Peanut Butter

If you love peanut butter you may have already noticed an increase in price recently. This is due to peanut shortages in several different states in the U.S. Drought was one of the factors that has contributed to the shortage of peanuts. The other main reason for the lower supply of peanuts is the decision of many peanut farmers to plant cotton.

Unfortunately, many of the peanut farmers of will not reap the benefit of the high prices, since much of their crop was already contracted before the prices began to increase. Despite this, the Executive Secretary of the Peanut Growers Cooperative Marketing Association Dell Cotton seems to have a good handle on the economic strategy for the peanut farmers. He states that "the cupboard is bare, so we've got to build the supplies back...But we've got to be cautious about that. You can't oversupply, because that kills the prices the other way."

With the increase in price for peanut butter, Kara Yorio provides a few alternatives in this NorthJersey.com article. Here are some of the suggestions she gives: almond butter, soy butter, sun butter. I have never tried any of these, but I suppose if I ate peanut butter often and was unwilling to pay the higher price, I might give them a try. It will be interesting to see what kind of domino effect the peanut shortage will have on other goods. One example is strawberry jam. Since the jam complements peanut butter, surely the demand for the jam will fall (ceteris paribus).


Papa Smurf said...

I agree with Xavier on this. I think that this is interesting because it deals with supply and demand of both substitutes and compliments. As Kara Yorio points out there are some substitutes for peanut butter so according to the economics of supply and demand the increase in the price of peanut butter should cause an increase in the demand for goods such as: almond butter, soy butter and sun butter, but a majority of the consumers are probably like Xavier and myself and have not tried these other substitutes. I think that because consumers have not tried the substitutes in the past many will continue to pay the higher price for peanut butter. For the same reason I don’t believe that the compliments of peanut butter will see too much of a change in sales.

Dr. Tufte said...

I wonder to what extent peanut butter has aspects of a durable good. An open jar can sit around on someone's shelves for quite a while.

I'd also like to know what is going on in the market for other products made from peanuts. I'm assuming that there are quite a few, but I really don't know. But if farmers are shifting to cotton, it stands to reason that all peanut products are going up in price.

Xavier said...

Dr. Tufte, I suppose that peanut butter would have some aspects of a durable good, but our textbook (on page 33) states that future prices and income, interest rates, and prices of used models influence the demand for durable goods. None of those three seem very applicable to peanut butter (maybe prices and income to a small extent, but not much when it comes to interest rates and prices of used models).

Dr. Tufte said...


What I was thinking is that peanut butter is a good you want to have available, but which you're also unlikely to buy more of when you do have it available. This makes it somewhat durable-like: if you put it on sale, people will buy it, but if you leave it on sale for too long, people will stock up on enough and lose interest.