“With corn at $7 bushel, that equates to about $500 for non-irrigated peanuts, or $700 for irrigated. Cotton at 75 cents equates to $518 non-irrigated peanuts and $609 irrigated. For soybeans at $14, that equates to $601 for non-irrigated peanuts and $667 for irrigated.

“We do not, and we will not, ever have a trading floor for peanuts, as other commodities do with the futures markets. There aren’t enough consistent round turn sales for a liquid peanut futures market, which prevents you from hedging to manage risk, or forward contracting on a daily basis off the board.

This “puts risk into every aspect of every segment of the U.S. peanut industry,” Lamb says. “In 2010 and 2011 shellers bore the majority of the risk from the quality problems. They couldn’t get full utilization of the peanuts they were buying because they had to push a lot of them into the oil market. And with the short crop that occurred in 2011, farmers who had completely contracted all their production in advance weren’t able to take advantage of the $1,000 offers at the end of the year.

“In 2012, some farmers who didn’t contract for the good prices early now have their peanuts sitting in the loan because of the huge production.”

The amount of volatility in production creates risk for growers, Lamb says, and “frankly, I don’t think there’s much that can be done about it.

“What I recommend — and what I’ve said for years — is to take a balanced approach to marketing. You should almost always have some of your peanuts contracted up front, but also have some open at the end of the year to take advantage of any higher prices that may occur if there are crop problems.

“In the absence of a futures market and the volatility that we have because of the geographic limitations of where peanuts are grown, this balanced approach to marketing is the best way to protect yourself against risk.”

U.S. peanut markets — and acreage and production — have been “a roller coaster ride” of variability since government quotas were phased out in 2002, Lamb says.

“There were drops in 2006 and 2007, an upturn in 2008, then back down for a three-year period, followed by 2012’s steep climb, when we planted roughly 1.6 million.

“Last year at this meeting, following 2011’s very short crop, I estimated we needed about 1.4 million to 1.5 million acres for 2012, based on average yields. We went a bit too high on the acreage response, but that wouldn’t have been too bad if we’d had on average yields.

“What happened, though, was good weather, good rains, cooler temperatures — and everything came together for yield.”

Yields following the end of the quota system in 2002 had been averaging about 3,040 pounds per acre, until 2008, when new cultivars started becoming available that boosted the average to about 3,350 pounds.

“But 2012 blew all that away,” Lamb says. “We had a U.S. average of almost 4,200 pounds per acre. Absolutely unbelievable! Mississippi averaged 4,400 pounds per acre, Alabama about 4,000 pounds, and Georgia 4,550 pounds on about 800,000 acres. These were incredible, mind-boggling yields, and the U.S. produced just under 3.4 million farmer stock tons in shell.”