“The Argentine crop has been negatively affected by weather all year,” he says. “They’re in their harvest now, about 50 percent finished. They had a tremendous drought, followed by rain and freezing weather, all of which will reduce their crop. How they will finish will impact their exports. A lot of their peanuts that might have come to the U.S. will go to satisfy European demand.

“If they can’t fill all that European demand, there could be some new opportunities for U.S. peanuts to get into that market, which would also help in the event we have an oversupply this year.”

How will things stand at the end of the current marketing year July 31?

“A lot of people say we’ve got too many peanuts planted this year,” Lamb says. “I’m not one of those.

“If we bring forward 210,000 FST from 2011, have 1.45 million planted acres for 2012, and if we average 3,350 pounds per acre, we’ll produce a crop of roughly 2.4 million FST this year. That would give us a total supply to work with of roughly 2.6 to 2.7 million FST.

“Assuming a good average demand of 2.1 million FST, carryforward going out of this marketing year would be about 571,000 tons. That’s not a flood of peanuts. It would get us back to a comfortable level, as far as having enough peanuts to supply the market.

“But, what if we get good weather and rains and have a yield average in the 3,550 pound range? That still won’t flood the market, in my opinion. It would mean production of  2.5-2.6 million FST, which would give us carryout of 716,000 FST. We’ve been near that level before, so we still would be oversupplying.

“Conversely, what would happen if things should go downhill a bit and we average only about 3,150 pounds per acre? That’s roughly 2.3 million FST of production, which would give us a 2.5 million FST supply. Take out demand and we’d be at 426,000 FST carryforward.

“If we can shell 165,000 tons per months, that’s 495,000 tons we’d need for carryout. If that should happen, we’d be right back where we were in terms of the market being a little short in terms of carryforward.”

Last year, Lamb says, “We were in the middle of a perfect storm in terms of supply/demand. We’re still sort of in the middle of that storm, but in my opinion, we’re slowly coming out of it.”

If yields this year are average to above average, he says, some uncontracted peanuts could be forced into the loan.. “I’m not so sure I’d be afraid of that. Right now, we have a drought going on in the Midwest, and we’ve seen its impact on major commodity prices: corn, soybeans, and wheat prices all up strongly. That kind of scenario affects all of us. “If we get wheat and beans and corn fighting for acres, that will be direct competition for land that peanuts are grown on. If cotton gets back to 80 cents or above, that will have an effect, too. What happens in the Midwest will have an impact on peanut acreage.

“If the drought lingers, next spring when manufacturers and shellers are trying to contract peanuts to be planted in 2013, they’re also going to want to be getting those peanuts out of the loan. If it’s dry in the Midwest, prices of peanuts will go up if the competition for land stays strong.  So, don’t be afraid to put some peanuts in the loan if these other commodity prices stay high.”

Looking at the three possible yield scenarios— average, below average, and above average — “none of them indicate that we’re going to flood this market,” Lamb says. “We may have a slight oversupply, or we may hit it right on the money, but the potential is there for undersupply as well.”