State’s farmers take early blow

Georgia’s peanut farmers, processors and manufacturers —- the biggest collection of peanut-related businesses in the nation —- were already facing a bleak year when the recent recall of salmonella-tainted products made a bad situation worse.

Last year brought a bumper crop with record prices. This year, companies that buy peanuts —- brokers, shellers and food and snack manufacturers such as Mars and J.M. Smucker Co. —- already have warehouses full of last year’s crop.

Mix in the dismal economy, which has driven down prices of alternative crops such as cotton, corn and soybeans, and the recipe was there for a very bad year in Georgia’s farming regions.

Now the peanut industry is worried that consumer fears over the salmonella outbreak linked to a South Georgia peanut processing plant will put to rest any hopes of a quick turnaround. The outbreak has sickened more than 500 people in the United States and Canada, and it is suspected of causing eight deaths.

“This is the darkest year I’ve ever seen going into the upcoming crop year,” said Mike Newberry, a fourth-generation farmer who has been working his family’s southwest Georgia farm near Arlington for 29 years. “And that was before the peanut scare.”

Indeed, the fallout from the salmonella outbreak seems to have sharpened a looming recession for Georgia’s agricultural industry. While prices for this year’s expected crop were already plunging because of the oversupply of peanuts, the salmonella scare threatens to drive down demand for an extended period.

“The whole industry is on edge,” said Emory Murphy, assistant executive director of the Georgia Peanut Commission.

Consumer jitters threaten one of Georgia’s largest agricultural industries, which helps employ roughly 30,000 people involved in growing, transporting, processing or making products from peanuts. The challenges likewise threaten the economic underpinnings of many rural communities in South Georgia.

“It’s going to be tough for the whole industry,” said Brian Cresswell, the University of Georgia’s agricultural extension coordinator in Blakely. “In a community like this, when the farmers have a good year, everybody has a good year, and when they have a bad year, everybody has a bad year.”

Georgia is the nation’s largest peanut producer, accounting for about 45 percent of the nation’s crop last year, according to the U.S. Department of Agriculture. Estimates of the industry’s economic impact in Georgia range from under $1 billion to almost $2.5 billion. That includes $400 million in annual peanut sales by the state’s 4,800 farmers who grow peanuts along with cotton, corn and other crops.

Peanut industry representatives and snack manufacturers have been trying to restore public confidence, although with unclear results. They have launched ad campaigns telling consumers that only a small fraction of peanut products were tainted. Several companies, such as Charlotte-based Lance, which owns Tom’s Foods in Columbus, have issued repeated statements saying none of their foods were in the recall.

“Peanut products are a good food,” Murphy said. “We’ve just unfortunately got this problem that is not representative of the industry.”

But coming on top of other recent tainted-food scares, including a recall of Peter Pan peanut butter in 2007, industry experts fear it could take two years or more for the industry to recover.

Industry experts say the recent recall may have a more devastating effect on the industry than the Peter Pan recall, which was tied to salmonella-tainted peanut butter produced by a ConAgra-owned plant in Sylvester. The fallout was relatively short-lived because most consumers simply switched to another brand.

“It affected us drastically” for a few months, Kenny Brownlee, owner of Tifton-based Banner Grain and Peanut Co., said of the Peter Pan recall. “But it wasn’t as great a magnitude as this.”

This time, the U.S. Food and Drug Administration has recalled hundreds of products nationwide ranging from dog food to ice cream that may have included peanut paste or other peanut ingredients produced by Peanut Corporation of America’s plant in Blakely.

A list of the recalled products is available on the FDA’s Web site. The recall does not include any jars of peanut butter sold in stores.

Because the recall covers such a broad array of other products, many consumers are avoiding all foods containing peanuts.

“The salmonella recall … has essentially everyone in shock,” Tyron Spearman of Tifton, editor of the Peanut Farm Market New, said of growers. “Everybody’s kind of in a fog right now wondering, ‘What I can plant?’ “

The scare comes at a particularly bad time. Usually at this time, peanut farmers are considering which price and production contracts to sign with large buyers such as shelling and storage companies and food manufacturers. Farmers use the contracts as collateral to obtain loans from banks to cover their planting and operating costs until the fall harvest.

Last year, experts say, farmers were able to get top dollar because of an earlier peanut shortage. This year, prices have dropped nearly 50 percent in some cases, and peanut contracts are practically nonexistent.

Consumer worries are one cause, experts say, but the main one is too many peanuts.

Last year, farmers in most of the nation’s peanut-growing regions boosted their acreage and produced a huge crop because of favorable growing conditions. Nationwide, farmers produced 5.1 billion pounds of peanuts —- almost 40 percent more than in 2007. Georgia’s share jumped from 1.6 billion pounds in 2007 to 2.3 billion last year, continuing a growth trend that started after federal production limits were eliminated several years ago.

Nationwide, the industry now has 900,000 tons of surplus peanuts in warehouses —- nearly half the nation’s typical annual consumption.

“Now with the salmonella outbreak, it may take a couple of years to work through this,” said Nathan Smith, a University of Georgia professor and economist with the agricultural extension service. He expects peanut consumption to decline in coming months after an initial jump to replace inventories that were thrown away by retailers.

Brownlee, who operates a “buying point” in Tifton that buys peanuts from farmers and cleans them for inspection and grading by government inspectors, said the whole market is off dramatically.

“We have not had a peanut contract in ‘09. Not any,” he said. Purchases by candy maker Mars, for instance, are lower because its sales are off, he said.

Smith, the UGA economist, expects Georgia farmers to plant 20 percent less acreage in peanuts this year and prices to be down 40 percent.

“It’s going to hurt,” he said. “I think this year is going to be a year of looking to survive. But I think agriculture is in better shape financially than it was the last time we had a crisis like this.”

Newberry, the farmer in Arlington, said he has saved money from the good years and will make whatever adjustments are needed to get through 2009.

Newberry said he’s lucky because last year was such a strong year and he’s got more than 1,000 acres of prime farmland, mostly irrigated. It produced lots of peanuts, cotton, corn, wheat and cattle last year. Most sold for nearly record prices.

But this year, nothing looks good. Newberry expects to idle some land and use less fertilizer and pesticides to cut costs. He hopes those moves will minimize losses and cover his living and long-term expenses this year.

“You go in a defensive manner,” he said. But in farming, he added, the bad years go with the good. “You can’t farm one year at a time.”

 SHANNON PEAVY / Staff 
NOT 'JUST PEANUTS' IN GEORGIA 
Georgia has long been the nation's dominant peanut producer. 
That means the recent salmonella recall's economic impact will 
likely be substantial in South Georgia's peanut-growing region, 
which was already worried by falling peanut prices because of 
the weak economy and a bumper crop last year. 

Bar chart compares Georgia production and U.S. production in billions of pounds from years 1998 to 2008.

Source: U.S. Department of Agriculture