Dairy Outlook. Recent futures market settlement prices at the Chicago Mercantile Exchange shows the Class III (cheese) price to peak at $13.25 per cwt in September of 2001. Last year the September Class III price was $10.76 per cwt. The Class IV (butter/powder) futures price peaks at over $14.50 by April and remains close to that level through November 2001.

These are very strong prices and show that higher farm prices should be on the way! The question then is whether the actual cheese and butter/powder prices will be this strong when we reach these spring and fall months. Actual prices could be higher or lower. What we do know is that producers can use the futures markets today to "lock in" substantially higher milk prices when compared to last year. (Bill Thomas)

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Supply Is Down But So Is Demand. As farmers prepare to plant the 2001 crop, the market situation for peanuts has changed somewhat from last year. Supplies are down due to a shortfall in production. US production totaled 1.644 million tons, down 9% from the last two years. Although US farmers planted 1.543 million acres in 2000, they harvested 1.315 million acres abandoning 3 times the normal abandonment acreage. Yield was down also at 2500 pounds per acre verses about 2700 pounds in '99 and '98. Carryover stocks from the '99 crop totaled 617 thousand tons and imports including minimum access are estimated at 179 million pounds. Adding together production, stocks and imports gives a total supply for the 2000/01 marketing year of 2.35 million tons. Total supply is down 13% from the previous year. 

Despite the drop in production mainly due harvest problems in the Southwest, quota needs were met through the buyback provision allowing 112,000 tons of additionals to be converted to domestic use. Contract additionals totaled 229,000 tons and loan additionals minus buybacks totaled 114.000 tons. The Southeast is the only source of export additionals with at least 60,000 tons available in the GFA peanut association. Thus, export additionals seem to be in short supply. However, in 1999 too many additionals were contracted at 589,000 tons creating an inventory to meet needs this year. USDA revised it's export projection down in the March report to 300,000 tons verses 363,000 tons last year. The world export price delivered to Rotterdam traded at about $375 per ton farmer stock equivalent in February. Unless, Argentina or another country experiences export problems, exports are likely to remain stagnant. 

The lower supply would prove positive for the peanut market if use continued its trend from 1999 when demand was increasing by 3%. However, the latest Peanut Stocks and Processing report shows use down by about 7%. The drop is largely due to a drop in peanut butter and snacks use of domestic peanuts. Food use is projected by the USDA for the 2000/01 marketing year to be down nearly 3% and overall total use down 9% from the 1999/00 marketing year. 

What does this mean for 2001? With exports stagnant, Spring contracts will likely be few in the Southeast and in the low $300s. The quota allotment will be the same as 2000, thus planted acreage will likely be the same in 2001. Without an improvement in demand, peanut prices will not likely improve in 2001. (Nathan Smith)

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