LUBBOCK, Texas — With hundreds of thousands of Americans out of work and the economy in a nose dive, the U.S. peanut industry expected sales to soar this year.
Americans tend to turn to peanut products to stretch their food dollars in tough times, avoiding more expensive protein sources such as steak and ground beef.
Enter an ongoing salmonella outbreak that has sickened some 600 people in 43 states and been linked to nine deaths, and those rosy predictions after a record growing season have been dashed.
"They've tainted our entire industry," said Shelly Nutt, executive director of the peanut producers board in Texas, the nation's second largest growing state behind Georgia. "Public perception is killing us."
More than 2,000 products have been recalled — one of the largest in U.S. history. And the damage was done by a small player in the industry — Virginia-based Peanut Corp. of America. Two of the company's plants — in Blakely, Ga., and in Plainview, Texas — have been shuttered after salmonella contamination was found.
The company, which has filed for bankruptcy, handles no more than 2.5 percent of all peanuts processed, yet sales of jarred peanut butter plummeted 22 percent nationwide for the four weeks ending Jan. 24 compared with the same period last year, Nutt said. February's numbers will likely worsen significantly, she said.
The devastating news came after U.S. peanut growers last year produced a record crop of 2.6 million tons. So many peanuts created a surplus, leading some producers to consider not planting them this year.
Texas produced 430,000 tons while Georgia had 1.2 million tons. All those peanuts are a big part of each state's economies, worth up to $1 billion in Texas and $2.5 billion in Georgia.
Patrick Archer, president of the American Peanut Council, an umbrella organization representing the industry's three major segments — growers, shellers and manufacturers — said he was aghast at the negligence he says was shown by Peanut Corp. President Stewart G. Parnell, who investigators have alleged knowingly distributed tainted products.
Parnell "failed Americans and failed again by refusing to show remorse and or accountability for those unconscionable" actions, Archer said.
Peanut Corp. denies any wrongdoing.
American food manufacturers use almost 2 billion pounds (900 million kilograms) of peanuts a year in a range of products. More than 1 billion pounds (450 million kilograms) go into peanut butter.
Recalls now include cookies, crackers, cereal, candy, ice cream, pet treats and much more, and the government has started a criminal investigation.
Regaining consumer confidence is paramount, and food manufacturers may be hesitant to purchase large quantities of peanuts, given the plummeting demand following the outbreak, West Texas peanut farmer Ted Higginbottom said.
"It is unfortunate peanut farmers can do everything right to produce a healthy and safe product to feed both their families and the nation, and then have to carry the burden for something they could not control," he said.
The outbreak was traced to Peanut Corp.'s Blakely, Ga., plant, where inspectors found roaches, mold and a leaking roof. A Food and Drug Administration inspection report found that the company shipped peanut products that tested positive for salmonella on 12 occasions from the plant from 2007-2008.
The company, now under FBI investigation, faced more scrutiny once it was revealed that its Texas plant, which opened in March 2005 and was run by a Peanut Corp. subsidiary, Plainview Peanut Co., was not inspected by state health officials until after problems arose at the company's Georgia plant.
On Friday, companies began destroying products made with anything that came from the plant after health officials said they discovered rodents, feces and feathers in a crawl space above a production area. Texas officials took the highly unusual step of ordering all products ever made at the plant be recalled.
"It's a shame that one company could tear down a complete industry," said Otis Johnson, a Seminole, Texas, peanut farmer who chairs the state's producer board. "As the story unfolds, I think there's more outrage."
Peanut shellers, which buy crops from the producers, are also bracing themselves, said Max Grice, general manager of Birdsong Peanuts, a shelling company in Brownfield, Texas.
"Obviously, we all realize it's a negative effect on consumption and it's hurting everyone," he said. "It's certainly not good for the industry."
Don Koehler, executive director of the Georgia Peanut Commission, a group representing about 4,500 growers in that state, said he has never seen the industry come under so much scrutiny and hopes it won't last much longer.
But "that's a crystal ball that we absolutely don't have," he said.
Betsy Blaney has been the AP's Lubbock correspondent since 2001 and regularly reports on agricultural issues.