Recall Adds to Peanut Stockpile

In connection with a salmonella investigation, the Food and Drug Administration has warned consumers against eating processed foods made with peanut butter. The country already had a large surplus of peanuts. With any decline in consumption now, that stockpile will grow, says a University of Georgia peanut expert.

“It’s never a good time to have anything like this, especially when there is consumer concern for health. But it comes at a particularly bad time considering the rather large surplus of peanuts last season’s bumper crop produced,” said Nathan Smith, an economist with the UGA College of Agricultural and Environmental Sciences.

U.S. peanut farmers produced 2.58 million tons of peanuts in 2008, a record crop, Smith said. This helped create what is now growing to be an 800,000-ton surplus. Because of the way the crop is bought and sold before becoming food, the industry likes to keep 300,000 tons to 400,000 tons in the pipeline as a buffer against a major crop loss.

In recent years, peanut consumption has increased annually. In fact, consumption was on track to be 6 percent more than in 2007, or around 2.24 million tons. Average annual peanut consumption in the U.S. is 6.5 pounds per person.

Before the FDA warning, the peanut industry was adjusting to the surplus. Because of it, farmers are expected to plant fewer peanuts this year and produce less than the U.S. consumes in a year, eating into that surplus, Smith said. That would be in a typical year, one without a decline in consumer consumption.

“It’s too early to tell how the FDA warning will impact consumption this year,” Smith said. “We were probably on our way to correcting the supply and demand gap we have with this year’s crop, but now it may take another year to do that.”

The peanut stockpile has already affected farmers’ prices.

Last year at this time, farmers could contract peanuts for $500 a ton, some as high as $600 a ton. There are no contracts being offered right now for the ’09 crop. A farmer that sees a contract above $400 per ton this year should think hard about taking it, Smith said. Prices may not get much higher for a while.

As part of the warning, the FDA now lists more than 125 products containing peanut paste, which has been linked to a Peanut Corp. of America plant in south Georgia.

Consumers can find a list of the suspect products at the FDA’s Web site www.fda.gov. Jarred peanut butter is considered safe and not part of the safety alert.

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