In the supply/demand picture, he says, carryout is the key number watched by the industry. “This number represents the amount of peanuts available in the pipeline at the end of the marketing year July 31 to carry processors until new crop deliveries start in October.

“A carryout of about 500,000 tons is when the system gets a little nervous. Shelling capacity in the U.S. is about 165,000 farmer stock tons per month, which means that over the three-month August-October period, we need about 500,000 tons to keep the mills in operation. If carryout gets to or below 500,000, that’s when the price signal starts coming down the chain to the growers in the form of attractive contracts.”

But, says Lamb, that encourages growers to increase production, only adding to the roller coaster effect.

“In 2006, we brought forward roughly 630,000 tons and produced 1.8 million tons, with a demand of 2 million tons. This gave us a forward carryout for 2007 of roughly 500,000 pounds. Contracts were offered early in 2008, and producers responded by planting more peanuts, plus it was a good production year, roughly 2.5 million farmer stock tons. Adding peanuts brought forward from 2007, plus some imports, gave us a 3.2 million ton supply to work with in 2008. Subtract demand, and we had roughly 1 million tons of carryout going into 2009.

“In just one year, we went from 500,000 ton carryout and a nervous market to over 1 million tons of carryout a year later — an excessive amount. It took a while to work that off.

“From 2008 up to 2009, we produced a significantly smaller amount of peanuts, but with carry forward and imports we still were dealing with roughly a 3 million ton crop. Subtracting demand, we still had about 900,000 tons to carry forward.

“In 2010, drought in the Wiregrass area of Alabama and in southwest Georgia, helped alleviate some of the oversupply. But production of 2 million farmer stock tons, carry forward of 900,000 tons, plus imports, put us back to dealing with 3 million tons of peanuts. For three years, we had 3 million farmer stock tons of peanuts to cope with.”

In 2010, Lamb says, there were large losses due to aflatoxin, which cost millions of dollars, primarily to shellers, and extensive product loss.

“The quality problems in 2010 got us back down to a more reasonable carryout of 665,000 tons. Then came 2011 with weather problems again in the Southeast and a significant drought in Texas. We only produced 1.8 million farmer stock tons and imported 70,000 tons, which gave us only a 2.5 million ton supply to work with. There were additional losses due to quality problems, which resulted in a carryout in 2011 of only 380,000 tons — the reason uncontracted peanuts at the end of 2011 were bringing as much as $1,000 a ton.

“That carried forward into 2012, with early contract offers in the $1,000 range, and farmers responded by planting a lot more peanuts. We brought forward only 380,000 tons, but we produced a 3.4 million ton crop. Add 10,000 tons of imports, mostly products, and we get roughly 3.76 million farmer stock tons.

“We thought the supply was high when it was 3 million tons for three consecutive years, and then all of a sudden we were dealing with 3.7 million farmer stock tons. What a difference a year made.”

The oversupply, Lamb says, “is putting a lot of risk on the entire system — growers, shellers, purchasers, sellers of shelled stock peanuts, and manufacturers, although to a much lesser degree.”