Excited by the prospect of record-high peanut contracts, many growers are starting to consider shortening their crop rotations to take advantage of the market.

But that would be a big mistake, says Marshall Lamb, research director for the National Peanut Research Laboratory in Dawson, Ga.

“I’m getting a lot of calls from growers about shortening their peanut rotations because of the $700 and $750 contracts,” said Lamb at the recent 2012 Regional Peanut Production Meeting in Shorter, Ala.

“It’s a huge mistake. One, you’ll lose yield, and two, you’ll lose money because the price differential is not that great whenever you shorten those rotations.”

Rotation research trials conducted in southwest Georgia show that the gains are not worth the risk, he says. “You’d have to get higher prices in order to justify shortening your rotations because yields would be lower.”

Comparing the costs and returns of irrigated cotton versus irrigated peanuts, Lamb says the break-even price of peanuts, considering 95-cent cotton and a rotation of two years out of peanuts, was $735 per ton.

However, if you shorten that rotation to one year out of peanuts, you’d have to get a contract of $900 per ton for peanuts in order to break even with 95-cent cotton. On irrigated corn, at $6 per bushel, the contract requirement to break even with peanuts goes from $700 to $854 per ton if you shorten the rotation to one year.

“I wouldn’t shorten my rotation just to increase peanut production, not at the prices now being offered,” says Lamb.

Looking at the current state of the market, Lamb says peanut harvest data for the U.S. shows somewhat of a roller-coaster ride, going from 1.6 million acres in 2004-2005, down to 1.2 in 2006 and 2007, and back up in 2008. It’s all related to the price of peanuts and the price of other crops competing for the same land, he says.

‘We’re in a good position as far as yields. It looks as though we’ve reached a new plateau in peanut yields. We’ve been hovering around the 3,000-pounds-per-acre mark, and despite having two devastatingly dry years in 2010 and 2011, we’re back to an average of around 3,300 pounds in the last four years, and a lot of that is due to improved genetics and outstanding Extension work,” he says.

But the volatility seen in production in recent years isn’t good for the industry, says Lamb.

In 2009, 2010 and 2011, U.S. growers produced 1.8, 1.8 and 2 million tons, respectively, and U.S. demand is from 2 to 2.1 million farmer-stock tons.

“The situation is so tight now because for the last three years, we haven’t produced enough peanuts to satisfy supply and demand. And we’re coming off the heels of a monster crop in 2008, so that’s why we’re at the place we are now.”