Peanut Butter Shortage: Here Are the Companies Being Affected

(By Rebecca Lipman)

Sharp increases in peanut butter prices, an effect following one of the worst peanut harvests in decades, can be an indication of a larger food crisis to come – not a great way to start off National Peanut Butter Lovers Month.

Sticker Shock

Peanuts are usually harvested in the fall, around September or October. According to the U.S. Department of Agriculture, a combination of intense heat and drought put this year’s harvest at 3.6 billion pounds, a 13% drop from last year. Prices for one ton of runner peanuts (commonly used to make peanut butter) hit nearly $1,200 this month, up from $450 a year ago.

CNN Money reports Kraft (KFT) will raise prices for its Planters brand peanut butter by 40% starting Monday, while ConAgra (CAG) has instituted increases of more than 20% for its Peter Pan brand that went into effect this month. J.M. Smucker (SJM), which makes Jif, will introduce price hikes of around 30% starting Tuesday.

America’s Love Affair With Peanut Butter

Peanuts are more pervasive in the American diet than one might think. The National Peanut Board found that Americans spend almost $800 million on peanut butter and consume an average of more than six pounds of peanut products each year. (via CNN Money) Peanut butter is in 90% of American houses. According to one report, most American kids will eat an average of 1,500 peanut butter sandwiches by the time they graduate from high school. (Washington Post)

Only the Beginning

The hike in peanut butter prices means another hit for consumers at the grocery checkout. Already this year corn prices hiked in August – up 70% from August 2010 – due to a less-than-expected crop yield. As the world population hits 7 billion it also serves as a reminder that food demand is growing. The more mouths there are to feed, the greater the demand for grains, meats, dairy products, etc. Similarly, as citizens of developing nations become richer, so do their tastes.

Global climate change is drastically affecting weather patterns, so the heat, cold, droughts and floods that have plagued crop yields this year are unlikely to abate in future years. Low crop yields may very well be the new normal in agriculture.

Investing Ideas

In short, food prices are going up with no clear end in sight. Peanuts are used in a wealth of consumer products, so will this price hike mean a big hit on sales?

Interested in following the peanut butter shortage’s effects on the companies mentioned above? We provide tools here to help you analyse and compare the companies’ stock performance.

Start with the Compar-O–Matic that shows a side-by-side view of the changes in average analyst recommendations for Kraft, ConAgra and J.M. Smucker.

 

Use the Turbo Chart to compare the stock performance of Kraft, ConAgra and J.M. Smucker.

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