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Food

America’s Got a $2 Billion Peanut Problem

Why is the US spending enough money to keep Lebron James playing for 80 years on peanuts we don't need? Blame the 2014 USDA-backed Farm Bill, which protects farmers from losing money if the market price for peanuts drops.
Photo via Flickr user southernpixel

There's a growing peanut problem in America, and we're not talking about the rise of peanut allergies. Thanks to booming crop yields and the way farming legislation is written, farmers are pumping out more peanuts than we can handle. According to Reuters, the growing peanut surplus could cost US taxpayers nearly $2 billion over the next three years.

And why is the US spending enough money to keep Lebron James playing for 80 years on peanuts we don't need? Blame the 2014 USDA-backed Farm Bill, which values peanuts at a historically high $535 per ton. That price acts as a sort of insurance for farmers, protecting them from losing money if the market price for peanuts drops. That might seem fair for farmers, but critics argue that it encourages them to keep planting even when they don't need to. That leaves taxpayers on the hook for picking up the tab while stockpiles amass and the market price trends downward. Right now, the market price for peanuts is less than $400 per ton.

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"It's a predicament," Tyron Spearman, executive director of the National Peanut Buying Points Association, told Reuters. "Is it a concern to us? Yes. We certainly hate any increase in cost but that's the way the program was designed."

Moreover, thanks to government lending promises to farmers, at a certain point it makes sense for farmers to not take peanuts to market. Instead, they default on their loans and hand over the peanuts to the government. Reuters found that last year the USDA picked up 145,000 tons of the peanuts, enough to satisfy Florida for a year, which have to be stored at a cost.

The overproduction problem looks to continue for the next three years until the Farm Bill expires, leading to the nearly $2 billion price tag. Due to increased yields and more acreage devoted to peanuts, this year's peanut crop was the second biggest ever, at 3.1 million tons. If the excess peanuts in the government's possession were to hit the market, the market price would continue to fall, and US taxpayers would be on the hook to pay even more as the gap between the market and the reference price grew. The government pays farmers for most of the difference between the market price and the reference price.

By the end of 2016, the cumulative peanut stockpile is projected to rise to 1.4 million tons. Some peanut shellers, who make peanuts into things like peanut butter, can't complain about the current conundrum, as low peanut prices are good for business. But it's unlikely that they'll be pumping out more peanut products just because prices are down, given that, as Reuters notes, 94 percent of US homes already have peanut butter in the pantry.

Hoping to find a new home for their product, peanut producers are looking overseas. The US currently exports just 15 percent of its peanuts, and China, even though it is a larger peanut producer than the US, could be a home for some excess; its peanut market is eight times the size of the US market.

In terms of the dollar amount that the government pays out for crops, peanuts aren't even the worst offenders. Corn cost the government $3.6 billion this year alone. Peanuts, however, are comparatively costlier, with the government payment accounting for a full third of their current market value.

If our peanut man abroad can't unload some of the American peanuts, maybe the patriotic solution to the peanut problem would be to eat our way to the bottom of the growing pile. But with peanut allergies on the rise and more and more places banning peanut products, it's a tall order. If only the rest of the world loved peanut butter as much as we do.