Peanut Outlook.Supply Picture is Seen as Tightening, But What's Up with Demand ? One key element to a successful supply program is determining supply levels so that demand is adequately met. The national quota allotment for 2000 was 1.18 million tons plus temporary seed quota allotment of about 145 pounds per planted acre. At 1.5 million acres the temporary seed quota would add about 108,000 tons to the quota allotment for a total of 1.288 million tons. This year's quota deliveries inspected by the Federal State Inspection Service totaled 1.163 million tons including seed quota. Thus, quota production fell short by an estimated 125,000 tons. Quota deliveries historically average around 95 to 97 percent. With the use of the buyback provision, 110,000 tons of additional loan peanuts were converted for domestic use bringing the "effective" quota up to a projected 1.27 million tons and within the range of projected needs. The effect of using buybacks to meet domestic needs this year has tightened the supply of additional peanuts. Currently, about 60,000 tons of loan additionals, all in the Southeast, are available for export sale until mid-May. China is experiencing quality problems and Argentina is having a dry spell. If their customers end up needing our peanuts, the additional sales could push the return to loan pool above $270 per ton not including the $132 loan advance. Keep an eye on GFA sales announcements. 

Despite the improving supply situation, demand estimates are taking a step backwards. USDA is reporting a decrease in total edible use of 8.7% from last year. A drop in demand of this magnitude is usually associated with some major shock such as an adverse health report or similar type of event. The reverse is true for peanuts as recent news articles and research reports claim the health benefits of eating peanuts. So, the question remains what is causing the drop in use? The answer has not been discovered as yet. Import of peanut butter paste may explain some of the decline in use of US peanuts but is not likely to cause such a dramatic drop. In the meantime, promotion efforts are picking up through the National Peanut Board in an effort to increase visibility and promote the health benefits of peanuts. Hopefully, this will translate into growth in demand for the coming years. (Nathan Smith)

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Dairy Outlook. Milk prices aren't out of the woods yet, despite falling milk production in December and January. U.S. cow numbers are still above year earlier levels, setting the state for a possible resurgence in production. A combination of good weather and cheap feed prices this spring could lead to a rebound in production and a decrease in milk price. Dairy farmers should be aware of this risk potential, and manage it appropriately. Many dairy farmers are heading this advise. The open interest in Class III milk futures on the Chicago Mercantile Exchange reached a record 10,669 contracts last week or over two billion pounds of milk. Open interest in Class IV contracts surpassed 2,000 as well. (Bill Thomas)

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