Mexico’s Demand for American Peanut Butter Rises Despite Increasing Prices

Peanut Butter

Mexico

Market & Price Trends

Published Dec 21, 2021

The U.S. processes over 50% of the peanuts produced into peanut butter every year to cater to the high domestic and export demand. Mexico has emerged as one of the largest markets for American peanut butter(PB) exports with export volumes rising over 20% in comparison to the previous year. Low supply of peanuts and higher prices translated into even higher prices for the peanut processors resulting in an increase in PB prices across the U.S. and Mexico.

American peanut butter (PB) has gained a lot of popularity in Mexico in the past few years and it has managed to establish its position on the Mexican grocery store shelves. In 2020, the average PB consumption in Mexico rose by 21% in comparison to the previous year and it is likely to follow a similar trend in the coming. It has also driven up Mexico’s peanut imports from the United States (U.S.) in comparison to previous years. During the first nine months of 2021, Mexico imported 150,119 tons of peanuts from the U.S. which is 21% more than the volume recorded in 2020 during the same period.

The U.S. is the fourth-largest producer of peanuts in the world and processes over 50% of the production volume into PB. In recent times, more and more U.S. processors and manufacturers have become interested in producing PB due to growing demand in the country as well as in the neighboring country of Mexico. 2021 was not a very good year for PB as there was a low supply of peanuts left from last year’s crop. Drought conditions throughout this year’s growing season reduced the volume of peanuts harvested and increased the prices of peanuts in the market for processors.

The price of peanuts was about USD 0.44 per kilogram in December 2020 increased by roughly 20% to reach USD 0.52 per kilogram by December 2021. Despite these higher prices, the farmers are unable to earn a large share of profits due to record-high production costs which are likely to reduce their interest in planting peanuts for the next season. This year, the area under peanut plantation fell by 5% in comparison to 2020 reflecting farmers' disinterest to plant the nuts due to less profitability.

Source: Y Charts.

This has reflected on the PB prices across the U.S. and Mexico. It is a hard blow for consumers who have already been hit hard this year by skyrocketing food prices. PB is an inexpensive source of vegetable protein and has become a staple for many households even in Mexico now. Rather, Mexico is a large market for the U.S.'s peanut butter exports but it is hard to say whether the trend will continue in the coming year as the U.S struggles to manage the production and processing targets in its own country. As the year comes to a close, peanut production is projected to improve over the 2020’s volume but the dynamics and pricing for PB processors and consumers remain in question.