Working for peanuts may actually be a good thing soon.
Peanut prices have shot up this year, due to a lack of supply and increase in consumption. The result is a sticky situation for retailers and a pricier PB&J sandwich for consumers.
The pain in the peanut butter aisle is related to what’s going on in the clothing department.
Farmers in the southern US opted to grow cotton instead of peanuts last year.
“Probably the first thing that happened was, cotton prices were very high, which was very attractive to the farmer,” said peanut broker Richard Barnhill in Albany, Ga. in an interview with Harvest Public Media. “So our first problem was, we didn’t plant enough peanuts.”
But it wasn’t just one year of puny peanut harvests.
“If you compare 2011 plantings with 2008, there was a 25 percent drop. So that’s what is significant. It’s not that we had a 10 percent drop this year. It’s that it’s been dropping for the last several years. And yields have not been as strong,” USDA economist Tiffany Arthur told Harvest Public Media.
The drought and high temperatures that scorched the southern US this year didn’t help matters. So, due to smaller plantings and bad growing conditions, there were less peanuts on the market and prices went up.
Peanuts now sell for nearly double what they did last year.
“Nobody on the supply chain can absorb that sort of price increase,” said Barnhill. “So the manufacturer will have to pay more for the peanuts, and they’ll have to pass that on in their wholesale prices to the retailers, and the retailers will have to pass that on to the consumers — squarely in the marketplace late this fall, or by January for sure.”
These prices come when demand for peanut butter is bustling.
Arthur noted that peanut butter consumption had jumped by 10 percent since 2008 vs. a normal 1 or 2 percent increase in a year.
You don’t need to be Adam Smith to know that increasing demand for a scarce commodity results in shelling out more for a peanut butter and jelly sandwich.