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Supply and demand set price for peanuts

To the editor,

As farmers, recent media reports about peanut growers receiving record prices for their peanuts as peanut butter prices rise caught our attention. We don't grow peanuts, but we know farmers who do, and so we asked about these reports.

Turns out, some reporters have used the United States Department of Agriculture's National Posted Price as a reference for the price farmers are getting for their peanuts. In mid-October this price was $1,200 a ton for the runner peanuts used to make peanut butter. Growers, however, were only being offered $800 to $1,000 a ton for their peanuts. Peanut farmers say it's well known in their industry that the USDA posted price for peanuts is higher than what peanut buyers actually pay farmers.

Most farmers contracted their peanuts for $550 to $600 a ton before planting their crop last spring. Row crop farmers forward-contract their crops to obtain loans to buy the seed, fertilizer and other supplies needed to plant their crops.

Peanut market experts estimate 75 to 80 percent of Georgia's peanuts were sold at the lower prices, so only 20 percent to 25 percent of the peanuts harvested this fall are expected to be sold at the higher prices.

When you see higher prices at the store for peanut butter and peanut products, please don't think it's because farmers have set higher prices for their peanuts. Farmers don't set the price for their crops. The rules of supply and demand set the prices, as is true for all commodities.

The price of peanuts has increased due to a low supply of peanuts, which has been caused by several things. The 2010 peanut crop was smaller than usual, then last winter peanut contracts weren't high enough to compete with cotton and corn prices, so farmers planted fewer peanuts. The drought we experienced this year further reduced the harvest.

Consumers should also understand that peanut farmers are paying more than ever to grow peanuts due to the rising costs of fuel, seed, fertilizer and pest control. Economists estimate Georgia peanut growers spent 30 percent more than last year to grow an acre of irrigated peanuts and 20 percent more an acre for non-irrigated peanuts.

It's not just peanut farmers who are facing higher production costs. According to the USDA, total operating costs for corn and wheat production have increased 18 percent from last year due to higher fuel, seed and fertilizer costs, and production costs have increased 13 percent for soybeans and 9 percent for cotton. Livestock producers are also facing higher production costs due to higher feed and fuel costs. These record-high production costs are consuming most of any higher prices farmers may be receiving.

Even though prices of peanut butter and other food products may rise, it's important to remember that these products are still a great value for the nutritional benefits they provide. It's important that American farmers remain economically viable so that the majority of the food we eat continues to be grown domestically rather than in foreign countries where quality standards are less stringent than in the U.S.

Keep in mind that every time you buy Georgia-grown products you are supporting Georgia farmers and keeping our rural communities economically viable.

McDuffie County Farm

Bureau board of directors

J. Robert Farr, president</p>

Web posted on Thursday, October 27, 2011

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