 2383.391 3594.996

2nd week June 2416.3 299.007 8.08 0 1828.175 3004.424

3rd week June 1701.822 599.608 2.84 0.005 522.412 2881.232

4th week June (dropped)

cons 2723.48 370.871 7.34 0 1993.987 3452.972

(95% Conf. Interval)

THE TOOL

Enter normal or average yield expected according to your experience

Select location Enter initial planting date Select row pattern planting method used

Enter the plant stand achieved in plants per foot

Enter the grade expected for this normal yield expected

TSMK provided by USDA

THE TOOL

Enter the new planting date or replanting date

Enter the number of seeds per foot to replant

Enter the grade expected for the replanted yield expected

Enter other costs associated to the replanting operation as own consideration

Enter the amount of fuel (gallons per acre) considered to be spent for replanting

Enter the total number of hours per acre considered to be needed for replanting

THE TOOL THE TOOL

Enter Override estimates

THE TOOL

Benefit

THE TOOL

Conclusions

Replanting a sparse stand should be the last alternative.

Follow the UGA recommended practices to achieve good plant stand density.

When the replanting scenario is unavoidable, accuracy in the information provided is vital for the success of the process.

Controlling the costs discussed (seed costs in particular) is critical, given that the additional costs incurred by the grower when replanting could not be offset by the additional revenue achieved.

ACKNOWLEDGMENTS

Funding support provided by National Peanut Board and Georgia Peanut Commission

Committee: Dr. Nathan Smith

Dr. Joshua Berning Dr. Cesar Escalante