Brian,
Wish I knew. I've got the same thing on my Euphorbia Lactea. It is over 4 ft. tall. I was told it was sun burn. The stem turns to bark. Very hard. You said you can peal it off your cactus? I know I can't even start to peal it off mine. You might have some thing different. However, I do have some Euphorbia Lactea White Ghost that is almost all white and has stayed in full direct sun with out any signs of this bark. Also I have E. lactea Cresta that is also into direct sun all day and also doesn't show any signs of this bark. I am beginning to think that this is not sun burn but maybe some thing, I don't have a clue, else. Hope some more knowable people help us out.
Stush
