By Argen Duncan: PNT senior writer
Retail costs for peanut products from this area are going up this year, due to processors paying more for the nuts.
Sunland Inc. CEO Jimmie Shearer said the company’s contracts with farmers for Valencia peanuts set the price about $50 higher per ton than last year, one of the highest prices Sunland has paid.
The cost for runner peanuts, the other variety grown in the area, is $100 more per ton than it was three years ago, he said.
Sunland specializes in processing Valencia peanuts.
If all of the added expense is passed on to consumers, Sunland’s retail prices would go up 7 percent, Shearer said. However, he said part of the high wholesale costs might be absorbed before being passed down to shoppers.
The higher prices benefit farmers, though.
“If the summer is normal, the price is good, we’ve got a pretty positive outlook,” organic peanut farmer and Sunland board member Wayne Baker said.
The high prices come from peanuts having to compete with cotton for available land.
“The problem this year is cotton prices have skyrocketed,” Shearer said. “So we’re having to increase our prices to compete with cotton prices.”
Baker said supply and demand kept the organic peanut prices from rising as drastically as their non-organic counterparts.
Shearer said peanut contracts are set on a year-by-year basis, so the price could change in 2011.
“I would anticipate that prices would be down a little bit next year,” he said.
Shearer expects cotton prices to return to more normal levels, meaning less competition to entice farmers to grow peanuts.
However, he said a number of factors affect peanut prices, including land competition, surpluses from the year before and whether farmers can get loans to grow peanuts, which are expensive to produce.
Valencia peanuts have less volatile price swings than runner peanuts, he said. Because Valencia prices are higher, farmers won’t grow them without contracts, and contracts limit price-lowering surpluses.
Some farmers grow runner peanuts on contract, and some don’t, Shearer said.