What is in this article?:
- Supply, demand at root of rising peanut butter costs
- Price didn't dictate acreage increase
• Some consumers may have concluded from these reports that farmers are responsible for the higher peanut butter prices peanut butter manufacturers have announced.
• Although some farmers have been offered $800 to $1,000 a ton for their peanuts this fall, most farmers contracted their peanuts for $550 to $600 a ton before planting their crop last spring.
Georgia Peanut Commission Chairman Armond Morris and Georgia Farm Bureau President Zippy Duvall are submitting this editorial to address the misconception consumers may have that rising peanut butter costs are due to higher peanut prices paid to farmers. Georgia grows almost half of all peanuts produced in the U.S. The Georgia Peanut Commission represents Georgia’s 4,500 peanut farmers. Georgia Farm Bureau is the state’s largest general farm organization and many of its members grow peanuts.
Recent reports of increasing peanut butter costs and farmers receiving record high peanut prices don’t tell the whole story.
Some consumers may have concluded from these reports that farmers are responsible for the higher peanut butter prices peanut butter manufacturers have announced. Although some farmers have been offered $800 to $1,000 a ton for their peanuts this fall, most farmers contracted their peanuts for $550 to $600 a ton before planting their crop last spring.
Farmers forward contract their crops in order to obtain financing to buy supplies needed to plant the crop.
Peanut market experts estimate 75 to 80 percent of Georgia’s farmers contracted their peanuts with buyers at the lower prices, so only 20 to 25 percent of the peanuts that farmers are harvesting this fall are expected to be sold at the higher prices.
References to USDA estimated prices, known in the industry as the USDA National Posted Price, also misled consumers. In mid-October, the USDA National Posted Price, which is issued weekly, listed runner peanuts — the type used to make peanut butter — at $1,200 a ton, but it’s well known in the peanut industry that farmers never receive the USDA estimated price.
A low supply of peanuts left from last year’s crop, poor market prices at planting and drought conditions throughout this year’s growing season have converged at one time to create a perfect storm that is driving up the price of peanuts.
The tight peanut supply and the rules of supply and demand, not farmers, are responsible for higher prices consumers may experience.