NORFOLK, VA. — A class-action lawsuit brought forth by peanut farmers alleges peanut-shelling companies Birdsong Corp. and Golden Peanut Co. L.L.C., a subsidiary of Archer Daniels Midland Co., conspired to fix the prices of runner peanuts in violation of the Sherman Antitrust Act.
The lawsuit filed Sept. 5 in the U.S. District Court for the Eastern District of Virginia alleges that since the beginning of 2014 the prices paid by shellers to peanut farmers for runners have remained “remarkably” flat and unchanged despite supply disruptions such as Hurricane Michael, a category 5 hurricane that hit peanut crops in the Florida panhandle/southern Georgia and Alabama area in 2018.
“Defendants and their co-conspirators entered into a continuing agreement, understanding and conspiracy in restraint of trade artificially to fix, depress, stabilize and peg prices for runner peanuts in the United States in violation of Section 1 of the Sherman Act,” the lawsuit alleged.
The Sherman Antitrust Act of 1890 was based on the constitutional power of Congress to regulate interstate commerce.
ADM does not comment on pending litigation, said Jackie Anderson, a media spokesperson for Chicago-based ADM.
The defendants Birdsong Corp., Suffolk, Va., and Golden Peanut Co., L.L.C., Alpharetta, Ga., together hold 80% to 90% of the total peanut-shelling market share, according to the lawsuit. The lawsuit alleged the peanut-shelling companies, beginning in at least 2014, over-reported peanut numbers to the U.S. Department of Agriculture to create the false impression of an oversupplied market, which allowed the peanut-shelling companies to offer artificially low runner prices to farmers. The lawsuit also alleged the peanut-shelling companies underreported peanut prices to the U.S.D.A. to further suppress prices.
The U.S.D.A.’s National Posted Price for peanuts was over $450 per ton in January 2014, dropped to about $250 per ton in the summer of 2015 and then remained flat at about $425 per ton from October 2015 to July of this year, according to the lawsuit. The prices did not fluctuate even after Hurricane Michael, which caused estimated losses of $10 million to $20 million to the Georgia peanut crop, $23 million to the Florida peanut crop and $11.3 million to the Alabama peanut crop, according to the lawsuit.
“The storm pushed back the harvest timeline, causing crop loss due to over-maturity as well as causing disease because farmers could not spray or dig the crop during the storm,” the lawsuit said.
The steadiness of the prices contrasted with price changes earlier in the decade. A record drought year and a production shortage in 2011 led to prices for runners reaching $1,200 per ton. A record harvest year followed in 2012.
The peanut shelling industry is susceptible to a conspiracy because of a lack of pricing transparency, according to the lawsuit. Unlike some other agricultural commodities, peanuts do not have a futures market. Private contracting between shellers and farmers sets the prices.
The U.S.D.A.’s National Agricultural Statistics Service publishes a Peanut Stocks and Processing report every month for peanut inventory levels at shelling plants and other storage warehouses. This inventory is gathered from shellers on a voluntary and confidential basis, rendering the data susceptible to inaccuracy or manipulation, according to the lawsuit, which pointed out the report overstated the peanut supply by 750,000 tons in July 2016.
Birdsong Corp. and Golden Peanut had opportunities to collude, the lawsuit alleged. Both peanut-shelling companies are members of the American Peanut Shellers Association, the American Peanut Council, and the Peanut and Tree Nut Processors Association. The two companies together hold a majority of the board of trustees positions of The Peanut Institute, a non-profit organization founded by shellers to promote peanut consumption.
The Florida partnership of D&M Farms and Florida peanut farmers Mark Hasty and Dustin Land brought the case forward. The plaintiff class consists of U.S. peanut farmers who sold raw, harvested runner peanuts to peanut-shelling companies beginning at least on Jan. 1, 2014. Runners, one of four types of peanuts grown in the United States, mainly are found in Georgia, Alabama, Florida, Texas and Oklahoma.