Paying More for Peanut Butter

If you enjoy your peanut butter and jelly sandwiches, you might be seeing the price of at least one-half of the sandwich rise. The peanut crop last year was less than stellar and has caused the supply to drop severely. The lack of rain combined with higher than typical temperatures caused a sub-standard crop that caused fewer peanuts to be used for peanut butter. This combined with farmers devoting less of their land to peanuts has caused a decrease of 17% in the peanut crop.

This decrease in the supply of peanuts for peanut butter has drastically increased the price of peanut butter. Manufacturers are increasing the price of peanut butter by as much as 40%. To show some numbers, the Department of Agriculture predicts the price of one ton of peanuts typically used for peanut butter to increase from $450 to $1,150. One pound of shelled peanuts has increased from $.52 to $1.20. These price increase are obviously the reason for the price increase in peanut butter.

Following basic economic principles, the increase in price was to be expected after the decrease in supply. This will most likely lead to a smaller quantity of peanut butter being purchased by the consumers. If the weather during 2012 allows for a better supply of peanuts, we would expect the supply of peanut butter to shift back and the price to drop accordingly. But as for now, the PB&J might shift a little more to the J side.

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