“In terms of supply and demand, carryout is the number we worry about each crop year. It represents the amount of peanuts in the pipeline August/September/October — the three-month period before new crop deliveries become available to processors.

“U.S. shelling capacity is about 165,000 FST per month, or about 500,000 FST for the three-month period. If we continually hit a carryforward of 400,000 to 500,000 FST, there might be supply interruptions from shellers to manufacturers, and we don’t want to see that, because it will slow demand.

“I don’t like to see a carryout of 800,000 to 900,000 FST, because too many peanuts suppress the price signals that come from the manufacturers to the shellers to the farmers. I like to see a little buffer, with a carryout of about 600,000 FST. Below that, manufacturers and shellers get nervous.”

For example, he says, in 2007 the carryout was only 510,000 FST, which resulted in early contract offers for 2008. “Farmers planted more, we had a good yield, and produced 2.5 million tons. That resulted in a carryout of over 1 million FST, which totally flattened the market. In one year, we’d doubled the carryout, and the market responded accordingly. In 2009, we planted fewer acres and produced 1.8 million FST, but still ended the year with 920,000 FST of carryout. It’s hard to get that big an elephant off your back.”

But in 2011, with a drought-decimated crop in Texas, production of 1.8 million FST and increased demand, carryover dropped to an extremely low 380,000 FST

“That kind of number makes manufacturers and shellers sweat,” Lamb says. “Manufacturers fear supply interruptions and shellers fear they won’t be able to deliver the peanuts they’ve forward contracted. That number is the reason that at the end of harvest in 2011, growers who had uncontracted peanuts could get anywhere from $1,000 to $1,100 per ton, where normally they’d be trading for $450 to $550.”

But he says, where the low carryover had the biggest impact was on price signals for the 2012 crop. “In the winter of 2011 and spring of 2012, growers were being offered contracts of $700 to $750 per FST in order to try and take acres away from corn and cotton into peanuts.”

The result: 1.6 million acres of peanuts, a record yield, a 3.4 million FST 2012 crop, a record carryover, and a price-depressing outlook for growers in 2013.