1. Hello, it’s time for a monopoly story! If you eat any kind of peanut product - butter, oil, cereals, trail mix, etc - those peanuts were probably processed by one of two powerful companies. Companies that set prices and hurt small, family farmers.

2. The two companies, Golden Peanut and Birdsong, control between 80 and 90% of the peanut shelling industry. Those two, along with a smaller company called Olam, shell something very close to 100% of all U.S. grown peanuts.

Ok. But what’s a sheller?

3. When peanut farmers harvest their crops, they sell to peanut shellers, who do exactly what it sounds like they do: process the peanuts and get them ready to be turned into peanut butter, candy bars, all the things.

4. The peanut shelling industry used to be vibrant and local. In 1970, there were 92 active shelling companies in the U.S. Most farmers would have some choice to whom they would sell. So how did we get here, with two massive companies controlling the industry? YOU’LL NEVER GUESS.

5. Mergers in the shelling industry began in earnest in the 1990s, when Golden Peanut bought Domco, a major sheller. By 2011, Archer Daniels Midland, the ag giant, had bought Golden Peanut, and four years later it bought Texoma Peanut Company, the largest sheller in the sunbelt.

6. Olam, meanwhile, was the product of a merger between the third- and sixth-largest shellers in the country. You get the idea.

But other policy choices got us to today, where two companies dictate prices to thousands of small farmers.

7. For most of the last century, peanut prices and supply were controlled under quotas. The 2002 federal farm bill changed that. Peanuts became a commodity like any other crop, with one major difference: no futures market. This mattered!

8. Without futures prices, peanut shellers were free to set prices themselves. But there was no competitive market for peanuts. Instead, the two big shellers set the price of peanuts how they saw fit. And - shocker - prices paid to farmers have been stubbornly low ever since!

9. Regulators realized there were problems with peanut prices as far back as 2009. The USDA revealed then that published peanut prices had nothing to do with a real market. Those prices were just submitted by the monopoly shellers. They just made the prices up.

10. What were the prices really based on? The contracts shellers offered to farmers - contracts that set the price at levels the shellers wanted, and contracts that were relatively uniform even when offered by the different companies. How does that happen?

11. According to a lawsuit filed last year, that happens because the big monopoly shellers have allegedly used a trade association to decide on prices and divide up the market. If true, they’d be about the 1 billionth company to fix prices that way.

https://www.locklaw.com/wp-content/uploads/2020/06/2020-05-27-2nd-amended-complaint.pdf

12. So far, Birdsong and Olam have paid $57 million to settle the lawsuit. Golden Peanut hasn’t settled. Trial is scheduled for January. We’ll see how that turns out.

13. Meanwhile, many farmers in the south and sunbelt are relying on debt to keep their farms afloat. In Georgia, one of the largest peanut producing states, bankruptcies among family farmers spiked in 2017, 2018 and this year. https://www.ajc.com/news/local/georgia-farm-troubles-lead-spike-bankruptcy-action/53NEcibQb025pPsViJQKlK/

14. Whether the allegations in the lawsuit are proven true or not isn’t really the point. The point is that the allegations wouldn’t exist at all were it not for monopoly power in the industry. Policies matter. Fight monopolies, and this kind of thing won’t happen! /end