Tag Archives: peanut butter

10.20.2012 | Peanut Butter Economics

Last year, we had a peanut shortage. As a result, Skippy raised its prices and Smucker’s removed its reduced-fat creamy peanut butter spread from supermarket shelves.

But now, supply has responded. Predicting a record year, the USDA says the peanut crop will exceed its recent 2008 high of 5.2 billion pounds. The reason? Farmers who had switched to more profitable commodities like cotton returned to peanuts when their prices went up.

As one LA Times blogger said, “Our national nightmare is over.”

And economists will be smiling because the peanut butter story is a perfect example of how incentives affect supply curves.

Sources and Resources: For lots of detail, I recommend this WSJ article and this one from the Chattanooga Free Press while for a smile, here is the LA Times blog. Also, you might enjoy this 1884 patent application for “peanut paste.” Finally, at econlife, here is some background from a past post on the peanut crop.

Posted by: adminEcon
Tags: cotton, drought, Georgia, law of demand, law of supply, peanut butter, peanuts, Skippy, Smucker
Comments (0) Add a Comment

06.05.2012 | How is Peanut Butter an Economic Indicator?

The head of the Cleveland Fed cares about peanut butter sales.

According to the WSJ, Sandra Pianalto, president of the Federal Reserve Bank of Cleveland, “likes to grill” the vice chairman of her board, jam CEO Richard Smucker, about peanut butter sales. Up 9% during 2011, rising peanut butter sales reflect increased demand for a relatively inexpensive source of protein when the economy is sluggish.

This takes us to Mr. Peanut and peanut butter. With an adult market their target, Kraft has begun to produce peanut butter. Instead of pb&j, they are suggesting peanut butter soup, smoothies and yogurt, and English muffin peanut butter snacks. In a $1.8 billion market dominated by Jif (J.M. Smucker), Skippy (Unilever) and Peter Pan (ConAgra), Mr. Peanut’s entry and disappointing GDP numbers, might shift supply even further to the right.

Leading indicators like the stock market telling us where we will go while lagging indicators such as unemployment reflect the past. Maybe we can call peanut butter a coincidental indicator because it tells us where we are?

My interest in peanut butter began wth this WSJ article. But here and here, we have looked at unusual economic indicators before. For more about Planters’ Mr. Peanut, a history is here from Kraft and you can read more about their decision to produce peanut butter here at Bloomberg.

Posted by: adminEcon
Tags: coincidental indicator, Federal Reserve Bank of Cleveland, J.M. Smucker, peanut butter, protein, recession, Sandra Pianalto
Comments (0) Add a Comment

03.25.2011 | Peanut Butter Prices

Let’s say that you saw the price of Skippy peanut butter, Tropicana orange juice, and Quaker oatmeal went up. Would you be concerned about inflation?

In a recent paper, researchers from Yale and the University of Chicago said it is a bit more complicated than that. Stores, they said, were very aware that certain consumers tended to be “loyals” while others were “shoppers.” The “loyals” bought the same brand, no matter what. “Shoppers,” by contrast, were bargain hunters. If Peter Pan peanut butter were on sale, they would not only buy it (and abandon Skippy), but they would also stock up with extra jars.

Knowing the character of their clientele, supermarkets adjusted prices to optimize purchases from “loyals” and “shoppers.” They made sure, for example, that sales were carefully scheduled so that they would minimize lost revenue from their “loyals.”

Fluctuations in price, then, do not only reflect increasing costs of production or changes in the money supply. Instead, they might just be an example of business strategy.

The Economic Lesson

Consistently, price watchers from the Bureau of Labor Statistics monitor specific items in a “market basket” of goods and services to give us a picture of where prices are heading. The result is the Consumer Price Index (CPI). Through Social Security payments that are based on annual changes in the CPI and monetary policy decisions, the CPI can have considerable impact.

But, what if, as these Yale and Chicago researchers suggest, price changes reflect a complexity that is not currently recognized by the CPI?

Posted by: adminEcon
Tags: CPI, inflation, peanut butter, social security
Comments (0) Add a Comment