Peanut producers are finding themselves in the middle of a “perfect storm” as planting time approaches, says Marshall Lamb, research director for the National Peanut Research Laboratory in Dawson, Ga.

“From a total production standpoint, we have an adequate supply,” said Lamb, speaking recently at a regional production meeting in Shorter, Ala. “But from an edible supply standpoint, the market is tight. The problem is that manufacturers are looking at the total supply. We’ve been to meetings with them, and they don’t seem to want to buy into this right now. They’re looking at the total supply, not the edible supply, and there’s a huge standoff right now between shellers and manufacturers.”

Shellers can’t offer $700 per ton for peanuts without having a contract from manufacturers for that price because the risk is too great, he says. But the manufacturers will not support the shellers at those higher prices.

Farmers do have options for other crops at the current high prices that could push peanuts to more than $700 per ton, says Lamb, but the manufacturers won’t back it right now.

“This situation with prices is not just a 2011 phenomenon,” he says. “This will go into 2012 as well. West Texas acres will be down significantly because their water resources are better allocated to cotton. If you do reduce peanut acres, don’t move to soybeans. Take the opportunity to improve your rotations. The demand for peanut products has increased, and hopefully it’ll continue. We need to maximize the profit on our farms this year.”

This will be a very expensive crop, adds Lamb. “We haven’t been told what peanut seed costs will be, but we know fuel costs are high, and that’ll affect everything else. Don’t let the high prices blind you on the cost-management side. We see people in our area competing for land now at absolutely stupid prices, and it’s not healthy. I think people are looking for short-term gain, but they’ll pay it back. This will probably be more interesting than any year we’ve had, and it’s working in the producers’ favor.”

If you look at harvested peanut acres in the United States since the farm bill passed in 2002, it’s basically a period of one to two low years followed by one to two higher years, says the economist.