Peanut prices respond to demand and supply

Peanut Butter Economics

by Elaine Schwartz    •    Oct 20, 2012    •    651 Views

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.

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