Two Major Peanut Shelling Companies Accused of Conspiring to Lower Prices Paid to Farmers [UPDATE]

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Major peanut shelling companies Birdsong Corporation and Golden Peanut Company, LLC have been accused in a proposed class action of conspiring to fix the prices charged to peanut farmers for raw harvested peanuts.

According to the 40-page lawsuit out of Virginia, the defendants have taken advantage of their market power—which the case says comprises 80 to 90 percent of the industry’s market share—and the lack of transparency in the peanut industry to artificially deflate peanut prices by overstating supply and underreporting the prices charged to farmers.

Birdsong and Golden Peanut’s alleged scheme began in 2014, the lawsuit alleges, after several years of drastic weather-related events that saw the price of runner peanuts—the most popular commercial variety—skyrocket. In order to avoid this volatility, the two companies, according to the case, agreed to maintain control over the prices paid to peanut farmers by conspiring to manipulate such prices:

“Defendants saw the need to stabilize and depress Runner prices after the Peanut market experienced a record drought year and production shortage in 2011, followed by a record harvest year in 2012,” the complaint reads. “Those drastic production differences resulted in prices paid by shellers for Runners increasing from $448 per ton to $736 per ton in just three years…These high prices and great volatility made it difficult for Defendants to manage risk and plan for production with such massive price changes in such a short period of time.”

The defendants executed their alleged scheme by holding secret communications at industry trade association meetings, the case says, where they shared exclusive, non-public market information. The companies then artificially depressed peanut prices by overreporting inventory levels to the USDA, which created the false impression of an oversupplied market, and by underreporting the prices they paid to farmers for harvested crops, the suit alleges.

The lawsuit notes that because there is no futures market for peanuts, there is a lack of transparency around pricing. According to the complaint, farmers enter into nearly identical private contracts with shelling companies over which they “rarely have negotiating power” and are pressured into agreeing on low prices for their crops.

“Upon information and belief,” the complaint alleges, “these contracts are released following National Peanut Buying Points Association conferences, which are sponsored and attended by both Golden Peanut and Birdsong.”

The lawsuit alleges that because of this lack of transparency and the defendants’ suspected conspiracy to depress peanut prices, the amounts paid to farmers by shelling companies have remained relatively flat since January 2014, despite weather-related supply disruptions such as 2018’s Hurricane Michael.

According to the case, the effect of the defendant’s alleged conspiracy on peanut farmers has been “devastating.”

“Unlike prior to the conspiracy, there are no longer good price years to balance out the now-common bad years of Runner prices,” the suit states. “This has led numerous farmers to borrow from generations of equity built up in their land, relying on that equity to pay themselves and keep their farms running. The consequence is smaller farmers being run out of business as they use up the remaining equity in their farms.”

The lawsuit seeks to cover a proposed class of farmers who sold runner peanuts to the defendants or their co-conspirators in the United States at any time since January 1, 2014.