A roller coaster ride — that’s how Marshall Lamb describes the peanut industry for the past decade starting with the 2002 farm bill.

It has been characterized by market dips brought on by over-production, followed by acreage cutbacks and lower production that then result in an upward market price trajectory, then a repeat of the cycle, says Lamb, who is research director of the USDA/ARS National Peanut Research Laboratory at Dawson, Ga..

“Right now, we’re in a very dynamic situation,” he said at the Mississippi Farm Bureau Federation’s summer peanut commodity conference at Grenada, Miss.

“We’re coming off two years, 2010-2011, that were marked by drought and very high temperatures in major production areas, which had an impact on peanut quality and supply,”

That reached a culmination in 2011, when severe drought in Texas sharply reduced production and shot the peanut market roller coaster dizzingly upward.

“With only 1.8 million tons produced and an edible supply just under 500,000 farmer stock tons (FST), and imports at roughly 70,000 tons, that left us with only a 2.4 million FST supply to work with. From 3 million FST in 2010 to 2.4 million in 2011 is a pretty steep drop.

“The crush was also a little higher in 2011, which left us with a carryout of only 207,000 FST. In the U.S., we have a shelling capacity of about 165,000 tons per month. Over a three-month period from August through October, the industry needs about 500,000 FST of carryover in the pipeline in order to keep the mills running and full until new crop deliveries come on board.

“When carryover gets down to 500,000 FST, that is extremely tight — as tight as we want to get in terms of marketing. Manufacturers get nervous, shellers get nervous, and that’s why in 2011 uncontracted peanuts pushed up to $1,000 per ton.

“Shellers and manufacturers were scrambling to get peanuts that weren’t already secured. That’s also why, going into 2012, we were seeing contracts around $700 to $750 per ton — because they wanted to make sure there would be enough acreage going into the season to get this under-supply situation off our backs.”

No contracts are currently being offered for 2012 peanuts, Lamb says, because “it’s too early to tell which way this crop is going to go. 

“From this point forward, yield will determine where we are in terms of the fall market. Don’t expect a contract to come out anytime soon. Manufacturers want to see where this crop is going, so they won’t support the shellers right now to go out and contract peanuts. And shellers can’t afford to go out on a limb and speculate where this crop is going without having the backing of the manufacturers. All of which means no offer is going to trickle down to farmers right now.”

A lot of uncertainties exist, Lamb says. “Yield and quality of this crop have a long way to go. We’re on a seesaw right now, and it’s balanced about in the middle. The question is, which way is it going to go — up or down? We’ve never made or lost a crop in June; it’s just too early to tell.”

Another factor that may influence the market, he says, is imports. Last year, peanut imports totaled about 70,000 tons; this year, that could be cut in half.